MedEquities Realty Trust, Inc. (Form: S-11, Received: 08/20/2015 17:09:26)

MEDEQUITIES REALTY TRUST, INC.

/s/ Jeffery C. Walraven

/s/ John W. McRoberts

Jeffery C. Walraven

John W. McRoberts

Chief Financial Officer, Secretary and Treasurer

Chairman of the Board of Directors and Chief Executive Officer

As filed with the Securities and Exchange Commission on August 20, 2015

Registration No. 333 -

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-11

FOR REGISTRATION

UNDER

THE SECURITIES ACT OF 1933

OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

MEDEQUITIES REALTY TRUST, INC.

(Exact name of registrant as specified in its governing instruments)

3100 West End Avenue, Suite 1000

Nashville, TN 37203

(615) 627-4710

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

John W. McRoberts

Chief Executive Officer and Chairman of the Board of Directors

MedEquities Realty Trust, Inc.

3100 West End Avenue, Suite 1000

Nashville, TN 37203

(615) 627-4710

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David P. Slotkin, Esq.

Morrison & Foerster LLP

2000 Pennsylvania Avenue, NW, Suite 6000

Washington, D.C. 20006

(202) 887-1500

Jay L. Bernstein, Esq.

Jacob A. Farquharson, Esq.

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

(212) 878-8000

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this Registration Statement.

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

Smaller reporting company ¨

(Do not check if a

smaller reporting company)

CALCULATION OF REGISTRATION FEE



Title of Securities to be Registered	Proposed Maximum Aggregate Offering Price ⁽¹⁾	Amount of Registration Fee
Common Stock, $0.01 par value per share	$150,000,000	$17,430

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes shares of common stock that the underwriters have the option to purchase solely for over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale thereof is not permitted.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED AUGUST 20, 2015

PROSPECTUS

Shares

LOGO

MEDEQUITIES REALTY TRUST, INC.

Common Stock

MedEquities Realty Trust, Inc., a Maryland corporation, is a self-managed and self-administered company that invests in a diversified mix of healthcare facilities and healthcare-related real estate debt investments. We have elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014.

This is our initial public offering, and no public market currently exists for our common stock. We are offering shares of our common stock, and the selling stockholders named in this prospectus are selling shares of our common stock. We will not receive any proceeds from the sale of our common stock by the selling stockholders. We have applied to list our common stock on the New York Stock Exchange, or the NYSE, under the symbol “MRT.” We expect the initial public offering price of our common stock to be between $ and $ per share.

In connection with this offering, funds managed by BlueMountain Capital Management, LLC, or BlueMountain, which own an aggregate 23.1% of the outstanding shares of our common stock as of the date of this prospectus, have the right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its ownership percentage in us following the completion of this offering, without payment by us of any underwriting discounts or commissions.

To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Internal Revenue Code of 1986, as amended, among other purposes, our charter prohibits, with certain exceptions, ownership by any person of more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock, the outstanding shares of any class or series of our preferred stock or the aggregate outstanding shares of all classes and series of our capital stock. See “Description of Capital Stock—Restrictions on Ownership and Transfer.”

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. See “ Risk Factors ” beginning on page 29 of this prospectus for a discussion of certain risk factors that you should consider before investing in our common stock.


	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions ⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$
Proceeds, before expenses, to the selling stockholders	$	$

(1)	See “Underwriting” for a detailed description of compensation payable to the underwriters.

We have granted the underwriters an option to purchase up to an additional shares of our common stock at the public offering price, less the underwriting discount, within 30 days after the date of this prospectus, solely to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock on or about , 2015.


FBR	J.P. Morgan	Citigroup	KeyBanc Capital Markets
RBC Capital Markets

The date of this prospectus is , 2015.

TABLE OF CONTENTS


	Page
PROSPECTUS SUMMARY		1
RISK FACTORS		29
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		61
USE OF PROCEEDS		63
DISTRIBUTION POLICY		64
CAPITALIZATION		67
DILUTION		68
SELECTED FINANCIAL DATA		69
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		72
OUR BUSINESS		89
MANAGEMENT		134
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		154
INVESTMENT POLICIES AND POLICIES WITH RESPECT TO CERTAIN ACTIVITIES		156
PRINCIPAL STOCKHOLDERS		160
SELLING STOCKHOLDERS		163
DESCRIPTION OF CAPITAL STOCK		164
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS		170
OUR OPERATING PARTNERSHIP AND THE PARTNERSHIP AGREEMENT		176
SHARES ELIGIBLE FOR FUTURE SALE		183
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS		185
UNDERWRITING		207
LEGAL MATTERS		212
EXPERTS		212
WHERE YOU CAN FIND MORE INFORMATION		212
INDEX TO FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by us or information to which we have referred you. No dealer, salesperson or other person is authorized to make any representations other than those contained in this prospectus and supplemental literature authorized by us and referred to in this prospectus. If anyone provides you with different information, you should not rely on it. This prospectus and any free writing prospectus prepared by us is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale thereof is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or as of another date specified herein, regardless of the time of delivery of this prospectus or any sale of these securities. You should not assume that the delivery of this prospectus or that any sale made pursuant to this prospectus implies that the information contained in this prospectus will remain fully accurate and correct as of any time subsequent to the date of this prospectus.

We use market data and industry forecasts and projections throughout this prospectus, including data from publicly available information and industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers’ experience in the industry and there can be no assurance that any of the forecasts or projections will be achieved. We believe that the surveys and market research others have performed are reliable, but neither we nor the underwriters have independently investigated or verified this information. The market data and industry forecasts and projections that we have included in this prospectus have not been expertized and are, therefore, solely our responsibility. As a result, the third parties that prepared the market data and industry forecasts and projections do not and will not have any liability or responsibility whatsoever for any market data and industry forecasts and projections that are contained in this prospectus. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this prospectus.

GLOSSARY OF CERTAIN TERMS

The following is a glossary of certain terms used in this prospectus:

“ Acute ” refers to a disease or condition with a rapid onset and short course.

“ ACH ” means acute care hospital. These facilities are general medical and surgical hospitals that provide both inpatient and outpatient medical services and are owned and/or operated either by a non-profit or for-profit hospital or hospital system. These facilities often act as feeder hospitals to dedicated specialty facilities.

“ ADA ” means the Americans with Disabilities Act of 1990, as amended.

“ Affordable Care Act ” means the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.

“ ALF ” means assisted living facility. These facilities are residential care facilities that provide housing, meals, personal care and supportive services to older persons and disabled adults who are unable to live independently. They are intended to be a less costly alternative to more restrictive, institutional settings for individuals who do not require 24-hour nursing supervision.

“ CMS ” means the Centers for Medicare and Medicaid Services, which administers Medicare, Medicaid and the State Children’s Health Insurance Program.

“ EMTALA ” means the Emergency Medical Treatment and Labor Act, as amended.

“ gross purchase price ” means the contractual purchase price paid or to be paid by us for the applicable property, as well as any other amounts expended by us at or near the time of acquisition that will generate a return under the lease for the applicable property. Gross purchase price excludes all transaction costs incurred by us to acquire the applicable property, some of which may be capitalized in accordance with generally accepted accounting principles in the United States.

“ HHS ” means the U.S. Department of Health and Human Services.

“ HIPAA ” means the Health Insurance Portability and Accountability Act of 1996, as amended.

“ HITECH Act ” means the Health Information Technology for Economic and Clinical Health Act.

“ IRF ” means inpatient rehabilitation facility. These facilities provide inpatient rehabilitation services for patients recovering from injuries, organ transplants, amputations, cardiovascular surgery, strokes, and complex neurological, orthopedic and other medical conditions following stabilization of their acute medical issues.

“ LTACH ” means long-term acute care hospital. These facilities are designed for patients with serious medical problems that require intense, special treatment for an extended period of time (typically at least 25 days), offer more individualized and resource-intensive care than a skilled nursing facility, nursing home or acute rehabilitation facility, and patients are typically transferred to a long-term acute care hospital from the intensive care unit of a traditional hospital.

“ MOB ” means medical office building. These are single-tenant or multi-tenant buildings where doctors, physician practice groups, hospitals, hospital systems or other healthcare providers lease space and are typically located near or adjacent to acute care hospitals or other facilities where healthcare services are rendered. Medical office buildings can include outpatient surgical centers, diagnostic labs, physical therapy providers and physician office space in a single building.

“ Post-acute ” refers to the period of time following acute care, in which the patient continues to require elevated levels of medical treatment.

“ SNF ” means skilled nursing facility. These facilities usually house elderly patients and provide restorative, rehabilitative and nursing care for patients not requiring more extensive and sophisticated treatment that may be available at acute care hospitals or long-term acute care hospitals. They are distinct from and offer a much higher level of care for older adults compared to senior housing facilities. Patients typically enter skilled nursing facilities after hospitalization.

“ Sub-acute ” refers to a disease or condition of less severity or duration than acute diseases or conditions.

iii

PROSPECTUS SUMMARY

The following summary highlights some of the information contained elsewhere in this prospectus. It is not complete and does not contain all of the information you should consider before making an investment decision. You should read carefully the more detailed information set forth under the heading “Risk Factors” and the other information included in this prospectus. In this prospectus, unless the context suggests otherwise, references to “MedEquities,” “the Company,” “we,” “us” and “our” refer to MedEquities Realty Trust, Inc., a Maryland corporation, together with its consolidated subsidiaries, including MedEquities Realty Operating Partnership, LP, a Delaware limited partnership, or our operating partnership, of which MedEquities OP GP, LLC, or the general partner, a wholly owned subsidiary of our company, is the sole general partner. Unless indicated otherwise, the information included in this prospectus assumes that (i) the underwriters’ over-allotment option is not exercised, (ii) BlueMountain purchases shares of our common stock pursuant to its right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its current ownership percentage in us following the completion of this offering, which we refer to as the BlueMountain Private Placement, and (iii) the common stock to be sold in this offering is sold at $ per share, which is the midpoint of the price range set forth on the front cover of this prospectus.

Our Company

We are a self-managed and self-administered company that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. We have elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014. As of the date of this prospectus, our portfolio is comprised of 21 healthcare facilities, including two long-term acute care hospitals, two acute care hospitals, 15 skilled nursing facilities, one medical office building and one assisted living facility, which we acquired for an aggregate gross purchase price of $452.9 million, and two healthcare-related debt investments in the aggregate principal amount of $28.0 million. In addition, we have two transactions under contract, consisting of one skilled nursing facility and one inpatient rehabilitation facility, and an option to purchase a skilled nursing facility for an initial aggregate purchase price of $46.0 million. Upon the acquisition of our properties under contract, our portfolio will be comprised of 24 healthcare facilities with an initial aggregate gross purchase price of $498.9 million and a total of 2,308 licensed beds located in Texas, California, Nevada and South Carolina, including 17 skilled nursing facilities, two acute care hospitals, two long-term acute care hospitals, one assisted living facility, one inpatient rehabilitation facility and one medical office building, providing aggregate annualized base rent of approximately $45.9 million, and a $10.0 million healthcare-related debt investment that provides annual interest payments of approximately $0.9 million. See “Our Business—Our Portfolio.”

Our strategy is to become an integral capital partner with high-quality, facility-based providers of healthcare services, primarily through net-leased real estate investments, and to continue to diversify over time based on our facility types, tenants and geographic locations. We invest primarily in real estate across the acute and post-acute spectrum of care, where our management team has extensive experience and relationships. We believe acute and post-acute healthcare facilities have the potential to provide higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise and insight necessary to own, finance and operate these properties, which are factors that tend to limit competition among owners, operators and finance companies. We target healthcare providers or operators that provide higher acuity services, are experienced, growth-minded and that we believe have shown an ability to successfully navigate a changing healthcare landscape. We believe that by investing in facilities that span the acute and post-acute spectrum of care, we will be able to adapt to, and capitalize on, changes in the healthcare industry and support, grow and develop long-term relationships with providers that serve the highest number of patients at the highest-yielding end of the healthcare real estate market. We expect to invest primarily in the following types of healthcare properties: acute care hospitals, short stay surgical and specialty hospitals (such as those focusing on orthopedic, heart, and other dedicated surgeries and specialty procedures), dedicated specialty hospitals (such as inpatient rehabilitation

facilities, long-term acute care hospitals and facilities providing psychiatric care), skilled nursing facilities, large and prominent physician clinics, diagnostic facilities, outpatient surgery centers and facilities that support these services, such as medical office buildings. Over the long-term, we expect our portfolio to be balanced equally between acute and post-acute facilities, although the balance may fluctuate from time to time due to the impact of individual transactions.

We intend to continue to capitalize on what we expect will be a need for significantly higher levels of capital investment in new and updated healthcare properties resulting from an aging U.S. population, increasing access to traditional healthcare services enabled by the Affordable Care Act, increasing regulatory oversight, rapidly changing technology and continuing focus on reducing healthcare costs. We believe these factors present opportunities for us to provide flexible capital solutions to healthcare providers as they seek the capital required to modernize their facilities, operate more efficiently and improve patient care.

While our preferred form of investment is fee ownership of a facility with a long-term triple-net lease with the healthcare provider or operator, we also may provide debt financing to healthcare providers, typically in the form of mortgage or mezzanine loans. In addition, we may provide capital to finance the development of healthcare properties, which we may use as a pathway to the ultimate acquisition of pre-leased properties by including purchase options or rights of first offer in the loan agreements. We intend to conduct our operations so that neither we nor any of our subsidiaries will meet the definition of investment company under the Investment Company Act of 1940, as amended, or the 1940 Act. Therefore, neither we nor any of our subsidiaries will be required to register as an investment company under the 1940 Act.

Our Management Team

Our management team has extensive experience in acquiring, owning, developing, financing, operating, leasing and disposing of many types of healthcare properties and portfolios, as well as acquiring, owning, financing, operating and selling healthcare operating companies. Our management team is led by John W. McRoberts, our chief executive officer and chairman of our board of directors, William C. Harlan, our president and chief operating officer and a member of our board of directors, and Jeffery C. Walraven, our chief financial officer. Each of Messrs. McRoberts and Harlan has over 30 years of experience investing in healthcare real estate and operating companies, having completed over 170 acquisitions of healthcare-related facilities through various investment vehicles. Mr. Walraven has 23 years of experience, including 22 years of public accounting experience, serving many public REIT clients since 1999, most recently as an assurance managing partner of the Memphis, Tennessee office of BDO USA, LLP where his primary responsibilities included providing core and peripheral assurance services and business operational and tax consulting services, including with respect to numerous public and private REIT offerings.

Our Portfolio

Upon the acquisition of our properties under contract, our portfolio will be comprised of 24 healthcare facilities with an aggregate gross purchase price of $498.9 million and a total of 2,308 licensed beds located in Texas, California, Nevada and South Carolina, including 17 skilled nursing facilities, two acute care hospitals, two long-term acute care hospitals, one assisted living facility, one inpatient rehabilitation facility and one medical office building, providing aggregate annualized base rent of approximately $45.9 million, with a weighted-average remaining lease term of 16.1 years, and a $10.0 million healthcare-related debt investment that provides annual interest payments of approximately $0.9 million. We own 100% of all of our properties, other than Lakeway Regional Medical Center, or Lakeway Hospital, in which we own a 51% interest through a consolidated partnership, or the Lakeway Partnership, with a neurosurgical physicians group. After taking into account our acquisitions under contract, our single-tenant properties will be leased to five operators with experienced management teams, with no single tenant/guarantor representing more than 27% of our annualized base rent.

11% other payors for the year ended December 31, 2014 and approximately 40% Medicare, 26% Medicaid, 22% commercial payors and 12% other payors for the six months ended June 30, 2015.

Healthcare Facilities

Facility Type—Current Portfolio

The following table contains information regarding the healthcare facilities in our portfolio, excluding our properties under contract, as of the date of this prospectus (dollars in thousands).


Facility Type	Number of Buildings		Gross Purchase Price			% of Total Gross Purchase Price			% Leased			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
Skilled Nursing Facilities/Assisted Living Facility ⁽²⁾		16	$	249,360	⁽²⁾		55.1	%		100.0	%	$	21,536	⁽²⁾		51.4	%
Acute Care Hospitals ⁽³⁾		2		110,370			24.4			100.0			12,534	⁽³⁾		29.9
Long-Term Acute Care Hospitals		2		78,010			17.2			100.0			6,470			15.5
Medical Office Building		1		15,128			3.3			78.7			1,331			3.2

Total		21	$	452,868			100.0	%		98.6	%	$	41,871			100.0	%

Facility Type—Current Portfolio and Properties under Contract

The following table contains information regarding the healthcare facilities in our portfolio, including our properties under contract, as of the date of this prospectus (dollars in thousands).


Facility Type	Number of Buildings		Gross Purchase Price			% of Total Gross Purchase Price			% Leased			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
Skilled Nursing Facilities/Assisted Living Facility ⁽²⁾ ⁽⁴⁾		18	$	276,000	⁽⁴⁾		55.3	%		100.0	%	$	23,838	⁽⁴⁾		52.0	%
Acute Care Hospitals ⁽³⁾		2		110,370	⁽³⁾		22.2			100.0			12,534	⁽³⁾		27.3
Long-Term Acute Care Hospitals		2		78,010			15.6			100.0			6,470			14.1
Inpatient Rehabilitation Facility ⁽⁵⁾		1		19,399	⁽⁵⁾		3.9			100.0			1,697	⁽⁵⁾		3.7
Medical Office Building		1		15,128			3.0			78.7			1,331			2.9

Total		24	$	498,907			100.0	%		98.7	%	$	45,870			100.0	%

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except as otherwise noted. For properties under contract, annualized base rent represents the base rent for the first month of the lease multiplied by 12. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments. For additional information on the expiration of these leases, see “Our Business—Lease Expirations.”

(2)	Includes one assisted living facility that we acquired as part of our acquisition of a portfolio from Life Generations Healthcare, LLC, or Life Generations. See “Our Business—Description of Properties and Investments in Our Portfolio—Life Generations Portfolio.”

(3)

Includes Lakeway Hospital, in which we own a 51% interest through the Lakeway Partnership. The annualized base rent for Lakeway Hospital as presented in this table and throughout this prospectus represents the incremental adjusted funds from operations, or AFFO, that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the $73.0 million intercompany mortgage loan that we made to the Lakeway Partnership. We expect the Lakeway Partnership

to contribute approximately $5.4 million of incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually. See “Our Business—Description of Properties and Investments in Our Portfolio—Current Properties—Lakeway Hospital.”

(4)

Includes Kearny Mesa, a skilled nursing facility that we have an option to purchase for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the earnings before interest, taxes, depreciation, amortization, rent and management fees, or EBITDARM, of Kearny Mesa for 2015 and 2016, respectively. The gross purchase price and annualized base rent do not reflect the $10.0 million earn-out. See “Our Business—Description of Properties and Investments in Our Portfolio—Properties under Contract—Kearny Mesa.”

(5)

Comprised of Vibra Rehabilitation Hospital of Amarillo, which we have under contract for a gross purchase price of $19.4 million, plus an earn-out of up to $10.6 million that may be paid to Vibra Healthcare approximately 24 months after closing of the acquisition, based on the tenant’s earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, for the prior 12 months. The gross purchase price and annualized base rent do not reflect the $10.6 million earn-out. We previously entered into a loan and security agreement with the seller to provide it with an $18.0 million mortgage loan that is secured by Vibra Rehabilitation Hospital of Amarillo, which we refer to as the Amarillo Mortgage Loan. See “Our Business—Description of Properties and Investments in Our Portfolio—Properties under Contract—Vibra Rehabilitation Hospital of Amarillo.”

Debt Investment

The following table contains information regarding the mortgage loan that we will have in our portfolio after the completion of this offering and the acquisition of our properties under contract (dollars in thousands).

Loan

Borrower

Principal
Amount

Term

Initial
Interest
Rate

First Lien
Mortgage

Guarantors

Vibra Mortgage Loan

Vibra
Healthcare, LLC
and Vibra
Healthcare II, LLC

$10,000

5/20 years ⁽¹⁾

9.00%

Vibra
Hospital of
Western
Massachusetts

Vibra Healthcare Real
Estate Company II, LLC and
Vibra Hospital of
Western Massachusetts, LLC

(1)

Following the initial interest-only five-year term, the Vibra Mortgage Loan will automatically convert to a 15-year amortizing loan requiring payments of principal and interest unless prepaid. The Vibra Mortgage Loan may be prepaid during the initial five-year term only if Vibra Healthcare, LLC or Vibra Healthcare II, LLC, or one of their respective affiliates, enters into a sale-leaseback transaction with us equal to or exceeding $25.0 million in value.

Recent Acquisitions and Properties under Contract

Our recent notable acquisitions include the following:

•

Texas SNF Portfolio . On July 30, 2015, we acquired nine skilled nursing facilities located throughout Texas, or the Texas SNF Portfolio, for an aggregate gross purchase price of $133.4 million. The Texas SNF Portfolio contains an aggregate of 1,025 licensed beds and approximately 307,342 square feet. Our purchase agreement for the Texas SNF Portfolio also covered a tenth skilled nursing facility, Graham Oaks Care Center, or Graham Oaks, which we expect to acquire by the end of the third quarter of 2015 for approximately $11.6 million, resulting in an aggregate gross purchase price of $145.0 million for the Texas SNF Portfolio and Graham Oaks. The aggregate gross purchase price includes $12.0 million of refundable contingent consideration, $3.0 million of which will become fully earned and non-forfeitable on January 1 of each year from 2016 through 2019, subject to the tenants’ compliance with certain financial covenants under the master lease agreement and other provisions in the purchase and sale agreement on such dates. If any of the refundable contingent consideration has

not been earned as of January 1, 2019, GruenePointe Holdings, LLC, or GruenePointe, will have until January 1, 2020 to achieve compliance with all of the applicable financial covenants and earn such remaining refundable contingent consideration. If GruenePointe has not achieved such compliance by January 1, 2020, GruenePointe must repay to us any refundable contingent consideration that has not been earned, together with interest from the closing date of our acquisition to January 1, 2020, at a rate of 3.0% per annum.

Concurrently with the closing of the acquisition, we leased 100% of the Texas SNF Portfolio to wholly owned subsidiaries of GruenePointe, pursuant to a 15-year triple-net master lease agreement that is guaranteed by GruenePointe and certain members of GruenePointe. The aggregate annual base rent under the master lease is approximately $11.3 million, or 8.5% of the $133.4 million paid at closing. The annual base rent will increase each year by 2.0% of the prior year’s base rent. The annual base rent will not be adjusted down in the event that GruenePointe is required to repay any portion of the refundable contingent consideration described above. In addition to the base rent, commencing in the second year of the lease, the master lease will provide for additional rent equal to 20% of the amount by which the aggregate gross patient care revenues (i.e., gross revenues less supplemental management fees) of four facilities (Songbird Lodge, Graham Oaks (upon closing on the acquisition of the facility), River City Care Center and Kerens Care Center) exceed the aggregate gross patient care revenues of such facilities in the first year of the lease, until the aggregate rent under the master lease for these four facilities equals 10.0% of the gross purchase price allocated to these facilities, subject to increases pursuant to the annual rent escalator.

An affiliate of OnPointe Health, which is one of the owners of GruenePointe, will manage the operations of the facilities in the Texas SNF Portfolio. OnPointe Health is a privately owned operator of post-acute facilities and, as of June 30, 2015, operated six skilled nursing facilities, two assisted living facilities and a home health company. OnPointe Health’s senior management team has extensive experience owning, operating, managing and developing skilled nursing facilities, primarily located in Texas, New Mexico and Louisiana. Based on information provided to us by OnPointe Health, OnPointe Health recognized combined net revenues of $51.8 million for the year ended December 31, 2014 and $34.7 million for the six months ended June 30, 2015.

•

Life Generations Portfolio . On March 31, 2015, we acquired four skilled nursing facilities and one assisted living facility, or the Life Generations Portfolio, from Life Generations for an aggregate purchase price of $80.0 million. All five facilities are located in southern California. Concurrently with the closing of the acquisition, we leased 100% of the Life Generations Portfolio to wholly owned subsidiaries of Life Generations, pursuant to a 15-year triple-net master lease agreement that is guaranteed by Life Generations. The initial annual base rent under the lease is approximately $7.0 million, or 8.75% of the $80.0 million purchase price, with annual escalators beginning in the fifth year of the lease term.

Life Generations is a privately owned owner-operator of long-term care facilities that began operations in 1998 and has approximately 3,100 employees. As of June 30, 2015, Life Generations operated 17 skilled nursing facilities and one assisted living facility and one memory care facility in California, with an aggregate of approximately 2,000 beds, and a therapy company that provides physical, occupational and speech therapy to residents in Life Generations’ facilities. Based on information provided to us by Life Generations, Life Generations recognized net revenues of $224.8 million for the year ended December 31, 2014 and $120.0 million for the six months ended June 30, 2015.

•

Lakeway Hospital . On February 3, 2015, we acquired Lakeway Hospital through a negotiated, non-judicial foreclosure and payment of an additional $25.0 million in cash consideration, for a total investment of $75.0 million. Lakeway Hospital, which opened in April 2012, is a 270,512 square-foot acute care hospital located in Lakeway, Texas, a suburb of Austin, that provides services in emergency medicine, family practice, cardiology, cardiothoracic surgery, radiation, oncology, general surgery,

gastroenterology, women’s health, infusion therapy, diagnostic and therapeutic radiology, respiratory, physical therapy and sports medicine, occupational therapy, speech-language pathology and pain management. We initially acquired a note receivable for $50.0 million on December 29, 2014, which had an outstanding principal balance of approximately $163.9 million and was secured by a first mortgage lien on Lakeway Hospital. The operator of the facility defaulted on debt service payments under the note in 2013, and the U.S. Department of Housing and Urban Development, or HUD, held an auction in December 2014 through which we acquired the note.

We own the facility through the Lakeway Partnership, which, based on a total equity cash contribution of $2.0 million, is owned 51% by us and 49% by a neurosurgical physicians group that relocated its practice to Lakeway Hospital. Our equity contribution to the Lakeway Partnership was $1.0 million, and our transfer of the original $50.0 million note and $23.0 million of cash to the Lakeway Partnership is structured as an intercompany $73.0 million loan, or the Lakeway Intercompany Mortgage Loan, to the Lakeway Partnership that is secured by a first mortgage lien on Lakeway Hospital. The Lakeway Intercompany Mortgage Loan has a ten-year term and requires payments of principal and interest at a rate of 8.0% per annum based on a 25-year amortization schedule. The interest rate on the Lakeway Intercompany Mortgage Loan will reset after five years based upon then-current market rates. The Lakeway Intercompany Mortgage Loan, the related interest income to us and the related interest expense to the Lakeway Partnership are eliminated in our consolidated financial statements.

We lease Lakeway Hospital to Lakeway Regional Medical Center, LLC, or the Lakeway Operator, pursuant to a non-cancelable 25-year triple-net lease and we will receive our proportionate share of rent paid to the Lakeway Partnership under the lease. The stabilized annualized base rent payable to the Lakeway Partnership under the lease is approximately $12.8 million, or approximately 17.0% of the Lakeway Partnership’s total investment in the facility of $75.0 million. However, the monthly rent is approximately $0.5 million for the second and third quarters of 2015 and will increase to approximately $1.1 million for the fourth quarter of 2015, which represents the stabilized monthly rent under the lease. The monthly rent will increase to approximately $1.6 million for the first two quarters of 2016 to account for the lower monthly rent in the first six months of the lease and will then return to the stabilized monthly rent of approximately $1.1 million. Beginning in the third year of the lease term, the annual base rent will increase each year by 3.0% of the prior year’s base rent. Based on the interest received under the Lakeway Intercompany Mortgage Loan and our proportionate share of the annual rent, the Lakeway Partnership is expected to contribute approximately $5.4 million in incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually based upon the stabilized monthly rent of $1.1 million.

Our underwriting for Lakeway Hospital was based on the expected improved operating results of the Lakeway Operator due to the replacement of the executive management team, restructuring of its ownership structure and the recruitment of a neurosurgical physicians group to Lakeway Hospital, which commenced operating in the hospital in April 2015. The lease for Lakeway Hospital was specifically structured with the expectation of such improved results, with the minimum rent coverage ratio (ratio of EBITDAR to rent) increasing from 1.0x for the first year of the lease, to 1.25x for year two, 1.75x for year three and 2.25x for year four and thereafter. Although the Lakeway Operator’s current EBITDAR is not sufficient to cover the stabilized monthly rent of approximately $1.1 million, the facility is already experiencing improved operating results due to the steps taken to date. For example, based on information provided to us by the Lakeway Operator, net patient revenue, admissions, patient days, and surgeries performed at the Lakeway Hospital increased by approximately 35%, 42%, 21% and 75%, respectively, during the second quarter of 2015 as compared to the first quarter of 2015. We believe the operating results of Lakeway Hospital should continue to improve as the neurosurgical physicians group completes its transition to Lakeway Hospital and as the Lakeway Operator’s new executive management team continues to improve the business processes at the hospital, recruits additional physicians to the hospital, implements new or expanded patient service

lines, such as plastic surgery, cardiology, orthopedics and other specialties, and obtains the hospital’s Primary and Comprehensive Stroke certifications.

•

Mountain’s Edge Hospital . On March 31, 2015, we acquired Mountain’s Edge Hospital, a newly developed 72,140 square-foot acute care hospital located in Las Vegas, Nevada, that began admitting patients in early July 2015. Our aggregate gross purchase price for the facility was $35.4 million, which includes a tenant allowance of $6.0 million that we paid to the tenant for certain furnishings, fixtures and equipment installed at the facility. On April 1, 2015, we leased 100% of Mountain’s Edge Hospital to a wholly owned subsidiary of Fundamental Healthcare pursuant to a 15-year triple-net lease, which is guaranteed by THI of Baltimore, Inc., or THI of Baltimore, another wholly owned subsidiary of Fundamental Healthcare. The annual base rent under the lease is approximately $3.1 million, or 8.75% of the aggregate gross purchase price, including the $6.0 million tenant allowance, with annual escalators of 1.5% beginning in the sixth year of the lease term.

Fundamental Healthcare is a privately owned owner-operator of healthcare facilities and operates 77 healthcare facilities in nine states, including skilled nursing facilities, long-term acute care hospitals and rehabilitation centers, largely concentrated in Texas, Nevada, Missouri and South Carolina. Subsidiaries of Fundamental Healthcare’s wholly owned subsidiary, THI of Baltimore, operate 67 skilled nursing facilities, three long-term acute care hospitals and two acute care hospitals, and based on information provided to us by Fundamental Healthcare, recognized consolidated net revenues of approximately $504.0 million for the year ended December 31, 2014 and $274.5 million for the six months ended June 30, 2015.

In addition, we have two transactions under contract and one under option for an initial aggregate gross purchase price of $46.0 million, consisting of the following:

•

Vibra Rehabilitation Hospital of Amarillo . On August 13, 2015, we entered into a definitive agreement to purchase Vibra Rehabilitation Hospital of Amarillo, an inpatient rehabilitation hospital located in Amarillo, Texas with 44 hospital beds, for approximately $19.4 million, plus an earn-out of up to $10.6 million that may be paid to the seller 24 months after the closing of the acquisition, based on the tenant’s EBITDAR for the previous 12 months. We previously entered into a loan and security agreement with the seller to provide it with the Amarillo Mortgage Loan. The $18.0 million principal balance of the Amarillo Mortgage Loan will be applied towards the $19.4 million purchase price, resulting in a cash expenditure of approximately $1.4 million to acquire the property. We expect to close this transaction by the end of 2015, subject to the satisfaction of customary closing conditions and receipt of approval from the seller’s working capital lender.

Upon the closing of the acquisition, we will lease 100% of Vibra Rehabilitation Hospital of Amarillo to the existing tenant, a wholly owned subsidiary of Vibra Healthcare, pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease will have a 15-year term, with three five-year extension options. The initial annual base rent under the lease will be approximately $1.7 million, or 8.75% of the initial $19.4 million purchase price, payable monthly. The base rent will thereafter increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing based on the tenant’s EBITDAR for the prior 12 months. Beginning in the second year of the initial lease term, the annual base rent will increase each year by 3.0% of the prior year’s rent.

Vibra Healthcare is a privately owned, nationwide owner-operator of freestanding long-term acute care hospitals and inpatient rehabilitation facilities, headquartered in Mechanicsburg, Pennsylvania. Vibra Healthcare operates more than 50 long-term acute care hospitals, inpatient rehabilitation facilities and outpatient physical therapy centers, and based on information provided to us by Vibra Healthcare, recognized consolidated net revenues, less doubtful accounts, of approximately $749.0 million for the year ended December 31, 2014 and $384.8 million for the six months ended June 30, 2015.

•

Kearny Mesa . In connection with our acquisition of the Life Generations Portfolio, we entered into an exclusive option with Life Generations to acquire Kearny Mesa, a 96-bed skilled nursing facility located in San Diego, California, for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the achievement of certain performance thresholds relating to the EBITDARM of Kearny Mesa for 2015 and 2016, respectively. The option period commenced on July 1, 2015 and expires on September 1, 2015. On August 10, 2015, we deposited $100,000 pursuant to the purchase option agreement. We intend to fund the transaction with available cash and borrowings under our secured credit facility and expect the transaction to close by the end of the third quarter of 2015, subject to customary closing conditions.

Concurrently with the closing of the acquisition, we will amend the master lease agreement for the Life Generations Portfolio to include Kearny Mesa, and the annual base rent under the master lease agreement will be increased by approximately $1.3 million, or 8.75% of the $15.0 million purchase price for Kearny Mesa. The base rent under the master lease will thereafter increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of Kearny Mesa for 2015 and 2016, respectively.

•

Graham Oaks Care Center . Our purchase agreement for the Texas SNF Portfolio also covered a tenth facility, Graham Oaks, a 32,391 square-foot skilled nursing facility located in Graham, Texas, with a total of 117 licensed beds, for a gross purchase price of approximately $11.6 million, which we intend to fund with available cash and borrowings under our secured credit facility. We expect to close this transaction by the end of the third quarter of 2015, subject to the satisfaction of customary closing conditions and receipt of certain regulatory consents.

Concurrently with the closing of the acquisition, we will amend the master lease agreement for the Texas SNF Portfolio to include Graham Oaks, and the annual base rent under the master lease agreement will be increased by approximately $1.0 million, or 8.75% of the $11.6 million purchase price for Graham Oaks.

For additional details regarding the healthcare facilities in our portfolio and that we have under contract, see “Our Business—Description of Properties and Investments in Our Portfolio.”

Our Tenants

Current Portfolio

The following table contains information regarding the tenants in our portfolio, excluding tenants at our properties under contract, as of the date of this prospectus (dollars in thousands).


Tenant	Weighted Average Remaining Lease Term		Total Leased GLA		Percent of Total Leased GLA			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
GruenePointe		14.9		307,342		29.6	%	$	11,336			27.1	%
Lakeway Operator		24.5		270,512		26.1			9,439	⁽²⁾		22.5
Fundamental Healthcare		12.8		211,280		20.4			8,005			19.1
Life Generations		14.6		154,199		14.9			7,000			16.7
Vibra Healthcare		14.4		40,091		3.9			4,760			11.4
MOB Tenants		2.4		53,295		5.1			1,331			3.2

Total / Weighted Average		16.2		1,036,719		100.0	%	$	41,871			100.0	%

Current Portfolio and Properties under Contract

The following table contains information regarding the tenants in our portfolio, including tenants at our properties under contract, as of the date of this prospectus (dollars in thousands).


Tenant	Weighted Average Remaining Lease Term		Total Leased GLA		Percent of Total Leased GLA			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
GruenePointe		14.9		339,733		29.9	%	$	12,325			26.8	%
Lakeway Operator		24.5		270,512		23.9			9,439	⁽²⁾		20.6
Life Generations		14.6		181,149		16.0			8,313	⁽³⁾		18.1
Fundamental Healthcare		12.8		211,280		18.6			8,005			17.5
Vibra Healthcare		14.7		77,925		6.9			6,457	⁽⁴⁾		14.1
MOB Tenants		2.4		53,295		4.7			1,331			2.9

Total / Weighted Average		16.1		1,133,894		100.0	%	$	45,870			100.0	%

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except as otherwise noted. For properties under contract, annualized base rent represents the base rent for the first month of the lease multiplied by 12. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments.

(2)

We own a 51% interest in Lakeway Hospital through the Lakeway Partnership. The annualized base rent for Lakeway Hospital as presented in this table and throughout this prospectus represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. We expect the Lakeway Partnership to contribute approximately $5.4 million of incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually. See “Our Business—Description of Properties and Investments in Our Portfolio—Current Properties—Lakeway Hospital.”

(3)

Annualized base rent for Life Generations does not reflect the $10.0 million earn-out that we may pay Life Generations in the first quarters of 2016 and 2017 based on the 2015 and 2016 EBITDARM of Kearny Mesa. The base rent will increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017. See “Our Business—Description of Properties and Investments in Our Portfolio—Properties under Contract—Kearny Mesa.”

(4)

Annualized base rent for Vibra Healthcare does not reflect an earn-out of up to $10.6 million that may be paid to the seller approximately 24 months after closing of the acquisition of Vibra Rehabilitation Hospital of Amarillo based on the tenant’s EBITDAR for the prior 12 months. The base rent will increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing. See “Our Business—Description of Properties and Investments in Our Portfolio—Properties under Contract—Vibra Rehabilitation Hospital of Amarillo.”

Current Portfolio and Properties under Contract

The following table contains information regarding the individual healthcare facilities in our portfolio including our properties under contract, as of the date of this prospectus (dollars in thousands).


Property	Major Tenant(s) ⁽¹⁾	Location	Property Type	% Leased			Gross Purchase Price			Annualized Base Rent ⁽²⁾			Lease Expiration(s)	GLA/ Square Feet
*Current Properties*
Texas SNF Portfolio (9 properties)	GruenePointe	Texas	SNF		100.0	%	$	133,360		$	11,336		July 2030		307,342

Lakeway Hospital ⁽³⁾	Lakeway Operator	Lakeway, TX	ACH		100.0			75,000			9,439	⁽³⁾	February 2040		270,512

Life Generations Portfolio ⁽⁴⁾ (5 properties)	Life Generations	CA	SNF/ALF		100.0			80,000	⁽⁴⁾		7,000		March 2030		154,199

Kentfield Rehab & Specialty Hospital	Vibra Healthcare	Kentfield, CA	LTACH		100.0			58,000	⁽⁵⁾		4,760	⁽⁵⁾	December 2029		40,091

Mountain’s Edge Hospital	Fundamental Healthcare	Las Vegas, NV	ACH		100.0			35,370	⁽⁶⁾		3,095	⁽⁶⁾	March 2030		72,140

Magnolia Place of Spartanburg	Fundamental Healthcare	Spartanburg, SC	SNF		100.0			20,000			1,800		July 2026		50,397

Horizon Specialty Hospital of Henderson	Fundamental Healthcare	Las Vegas, NV	LTACH		100.0			20,010			1,710	⁽⁷⁾	July 2029		37,209

Mira Vista	Fundamental Healthcare	Fort Worth, TX	SNF		100.0			16,000			1,400		February 2027		51,534

North Brownsville Medical Plaza ⁽⁸⁾	VBOA ASC Partners and Pain & Anesthesia Associates	Brownsville, TX	MOB		78.7			15,128			1,331	⁽⁹⁾	December 2017 and February 2018		67,682

Subtotal					98.6	%	$	452,868		$	41,871				1,051,106
*Properties under Contract*
Vibra Rehabilitation Hospital of Amarillo	Vibra Healthcare	Amarillo, TX	IRF		100.0			19,399	⁽¹⁰⁾		1,697	⁽¹⁰⁾	September 2030		37,834

Kearny Mesa ⁽¹¹⁾	Life Generations	San Diego, CA	SNF		100.0			15,000	⁽¹¹⁾		1,313	⁽¹¹⁾	March 2030		26,950

Graham Oaks	GruenePointe	Graham, TX	SNF		100.0			11,640			989		July 2030		32,391

Subtotal					100.0	%	$	46,039		$	3,999				97,175

Total					98.7	%	$	498,907		$	45,870				1,148,281

(1)

For properties other than Lakeway Hospital and North Brownsville Medical Plaza, the tenant listed is the parent guarantor. With respect to Fundamental Healthcare, the guarantor is THI of Baltimore, a wholly owned subsidiary of Fundamental Healthcare. For additional information, see “Our Business—Description of Properties and Investments in Our Portfolio.”

(2)

(3)

(4)

The Life Generations Portfolio is comprised of four skilled nursing facilities and one assisted living facility, of which three are located in San Diego County and two are located in San Bernardino County. The gross purchase price excludes approximately $1.6 million of transaction costs, which are capitalized under generally accepted accounting principles in the United States. See “Our Business—Description of Properties and Investments in Our Portfolio—Current Properties—Life Generations Portfolio.”

(5)

The gross purchase price includes $7.0 million that we agreed to pay to the seller/tenant to fund renovations, which the seller must draw in full no later than October 31, 2015. As of June 30, 2015, $3.6 million of this amount had been paid. The monthly rent will be increased each month by 8.75% of the amount that has been advanced as of the end of the preceding month.

(6)

The gross purchase price includes a tenant allowance of $6.0 million that we paid to the tenant for certain furnishings, fixtures and equipment installed at the facility. The annual base rent under the lease is approximately $3.1 million, or 8.75% of the aggregate gross purchase price, including the $6.0 million tenant allowance. Contractual rent for the first six months of the lease accrues from the commencement of the lease on April 1, 2015, but payment is deferred until April 2016, at which time the amounts are payable in monthly installments over the next twelve months in addition to the contractual rent then due. Interest accrues on the deferred rent at a rate of 8.75% per annum. See “Our Business—Description of Properties and Investments in Our Portfolio—Current Properties—Mountain’s Edge Hospital.”

(7)	Excludes $1.3 million in a lease incentive that we have granted to the tenant under the terms of the lease.

(8)

This property is subject to a ground lease that expires in 2081, with two ten-year extension options, and provides for annual base rent of approximately $0.2 million in 2015. For additional information, see “Our Business—Description of Properties and Investments in Our Portfolio—Current Properties—North Brownsville Medical Plaza.”

(9)	Annualized base rent excludes certain property operating expenses that are reimbursable by the tenants, which are included as rental income. For the six months ended June 30, 2015, the property operating expenses reimbursed by tenants were approximately $0.4 million.

(10)

The gross purchase price and annualized base rent do not reflect an earn-out of up to $10.6 million that may be paid to the seller approximately 24 months after closing of the acquisition, based on the tenant’s EBITDAR, for the prior 12 months. The base rent will increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing. See “Our Business—Description of Properties and Investments in Our Portfolio—Properties under Contract—Vibra Rehabilitation Hospital of Amarillo.”

(11)

We have an option to purchase this property for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of the property for 2015 and 2016, respectively. The base rent will increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017. See “Our Business—Description of Properties and Investments in Our Portfolio—Properties under Contract—Kearny Mesa.”

Acquisitions under Evaluation

acquisition of an aggregate of $ million of healthcare facilities. We expect these potential acquisitions to provide yields consistent with our current portfolio. We have engaged in preliminary discussions with the owners, commenced the process of conducting diligence on certain of these properties and/or submitted or entered into non-binding indications of interest or term sheets to the owners of these properties, which are the basis for our purchase price estimates. However, we have not entered into binding commitments with respect to any of the properties under evaluation, and the pricing and terms of such transactions are subject to negotiation and ongoing due diligence and, therefore, we do not believe any of these transactions are probable as of the date of this prospectus. Facilitating any acquisition under evaluation into a binding commitment with the seller is influenced by many factors including, but not limited to, the existence of other competitive bids, the satisfactory completion of all due diligence items by both parties and regulatory or lender approval, if required. The impact of these factors on the timing of any acquisition can vary based on the nature and size of each transaction. Once a binding commitment is reached with a seller, in the form of an executed purchase and sale agreement, closing on the transaction is generally expected to occur within 30 to 60 days subject to the completion of routine property due diligence that is customary in real estate transactions. Accordingly, there can be no assurance that we will enter into definitive agreements to acquire or ultimately complete the acquisition of any healthcare property under evaluation on the terms currently anticipated, or at all, and cannot predict the timing of any potential acquisitions if any are completed.

Market Opportunity

CMS and the U.S. Office of the Actuary estimate that healthcare expenditures and/or services comprised 17.4% of U.S. gross domestic product, or GDP, in 2013 and has risen from just 5.0% of GDP in 1960. According to the latest National Health Expenditures report by CMS, healthcare spending is projected to reach 18.4% of GDP by 2020. Similarly, overall healthcare expenditures have risen sharply from $1.4 trillion in 2000 to $2.8 trillion in 2012. CMS projects national healthcare expenditures to grow at a relatively stable rate of approximately 5.7% per year to reach $4.3 trillion by 2020.

National Healthcare Expenditures

(2004-2020)

LOGO

Source: HHS, CMS

We believe that there are several fundamental drivers behind the expected sustained growth in demand for healthcare services, including:

•

Aging and growing U.S. population: Between 2013 and 2050, the U.S. population over 65 years of age is projected to more than double from about 43 million to nearly 90 million people, according to the

U.S. Census Bureau. Furthermore various factors, including advances in healthcare treatments, are resulting in longer life expectancies. According to the Centers for Disease Control and Prevention, from 1950 to 2009, the average life expectancy at birth in the U.S. increased from 68.2 years to 78.5 years. By 2050, the average life expectancy at birth is projected to increase to 83.8 years, according to the U.S. Census Bureau.

•

Disproportionate spending across older Americans: The chart below highlights the distribution of median healthcare expenditures by age. According to HHS, those age 65 and over spend more per person on healthcare than all other age categories combined. We believe that healthcare expenditures for the U.S. population over 65 years of age will continue to rise as a disproportionate share of healthcare dollars is spent on older Americans due to increasing requirements for treatment and management of chronic and acute health ailments.


U.S. Population Age 65 and Over		Median Healthcare Spending per Person by Age Group

Source: U.S. Census Bureau, the Statistical Abstract of the United States		Source: Department of Health and Human Services Agency for Healthcare Research and Quality, Medial Expenditure Panel Survey, 2012

•

Healthcare is less impacted by macroeconomic conditions: Demand for healthcare and healthcare properties is based primarily on demographics and healthcare needs rather than macroeconomic conditions. This is evidenced by the steady growth of both healthcare related expenditures and healthcare employment through the 2008-2009 recession. For example, during 2008 and 2009 virtually all industries experienced widespread job losses while the healthcare industry continued to create jobs. During 2008 and 2009, a total of 317,000 and 234,000 new healthcare-related jobs, respectively, were created, corresponding to employment gains of 2.4% and 1.7%, according to the Bureau of Labor Statistics. By comparison, total non-farm employment declined by 2.6% and 3.8% in 2008 and 2009, respectively.

•

Affordable Care Act increases market size: The Affordable Care Act requires that every American have health insurance beginning in 2014 or be subject to a penalty. We expect millions of additional Americans to gain access to health insurance and participate in healthcare services that were once difficult to access. To that end, according to the Congressional Budget Office, implementation of the Affordable Care Act is expected to result in 24 million additional insured Americans by the end of 2017.

We believe that delivery of healthcare is shifting toward greater use of specialized facilities and is becoming less reliant on traditional “one-stop” acute care hospitals, and that the evolving regulatory environment has led to increased focus on reducing healthcare costs while improving patient outcomes. We further believe that specialized acute and post-acute care facilities, which are less costly to build, maintain and operate compared to traditional hospitals, will be an increasingly important factor in lowering healthcare delivery costs while improving patient

quality of care particularly with the trend of operators operating across the acute and post-acute spectrum of care. As a result, we believe the market is experiencing rising demand for newer, more convenient, technologically advanced and efficient healthcare properties, which is driving existing and newly formed medical service providers to modernize their facilities by renovating existing properties and building new facilities. Additionally, in order to operate profitably within a managed care environment, medical service providers are aggressively trying to increase patient populations, while maintaining lower overhead costs, through consolidation with other operators and by building new facilities that are more attractive to patients and their families, have greater operating efficiencies, and are increasingly being located in areas of population and patient growth.

While we believe that an increasing proportion of providers prefer to outsource their ownership and management of real estate to third-parties, the ownership of healthcare properties remains highly fragmented. According to the study “Slicing, Dicing and Scoping the Size of the U.S. Commercial Real Estate Market” (a study conducted by Andrew C. Florance, Norm G. Miller, Jay Spivey, and Ruijue Peng who were affiliated with the CoStar Group, Inc. and the University of San Diego), the size of the healthcare real estate market was approximately $1.3 trillion as of 2010. As of December 31, 2014, public REITs owned only approximately $14.3 billion of healthcare real estate assets. The high fragmentation that characterizes the market also creates significant investment opportunities for experienced investors like us to grow their businesses by acquiring institutional-quality healthcare facilities.

Competitive Strengths

We believe that the following competitive strengths will support the accretive growth of our business and the continued execution of our business plan:

•

Access to Attractive Off-Market and Target-Marketed Acquisition and Investment Opportunities through Industry Relationships. As healthcare industry veterans, Messrs. McRoberts and Harlan have long-standing relationships with owners, operators and developers of healthcare properties, who we believe value their industry knowledge and commitment to working in a cooperative and supportive manner. In addition, Messrs. McRoberts and Harlan have extensive relationships with private equity groups, attorneys, contractors and commercial bankers who invest in or otherwise support healthcare services operators. Messrs. McRoberts and Harlan were previously employed by Carter Validus Advisors, LLC, the advisory company to Carter Validus Mission Critical REIT, from October 2010 to April 2012, where they served as the President and Head of Healthcare, respectively, and continued to serve following 2012 as consultants, and where, as leaders of the senior management team, they were involved in sourcing and structuring off-market acquisitions and options to acquire and mezzanine financings on seven healthcare properties involving over $350 million in investment activity. Since our formation, each of the properties that we have acquired or are under contract to acquire was sourced through the existing relationships of our management team, and going forward, we believe these relationships will provide us with off-market acquisition and investment opportunities, as well as target-marketed opportunities that are strategically presented to a limited number of capital providers. We believe such off-market and target-marketed transactions may not be available to many of our competitors and provide us with the opportunity to purchase assets outside the competitive bidding process.

•

Experience-Driven Investment Underwriting Process. We believe our management team’s depth of experience in healthcare real estate, operations and finance, including underwriting debt and equity investments in healthcare properties, provides us with unique perspective in underwriting potential investments. Our rigorous investment underwriting process focuses on both real estate and healthcare operations and includes a detailed analysis of the property, including historical and projected cash flow and capital needs, visibility of location, quality of construction and local economic, demographic and regulatory factors, as well as an analysis of the financial strength and experience of the healthcare operator and its management team. We believe our underwriting process will support our ability to deliver attractive risk-adjusted returns to our stockholders.

•

High-Quality Portfolio with Well-Structured Net Leases. Upon the acquisition of our properties under contract, our portfolio will be comprised of 24 healthcare facilities with a total of 2,308 licensed beds located in Texas, California, Nevada and South Carolina, including 17 skilled nursing facilities, two acute care hospitals, two long-term acute care hospitals, one assisted living facility, one inpatient rehabilitation facility and one medical office building, providing aggregate annualized base rent of approximately $45.9 million, and a $10.0 million healthcare-related debt investment that provides annual interest payments of approximately $0.9 million. The properties in our portfolio and that we have under contract primarily are state-of-the-art facilities with high-quality amenities located in attractive markets with favorable demographic trends and, as of the date of this prospectus, were 98.7% leased and had a weighted-average remaining lease term of 16.1 years.

The single-tenant properties in our portfolio are leased to high-quality, experienced providers covering the acute and post-acute spectrum of care, are subject to long-term, non-cancellable triple-net leases and are supported by parent guarantees, cross-default provisions and/or cross-collateralization provisions. In addition, leases for our single-tenant properties contain rent escalators, which protect us against inflation and potential increases in interest rates. With the exception of Lakeway Hospital, all of the single-tenant facilities in our portfolio also benefit, and all of our single-tenant properties under contract will benefit, from parent guarantees. As a result, approximately 77% of our total annualized base rent after the acquisition of our properties under contract will benefit from an additional layer of credit protection by requiring the guarantors to make our tenants’ rental payments to us in the event that a facility on a stand-alone basis cannot generate sufficient cash flow to meet its rental obligations to us. One key advantage of this credit enhancement is that it minimizes our risk associated with the performance of one facility because our rental income is reinforced by the financial performance across a more diversified pool of facilities.

The following table contains EBITDAR-to-rent coverage ratios (i) for the guarantors of the single-tenant facilities in our current portfolio and under contract based on the guarantors’ total EBITDAR and total rent expense across their entire portfolios and (ii) for the stabilized single-tenant facilities in our portfolio and under contract, in each case based on information provided to us by our lease guarantors. Because our leases have been in place for less than one year as of June 30, 2015, the rental expense for our leases that is included in the calculation of the guarantor and facility coverage ratios is based on the annualized base rent for such leases as of June 30, 2015 for the stabilized properties currently in our portfolio and the annualized base rent for the first month of the lease for our stabilized properties under contract. The following coverage ratios are based on historical results of the guarantors and the facilities, as applicable, and should not be viewed as indicative of coverage ratios for future periods.


Facility Type	Guarantor Coverage Ratio ⁽¹⁾		Facility Coverage Ratio ⁽²⁾
Skilled Nursing Facilities/Assisted Living Facility ⁽³⁾		2.1x		1.3x
Long-Term Acute Care Hospitals/Inpatient Rehabilitation Facility		1.6x		1.5x

Total		2.0x		1.3x

(1)

The guarantor coverage ratio is equal to the guarantor’s EBITDAR for the twelve months ended June 30, 2015 divided by the guarantor’s total rental expense for the twelve months ended June 30, 2015. The resulting coverage ratios are weighted by the annualized base rent as of June 30, 2015 for properties currently in our portfolio and by the annualized base rent for the first month of the lease for our properties under contract.

(2)

The facility coverage ratios include only our 15 stabilized skilled nursing facilities, our two stabilized long-term acute care hospitals, our one stabilized assisted living facility and our one stabilized inpatient rehabilitation facility. Our non-stabilized properties include Lakeway Hospital, Mountain’s Edge Hospital, Magnolia Place of Spartanburg and Mira Vista. We consider a facility to be non-stabilized if it is a newly completed development, is undergoing or has recently undergone a significant addition or renovation or is being repositioned. The facility coverage ratio for each of the stabilized facilities currently in our portfolio is calculated as EBITDAR for the facility for the twelve months ended June 30, 2015 divided by annualized base rent under the applicable lease as of June 30, 2015. The facility coverage ratio for each of the stabilized facilities under contract is calculated as EBITDAR for the facility for the twelve months ended June 30, 2015 divided by the annualized base rent for the first month of the applicable lease.

(3)

For the Texas SNF portfolio, including the Graham Oaks facility, we have added back approximately $2.0 million of recoupments to revenue for the twelve months ended June 30, 2015. Recoupments occur when Medicare has overpaid a provider for services in prior periods and then recovers such overpayment by reducing payments to the provider in subsequent periods, which reduces the provider’s revenue for such periods. We believe this adjustment is appropriate because the successor operator (GruenePointe) will not be liable for deductions from revenue for recoupments related to the prior operator.

•

Strong Alignment of Interests. We believe the interests of our management team, our board of directors and our stockholders are strongly aligned. Certain members of our management team and board of directors purchased an aggregate of 405,833 shares of common stock in the management/director private placement described below, which closed on July 31, 2014. In addition, we have granted our management team an aggregate of 238,749 shares of restricted common stock, which will vest on the third anniversary of the grant date, and an aggregate of 358,125 restricted stock units that will vest on the third anniversary of the grant date only if certain performance metrics are achieved. See “Management—Executive Compensation—Equity Grants.” As a result, as of the date of this prospectus, our management team and directors collectively own approximately 5.7% of our common stock on a fully diluted basis, which we believe aligns their interests with those of our stockholders.

Our Business and Growth Strategies

Our primary business objective is to provide our stockholders with stable cash distributions and an opportunity for value enhancement over time through investments in a diversified mix of healthcare properties, coupled with proactive management and prudent financing of our healthcare property investments. Key elements of our strategy include:

•

Focus on Multiple Types of Acute and Post-Acute Healthcare Properties. We focus on acquiring multiple types of acute and post-acute healthcare properties, including: acute care hospitals, short-stay surgical and specialty hospitals (such as those focusing on orthopedic, heart and other dedicated surgeries and specialty procedures), dedicated specialty hospitals (such as inpatient rehabilitation facilities, long-term acute care hospitals and facilities providing psychiatric care), skilled nursing facilities, large and prominent physician clinics, diagnostic facilities, outpatient surgery centers and facilities that support the aforementioned, such as medical office buildings (including those providing outpatient surgery, diagnostics, physical therapy and physician office space in a single building). We believe that by investing in facilities that span the acute and post-acute spectrum of care, we will be able to adapt to, and capitalize on, changes in the healthcare industry and support, grow and develop long-term relationships with providers that serve the highest number of patients at the highest-yielding end of the healthcare real estate market.

•

Employ Multiple Investment Structures to Maximize Investment Returns. We intend to continue to employ multiple investment structures to maximize investment returns, including: healthcare property purchases with triple-net leases back to the operators, first mortgage loans secured by healthcare properties, mezzanine loans secured by ownership interests in entities that own healthcare properties,

leasehold mortgages, loans to healthcare operators and equity investments in healthcare operators. In addition, we may provide capital to finance the development of healthcare properties, which may lead to the ultimate acquisition of pre-leased properties. We believe that providing operators and developers with a variety of financing options enhances yield, provides a pathway to additional investments and positions us as a favorable capital partner that can accommodate creative and flexible capital structures.

•

Negotiate Well-Structured Net Leases with Strong Coverage. Our primary ownership structure is a facility purchase with a long-term triple-net lease with the healthcare provider. We intend to continue to enter into leases that generally have minimum lease coverage ratio requirements (the ratio of the tenant’s EBITDAR to its annualized base rent) and fixed charge coverage ratio requirements (the ratio of the tenant’s EBITDAR to its annualized fixed charges (rent, interest and current maturities of long-term debt)). For single tenant properties, we also seek to structure our leases with lease terms ranging from 10 to 25 years and rent escalators that provide a steadily growing cash rental stream. Our lease structures are designed to provide us with key credit support for our rents, including, in certain cases, lease deposits, covenants regarding liquidity, minimum working capital and net worth, liens on accounts receivable and other operating assets, and various provisions for cross-default, cross-collateralization and corporate or parent guarantees, when appropriate. We believe these features help insulate us from variability in operator cash flows and enable us to minimize our expenses while we continue to build our portfolio.

•

Leverage Existing and Develop New Operator Relationships . Our management team has long-standing relationships in the healthcare industry through which we have sourced our existing portfolio and properties under contract and under evaluation, and we intend to continue to expand our portfolio by leveraging these existing relationships. Many of our operators have demonstrated a desire, as well as the resources, to grow, and we expect our strong relationships with these operators to lead to other acquisition and investment opportunities going forward. In addition, we intend to develop new relationships with healthcare providers and operators in order to diversify our tenant base and reduce our dependence on any single tenant or operator.

•

Adhere to Rigorous Investment Underwriting Criteria. We have adopted a rigorous investment underwriting process based on extensive analysis and due diligence with respect to both the healthcare real estate and the healthcare service operations. We seek to make investments in healthcare properties that have the following attributes: well-located, visible to traffic, in good physical condition with predictable future capital improvement needs and with a profitable operating history or, if a new or non-stabilized facility, a viable and supportable projection of profitability, a well-qualified and experienced operator or guarantor with a good credit history, and located in a market with economic, demographic and regulatory trends that we believe support increasing facility revenues.

•

Actively Monitor the Performance of Our Facilities and Industry Trends. We actively monitor the financial and operational performance of our tenants and lease guarantors and of the specific facilities in which we invest through a variety of methods, such as reviews of periodic financial statements, operating data and clinical outcomes data, regular meetings with the facility management teams and joint strategic planning with facility operators. Pursuant to the terms of our leases, our tenants are required to provide us with certain periodic financial statements and operating data, and, during the terms of such leases, we conduct joint evaluations of local facility operations and participate in discussions about strategic plans that may ultimately require our approval pursuant to the terms of our lease agreements. Our management team also communicates regularly with their counterparts at our tenants, and others who closely follow the healthcare industry, in order to maintain knowledge about changing regulatory and business conditions. We believe this knowledge, combined with our management team’s experience in the healthcare industry, allows us to anticipate changes in our tenants’ operations in sufficient time to strategically and financially plan for changing economic, market and regulatory conditions.

•

Conservatively Utilize Leverage in Our Investing Activities. We intend to use leverage conservatively, assessing the appropriateness of new equity or debt capital based on market conditions, future cash flows, the creditworthiness of tenants/operators and future rental rates, with the ultimate objective of becoming an issuer of investment grade debt. On July 30, 2015, we entered into an amended and restated $375 million secured revolving credit facility, which is used primarily to fund acquisitions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Secured Revolving Credit Facility.” We intend to target a ratio of debt to gross undepreciated asset value of between 30% and 40%. However, our charter and bylaws do not limit the amount of debt that we may incur and our board of directors has not adopted a policy limiting the total amount of our borrowings. In addition, subject to satisfying the annual distribution requirements applicable to REITs, we intend to target a dividend payout ratio that allows us to retain some of our operating cash flow and thereby reduce our need to rely on additional debt.

Secured Revolving Credit Facility

On July 30, 2015, we entered into an amended and restated $375 million secured revolving credit facility, which replaced our prior $200 million facility. The secured credit facility includes an accordion feature, which allows the total borrowing capacity under the our secured credit facility to be increased to up to $600 million, subject to certain conditions, including obtaining additional commitments from lenders. Upon completion of this offering, amounts outstanding under our secured credit facility will bear interest at the London Interbank Offered Rate, or LIBOR, plus a margin between 2.00% and 2.50% or a base rate plus a margin between 1.00% and 1.50%, in each case depending on our leverage. As of the date of this prospectus, we had $216 million outstanding under our secured credit facility and approximately $29 million of available capacity, which is based on the cost of eligible real estate investments available to collateralize the facility. The amount available to borrow under our secured credit facility will increase with each acquisition of unencumbered healthcare properties. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Secured Revolving Credit Facility.”

Summary Risk Factors

An investment in our common stock is subject to significant risks. You should carefully consider the matters discussed under the section captioned “Risk Factors” beginning on page 29 before deciding to invest in our common stock. These risk factors include but are not limited to the following:

•

We have a limited operating history and limited resources and may not be able to successfully operate our business, continue to implement our investment strategy or generate sufficient revenue to make or sustain distributions to our stockholders.

•

Our growth will depend upon future acquisitions of healthcare properties, and we may be unsuccessful in identifying and consummating attractive acquisitions or taking advantage of other investment opportunities, which would impede our growth and negatively affect our cash available for distribution to stockholders.

•

We may be unable to complete the acquisition of our properties under contract, which would adversely affect our results of operations and ability to make distributions to our stockholders.

•

The success of our investment in Lakeway Hospital depends on improved operating results by the Lakeway Operator and such improved operating results may not occur on the schedule or to the extent that we anticipate, or at all, which could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

•

We face additional risks associated with property development that can render a project less profitable or not profitable at all and, under certain circumstances, prevent completion of development activities once undertaken.

•

BlueMountain has the ability to exercise substantial influence over us, including the approval of certain acquisitions and certain issuances of equity.

•

We depend on key personnel whose continued service is not guaranteed and each of whom would be difficult to replace.

•

We may be unable to source off-market or target-marketed deal flow in the future.

•

Certain tenants/operators account for a significant percentage of the rent we generate from our portfolio.

•

Properties in Texas, California, Nevada and South Carolina account for all of the rent we generate from our portfolio.

•

Reductions in reimbursements from third-party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants/operators, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

•

Reductions in federal government spending, tax reform initiatives or other federal legislation to address the federal government’s projected operating deficit could have a material adverse effect on our tenant operators’ liquidity, financial condition or results of operations.

•

Our secured revolving credit facility restricts our ability to engage in certain business activities, including our ability to incur additional indebtedness, make capital expenditures and make certain investments, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

•

We intend to incur mortgage indebtedness and other borrowings, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

•

Higher mortgage rates and other factors may make it more difficult or more costly for us to finance or refinance properties, which could reduce the number of properties we can acquire or require us to sell properties on terms that are not advantageous to us, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

•

We may be unable to successfully foreclose on the collateral securing real estate-related loans we make, and even if we are successful in our foreclosure efforts, we may be unable to successfully operate, occupy or reposition the underlying real estate, which may adversely affect our ability to recover our investments.

•

Adverse trends in healthcare provider operations may negatively affect our lease revenues, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

•

Our tenants, operators, borrowers and managers may be adversely affected by healthcare regulation and enforcement.

•

Failure to maintain our qualification as a REIT for U.S. federal income tax purposes would subject us to federal income tax on our taxable income at regular corporate rates, which would substantially reduce our ability to make distributions to our stockholders.

Recent Private Placements

Common Stock

On July 31, 2014, we sold an aggregate of 10,351,040 shares of our common stock, at a price per share of $15.00, to certain institutional and individual investors, with FBR Capital Markets & Co., or FBR, acting as initial purchaser/placement agent and, on August 22, 2014, we sold an additional 188,521 shares of our common stock pursuant to the exercise by FBR of its option to purchase shares to cover additional allotments, in each case in reliance upon exemptions from registration provided by Rule 144A, Regulation S and Regulation D under the Securities Act of 1933, as amended, or the Securities Act, which we collectively refer to as the initial private placement. Concurrently with the completion of the initial private placement, on July 31, 2014, we sold an aggregate of 405,833 shares of our common stock, at a price per share of $15.00, to certain of our officers, directors and their family members in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation D thereunder, which we refer to as the management/director private placement. We refer to the initial private placement and the management/director private placement collectively as the common stock private placements. The aggregate net proceeds to us from the common stock private placements, after deducting the initial purchaser’s discount and placement fee and offering expenses payable by us, were approximately $151.7 million.

BlueMountain purchased 2,583,686 shares of our common stock in the initial private placement and, as of the date of this prospectus, owns 23.1% of the outstanding shares of our common stock. In connection with its purchase, we granted BlueMountain the right initially to designate two of the members of our board of directors, whose terms began on July 31, 2014, and to continue to designate two directors or one director in the future, subject to certain ownership requirements. See “Certain Relationships and Related Transactions—BlueMountain Rights Agreement.” In addition, two of the members of our investment committee are and will be appointed by BlueMountain so long as BlueMountain is entitled to two nominees to our board of directors, and one member of the investment committee will be appointed by BlueMountain so long as BlueMountain is entitled to one nominee to our board of directors. One of BlueMountain’s designees will have the right to serve on our risk committee for so long as such individual serves on our board of directors. In addition, for as long as BlueMountain owns greater than 10% of the outstanding shares of our common stock, the vote of at least one of the BlueMountain designees on our board of directors shall be required in order for our board of directors to approve the issuance of any shares of our common stock for consideration less than the lower of (i) the then-current market price of our common stock if our common stock is then listed for trading on a national securities exchange or (ii) $15.00 per share, in each case as may be adjusted for any stock splits, stock dividends or other similar recapitalizations. In connection with this offering, BlueMountain has the right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its ownership percentage in us following the completion of this offering, without payment by us of any underwriting discount or commissions.

Series B Preferred Stock

In March and April of 2015, we issued an aggregate of 125,000 shares of newly classified 7.875% Series B Redeemable Cumulative Preferred Stock, or our Series B Preferred Stock, to Carter/Validus Operating Partnership, L.P., or the Carter Validus Operating Partnership, for gross proceeds of $125.0 million, which we used to fund our acquisitions in the first quarter of 2015 and repay amounts outstanding under our secured credit facility. We intend to use a portion of the net proceeds from this offering to redeem all of the Series B Preferred Stock, which is redeemable at any time at our option, and must be redeemed in connection with a change of control of us or the initial public offering of our common stock, in each case at the $1,000 liquidation preference, plus accumulated and unpaid dividends and a special redemption dividend equal to 1% of the liquidation preference if redeemed prior to December 10, 2015, 3% of the liquidation preference if redeemed after December 10, 2015 but prior to March 10, 2016 and 5% of the liquidation preference if redeemed on or after March 10, 2016.

Our Structure

We conduct our business through an umbrella partnership REIT, or UPREIT, structure, consisting of our operating partnership, MedEquities Realty Operating Partnership, LP, and subsidiaries of our operating partnership, including our taxable REIT subsidiary, or TRS, MedEquities Realty TRS, LLC. Through our wholly owned limited liability company, MedEquities OP GP, LLC, we are the sole general partner of our operating partnership, and we presently own all of the limited partnership units of our operating partnership, or OP units. In the future, we may issue OP units to third parties in connection with healthcare property acquisitions, as compensation or otherwise.

Holders of OP units of our operating partnership, other than us, will, after a one-year holding period, subject to earlier redemption in certain circumstances, be able to redeem their OP units for a cash amount equal to the then-current value of our common stock or, at our option, for shares of our common stock on a one-for-one basis, subject to adjustments for stock splits, dividends, recapitalizations and similar events. Holders of OP units will receive distributions equivalent to the dividends we pay to holders of our common stock, but holders of OP units will have no voting rights, except in certain limited circumstances. As the sole owner of the general partner of our operating partnership, we have the exclusive power to manage and conduct our operating partnership’s business, subject to the limitations described in the Agreement of Limited Partnership of our operating partnership. See “Our Operating Partnership and the Partnership Agreement.”

The following chart illustrates our organizational structure, after giving effect to this offering (including the application of the net proceeds as described in “Use of Proceeds”):

LOGO

Our Tax Status

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014. Our ability to maintain our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code of 1986, as amended, or the Code, relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our stock. We believe that, commencing with our short taxable year ended December 31, 2014, we have been organized in conformity with the requirements for qualification as a REIT under the Code, and we intend to continue to operate in such a manner.

As a REIT, we generally will not be subject to federal income tax on the REIT taxable income that we currently distribute to our stockholders, but taxable income generated by any TRSs will be subject to federal, state and local income tax. Under the Code, REITs are subject to numerous organizational and operational requirements, including a requirement that they distribute annually at least 90% of their REIT taxable income, determined without

regard to the deduction for dividends paid and excluding net capital gains, to their stockholders. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, our income would be subject to federal income tax at regular corporate rates, and we would be precluded from qualifying for treatment as a REIT until the fifth calendar year following the year in which we failed to qualify. Even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some federal, state and local taxes on our income and property and to federal income and excise taxes on our undistributed income.

Distribution Policy

We intend to continue to make regular quarterly distributions of all, or substantially all, of our REIT taxable income to our stockholders. For the period from April 23, 2014 (inception) to December 31, 2014, and for the six months ended June 30, 2015, we declared total dividends to our common stockholders of $2.2 million and $1.9 million, respectively. On August 13, 2015, our board of directors declared a dividend of $0.17 per share, payable on September 9, 2015 to stockholders of record on August 27, 2015.

We intend to pay a pro rata initial distribution with respect to the quarter during which this offering occurs, based on a distribution rate of $ per share of our common stock for a full quarter. On an annualized basis, this would be $ per share, or an annual distribution rate of approximately % based on an assumed initial public offering price at the midpoint of the price range set forth on the front cover of this prospectus. This initial annual distribution rate will represent approximately % of estimated cash available for distribution for the 12 months ending June 30, 2016. We do not intend to reduce the annualized distribution per share of our common stock if the underwriters exercise their option to purchase additional shares. We intend to maintain a distribution rate for the 12-month period following completion of this offering that is at or above our initial distribution rate unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in determining our initial distribution rate. Any future distributions we make will be at the sole discretion of our board of directors and will depend upon a number of factors, including our actual and projected results of operations, the cash flow generated by our operations, funds from operations, or FFO, AFFO, liquidity, our operating expenses, our debt service requirements, capital expenditure requirements for the properties in our portfolio, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, restrictions on making distributions under Maryland law and such other factors as our board of directors deems relevant. We cannot assure you that our estimated distributions will be made or sustained or that our board of directors will not change our distribution policy in the future.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. For as long as we are an emerging growth company, among other things:

•

we are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

•

we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

•

we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions until December 31, 2020 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenues, have more than $700 million in market value of shares of our common stock held by non-affiliates, or issue more than $1 billion of non-convertible debt securities over a three-year period. We have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards under Section 102(b) of the JOBS Act.

Selling Stockholders

Pursuant to, and subject to the terms and conditions of, the registration rights agreement described below, persons who purchased shares of our common stock in the initial private placement and their respective transferees have the right to sell their shares in this offering, subject to customary terms and conditions. We are including in this prospectus shares of our common stock in this offering to be sold by certain selling stockholders.

Registration Rights and Lock-Up Agreements

Pursuant to the registration rights agreement between us and the initial purchaser/placement agent for the initial private placement in July 2014, which we refer to as the registration rights agreement, we are required, among other things, to use our commercially reasonable efforts to cause a resale shelf registration statement registering all of the shares of our common stock sold in the initial private placement that are not sold by selling stockholders in this offering to become effective under the Securities Act, as promptly as practicable after the filing of the resale shelf registration statement, and in any event, subject to certain exceptions, no later than December 31, 2015 (or, if we complete this offering prior to December 31, 2015, on a date that is on or before 60 days after the completion of this offering), and to maintain the resale shelf registration statement continuously effective under the Securities Act for a specified period. The original deadline under the registration rights agreement was extended by the stockholders in accordance with the terms of the registration rights agreement.

Subject to certain exceptions, each of our executive officers and members of our board of directors has entered into a lock-up agreement with respect to shares of our common stock and securities exchangeable or exercisable for shares of our common stock, restricting the direct or indirect sale of such securities for 180 days after the date of this prospectus, without the prior written consent of FBR and J.P. Morgan. Each selling stockholder also has agreed with us not to directly or indirectly sell, offer to sell, grant any option or otherwise transfer or dispose of shares of our common stock not sold in this offering for 180 days after the date of this prospectus, without the prior written consent of FBR and J.P. Morgan. Additionally, all of our stockholders that purchased shares in the initial private placement and have not elected to include their shares for resale in this offering have agreed with us not to directly or indirectly sell, offer to sell, grant any option or otherwise transfer or dispose of shares of our common stock for 60 days after the date of this prospectus without the prior written consent of FBR and J.P. Morgan. See “Underwriting—Lockup Agreements.”

Corporate Information

Our principal executive offices are located at 3100 West End Avenue, Suite 1000, Nashville, TN 32703. Our telephone number at our executive offices is (615) 627-4710 and our corporate website is www.medequities.com. The information contained on, or accessible through, our website is not incorporated by reference into, and does not form a part of, this prospectus.

THE OFFERING

Common stock offered by us

shares, plus up to an additional shares that we may issue and sell upon exercise of the underwriters’ over-allotment option.

Common stock offered by our selling stockholders

Common stock to be outstanding after this offering and the BlueMountain Private Placement

shares ⁽¹⁾

Use of proceeds

We estimate that the net proceeds from this offering, after deducting the underwriting discount and commissions and estimated offering expenses payable by us, will be approximately $ million ($ million if the underwriters exercise their over-allotment option in full). The net proceeds we will receive from the BlueMountain Private Placement will be $ million. We will contribute the net proceeds from this offering and the BlueMountain Private Placement to our operating partnership. Our operating partnership intends to use the net proceeds from this offering and the BlueMountain Private Placement as follows: (i) approximately $126.3 million to redeem our Series B Preferred Stock; (ii) approximately $ million to repay amounts outstanding under our secured credit facility; (iii) approximately $1.4 million to acquire Vibra Rehabilitation Hospital of Amarillo; (iv) approximately $0.1 million to redeem our 12.5% Series A Redeemable Cumulative Preferred Stock, or our Series A Preferred Stock; and (v) the remaining net proceeds, if any, for general corporate purposes, including working capital and future acquisitions.

Risk factors

Investing in our common stock involves risks. You should carefully read and consider the information set forth under the heading “Risk Factors” and all other information in this prospectus before making a decision to invest in our common stock.

Proposed NYSE listing symbol

MRT

Restrictions on ownership of our common stock

Our charter provides that, subject to certain exceptions, no person may beneficially or constructively own more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding shares of common stock. See “Description of Capital Stock—Restrictions on Ownership and Transfer.”

(1)

Includes an aggregate of 287,351 restricted shares of common stock previously granted to our executive officers, non-employee directors and certain other employees. Excludes (i) shares of our common stock issuable upon the exercise of the underwriters’ over-allotment option in full, (ii) 358,125 restricted stock units previously granted to our executive officers and certain other employees and (iii) 709,747 shares of our common stock reserved for future issuance under our Amended and Restated 2014 Equity Incentive Plan, or our 2014 Equity Incentive Plan.

SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following tables set forth summary selected financial and operating data based on (i) our historical consolidated balance sheets as of June 30, 2015 and December 31, 2014, (ii) our unaudited pro forma consolidated balance sheet as of June 30, 2015, (iii) our historical consolidated statements of operations for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014 and (iv) our unaudited pro forma consolidated statements of operations for the six months ended June 30, 2015 and the year ended December 31, 2014. We have not presented any other historical financial data because, prior to the completion of the common stock private placements on July 31, 2014, we did not have any corporate activity since our formation other than the issuance of 1,000 shares of our common stock in connection with the initial capitalization of the company on May 5, 2014.

The unaudited pro forma financial and operating data have been derived from our historical consolidated financial statements. The unaudited pro forma consolidated balance sheet as of June 30, 2015 is presented to reflect adjustments to our historical balance sheet as if this offering, the BlueMountain Private Placement and certain real estate property acquisitions described herein were completed on June 30, 2015. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2015 and the year ended December 31, 2014 are presented as if this offering, the common stock private placements, the BlueMountain Private Placement and certain real estate property acquisitions and healthcare-related debt investments described herein were completed on the first day of the annual period presented.

You should read the following summary selected financial and operating data in conjunction with: (i) our historical consolidated balance sheets as of June 30, 2015 and December 31, 2014 and our historical consolidated statements of operations for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014; (ii) our unaudited pro forma consolidated financial statements; (iii) the audited and unaudited statements of revenues and certain direct operating expenses of certain acquired properties and; and (iv) the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections in this prospectus. We have based the unaudited pro forma adjustments on available information and assumptions that we believe are reasonable. The following unaudited pro forma financial and operating data are presented for informational purposes only and are not necessarily indicative of what our actual financial position would have been as of June 30, 2015 assuming this offering, the BlueMountain Private Placement and certain real estate property acquisitions had all been completed on June 30, 2015, what actual results of operations would have been for the six months ended June 30, 2015 and the year ended December 31, 2014 assuming this offering, the common stock private placements, the BlueMountain Private Placement and certain real estate property acquisitions and healthcare-related debt investments were completed on the first day of the annual period presented, and are not indicative of future results of operations or financial condition and should not be viewed as indicative of future results of operations or financial condition.

Consolidated Balance Sheet Data

(in thousands)


	As of June 30, 2015			Historical as of December 31, 2014
	Pro Forma	Historical		Historical as of December 31, 2014
	(unaudited)	(unaudited)
Assets
Total real estate properties, net	$	$	310,709	$	111,900
Mortgage notes receivable, net			27,736		77,727
Total assets			359,119		211,033

Liabilities and Equity
Total liabilities			86,339		61,156
Total stockholders’ equity			270,463		149,877
Total liabilities and equity	$	$	359,119	$	211,033

Consolidated Income Statement Data

(in thousands, except per share data)


	Six months ended June 30, 2015						Pro Forma for year ended December 31, 2014 (unaudited)			Historical for the period from April 23, 2014 (inception) to December 31, 2014
	Pro Forma (unaudited)			Historical (unaudited)
Revenues
Rental income	$	29,228		$	13,969		$	58,409		$	4,316
Interest on mortgage notes receivable		455			1,670			1,099			1,078
Interest on note receivable		224			224			53			53

Total revenues		29,907			15,863			59,561			5,447
Expenses
Depreciation and amortization		6,546			3,246			13,037			1,273
Property related		579			579			1,080			308
Acquisition costs		194			194			192			192
Start-up costs		—			—			888			888
Franchise, excise, and other taxes		228			228			72			72
General and administrative		3,671			3,671			3,626			2,391

Total operating expenses		11,218			7,918			18,895			5,124

Operating income		18,689			7,945			40,666			323
Other income (expense)
Interest and other income		9			9			17			17
Interest expense					(1,816	)					(317	)

Net other income (expense)					(1,807	)					(300	)

Net income	$			$	6,138		$			$	23

Less: Preferred Stock Dividends		—			(2,905	)		—			—
Less: Net income attributable to non-controlling interests		(2,575	)		(1,317	)		(5,142	)		—

Net income attributable to common stockholders					1,916		$			$	23

Earnings per share—basic and diluted
Net income (loss) attributable to common stockholders	$			$	0.17		$			$	(0.00	)
Weighted average shares outstanding:
Basic and diluted					11,092						10,918
Dividends declared per common share				$	0.17					$	0.20

Other Data

(in thousands, unaudited)


	Six months ended June 30, 2015			Pro Forma for year ended December 31, 2014	Historical for the period from April 23, 2014 (inception) to December 31, 2014
	Pro Forma	Historical		Pro Forma for year ended December 31, 2014
FFO attributable to common stockholders ⁽¹⁾		$	4,922	$	$	1,291
AFFO attributable to common stockholders ⁽¹⁾			4,262			2,545

(1)

For definitions and reconciliations of net income (loss) attributable to common stockholders to FFO and AFFO, as well as a statement disclosing the reasons why our management believes that FFO and AFFO provide useful information to investors and, to the extent material, any additional purposes for which our management uses FFO and AFFO, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

RISK FACTORS

An investment in our common stock involves risks. Before making an investment decision, you should carefully consider the following risk factors, which address the material risks concerning our business and an investment in our common stock, together with the other information contained in this prospectus. If any of the risks discussed in this prospectus were to occur, our business, prospects, financial condition, liquidity, FFO, AFFO and results of operations and our ability make distributions to our stockholders and achieve our goals could be materially and adversely affected, the value of our common stock could decline significantly and you could lose all or a part of your investment. Some statements in this prospectus, including statements in the following risk factors constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Growth Strategy

We were organized in April 2014 and commenced operations upon completion of the initial private placement in July 2014. We have a limited operating history and are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objectives and that the value of your investment could decline substantially. Our ability to achieve attractive returns is dependent on our ability to generate sufficient cash flow to pay our investors attractive distributions and to achieve capital appreciation, and we cannot assure you that we will be able to do either. In addition, there can be no assurance that we will be able to generate sufficient revenue from operations to pay our operating expenses and make or sustain distributions to stockholders. Our limited resources may also materially and adversely impact our ability to successfully operate our portfolio or implement our business plan successfully. As a result of our failure to successfully operate our business, implement our investment strategy or generate sufficient revenue to make or sustain distributions to stockholders, the value of your investment could decline significantly or you could lose a portion of or all of your investment.

Our ability to expand through acquisitions is integral to our business strategy and requires that we identify and consummate suitable acquisition or investment opportunities that meet our investment criteria and are compatible with our growth strategy. We may be unable to acquire any of the properties identified as potential acquisition opportunities under “Our Business—Descriptions of Properties and Investments in Our Portfolio—Properties under Contract” and “—Acquisitions under Evaluation.” In addition, we may not be successful in identifying and consummating additional acquisitions or investments in healthcare properties that meet our investment criteria, which would impede our growth. Our ability to acquire healthcare properties on favorable terms, or at all, may be adversely affected by the following significant factors:

•

competition from other real estate investors, including public and private REITs, private equity investors and institutional investment funds, many of whom may have greater financial and operational resources and lower costs of capital than we have and may be able to accept more risk than we can prudently manage;

•

competition from other potential acquirers, which could significantly increase the purchase prices for properties we seek to acquire;

•

we may incur significant costs and divert management attention in connection with evaluating and negotiating potential acquisitions, including ones that we are subsequently unable to complete;

•

even if we enter into agreements for the acquisition of properties, these agreements are subject to customary closing conditions, including the satisfactory results of our due diligence investigations; and

•

we may be unable to finance the acquisition on favorable terms, or at all.

Our failure to identify and consummate attractive acquisitions or take advantage of other investment opportunities without substantial expense, delay or other operational or financial problems, would impede our growth and negatively affect our results of operations and cash available for distribution to our stockholders.

We may be unable to complete the acquisition of our properties under contract, which would adversely affect our results of operations and ability to make distributions to our stockholders.

We cannot assure you that we will complete the acquisition of our properties under contract, on the terms described in this prospectus, or at all, because each of these transactions is subject to a variety of conditions, such as the execution of a mutually agreed-upon triple-net lease between us and the proposed tenant, our satisfactory completion of due diligence, the receipt of consents from third parties, including regulatory agencies in the case of Graham Oaks, and the satisfaction of customary closing conditions. If we are unable to complete the acquisition of our properties under contract, we would still incur the costs associated with pursuing that investment but without achieving the corresponding revenues, which would adversely affect our results of operations and ability to make distributions to our stockholders. Furthermore, you would then not be able to evaluate the other acquisitions and investments we may make with the remaining net proceeds of this offering, and we may not be able to invest the remaining net proceeds on acceptable terms or timeframes, or at all, which may harm our results of operations, cash flow and ability to make distributions to our stockholders.

Certain tenants/operators in our portfolio account for a significant percentage of the rent we expect to generate from our portfolio, and the failure of any of these tenants/operators to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

The successful performance of our real estate investments is materially dependent on the financial stability of our tenants/operators. As of the date of this prospectus, approximately 96.8% of the annualized base rent in our portfolio is generated by GruenePointe (27.1%), the Lakeway Operator (22.5%), Hunt Valley Holdings LLC, or Fundamental Healthcare (19.1%), Life Generations (16.7%) and Vibra Healthcare, LLC, or Vibra Healthcare (11.4%). Upon the acquisition of all of our properties under contract, we expect approximately 97.1% of the annualized base rent in our portfolio will be generated by GruenePointe (26.8%), the Lakeway Operator (20.6%), Life Generations (18.1%), Fundamental Healthcare (17.5%) and Vibra Healthcare (14.1%). Fundamental Healthcare and certain of its subsidiaries and the Lakeway Operator are defendants in significant litigation, which, if determined adversely against them, could have a material and adverse effect on their financial condition, cash flow and ability to meet their obligations under their leases or guarantees with us. Lease payment defaults by GruenePointe, Fundamental Healthcare, the Lakeway Operator, Life Generations, Vibra Healthcare or other significant tenants/operators or declines in their operating performance could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. If the property is subject to a mortgage, a default by a significant tenant/operator on its lease payments to us or a significant decline in operating performance at a facility may result in a foreclosure on the property if we are unable to find an alternative source of revenue to meet mortgage payments. In the event of a tenant/operator default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property. Further, we cannot assure you that we will be able to re-lease the property for the rent previously received, or at all, or that lease terminations will not cause us to sell the property at a loss. The result of any of the foregoing risks could materially and adversely affect our business, financial conditions and results of operations and our ability to make distributions to our stockholders.

On February 3, 2015, we obtained fee simple ownership of Lakeway Hospital through a negotiated, non-judicial foreclosure for a total investment of $75.0 million. The Lakeway Operator is not currently generating sufficient cash flow to pay the stabilized monthly rent under its lease with us and its ability to do so depends on improved operating results of the Lakeway Operator as a result of its ownership and management restructuring and the relocation of the neurosurgical physicians group to Lakeway Hospital. Lakeway Hospital, which opened in April 2012, was funded with $35.0 million of preferred notes, equity and a $167.0 million mortgage loan that was guaranteed by HUD. When the Lakeway Operator defaulted on debt service payments in August 2013, HUD assumed control of the loan and held an auction in December 2014 through which we acquired the note for $50.0 million. The operating results of the Lakeway Operator may not improve on the schedule or to the extent that we anticipate, and the Lakeway Operator may default on its lease payments or other obligations to us, which could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. In the event of a default by the Lakeway Operator, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and attracting a new tenant to Lakeway Hospital. Furthermore, we cannot assure you that we will be able to re-lease the facility for the rent previously received, or at all, or that such a lease termination would not cause us to sell the property at a loss.

Recently developed properties may take longer than expected to achieve stabilized operating levels, if at all, which could adversely affect our business and results of operations.

Recently developed properties, such as Mountain’s Edge Hospital and Mira Vista, may take longer than expected to achieve stabilized operating levels, if at all. To the extent such facilities fail to reach stabilized operating levels or achieve stabilization later than expected, it could materially adversely affect our tenants’ abilities to make payments to us under their leases and thus adversely affect our business and results of operations.

We may face additional risks associated with property development that can render a project less profitable or not profitable at all and, under certain circumstances, prevent completion of development activities once undertaken.

We may determine in the future to develop certain healthcare properties directly rather than acquire properties upon completion of the development. Large-scale, ground-up development of healthcare properties presents additional risks for us, including risks that:

•

a development opportunity may be abandoned after expending significant resources resulting in the loss of deposits or failure to recover expenses already incurred;

•

the development and construction costs of a project may exceed original estimates due to increased interest rates and higher materials, transportation, labor, leasing or other costs, which could make the completion of the development project less profitable;

•

construction and/or permanent financing may not be available on favorable terms or at all;

•

the project may not be completed on schedule as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, regulatory hurdles, civil unrest and terrorism or war, which can result in increases in construction costs and debt service expenses or provide tenants or operators with the right to terminate pre-construction leases; and

•

occupancy rates and rents at a newly completed property may not meet expected levels and could be insufficient to make the property profitable.

These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development activities once undertaken, any of which could have a material adverse effect on our business, results of operations and financial condition.

Our real estate investments are, and are expected to continue to be, concentrated in healthcare properties, which could adversely affect our operations relative to a more diversified portfolio of assets.

We invest in a diversified mix of healthcare facilities and healthcare-related real estate debt investments. We are subject to risks inherent in concentrating investments in real estate, and the risks resulting from a lack of diversification may become even greater as a result of our business strategy to concentrate our investments in the healthcare sector. Any adverse effects that result from these risks could be more pronounced than if we diversified our investments outside of healthcare properties. Given our concentration in this sector, our tenant base is especially concentrated and dependent upon the healthcare industry generally, and any industry downturn or negative regulatory or governmental development could adversely affect the ability of our tenants to make lease payments and our ability to maintain current rental and occupancy rates. Our tenant mix could become even more concentrated if a significant portion of our tenants practice in a particular medical field or are reliant upon a particular healthcare delivery system. Accordingly, a downturn in the healthcare industry generally, or in the healthcare related facility specifically, could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We depend on key personnel whose continued service is not guaranteed and each of whom would be difficult to replace.

We depend on the efforts and expertise of Mr. McRoberts, our chief executive officer and chairman of our board of directors, Mr. Harlan, our president and chief operating officer and member of our board of directors, and Mr. Walraven, our chief financial officer, to execute our business strategy. If one or more of these individuals were to no longer be employed by us, we may be unable to find suitable replacements. If we were to lose the services of one or more of our executive officers and were unable to find suitable replacements, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially and adversely affected.

We may be unable to source off-market or target-marketed transactions in the future, which could materially impede our growth.

A main component of our investment strategy is to acquire healthcare properties in off-market or target-marketed transactions. If we cannot obtain off-market or target-marketed deal flow in the future or on a consistent basis, our ability to locate and acquire healthcare properties at attractive prices could be adversely affected, which could materially impede our growth.

Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all, which could limit our ability, among other things, to meet our capital and operating needs or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.

In order to qualify and maintain our qualification as a REIT, we are required under the Code, among other things, to distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we intend to rely on third-party sources to fund our capital needs. We may not be able to obtain such financing on favorable terms or at all and any additional debt we incur will increase our leverage and likelihood of default. Our access to third-party sources of capital depends, in part, on:

•

general market conditions;

•

the market’s perception of our business and growth potential;

•

our current debt levels;

•

our current and expected future earnings;

•

our cash flow and cash distributions; and

•

the market price per share of our common stock.

If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet the capital and operating needs of our existing properties, satisfy our debt service obligations or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.

We have experienced and expect to continue to experience rapid growth and may not be able to adapt our management and operational systems to respond to the integration of the healthcare properties we expect to acquire without unanticipated disruption or expense, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our stockholders.

We have experienced and expect to continue to experience rapid growth following this offering through the acquisition of our properties under contract and other healthcare properties we are currently evaluating. We may not be able to adapt our management, administrative, accounting and operational systems or hire and retain sufficient operational staff to manage such acquisitions without operating disruptions or unanticipated costs. Our failure to successfully manage our growth could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our healthcare properties and tenants/operators may be unable to compete successfully.

We expect our healthcare properties often will face competition from nearby hospitals and other healthcare properties that provide comparable services. Some of those competing facilities are owned by governmental agencies and supported by tax revenues, and others are owned by nonprofit corporations and may be supported to a large extent by endowments and charitable contributions. These types of support are not available to our properties.

Similarly, our tenants/operators may face competition from other medical practices in nearby hospitals and other medical facilities, including newer healthcare facilities. Our tenants/operators’ failure to compete successfully with these other practices could adversely affect the operating performance of our facilities. Further, from time to time and for reasons beyond our control, referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients. This could also materially adversely affect our tenants/operators’ ability to meet our operating performance expectations and make rental payments to us or, for properties leased to our TRS, our TRS’s ability to make rental payments to us, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

A high concentration of our properties in a particular facility type magnifies the effects of events that may adversely impact this particular facility type.

We intend to acquire income-producing healthcare properties diversified by facility type. However, as of the date of this prospectus, including our properties under contract, approximately 52.0% and 27.3% of our total annualized base rent is derived from skilled nursing facilities and acute care hospitals, respectively. As such, any adverse situation that disproportionately affects these facility types would have a magnified adverse effect on our portfolio.

Properties in Texas, California, Nevada and South Carolina account for all of the rent we generate from our portfolio.

Upon the acquisition of all of our properties under contract, we expect all of our annualized base rent to derive from properties located in Texas (57.1%), California (28.5%), Nevada (10.5%) and South Carolina (3.9%). As a result of this geographic concentration, we are particularly exposed to downturns in the economies of, as well as other changes in the real estate and healthcare industries in, these geographic areas. Any material change in the current payment programs or regulatory, economic, environmental or competitive conditions in these geographic areas could have a disproportionate effect on our overall business results. In the event of negative economic or other changes in these geographic areas, our business, financial condition and results of operations and our ability to make distributions to our stockholders may be adversely affected.

We face potential adverse consequences of bankruptcy or insolvency by our tenants, operators, borrowers, managers and other obligors.

We are exposed to the risk that our tenants, operators, borrowers, managers or other obligors could become bankrupt or insolvent. Although our lease, loan and management agreements will provide us with the right to exercise certain remedies in the event of default on the obligations owing to us or upon the occurrence of certain insolvency events, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. For example, a debtor-lessee may reject its lease with us in a bankruptcy proceeding. In such a case, our claim against the debtor-lessee for unpaid and future rents would be limited by the statutory cap of the U.S. Bankruptcy Code. This statutory cap could be substantially less than the remaining rent actually owed under the lease, and any claim we have for unpaid rent might not be paid in full. In addition, a debtor-lessee may assert in a bankruptcy proceeding that its lease should be re-characterized as a financing agreement. If such a claim is successful, our rights and remedies as a lender, compared to a landlord, are generally more limited. In the event of an obligor bankruptcy, we may also be required to fund certain expenses and obligations (e.g., real estate taxes, debt costs and maintenance expenses) to preserve the value of our properties, avoid the imposition of liens on our properties or transition our properties to a new tenant, operator or manager. As a result, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be adversely affected if an obligor becomes bankrupt or insolvent.

Long-term leases may result in below market lease rates over time, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We have entered into long-term leases with tenants/operators at all of our single-tenant properties. Our long-term leases provide for rent to increase over time. However, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of such long-term leases at levels such that even after contractual rental increases, the rent under our long-term leases could be less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially and adversely affected.

We may incur additional costs in acquiring or re-leasing properties, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may invest in properties designed or built primarily for a particular tenant/operator of a specific type of use known as a single-user facility. If the tenant/operator fails to renew its lease or defaults on its lease obligations, we may not be able to readily market a single-user facility to a new tenant/operator without making substantial capital improvements or incurring other significant costs. We also may incur significant litigation costs in enforcing our rights against the defaulting tenant/operator. These consequences could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases.

We cannot predict whether our tenants will renew existing leases beyond their current terms. If any of our leases are not renewed upon expiration, we would attempt to lease those properties to another tenant. In case of non-renewal, we generally expect to have advance notice before expiration of the lease term to arrange for repositioning of the properties and our tenants are required to continue to perform all of their obligations (including the payment of all rental amounts) for the non-renewed assets until such expiration. However, following expiration of a lease term or if we exercise our right to replace a tenant in default, rental payments on the related properties could decline or cease altogether while we reposition the properties with a suitable replacement tenant. We also might not be successful in identifying suitable replacement tenants or entering into leases with new tenants on a timely basis or on terms as favorable to us as our current leases, or at all, and we may be required to fund certain expenses and obligations (e.g., real estate taxes, debt costs and maintenance expenses) to preserve the value of, and avoid the imposition of liens on, our properties while they are being repositioned. Our ability to reposition our properties with a suitable tenant could be significantly delayed or limited by state licensing, receivership, certificate of need or other laws, as well as by the Medicare and Medicaid change-of-ownership rules. We could also incur substantial additional expenses in connection with any licensing, receivership or change-of-ownership proceedings. In addition, our ability to locate suitable replacement tenants could be impaired by the specialized healthcare uses or contractual restrictions on use of the properties, and we may be required to spend substantial amounts to adapt the properties to other uses. Any such delays, limitations and expenses could adversely impact our ability to collect rent, obtain possession of leased properties or otherwise exercise remedies for tenant default and could have a material adverse effect on us. In addition, if we are unable to re-let the properties to healthcare operators with the expertise necessary to operate the type of properties in which we intend to invest, we may be forced to sell the properties at a loss due to the repositioning expenses likely to be incurred by potential purchasers.

All of these risks may be greater in smaller markets, where there may be fewer potential replacement tenants, making it more difficult to replace tenants, especially for specialized space, and could have a material adverse effect on us.

If we indirectly invest in healthcare operators, we will be subject to additional risks related to healthcare operations, which could have a material adverse effect on our results of operations.

We may invest in hospitals or other providers that are tenants of our properties, structured, where applicable, in compliance with the REIT Investment and Diversification and Empowerment Act of 2007, or RIDEA, or other applicable REIT laws or regulations. If so, we will be exposed to various operational risks with respect to those operating properties that may increase our costs or adversely affect our ability to generate revenues. These risks include fluctuations in patient volume and occupancy, Medicare and Medicaid reimbursement, if applicable, and private pay rates; economic conditions; competition; federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards; the availability and increases in cost of general and professional liability insurance coverage; federal, state and local regulations; the costs associated with government investigations and enforcement actions and False Claim Act litigation; the availability and increases in cost of labor (as a result of unionization or otherwise); and other risks applicable to operating businesses. Any one or a combination of these factors may adversely affect our revenue and operations.

We may be unable to secure funds for future capital improvements, which could limit our ability to attract or replace tenants/operators, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Although under our typical lease structure our operators generally are responsible for capital improvement expenditures, it is possible that an operator may not be able to fulfill its obligations to keep the facility in good operating condition. Further, we may be responsible for capital improvement expenditures on such facilities after

the terms of the triple-net leases expire. In addition, when tenants/operators do vacate their space, it is common that, in order to attract replacement tenants/operators, we will be required to expend substantial funds for improvements and, for our leased properties, leasing commissions related to the vacated space. Such improvements may require us to incur substantial capital expenditures. If we have not established capital reserves for such capital improvements, we will have to obtain financing from other sources, which may not be available on attractive terms or at all. We may also have future financing needs for other capital improvements to refurbish or renovate our properties. If we need to secure financing sources for capital improvements in the future, but are unable to secure such financing or are unable to secure financing on terms we feel are acceptable, we may be unable to make capital improvements or we may be required to defer such improvements. If this happens, it may cause one or more of our properties to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased cash flows as a result of fewer potential tenants/operators being attracted to the property or existing tenants/operators not renewing their leases or operating agreements, as the case may be. If we do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to our properties, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on our tenants and operators and on us.

Some of our tenants and operators may rely on reimbursement from third-party payors, including the Medicare and Medicaid programs, for substantially all of their revenues. Federal and state legislators and regulators have adopted or proposed various cost-containment measures that would limit payments to healthcare providers, and budget crises and financial shortfalls have caused states to implement or consider Medicaid rate freezes or cuts. Private third-party payors have also continued their efforts to control healthcare costs. We cannot assure you that adequate reimbursement levels will be available for services to be provided by our tenants and operators that currently depend on Medicare, Medicaid or private payor reimbursement. Significant limits by governmental and private third-party payors on the scope of services reimbursed or on reimbursement rates and fees—whether from sequestration, alternatives to sequestration or future legislation or administrative actions—could have a material adverse effect on the liquidity, financial condition and results of operations of certain of our tenants and operators, which could affect adversely their ability to make rental payments under, and otherwise comply with the terms of, their leases with us.

Reductions in federal government spending, tax reform initiatives or other federal legislation to address the federal government’s projected operating deficit could have a material adverse effect on our operators’ liquidity, financial condition or results of operations.

President Obama and members of the U.S. Congress have approved or proposed various spending cuts and tax reform initiatives that have resulted or could result in changes (including substantial reductions in funding) to Medicare, Medicaid or Medicare Advantage Plans. Any such existing or future federal legislation relating to deficit reduction that reduces reimbursement payments to healthcare providers could have a material adverse effect on certain of our operators’ liquidity, financial condition or results of operations, which could adversely affect their ability to satisfy their obligations to us and could have a material adverse effect on us.

There are inherent risks associated with real estate investments and with the real estate industry, each of which could have an adverse impact on our financial performance and the value of our properties.

By owning our common stock, you will be subject to the risks associated with the ownership of real properties, including risks related to:

•

changes in national, regional and local conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence, liquidity concerns and other adverse business concerns;

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changes in local conditions, such as an oversupply of, reduction in demand for, or increased competition among, healthcare properties;

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changes in interest rates and the availability of financing;

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the attractiveness of our facilities to healthcare providers; and

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changes in laws and governmental regulations, including those governing real estate usage, zoning and taxes.

Any of these factors could adversely impact our financial performance and the value of our properties.

The illiquidity of real estate investments could significantly impede our ability to respond to changing economic, financial and investment conditions, which could adversely affect our cash flows and results of operations.

Real estate investments are relatively illiquid and, as a result, we will have a limited ability to vary our portfolio in response to changes in economic, financial and investment conditions. We will also have a limited ability to sell assets in order to fund working capital and similar capital needs. In addition, healthcare properties are special purpose properties that could not be easily converted to general residential, retail or office use without significant expense. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. We also may be required to expend significant funds to correct defects or to make improvements before a property can be sold, and we cannot assure you that we will have funds available to correct those defects or to make those improvements. Our inability to dispose of assets at opportune times or on favorable terms could adversely affect our cash flows and results of operations.

Moreover, the Code imposes restrictions on a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies. In particular, the tax laws applicable to REITs require that we hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interests. Therefore, we may not be able to vary our portfolio promptly in response to economic or other conditions or on favorable terms, which may adversely affect our cash flows, our ability to make distributions to our stockholders and the market price of our common stock.

We may structure acquisitions of property in exchange for OP units in our operating partnership on terms that could limit our liquidity or our flexibility or require us to maintain certain debt levels that otherwise would not be required to operate our business.

We may acquire certain properties by issuing OP units in our operating partnership in exchange for a property owner contributing property to our operating partnership. If we enter into such transactions, in order to induce the contributors of such properties to accept OP units in our operating partnership, rather than cash, in exchange for their properties, it may be necessary for us to provide them additional incentives. For instance, our operating partnership’s limited partnership agreement provides that any holder of OP units may redeem OP units for cash equal to the value of an equivalent number of shares of our common stock or, at our option, shares of our common stock on a one-for-one basis. Furthermore, we might agree that if distributions the contributor received as a limited partner in our operating partnership did not provide the contributor with a defined return, then upon redemption of the contributor’s OP units we would pay the contributor an additional amount necessary to achieve that return. Such a provision could further negatively impact our liquidity and flexibility. Finally, in order to allow a contributor of a property to defer taxable gain on the contribution of property to our operating partnership, we might agree not to sell a contributed property for a defined period of time or until the contributor exchanged the contributor’s OP units for cash or shares of our common stock. Such an agreement would prevent us from selling those properties, even if market conditions made such a sale favorable to us. Additionally, in

connection with acquiring properties in exchange for OP units, we may offer the property owners who contribute such property the opportunity to guarantee debt in order to assist those property owners in deferring the recognition of taxable gain as a result of their contributions. These obligations may require us to maintain more or different indebtedness than we would otherwise require for our business.

If we issue OP units in our operating partnership in exchange for property, as we intend, the value placed on such units may not accurately reflect their market value, which may dilute your interest in us.

If we issue OP units in our operating partnership in exchange for property, as we intend, the per unit value attributable to such units will be determined based on negotiations with the property seller and, therefore, may not reflect the fair market value of such units if a public market for such units existed. If the value of such units is greater than the value of the related property, your interest in us may be diluted.

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make shares of our common stock less attractive to investors.

In April 2012, President Obama signed into law the JOBS Act. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for “emerging growth companies,” including certain requirements relating to accounting standards and compensation disclosure. We are classified as an emerging growth company. For as long as we are an emerging growth company, which may be until December 31, 2020, we may take advantage of exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including the requirements to:

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provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act;

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comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;

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comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise;

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provide certain disclosure regarding executive compensation required of larger public companies; or

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hold stockholder advisory votes on executive compensation.

We cannot predict if investors will find shares of our common stock less attractive because we will not be subject to the same reporting and other requirements as certain other public companies. If some investors find shares of our common stock less attractive as a result, there may be a less active trading market for our common stock, and the per share trading price of our common stock could decline and may be more volatile.

We will incur new costs as a result of becoming a public company, and such costs may increase if and when we cease to be an “emerging growth company,” which could adversely impact our results of operations.

As a public company, we will incur significant legal, accounting, insurance and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the NYSE and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. As a result, our executive officers’ attention may be diverted from other business concerns, which could adversely affect our business and results of operations. In addition, the expenses incurred by public companies generally for reporting and corporate

governance purposes have been increasing. We expect compliance with these public reporting requirements and associated rules and regulations to increase expenses, particularly after we are no longer an emerging growth company, although we are currently unable to estimate these costs with any degree of certainty. We could be an emerging growth company until December 31, 2020, although circumstances could cause us to lose that status earlier, which could result in our incurring additional costs applicable to public companies that are not emerging growth companies.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of our executive officers’ time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our executive officers and adversely affect our business and results of operations.

As a result of becoming a public company, management will be required to report periodically on the effectiveness of its system of internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or our system of internal control over financial reporting may not be determined to be appropriately designed or operating effectively, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first full fiscal year after the completion of our initial public offering. In addition, after we are no longer an emerging growth company under the JOBS Act, Section 404 of the Sarbanes-Oxley Act requires our auditors to deliver an attestation report on the effectiveness of our internal control over financial reporting in conjunction with their opinion on our audited financial statements. Substantial work on our part is required to implement appropriate processes, document the system of internal control over key processes, assess their design, remediate any deficiencies identified and test their operation. This process is expected to be both costly and challenging. The existence of any material weakness would preclude a conclusion by management and our independent auditors that we maintained effective internal control over financial reporting. Our management may be required to devote significant time and expense to remediate any material weaknesses that may be discovered and may not be able to remediate any material weakness in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could lead to a decline in the per-share trading price of our common stock.

Acquired properties may expose us to unknown liabilities, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may acquire properties subject to liabilities and without any recourse, or with only limited recourse, against the prior owners or other third parties with respect to unknown liabilities. Unknown liabilities with respect to acquired properties may include, but are not limited to, liabilities for clean-up of undisclosed environmental contamination, liabilities for failure to comply with fire, health, life-safety and similar regulations, claims by tenants, vendors or other persons against the former owners of the properties, liabilities incurred in the ordinary course of business and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. If a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We face possible liability for environmental cleanup costs and damages for contamination related to properties we acquire, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Because we own real estate, we are subject to various federal, state and local environmental laws, ordinances and regulations. Under these laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the cost of removal or remediation of hazardous or toxic substances on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including the release of asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real estate for personal injury or property damage associated with exposure to released hazardous substances. In addition, new or more stringent laws or stricter interpretations of existing laws could change the cost of compliance or liabilities and restrictions arising out of such laws. The cost of defending against these claims, complying with environmental regulatory requirements, conducting remediation of any contaminated property, or of paying personal injury claims could be substantial, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. In addition, the presence of hazardous substances on a property or the failure to meet environmental regulatory requirements may materially impair our ability to use, lease or sell a property, or to use the property as collateral for borrowing.

Our secured credit facility restricts our ability to engage in certain business activities, including our ability to incur additional indebtedness, make capital expenditures and make certain investments, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our secured credit facility contains customary negative covenants and other financial and operating covenants that, among other things:

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restrict our ability to incur additional indebtedness;

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restrict our ability to incur additional liens;

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restrict our ability to make certain investments;

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restrict our ability to merge with another company;

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restrict our ability to sell or dispose of assets;

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limit our distributions to stockholders to 95% of FFO (as defined under the secured credit facility), subject to certain exceptions; and

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require us to satisfy minimum financial coverage ratios, minimum tangible net worth and liquidity requirements, minimum average occupancy rates and weighted average remaining lease terms, and maximum leverage ratios.

These limitations restrict our ability to engage in certain business activities, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. Our secured credit facility also contains cross-default provisions with respect to specified other indebtedness, giving the lenders the right, in certain circumstances, to declare a default if we are in default under other loans. In addition, it will constitute an event of default under our secured credit facility if certain of our executive officers leave our company and are not replaced by an executive officer reasonably acceptable to the lenders within 90 days of such departure.

We intend to continue to incur mortgage indebtedness and other borrowings, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We have financed and intend to continue to finance a portion of the purchase price of our investments in real estate and real estate-related investments by borrowing funds, including borrowings under our secured credit facility. Certain of our properties have been pledged as collateral for our secured credit facility. In the future, we may incur mortgage debt and pledge some or all of our real estate as security for that debt to obtain funds to acquire additional real estate or for working capital. We also may borrow funds to satisfy the REIT qualification requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our ability to incur additional debt and affect our distribution and operating strategies. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage, or replace certain members of our management team. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

High debt levels may cause us to incur higher interest charges, which would result in higher debt service payments and lower amounts available for distributions to our stockholders. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default. For tax purposes, a foreclosure on any of our properties will be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our business, financial condition and results of operations and our ability to make distributions to our stockholders may be materially adversely affected.

Higher mortgage rates and other factors may make it more difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire or require us to sell properties on terms that are not advantageous to us, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

If mortgage debt is unavailable on reasonable terms or at all as a result of increased interest rates or other factors, we may not be able to finance the purchase of properties. In addition, if we place mortgage debt on properties, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to

refinance on favorable terms. If mortgage rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our business, financial condition and results of operations and our ability to make distributions to our stockholders may be materially adversely affected.

Failure to hedge effectively against interest rate changes may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may seek to manage our exposure to interest rate risk attributable to variable-rate debt by using interest rate swap arrangements and other derivatives that involve risk, including the risk that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that these arrangements may result in higher interest rates than we would otherwise have. Moreover, no hedging activity can completely insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate changes may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our costs associated with complying with the Americans with Disabilities Act may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The ADA’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We attempt to acquire properties that comply with the ADA or place the burden on the seller or other third-party, such as a tenant/operator, to ensure compliance with the ADA. However, we cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our costs associated with ADA compliance could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may obtain only limited warranties when we purchase a property and would have only limited recourse in the event that our due diligence did not identify any issues that lower the value of our property.

The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase and sale agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all of our invested capital in the property, as well as the loss of rental income from that property which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Acquiring or attempting to acquire multiple properties in a single transaction may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

From time to time, we acquire multiple properties in a single transaction. Portfolio acquisitions may be more complex and expensive than single-property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions may also result in our owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if

we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. Moreover, our ability to dispose of properties could be limited by our intention to avoid any “dealer sale” that could be subject to the 100% REIT prohibited transaction tax. To acquire multiple properties in a single transaction, we may be required to accumulate a large amount of cash. We would expect the returns that we earn on such cash to be less than the ultimate returns on real property. Any of the foregoing events may have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Uninsured losses relating to real estate and lender requirements to obtain insurance may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

There are types of losses relating to real estate, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, for which we do not intend to obtain insurance unless we are required to do so by mortgage lenders. If any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, other than any reserves we may establish, we have no source of funding to repair or reconstruct any uninsured damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future. Also, to the extent we must pay unexpectedly large amounts for uninsured losses, we could suffer reduced earnings. In cases where we are required by mortgage lenders to obtain casualty loss insurance for catastrophic events or terrorism, such insurance may not be available, or may not be available at a reasonable cost, which could inhibit our ability to finance or refinance our properties. Additionally, if we obtain such insurance, the costs associated with owning a property would increase. If any one of the events described above were to occur, it could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Uncertain market conditions relating to the future disposition of properties could cause us to sell our properties at a loss in the future which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We intend to hold our various real estate investments until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives. Our management, subject to the oversight and approval of our board of directors, may exercise its discretion as to whether and when to sell a property, and we will have no obligation to sell properties at any particular time. We generally intend to hold properties for an extended period of time, and we cannot predict with any certainty the various market conditions affecting real estate investments that will exist at any particular time in the future. Additionally, we may incur prepayment penalties in the event we sell a property subject to a mortgage earlier than we otherwise had planned. Because of the uncertainty of market conditions that may affect the future disposition of our properties, and the potential payment of prepayment penalties upon such disposition, we cannot assure you that we will be able to sell our properties at a profit in the future, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

If we sell properties by providing financing to purchasers, defaults by the purchasers could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default on its obligations under the financing. Even in the absence of a purchaser default, the distribution of sale proceeds, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the

year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

The mortgage loans that we have made, and that we may make or purchase in the future, may be impacted by unfavorable real estate market conditions, which could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Upon completion of this offering and the acquisition of our properties under contract, we will have a $10.0 million mortgage loan, and we may make or purchase additional mortgage loans in the future. Such investments involve special risks relating to the particular borrower, and we are at risk of loss on those investments, including losses as a result of defaults on mortgage loans. These losses may be caused by many conditions beyond our control, including economic conditions affecting real estate values, tenant/operator defaults and lease expirations, interest rate levels and the other economic and liability risks associated with real estate. If we acquire property by foreclosure following defaults under our mortgage loans, we will have the economic and liability risks as the owner of such property. We do not know whether the values of the healthcare property securing any of our mortgage loans will remain at the levels existing on the dates we initially purchased the mortgage loan. If the values of the underlying healthcare properties drop or the borrower defaults, our business, financial condition and results of operations may be materially and adversely affected.

We may be unable to successfully foreclose on the collateral securing our real estate-related loans and other investments we intend to make, and, even if we are successful in our foreclosure efforts, we may be unable to successfully sell any acquired equity interests or reposition any acquired properties, which may adversely affect our ability to recover our investments.

If a borrower defaults under mortgage or other secured loans for which we are the lender, we may attempt to foreclose on the collateral securing those loans, including by acquiring the pledged equity interests or acquiring title to the subject properties, to protect our investment. In response, the defaulting borrower may contest our enforcement of foreclosure or other available remedies, seek bankruptcy protection against our exercise of enforcement or other available remedies, or bring claims against us for lender liability. If a defaulting borrower seeks bankruptcy protection, the automatic stay provisions of the U.S. Bankruptcy Code would preclude us from enforcing foreclosure or other available remedies against the borrower unless relief is first obtained from the court with jurisdiction over the bankruptcy case. In addition, we are, and in the future may be, subject to intercreditor agreements that delay, impact, govern or limit our ability to foreclose on a lien securing a loan or otherwise delay or limit our pursuit of our rights and remedies. Any such delay or limit on our ability to pursue our rights or remedies could materially and adversely affect our business, results of operations and ability to make distributions to our stockholders. Even if we successfully foreclose on the collateral securing our mortgage loans and other investments, foreclosure-related costs, high loan-to-value ratios or declines in equity or property value could prevent us from realizing the full amount of our secured loans, and we could be required to write the asset down to its fair value and record an impairment charge for such losses. Moreover, we may acquire equity interests that we are unable to sell due to securities law restrictions or otherwise, and we may acquire title to properties that we are unable to reposition with new tenants or operators on a timely basis, if at all, or without making improvements or repairs to the properties at a significant expense. Any delay or costs incurred in repositioning the properties could adversely affect our ability to recover our investments.

Hedging against interest rate exposure may adversely affect us.

Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable

spread between the yield on our assets and the cost of financing such assets. We can provide no assurances, however, that our efforts to manage interest rate and foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio. These agreements involve the risks that these arrangements may fail to protect or adversely affect us because, among other things:

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interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;

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the duration of the hedge may not match the duration of the related liability;

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the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and

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the hedging counterparty owing money in the hedging transaction may default on its obligation to pay.

As a result of any of the foregoing, our hedging transactions, which are intended to limit losses, could have a material adverse effect on us.

The terms of joint venture agreements or other joint ownership arrangements into which we may enter could impair our operating flexibility and could adversely affect our business, financial condition and results of our operations and our ability to make distributions to our stockholders.

We may enter into joint ventures with affiliates and/or third parties to acquire or improve properties. We may also purchase properties in partnerships, co-tenancies or other co-ownership arrangements. For example, we own Lakeway Hospital in a consolidated partnership between us and a neurosurgical physicians group. Such investments may involve risks not otherwise present when acquiring real estate directly, including the following:

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a co-venturer, co-owner or partner may have certain approval rights over major decisions, which may prevent us from taking actions that are in our best interest but opposed by our partners, co-owners or co-venturers;

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a co-venturer, co-owner or partner may at any time have economic or business interests or goals, which are, or become, inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in the joint venture or the timing of termination or liquidation of the joint venture;

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a co-venturer, co-owner or partner in an investment may become insolvent or bankrupt (in which event we and any other remaining partners or members would generally remain liable for the liabilities of the partnership or joint venture);

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we may incur liabilities as a result of an action taken by our co-venturer, co-owner or partner;

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a co-venturer, co-owner or partner may be in a position to take actions contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT;

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agreements governing joint ventures, limited liability companies and partnerships often contain restrictions on the transfer of a member’s or partner’s interest or “buy-sell” or other provisions that may result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms;

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disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable joint venture to additional risk; and

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that under certain joint venture arrangements, neither joint venture partner may have the power to control the venture, and an impasse could be reached, which might have a negative influence on the joint venture.

If any of the foregoing were to occur, our financial condition, results of operations and cash available for distribution to our stockholders could be adversely affected.

Risks Related to the Healthcare Industry

Adverse trends in healthcare provider operations may negatively affect the operations at our properties, which in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We believe the healthcare industry is currently experiencing the following trends:

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changes in the demand for and methods of delivering healthcare services;

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changes in third-party reimbursement policies;

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significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas;

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increased expense for uninsured patients;

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increased competition among healthcare providers;

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increased liability insurance expense;

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continued pressure by private and governmental payors to reduce payments to providers of services; and

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increased scrutiny of billing, referral and other practices by federal and state authorities and private insurers.

These factors may materially adversely affect the economic performance of some or all of our tenants/operators, which in turn could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our tenants, operators, borrowers, guarantors and managers may be adversely affected by healthcare regulation and enforcement.

The regulatory environment of the long-term healthcare industry has generally intensified over time both in the amount and type of regulations and in the efforts to enforce those regulations. The extensive federal, state and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, qualified beneficiaries, quality of care, patient rights, fraudulent or abusive behavior, and financial and other arrangements that may be entered into by healthcare providers. Moreover, changes in enforcement policies by federal and state governments have resulted in an increase in the number of inspections, citations of regulatory deficiencies and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties and even criminal penalties. See “Our Business—Regulation—Healthcare Regulatory Matters.” We are unable to predict the scope of future federal, state and local regulations and legislation, including the Medicare and Medicaid statutes and regulations, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory framework could have a material adverse effect on our tenants, operators, guarantors and managers, which, in turn, could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Further, if our tenants, operators, borrowers, guarantors and managers fail to comply with the extensive laws, regulations and other requirements applicable to their businesses and the operation of our properties (some of which are discussed below), they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties or be required to make significant changes to their operations. Our tenants, operators, borrowers, guarantors and managers also could be forced to expend considerable resources responding to an investigation or other enforcement action under applicable laws or regulations. In such event, the results of operations and

financial condition of our tenants, operators, borrowers, guarantors and managers and the results of operations of our properties operated or managed by those entities could be adversely affected, which, in turn, could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

All healthcare providers are subject to the Federal Anti-Kickback Statute, which generally prohibits persons from offering, providing, soliciting, or receiving remuneration to induce either the referral of an individual or the furnishing of a good or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Certain healthcare facilities are also subject to the Federal Ethics in Patient Referral Act of 1989, commonly referred to as the Stark Law. The Stark Law generally prohibits the submission of claims to Medicare for payment if the claim results from a physician referral for certain designated services and the physician has a financial relationship with the health service provider that does not qualify under one of the exceptions for a financial relationship under the Stark Law. Similar prohibitions on kickbacks, physician self-referrals and submission of claims apply to state Medicaid programs, and may also apply to private payors under state laws. Violations of these laws subject persons and entities to termination from participation in Medicare, Medicaid and other federally funded healthcare programs or result in the imposition of treble damages and fines or other penalties. Healthcare facilities and providers may also experience an increase in medical record reviews from a host of government agencies and contractors, including the HHS Office of the Inspector General, the Department of Justice, Zone Program Integrity Contractors, and Recovery Audit Contractors.

Other laws that impact how our operators conduct their operations include: federal and state laws designed to protect the confidentiality and security of patient health information; state and local licensure laws; laws protecting consumers against deceptive practices; laws generally affecting our operators’ management of property and equipment and how our operators generally conduct their operations, such as fire, health and safety, and environmental laws; federal and state laws affecting assisted living facilities mandating quality of services and care, and quality of food service; resident rights (including abuse and neglect laws); and health standards set by the federal Occupational Safety and Health Administration. For example, HIPAA imposes extensive requirements on the way in which certain healthcare entities use, disclose, and safeguard protected health information (as that term is defined under HIPAA), including requirements to protect the integrity, availability, and confidentiality of electronic medical records. Many of these obligations were expanded under the HITECH Act. In order to comply with HIPAA and the HITECH Act, covered entities often must undertake significant operational and technical implementation efforts. Operators also may face significant financial exposure if they fail to maintain the privacy and security of medical records, personal health information about individuals, or protected health information. The HITECH Act strengthened the HHS Secretary’s authority to impose civil money penalties for HIPAA violations occurring after February 18, 2009. The HITECH Act directs the HHS Secretary to provide for periodic audits to ensure covered entities and their business associates (as that term is defined under HIPAA) comply with the applicable HITECH Act requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action. In October 2009, the Office for Civil Rights, or OCR, issued an interim final rule which conformed HIPAA enforcement regulations to the HITECH Act, increasing the maximum penalty for multiple violations of a single requirement or prohibition to $1.5 million. Higher penalties may accrue for violations of multiple requirements or prohibitions. HIPAA violations are also potentially subject to criminal penalties. Additionally, on January 25, 2013, OCR promulgated a final rule that expands the applicability of and requirements under HIPAA and the HITECH Act and strengthens the government’s ability to enforce these laws. Generally, covered entities and business associates were required to come into compliance with the final rule by September 23, 2013, though certain exceptions may apply. We cannot predict the effect additional costs to comply with these laws may have on the expenses of our operators and their ability to meet their obligations to us. For additional information on healthcare regulation and enforcement, see “Our Business—Regulation—Healthcare Regulatory Matters.”

We are unable to predict the impact of the Affordable Care Act, which represents a significant change to the healthcare industry.

The Affordable Care Act has changed how healthcare services are covered, delivered and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid Disproportionate Share Hospital, or DSH, payments, and expanding efforts to tie reimbursement to quality and efficiency. In addition, the law reforms certain aspects of health insurance, contains provisions intended to strengthen fraud and abuse enforcement, and encourages the development of new payment models, including the creation of Accountable Care Organizations, or ACOs.

Our tenants/operators may be negatively impacted by the law’s payment reductions, and it is uncertain what reimbursement rates will apply to coverage purchased through the exchanges. We cannot predict the full impact of the Affordable Care Act on our operators and tenants and, thus, our business due to the law’s complexity, limited implementing regulations and interpretive guidance, gradual and delayed implementation, and our inability to foresee how individuals, states and businesses will respond to the choices afforded them by the law throughout its gradual implementation. Further, it is unclear how remaining or any new efforts to repeal or revise the Affordable Care Act will be resolved or what the impact would be of any resulting changes to the law.

Our tenants/operators may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us and, thus, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

As is typical in the healthcare industry, our tenants/operators may often become subject to claims that their services have resulted in patient injury or other adverse effects. Many of these tenants/operators may have experienced an increasing trend in the frequency and severity of professional liability and general liability insurance claims and litigation asserted against them. The insurance coverage maintained by tenants/operators may not cover all claims made against them nor continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be available to these tenants/operators due to state law prohibitions or limitations of availability. As a result, these types of tenants/operators of our healthcare properties operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits. We also believe that there has been, and will continue to be, an increase in governmental investigations of certain healthcare providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Insurance is generally not available to cover such losses. Any adverse determination in a legal proceeding or governmental investigation, whether currently asserted or arising in the future, could have a material adverse effect on a tenant/operator’s financial condition. In particular, Fundamental Healthcare and certain of its subsidiaries, which together will account for approximately 17.5% of the annualized base rent of our portfolio upon the acquisition of all of our properties under contract, are defendants in significant litigation, which, if determined adversely against them, could have a material and adverse effect on their financial condition, cash flow and ability to meet their obligations under their leases or guarantees with us. In addition, the Lakeway Operator, which is our largest tenant and which we expect to contribute approximately $5.4 million in incremental AFFO for the year ending December 31, 2015 and thereafter approximately $9.4 million annually, is the defendant in a lawsuit in which an $11.0 million judgment has been awarded to the plaintiff, which is currently under appeal. If the Lakeway Operator is not successful in the appeal, it could have an adverse effect on its financial condition, cash flow and ability to meet its obligations to us. If a tenant/operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant/operator is required to pay uninsured punitive damages, or if a tenant/operator is subject to an uninsurable government enforcement action, the tenant/operator could be exposed to substantial additional liabilities, which may affect the tenant/operator’s ability to pay rent to us, which in turn could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Merger and acquisition activity or consolidation in the healthcare industries resulting in a change of control of, or a competitor’s investment in, one or more of our tenants, operators or managers could have a material adverse effect on us.

The healthcare industries have recently experienced increased consolidation, including among owners of real estate and care providers. We compete with other healthcare REITs, healthcare providers, healthcare lenders, real estate partnerships, banks, insurance companies, private equity firms and other investors that pursue a variety of investments, which may include investments in our tenants, operators, borrowers or managers. A competitor’s investment in one of our tenants, operators or managers could enable our competitor to influence that tenant’s, operator’s, borrower’s or manager’s business and strategy in a manner that impairs our relationship with the tenant, operator, borrower or manager or is otherwise adverse to our interests. Depending on our contractual agreements and the specific facts and circumstances, we may have the right to consent to, or otherwise exercise rights and remedies, including termination rights, on account of, a competitor’s investment in, a change of control of, or other transactions impacting a tenant, operator or manager. In deciding whether to exercise our rights and remedies, including termination rights, we assess numerous factors, including legal, contractual, regulatory, business and other relevant considerations. In addition, in connection with any change of control of a tenant, operator or manager, the tenant’s, operator’s, borrower’s or manager’s management team may change, which could lead to a change in the tenant’s, operator’s, borrower’s or manager’s strategy or adversely affect the business of the tenant, operator or manager, either of which could have a material adverse effect on us.

Risks Related to Our Organizational Structure

BlueMountain has the ability to exercise substantial influence over us, including the approval of certain acquisitions and certain issuances of equity.

As of the date of this prospectus, BlueMountain owns approximately 23.1% of the outstanding shares of our common stock. In connection with this offering, BlueMountain has the right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its current ownership percentage in us following the completion of this offering, without payment by us of any underwriting discount or commissions. In addition, BlueMountain has designated two of the members of our board of directors and will have a continuing right to designate one or two of our directors, who will serve on our investment committee, as described under “Management.” BlueMountain and its two board designees have substantial influence over us, including the ability to veto certain of our acquisitions and certain equity offerings and any changes to the size of our board of directors, and the concentration of ownership by BlueMountain in us may influence the outcome of any matters submitted to our stockholders for approval.

The stock ownership limits imposed by the Code for REITs and our charter may restrict stock transfers and/or business combination opportunities, particularly if our management and board of directors do not favor a combination proposal.

In order for us to qualify and maintain our qualification as a REIT under the Code, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, including through the application of certain attribution rules, by five or fewer individuals (as defined in the Code to include certain entities such as qualified pension plans) at any time during the last half of a taxable year (other than the first year for which we qualify and elect to be taxed as a REIT). Our charter, with certain exceptions, authorizes our board of directors to take the actions that are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person or entity may actually or beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of our common stock, or 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our capital stock, in each case excluding any shares of our capital stock that are not treated as outstanding for U.S. federal income tax purposes. Our board of directors may, in its sole discretion, grant an exemption to the stock ownership limits, subject to certain conditions and the receipt by our board of directors of certain representations and undertakings.

Our charter also prohibits any person from (1) beneficially or constructively owning shares of our capital stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT, including, but not limited to, as a result of any person that operates a “qualified healthcare property” on behalf of a TRS failing to qualify as an “eligible independent contractor” (as defined in Section 856(d)(9)(A) of the Code), or us having significant non-qualifying income from “related” parties, or (2) transferring shares of our capital stock if such transfer would result in us being owned by fewer than 100 persons (determined without regard to any rules of attribution). The stock ownership limits contained in our charter key off the ownership at any time by any “person,” which term includes entities, and take into account direct and indirect ownership as determined under various ownership attribution rules in the Code. The stock ownership limits also might delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

Our authorized but unissued common stock and preferred stock may prevent a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of shares of our common stock or the number of shares of any class or series of preferred stock that we have authority to issue and classify or reclassify any unissued shares of common stock or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a series of common stock or preferred stock that could delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from seeking change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of the Maryland General Corporation Law, or the MGCL, may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under certain circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

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“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or any affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and thereafter impose fair price and/or supermajority voting requirements on these combinations; and

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“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, except solely by virtue of a revocable proxy, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to their control shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

As permitted by the MGCL, we have elected, by resolution of our board of directors, to exempt from the business combination provisions of the MGCL, any business combination between us and any person and, pursuant to a provision in our bylaws, to exempt any acquisition of our stock from the control share provisions of

the MGCL. However, our board of directors may by resolution elect to repeal the exemption from the business combination provisions of the MGCL and may by amendment to our bylaws opt in to the control share provisions of the MGCL at any time in the future.

Additionally, certain provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or our bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not currently employ. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring, or preventing a change in control of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price. Our charter contains a provision whereby we elect to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our board of directors. See “Certain Provisions of Maryland Law and of Our Charter and Bylaws.”

Our charter, our bylaws and Maryland law also contain other provisions, including the provisions of our charter on removal of directors and the advance notice provisions of our bylaws, that may delay, defer, or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. See “Certain Provisions of Maryland Law and of Our Charter and Bylaws.”

Our board of directors may change our business, investment and financing strategies without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.

Our investment and financing policies are exclusively determined by our board of directors. Accordingly, our stockholders do not control these policies. As the market evolves, we may change our business, investment and financing strategies without a vote of, or notice to, our stockholders, which could result in our making investments and engaging in business activities that are different from, and possibly riskier than, the investments and businesses described in this prospectus. In particular, a change in our investment strategy, including the manner in which we allocate our resources across our properties or the types of assets in which we seek to invest, may increase our exposure to real estate market fluctuations. In addition, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. If this policy is changed, we may in the future become highly leveraged, which could result in an increase in our debt service. Higher leverage also increases the risk of default on our obligations. Furthermore, as the market evolves, our board may determine that healthcare properties do not offer the potential for attractive risk-adjusted returns for an investment strategy. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to our strategies with regard to the foregoing could materially and adversely affect our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.

Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event that we take certain actions which are not in our stockholders’ best interests.

Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner that he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Under the MGCL, directors are presumed to have acted with this standard of care. As permitted by Maryland law, our charter eliminates the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:

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actual receipt of an improper benefit or profit in money, property or services; or

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active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.

Our charter and bylaws obligate us to indemnify each present and former director or officer, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us. In addition, we may be obligated to advance the defense costs incurred by our directors and officers. We also have entered into indemnification agreements with our officers and directors granting them express indemnification rights. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist absent the current provisions in our charter, bylaws and indemnification agreements or that might exist for other public companies.

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management.

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management and may prevent a change in control of our company that is in the best interests of our stockholders. Our charter provides that a director may only be removed for cause upon the affirmative vote of holders of two-thirds of all the votes entitled to be cast generally in the election of directors. Vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our stockholders.

Termination of the employment agreements with our executive officers could be costly and prevent a change in our control.

The employment agreements that we entered into with each of our executive officers provide that, if their employment with us terminates under certain circumstances (including upon a change in our control), we may be required to pay them significant amounts of severance compensation, including accelerated vesting of equity awards, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction or a change in our control that might involve a premium paid for our common stock or otherwise be in the best interests of our stockholders.

Conflicts of interest could arise between the interests of our stockholders and the interests of holders of OP units, which may impede business decisions that could benefit our stockholders.

Conflicts of interest could arise as a result of the relationships between us, on the one hand, and our operating partnership or any limited partner thereof, on the other. Our directors and officers have duties to us and our stockholders under applicable Maryland law in connection with their management of our company. At the same time, we, as the sole member of the general partner of our operating partnership, have fiduciary duties and obligations to our operating partnership and its limited partners under Delaware law and the partnership agreement of our operating partnership in connection with the management of our operating partnership. Our duties as the sole member of the general partner to our operating partnership and its partners may come into conflict with the duties of our directors and officers to our company and our stockholders. These conflicts may be resolved in a manner that is not in the best interests of our stockholders.

Federal Income Tax Risks

Failure to maintain our qualification as a REIT for U.S. federal income tax purposes would subject us to U.S. federal income tax on our taxable income at regular corporate rates, which would substantially reduce our ability to make distributions to our stockholders.

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014. To maintain our qualification as a REIT, we must meet various requirements set forth in the Code concerning, among other things, the ownership of our outstanding stock, the

nature of our assets, the sources of our income and the amount of our distributions. The REIT qualification requirements are extremely complex, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we will be successful in operating so as to qualify as a REIT. At any time, new laws, interpretations or court decisions may change the federal tax laws relating to, or the U.S. federal income tax consequences of, qualification as a REIT. It is possible that future economic, market, legal, tax or other considerations may cause our board of directors to determine that it is not in our best interest to qualify as a REIT or revoke our REIT election, which it may do without stockholder approval.

Although we do not expect to request a ruling from the Internal Revenue Service, or IRS, that we qualify as a REIT, we will receive an opinion prior to the effectiveness of this registration statement from our legal counsel, Morrison & Foerster LLP, that commencing with our short taxable year ended December 31, 2014, we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws, and our proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws. Investors should be aware that Morrison & Foerster LLP’s opinion will be based on the U.S. federal income tax laws governing qualification as a REIT as of the date of such opinion, which will be subject to change, possibly on a retroactive basis, will not be binding on the IRS or any court, and will speak only as of the date issued. In addition, Morrison & Foerster LLP’s opinion will be based on customary assumptions and will be conditioned upon certain representations made by us as to factual matters, including representations regarding the nature of our assets and the future conduct of our business. Moreover, our qualification and taxation as a REIT depend on our ability to meet, on a continuing basis, through actual results, certain qualification tests set forth in the U.S. federal income tax laws. Those qualification tests involve, among other things, the percentage of our gross income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our stock ownership and the percentage of our earnings that we distribute. Morrison & Foerster LLP will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that the actual results of our operations for any particular taxable year will satisfy such requirements. Morrison & Foerster LLP’s opinion will not foreclose the possibility that we may have to use one or more of the REIT savings provisions, which may require us to pay a material excise or penalty tax in order to maintain our REIT qualification.

If we fail to qualify as a REIT for any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate rates. In addition, we generally would be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution because of the additional tax liability. In addition, distributions would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

As a result of all these factors, our failure to maintain our qualification as a REIT could impair our ability to expand our business and raise capital, and would substantially reduce our ability to make distributions to you.

Our ability to qualify as a REIT could be adversely affected by our ownership of a health care facility if we lease a healthcare facility to a TRS lessee and such lease is not respected as a true lease for U.S. federal income tax purposes, if our TRS lessee fails to qualify as a “taxable REIT subsidiary,” or if the operator of the health care facility does not qualify as an “eligible independent contractor.”

We may lease health care facilities to a TRS. If a lease of a health care facility to a TRS lessee is not respected as a true lease for U.S. federal income tax purposes, we may fail to qualify as a REIT. For the rent paid pursuant to any leases of health care facilities to a TRS lessee to qualify for purposes of the gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and must not be treated as a service contracts, joint ventures or some other type of arrangements. We intend to structure any leases of health care facilities to a TRS lessee so that the leases will be respected as true leases for U.S. federal income tax purposes, but there can be no assurance that the IRS will agree with this characterization.

If a TRS fails to qualify as a “taxable REIT subsidiary” under the Code, we could fail to qualify as a REIT. Rent paid by a lessee that is a “related party tenant” is not qualifying income for purposes of the 75% and 95% gross income tests applicable to REITs. So long as the TRS lessee qualifies as a TRS, it will not be treated as a “related party tenant” with respect to our properties that are managed by an eligible independent contractor. We believe that our TRS qualifies to be treated as a TRS for U.S. federal income tax purposes, but there can be no assurance that the IRS will not challenge the status of our TRS for U.S. federal income tax purposes or that a court would not sustain such a challenge.

If a given health care facility management company does not qualify as an “eligible independent contractor” or if a given health care facility is not a “qualified health care property,” we could fail to qualify as a REIT. Each property with respect to which our TRS lessee pays rent must be a “qualified health care property.” The REIT provisions of the Code provide only limited guidance for making determinations under the requirements for “qualified health care properties” and there can be no assurance that these requirements will be satisfied in all cases. Any health care facility management company that enters into a management contract with a TRS lessee must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by our TRS to be qualifying income for our REIT income test requirements. Complex ownership attribution rules apply for purposes of these ownership thresholds. Although we intend to monitor ownership of our stock by operators of our health care facilities and their owners, and certain provisions of our charter are designed to prevent ownership of our stock in violation of these rules, there can be no assurance that these ownership levels will not be exceeded.

The IRS may challenge the valuation of our assets and securities or the real estate collateral for the mortgage or mezzanine loans that we may originate and may contend that our ownership of such assets violates one or more of the asset tests applicable to REITs.

We believe that the assets that we will hold after consummation of this offering satisfy the asset test requirements. We will not obtain, nor are we required to obtain under the U.S. federal income tax laws, independent appraisals to support our conclusions as to the value of our assets and securities or the real estate collateral for the mortgage or mezzanine loans that we may originate. Moreover, the values of some assets may not be susceptible to a precise determination. As a result, there can be no assurance that the IRS will not contend that our ownership of securities and other assets violates one or more of the asset tests applicable to REITs.

To qualify as a REIT and to avoid the payment of U.S. federal income and excise taxes, we may be forced to borrow funds, use proceeds from the issuance of securities (including this offering), pay taxable dividends of our stock or debt securities or sell assets to make distributions, which may result in our distributing amounts that may otherwise be used for our operations.

To obtain the favorable tax treatment accorded to REITs, we normally will be required each year to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and by excluding net capital gains. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on acquisitions of properties and it is possible that we might be required to borrow funds, use proceeds from the issuance of securities (including this offering), pay taxable dividends of our stock or debt securities or sell assets in order to distribute enough of our taxable income to qualify or maintain our qualification as a REIT and to avoid the payment of U.S. federal income and excise taxes.

Future sales of properties may result in penalty taxes, or may be made through TRSs, each of which would diminish the return to you.

It is possible that one or more sales of our properties may be “prohibited transactions” under provisions of the Code. If we are deemed to have engaged in a “prohibited transaction” (i.e., we sell a property held by us primarily for sale in the ordinary course of our trade or business), all income that we derive from such sale would be subject to a 100% tax. The Code sets forth a safe harbor for REITs that wish to sell property without risking the imposition of the 100% tax. A principal requirement of the safe harbor is that the REIT must hold the applicable property for not less than two years prior to its sale. It is entirely possible, if not likely, that the sale of one or more of our properties will not fall within the prohibited transaction safe harbor.

If we acquire a property that we anticipate will not fall within the safe harbor from the 100% penalty tax upon disposition, we may acquire such property through a TRS in order to avoid the possibility that the sale of such property will be a prohibited transaction and subject to the 100% penalty tax. If we already own such a property directly or indirectly through an entity other than a TRS, we may contribute the property to a TRS. Though a sale of such property by a TRS likely would mitigate the risk of incurring a 100% penalty tax, the TRS itself would be subject to regular corporate income tax at the U.S. federal level, and potentially at the state and local levels, on the gain recognized on the sale of the property as well as any income earned while the property is operated by the TRS. Such tax would diminish the amount of proceeds from the sale of such property ultimately distributable to you.

Our ability to use TRSs in the foregoing manner is subject to limitation. Among other things, the value of our securities in TRSs may not exceed 25% of the value of our assets and dividends from our TRSs, when aggregated with all other non-real estate income with respect to any one year, generally may not exceed 25% of our gross income with respect to such year. No assurances can be provided that we would be able to successfully avoid the 100% penalty tax through the use of TRSs.

In certain circumstances, we and/or our subsidiaries may be subject to U.S. federal and state income taxes, which would reduce our cash available for distribution to our stockholders.

Even if we qualify as a REIT, we may be subject to U.S. federal income taxes or state taxes. As discussed above, net income from a “prohibited transaction” will be subject to a 100% penalty tax. To the extent we satisfy the distribution requirements applicable to REITs, but distribute less than 100% of our taxable income, we will be subject to U.S. federal income tax at regular corporate rates on our undistributed income. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain capital gains we earn from the sale or other disposition of our properties and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, our stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. We may also be subject to state and local taxes on our income or property, either directly or at the level of the companies through which we indirectly own our assets. Any federal or state taxes we pay will reduce our cash available for distribution to our stockholders. In addition, our TRS, MedEquities Realty TRS, LLC, will be subject to corporate-level tax.

The ability of our board of directors to revoke or otherwise terminate our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income at regular corporate rates and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.

If our operating partnership were taxable as a corporation for U.S. federal income tax purposes, we would fail to qualify as a REIT and would suffer other adverse tax consequences.

If additional partners are admitted to our operating partnership, we intend for our operating partnership to be treated as a partnership for U.S. federal income tax purposes. If the IRS were to successfully challenge the status of our operating partnership as a partnership, however, our operating partnership generally would be taxable as a corporation. In such event, we likely would fail to qualify as a REIT for U.S. federal income tax purposes, and the resulting corporate income tax burden would reduce the amount of distributions that our operating partnership could make to us. This would substantially reduce the cash available to make distributions to our stockholders.

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may acquire mezzanine loans for which the IRS has provided a safe harbor but not rules of substantive law. In IRS Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant to which a mezzanine loan, if it meets certain requirements, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test. We may acquire mezzanine loans that do not meet all of the requirements of this safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, the IRS could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and gross income tests and, if such a challenge were sustained, we could fail to qualify as a REIT.

Complying with the REIT requirements may limit our ability to hedge risk effectively.

The REIT provisions of the Code may limit our ability to hedge our liabilities effectively. In general, income from hedging transactions does not constitute qualifying income for purposes of the 75% and 95% gross income tests applicable to REITs. However, to the extent, we enter into a hedging contract to reduce interest rate risk or foreign currency risk on indebtedness incurred to acquire or carry real estate assets, any income we derive from the contract would be excluded from gross income for purposes of calculating the REIT 75% and 95% gross income tests if specified requirements are met. Consequently, we may have to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This may leave us exposed to greater risks than we would otherwise want to bear and could increase the cost of our hedging activities because a TRS would be subject to tax on the income therefrom.

Complying with the REIT requirements may cause us to forego otherwise attractive opportunities or sell properties earlier than we wish.

To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of shares of our stock. We may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution, or we may be required to forego or liquidate otherwise attractive investments in order to comply with the REIT tests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

We may make distributions consisting of both stock and cash, in which case stockholders may be required to pay income taxes in excess of the cash distributions they receive.

We may make distributions that are paid in cash and stock at the election of each stockholder and may distribute other forms of taxable stock dividends. Taxable stockholders receiving such distributions will be required to include the full amount of the distributions as ordinary income to the extent of our current and

accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such distributions in excess of the cash received. If a stockholder sells the stock that it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, in the case of certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to taxable dividends, including taxable dividends that are paid in stock. In addition, if a significant number of our stockholders decide to sell their stock in order to pay taxes owed with respect to taxable stock dividends, it may put downward pressure on the trading price of our stock.

You may be restricted from acquiring or transferring certain amounts of our common stock.

Certain provisions of the Code and the stock ownership limits in our charter may inhibit market activity in our stock and restrict our business combination opportunities. In order to maintain our qualification as a REIT, five or fewer individuals, as defined in the Code, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year. Attribution rules in the Code determine if any individual or entity beneficially or constructively owns our stock under this requirement. Additionally, at least 100 persons must beneficially own our stock during at least 335 days of a taxable year. To help insure that we meet these tests, our charter restricts the acquisition and ownership of shares of our stock.

Our charter, with certain exceptions, authorizes our board of directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, our charter prohibits any person from beneficially or constructively owning more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our stock. Our board of directors may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of such ownership limit would result in our failing to qualify as a REIT.

Dividends paid by REITs generally do not qualify for the favorable tax rates available for some dividends.

The maximum U.S. federal income tax rate applicable to qualified dividend income paid to U.S. stockholders that are individuals, trusts and estates currently is 20%. Dividends paid by REITs generally are not eligible for such maximum tax rate. Although the favorable tax rates applicable to qualified dividend income do not adversely affect the taxation of REITs or dividends paid by REITs, such favorable tax rates could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

Legislative or regulatory action with respect to taxes could adversely affect the returns to our stockholders.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of the U.S. federal income tax laws applicable to investments similar to an investment in our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our stock or on the market value or the resale potential of our assets. You are urged to consult with your own tax advisor with respect to the impact of recent legislation on your investment in our stock and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

See “Material U.S. Federal Income Tax Considerations” for a more detailed discussion of these and other material U.S. federal income tax considerations applicable to the acquisition, ownership and disposition of our common stock.

Risks Related to This Offering and Ownership of Our Common Stock

There has been no public market for our common stock prior to this offering and an active trading market for our common stock may not develop and be sustained following this offering.

Prior to this offering, there has not been any public market for our common stock, and there can be no assurance that an active trading market will develop or be sustained or that shares of our common stock will be resold at or above the initial public offering price. The initial public offering price of our common stock will be determined by agreement among us and the underwriters, but there can be no assurance that our common stock will not trade below the initial public offering price following the completion of this offering. See “Underwriting.” The market value of our common stock could be substantially affected by general market conditions, including the extent to which a secondary market develops for our common stock following the completion of this offering, the extent of institutional investor interest in us, the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate-based companies), our financial performance and general stock and bond market conditions.

The trading volume and market price of our common stock may be volatile and could decline substantially following this offering.

Even if an active trading market develops and is sustained for our common stock, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the price at which you purchase them in this offering. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future, including as a result of factors unrelated to our operating performance or prospects. In particular, the market price of our common stock could be subject to wide fluctuations in response to a number of factors, including, among others, the following:

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actual or anticipated differences in our operating results, liquidity, or financial condition;

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changes in our revenues, FFO, AFFO or earnings estimates;

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publication of research reports about us, our properties, the healthcare industry or overall real estate market;

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increases in market interest rates that lead purchasers of our common stock to demand a higher yield;

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additions and departures of key personnel;

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the performance and market valuations of other similar companies;

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adverse market reaction to any additional debt we incur in the future;

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actions by institutional stockholders;

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the passage of legislation or other regulatory developments that adversely affect us or our industry;

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the realization of any of the other risk factors presented in this prospectus;

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speculation in the press or investment community;

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the extent of investor interest in our securities;

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the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

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our underlying asset value;

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changes in accounting principles;

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investor confidence in the stock and bond markets generally;

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future equity issuances;

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failure to meet and maintain REIT qualification and requirements;

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low trading volume of our stock;

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terrorist acts; and

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general market and economic conditions, including factors unrelated to our operating performance.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of their common stock. If the market price of our common stock is volatile and this type of litigation is brought against us, it could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.

Common stock eligible for future sale could have an adverse effect on the value of our common stock.

In connection with the initial private placement, we entered into a registration rights agreement requiring us to use commercially reasonable efforts to cause a resale shelf registration statement with respect to the shares sold in that private placement to become effective under the Securities Act as soon as practicable after filing, and in any event, subject to certain exceptions, no later than December 31, 2015 (or, if we complete this offering prior to December 31, 2015, on a date that is on or before 60 days after the completion of this offering). As a result, holders of shares of our common stock acquired in the initial private placement have registration rights that obligate us to register their shares under the Securities Act. Once we register the shares, they can be freely sold in the public market, subject to any applicable lock-up agreements. See “Shares Eligible for Future Sale.” Future sales by these holders of our common stock, or the perception that such sales could occur in the future, could have a material adverse effect on the market price of our common stock. In particular, as of the date of this prospectus, BlueMountain owns 23.1% of the outstanding shares of our common stock, and has the right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its ownership percentage in us following the completion of this offering, without payment by us of any underwriting discount or commissions. If BlueMountain sells all or a substantial portion of their shares, it could have a material adverse impact on the market price of our common stock.

From time to time we also intend to issue additional shares of common stock or OP units, which, at our option, may be redeemed for shares of our common stock, in connection with the acquisition of investments, as compensation or otherwise, and we may grant additional registration rights in connection with such issuances.

We cannot predict the effect, if any, of future sales of our common stock, or the availability of shares for future sales, on the market price of the common stock. Sales of substantial amounts of our common stock, or the perception that such sales could occur, may adversely affect prevailing market price of our common stock.

You will experience immediate and substantial dilution from the purchase of our shares sold in this offering.

The offering price of our shares is higher than what our net tangible book value per share will be immediately after this offering. Accordingly, purchasers of our shares in this offering will incur immediate dilution of approximately $ in net tangible book value per share, based on the midpoint of the price range set forth on the cover page of this prospectus.

We have not established a minimum dividend payment level and we cannot assure you of our ability to pay dividends in the future or the amount of any dividends.

We have not established a minimum distribution payment level, and our ability to make distributions to our stockholders may be adversely affected by the risk factors described in this prospectus. Until our portfolio of assets generates sufficient income and cash flow, we could be required to fund distributions from working capital, sell assets or borrow funds. To the extent that we are required to sell assets in adverse market conditions or borrow funds at unfavorable rates, our results of operations could be materially and adversely affected.

All distributions will be made at the discretion of our board of directors and will be based upon, among other factors, our historical and projected results of operations, financial condition, cash flows and liquidity, maintenance of our REIT qualification and other tax considerations, capital expenditure and other expense obligations, debt covenants, contractual prohibitions or other limitations and applicable law and such other matters as our board of directors may deem relevant from time to time. We may not be able to make distributions in the future, and our inability to make distributions, or to make distributions at expected levels, could result in a decrease in the market price of our common stock.

We may use a portion of the net proceeds from this offering to make distributions to our stockholders, which would, among other things, reduce our cash available to acquire properties and may reduce the returns on your investment in our common stock.

Prior to the time we have fully invested the net proceeds from this offering, we may fund distributions to our stockholders out of the net proceeds from this offering, which would reduce the amount of cash we have available to acquire properties and may reduce the returns on your investment in our common stock. The use of these net proceeds for distributions to stockholders could adversely affect our financial results. In addition, funding distributions from the net proceeds from this offering may constitute a return of capital to our stockholders, which would have the effect of reducing each stockholder’s tax basis in our common stock.

Future issuances of debt securities, which would rank senior to our common stock upon liquidation, or future issuances of equity securities (including OP units), which would dilute our existing stockholders and may be senior to our common stock for purposes of making distributions, may adversely affect the market price of our common stock.

In the future, we may issue debt or equity securities or incur other borrowings. Upon our liquidation, holders of our debt securities and other loans and preferred stock will receive a distribution of our available assets before common stockholders. If we incur debt in the future, our future interest costs could increase and adversely affect our liquidity, FFO, AFFO and results of operations. We are not required to offer any additional equity securities to existing common stockholders on a preemptive basis; however, BlueMountain has the right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its ownership percentage in us following the completion of this offering, without payment by us of any underwriting discount or commissions. Therefore, additional common stock issuances, directly or through convertible or exchangeable securities (including OP units), warrants or options, will dilute the holdings of our existing common stockholders and such issuances or the perception of such issuances may reduce the market price of our common stock. Our preferred stock, if issued, would likely have a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common stockholders. Because our decision to issue debt or equity securities or incur other borrowings in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. Thus, common stockholders bear the risk that our future issuances of debt or equity securities or our incurrence of other borrowings will negatively affect the market price of our common stock.

Increases in market interest rates may reduce demand for our common stock and result in a decline in the market price of our common stock.

The market price of our common stock may be influenced by the distribution yield on our common stock (i.e., the amount of our annual distributions as a percentage of the market price of our common stock) relative to market interest rates. An increase in market interest rates, which are currently low compared to historical levels, may lead prospective purchasers of our common stock to expect a higher distribution yield, which we may not be able, or may choose not, to provide. Higher interest rates would also likely increase our borrowing costs and decrease our operating results and cash available for distribution. Thus, higher market interest rates could cause the market price of our common stock to decline.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements in this prospectus are “forward-looking statements” within the meaning of the U.S. federal securities laws. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. This prospectus also contains forward-looking statements by third parties relating to market and industry data and forecasts; forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this prospectus. These forward-looking statements include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations, FFO, AFFO, our strategic plans and objectives, cost management, potential property acquisitions, anticipated capital expenditures (and access to capital), amounts of anticipated cash distributions to our stockholders in the future and other matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of these words and other similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. You are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to:

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risks and uncertainties related to the national, state and local economies, particularly the economies of Texas, California, Nevada and South Carolina, and the real estate and healthcare industries in general;

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our limited operating history;

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our use of the net proceeds from this offering and the BlueMountain Private Placement;

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our ability to acquire our properties under contract;

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the ability of certain of our tenants to improve their operating results, which may not occur on the schedule or to the extent that we anticipate, or at all;

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availability and terms of capital and financing;

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the impact of existing and future healthcare reform legislation on our tenants, borrowers and guarantors;

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adverse trends in the healthcare industry, including, but not limited to, changes relating to reimbursements available to our tenants by government or private payors;

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our tenants’ ability to make rent payments, particularly those tenants comprising a significant portion of our portfolio and those tenants occupying recently developed properties;

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our guarantors’ ability to ensure rent payments;

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our possible failure to maintain our qualification as a REIT and the risk of changes in laws governing REITs;

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our dependence upon key personnel whose continued service is not guaranteed;

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availability of appropriate acquisition, development and redevelopment opportunities;

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ability to source off-market and target-marketed deal flow;

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fluctuations in mortgage and interest rates;

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risks and uncertainties associated with property ownership and development;

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failure to integrate acquisitions successfully;

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potential liability for uninsured losses and environmental liabilities; and

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the potential need to fund improvements or other capital expenditures out of operating cash flow.

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. You should carefully read the section entitled “Risk Factors” in this prospectus. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us.

USE OF PROCEEDS

After deducting the underwriting discount and commissions and estimated expenses of this offering of approximately $ million payable by us, we expect to receive net proceeds from this offering of approximately $ million, or approximately $ million if the underwriters’ over-allotment option is exercised in full. The net proceeds we will receive from the BlueMountain Private Placement will be $ million.

We intend to contribute the net proceeds from this offering and the BlueMountain Private Placement to our operating partnership in exchange for OP units, and our operating partnership intends to use the net proceeds from this offering and the BlueMountain Private Placement as follows:

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approximately $126.3 million to redeem our Series B Preferred Stock;

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approximately $ million to repay amounts outstanding under our secured credit facility;

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approximately $1.4 million to acquire Vibra Rehabilitation Hospital of Amarillo;

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approximately $0.1 million to redeem our Series A Preferred Stock; and

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the remaining net proceeds, if any, for general corporate purposes, including working capital and future acquisitions.

Upon completion of this offering, amounts outstanding under our secured credit facility will bear interest at LIBOR plus a margin between 2.00% and 2.50%. As of the date of this prospectus, approximately $216 million was outstanding under our secured credit facility and the interest rate was 3.44%. We initially entered into our revolving credit facility in November 2014 and have used borrowings under the facility to fund a portion of the consideration for our acquisitions, including Lakeway Hospital, the Life Generations Portfolio, the Texas SNF Portfolio, Mountain’s Edge Hospital and Mira Vista. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Secured Revolving Credit Facility.”

Affiliates of J.P. Morgan Securities LLC, Citigroup Global Markets Inc., KeyBanc Capital Markets Inc. and RBC Capital Markets, LLC are lenders under our secured credit facility. As a result, these affiliates will receive their proportionate shares of any amount of our secured credit facility that is repaid with the net proceeds from this offering.

Prior to the full investment of the net proceeds in healthcare properties, we intend to invest the net proceeds in interest-bearing, short-term investment-grade securities, money market accounts or other investments that are consistent with our intention to elect and qualify to be taxed as a REIT. Such investments may include, for example, government and government agency certificates, government bonds, certificates of deposit, interest-bearing bank deposits, money market accounts and mortgage loan participations. These initial investments are expected to provide a lower net return than we will seek to achieve from investments in healthcare properties.

DISTRIBUTION POLICY

To satisfy the requirements to qualify as a REIT, and to avoid paying tax on our income, we intend to make regular quarterly distributions of all, or substantially all, of our REIT taxable income to our stockholders. For the period from April 23, 2014 (inception) to December 31, 2014, and for the six months ended June 30, 2015, we declared total dividends to our common stockholders of $2.2 million and $1.9 million, respectively. On August 13, 2015, our board of directors declared a dividend of $0.17 per share, payable on September 9, 2015 to stockholders of record on August 27, 2015.

We intend to pay a pro rata initial distribution with respect to the quarter during which this offering occurs, based on a distribution rate of $ per share of our common stock for a full quarter. On an annualized basis, this would be $ per share, or an annual distribution rate of approximately % based on an assumed initial public offering price at the midpoint of the price range set forth on the front cover of this prospectus. This initial annual distribution rate will represent approximately % of estimated cash available for distribution for the 12 months ending June 30, 2016. We do not intend to reduce the annualized distribution per share of our common stock if the underwriters exercise their option to purchase additional shares. We have estimated our cash available for distribution to our common stockholders for the twelve months ending June 30, 2016 based on adjustments to our pro forma net income attributable to common stockholders for the twelve months ended June 30, 2015 as described below. This estimate was based on our pro forma operating results, which assume that we owned all of the properties in our portfolio and under contract for the entirety of the periods presented. This estimate does not take into account our long-term business and growth strategies, nor does it take into account any unanticipated expenditures that we may have to make or any financings for such expenditures. In estimating our cash available for distribution to our common stockholders for the 12 months ending June 30, 2016, we have made certain assumptions as reflected in the table and footnotes below.

Estimated cash available for distribution for the 12 months ending June 30, 2016 does not include the effect of any changes in our working capital. It also does not reflect the amount of cash to be used for investing, acquisition and other activities during the 12 months following June 30, 2015. It also does not reflect the amount of cash to be used for financing activities during the 12 months following June 30, 2015. Any such investing and/or financing activities may have a material effect on our cash available for distribution. Because we have made the assumptions set forth above in calculating cash available for distribution for the 12 months ending June 30, 2016, we do not intend this number to be a projection or forecast of our actual results of operations, FFO, AFFO or liquidity, and have calculated this number for the sole purpose of determining our estimated initial annual distribution rate. Our estimated cash available for distribution for the 12 months ending June 30, 2016 should not be considered as an alternative to cash flow from operating activities (computed in accordance with GAAP) or as an indicator of our liquidity or our ability to pay dividends or make other distributions. In addition, the methodology upon which we made the adjustments described below is not necessarily intended to be a basis for determining future distributions.

We intend to maintain a distribution rate for the 12-month period following completion of this offering that is at or above our initial distribution rate unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in determining our initial distribution rate. Any future distributions we make will be at the sole discretion of our board of directors and will depend upon a number of factors, including our actual and projected results of operations, the cash flow generated by our operations, FFO, AFFO, liquidity, our operating expenses, our debt service requirements, capital expenditure requirements for the properties in our portfolio, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, restrictions on making distributions under Maryland law and such other factors as our board of directors deems relevant. Actual distributions may be significantly different from expected distributions. We cannot assure you that our estimated distributions will be made or sustained or that our board of directors will not change our distribution policy in the future. For more information regarding risk factors that could materially adversely affect our ability to make distributions to our stockholders, please see “Risk Factors.”

We anticipate that our distributions generally will be taxable as ordinary income to our stockholders, although a portion of the distributions may constitute a return of capital or may be designated by us as qualified dividend income or capital gain. We will furnish annually to each of our stockholders a statement setting forth distributions paid during the preceding year and their characterization as ordinary income, return of capital, qualified dividend income or capital gain. Distributions in excess of our current and accumulated earnings and profits will not be taxable to a taxable U.S. stockholder under current U.S. federal income tax law to the extent those distributions do not exceed the stockholder’s adjusted tax basis in his or her common stock, but rather will reduce the adjusted tax basis of the common stock. Therefore, the gain (or loss) recognized on the sale of that common stock or upon our liquidation will be increased (or decreased) accordingly. To the extent those distributions exceed a taxable U.S. stockholder’s adjusted tax basis in his or her common stock, they generally will be treated as a capital gain realized from the taxable disposition of those shares. The percentage of our stockholder distributions that exceeds our current and accumulated earnings and profits may vary substantially from year to year. For a more complete discussion of the tax treatment of distributions to holders of our common stock, see “Material U.S. Federal Income Tax Considerations.”

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014. U.S. federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income, including net capital gain. For more information, please see “Material U.S. Federal Income Tax Considerations.” We anticipate that our estimated cash available for distribution will allow us to satisfy the annual distribution requirements applicable to REITs and to avoid the payment of tax on undistributed taxable income. However, under some circumstances, our cash available for distribution may be less than the amount required to meet the annual distribution requirements applicable to REITs, and we may be required to make distributions in excess of cash available for distribution in order to meet these distribution requirements and we may need to borrow funds to make certain distributions. We also may elect to pay all or a portion of any distribution in the form of a taxable distribution of our common stock to enable us to satisfy the annual distribution requirements applicable to REITs and to avoid the payment of tax on our undistributed taxable income. We currently have no intention to make taxable distributions of our common stock or debt securities. However, to the extent that you receive a taxable distribution of our common stock or debt securities, you will be taxed on such securities as if you had received the equivalent value in cash. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the securities received. To the extent not inconsistent with our intention to qualify as a REIT, we may cause any TRS that we may organize to retain any earnings that it accumulates.

The following table describes our pro forma net income attributable to common stockholders for the 12 months ended June 30, 2015, and the adjustments we have made to calculate our estimated cash available for distribution for the 12 months ending June 30, 2016 (dollars in thousands, except per share amounts):


Pro forma net income attributable to common stockholders for the twelve months ended December 31, 2014	$
Less: pro forma net income attributable to common stockholders for the six months ended June 30, 2014
Add: pro forma net income attributable to common stockholders for the six months ended June 30, 2015

Pro forma net income attributable to common stockholders for the twelve months ended June 30, 2015	$
Add: Pro forma real estate depreciation and amortization
Less: Pro forma real estate depreciation and amortization attributable to noncontrolling interest
Add: Net increases in contractual rental income ⁽¹⁾
Add: Amortization of deferred financing costs
Add: Non-cash stock-based compensation expense
Add: Effect of straight-line rent expense
Less: Estimated additional cash general and administrative expenses ⁽²⁾
Less: Effect of straight-line rental income ⁽³⁾
Add: Effect of straight-line rental income attributable to noncontrolling interest

Estimated cash flows from operating activities for the twelve months ending June 30, 2016	$

Estimated cash available for distribution for the twelve months ending June 30, 2016	$

Estimated annual distribution to common stockholders	$

Distribution ratio based on estimated cash available for distribution to common stockholders		%

(1)	Represents the net increases in contractual rental income from existing leases.

(2)

Estimated additional general and administrative expenses consisting of salaries and benefits, insurance, travel and other costs based on proposed arrangements and anticipated activity. We have estimated a level of general and administrative costs required to manage the Company as a public company and our portfolio, including but not limited to salaries and benefits, compliance costs with the Sarbanes-Oxley Act of 2002, and legal, audit and tax fees.

(3)	Represents the conversion of estimated rental revenues on in-place leases from GAAP basis to cash basis of recognition.

CAPITALIZATION

The following table sets forth:

•

our actual capitalization as of June 30, 2015;

•

our pro forma capitalization as of June 30, 2015, giving effect to the acquisition of the Texas SNF Portfolio; and

•

our pro forma as adjusted capitalization as of June 30, 2015, giving effect to this offering and the BlueMountain Private Placement and the application of the net proceeds therefrom as described in “Use of Proceeds,” including our acquisitions of Vibra Rehabilitation Hospital of Amarillo, Graham Oaks and Kearny Mesa.

You should read this table in conjunction with “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated balance sheet as of June 30, 2015 and related notes included elsewhere in this prospectus.


	As of June 30, 2015
	Actual ⁽¹⁾			Pro Forma ⁽¹⁾			Pro Forma As Adjusted ⁽¹⁾
	(unaudited, amounts in thousands, except per share amounts)
Debt	$	78,000		$	238,000		$
Equity:
Common stock, par value $0.01 per share, 400,000 authorized, actual, pro forma and pro forma as adjusted; 11,096 shares issued and outstanding, actual and pro forma; shares issued and outstanding, pro forma as adjusted		109			109
Preferred stock, par value $0.01 per share, 50,000 shares authorized, actual, pro forma and pro forma as adjusted; 125 shares issued and outstanding, actual and pro forma; 0 shares issued and outstanding pro forma as adjusted		1			1
Additional paid-in capital		272,573			272,573
Dividends declared		(7,064	)		(7,064	)
Retained earnings		4,844			4,844

Total MedEquities Realty Trust, Inc. stockholders’ equity		270,463			270,463
Non-controlling interests		2,317			2,317

Total equity	$	272,780		$	272,780		$

Total Capitalization	$	350,780		$	510,780		$

(1)

Includes an aggregate of 151,020 restricted shares of common stock outstanding as of June 30, 2015, which are held by our executive officers, non-employee directors and certain other employees. Excludes (i) an aggregate of 287,351 restricted shares of common stock and 358,125 restricted stock units granted to our executive officers, non-employee directors and certain other employees subsequent to June 30, 2015, (ii) an aggregate of 166,127 restricted stock units outstanding as of June 30, 2015, which are held by our executive officers and certain other employees, all of which are performance-based and will not vest unless certain operating metrics are achieved (see “Management—2014 Equity Incentive Plan”), and (iii) 709,747 shares of our common stock available for future issuance under our 2014 Equity Incentive Plan as of the date of this prospectus.

DILUTION

Dilution is the amount by which the offering price paid by the purchasers of the shares of our common stock sold in this offering exceeds the pro forma net tangible book value per share of our common stock after completion of this offering and the BlueMountain Private Placement. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date.

At June 30, 2015, our net tangible book value was $ million, or $ per share. After giving effect to the sale of the shares of our common stock in this offering and the BlueMountain Private Placement, including the use of proceeds as described under “Use of Proceeds,” and the deduction of underwriting discounts and estimated offering expenses, our pro forma net tangible book value as of June 30, 2015 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing investors and an immediate dilution in pro forma net tangible book value of $ per share to new investors purchasing shares of our common stock in this offering. The following table illustrates this per share dilution to new investors.


Assumed initial public offering price per share		$
Net tangible book value per share at June 30, 2015	$
Net increase in pro forma net tangible book value per share attributable to this offering and the BlueMountain Private Placement	$

Pro forma net tangible book value per share after giving effect to this offering and the BlueMountain Private Placement		$

Dilution in pro forma net tangible book value per share to new investors		$

If the underwriters exercise their option to purchase additional shares in full, the pro forma net tangible book value after this offering and the BlueMountain Private Placement would be $ per share, the increase in the net tangible book value to existing investors would be $ per share and the dilution in pro forma net tangible book value per share to new investors purchasing common stock in this offering would be $ per share.

The following table summarizes, as of June 30, 2015:

•

the total number of shares of our common stock issued to existing investors and the number of shares of our common stock purchased from us in the BlueMountain Private Placement and by new investors in this offering;

•

the total consideration paid to us by existing investors and by new investors purchasing shares in this offering and the BlueMountain Private Placement, assuming an initial public offering of $ per share (the midpoint of the price range set forth on the front cover of this prospectus), before deducting the estimated underwriting discount and estimated offering expenses payable by us in connection with this offering; and

•

the average price per share paid by existing investors and by new investors purchasing shares in this offering and the BlueMountain Private Placement.

Shares

Total Consideration

Average Price
per Share

Number

Percent

Amount

Percent

Existing Investors

BlueMountain Private Placement

New investors

Total

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following tables set forth selected financial and operating data based on (i) our historical consolidated balance sheets as of June 30, 2015 and December 31, 2014, (ii) our unaudited pro forma consolidated balance sheet as of June 30, 2015, (iii) our historical consolidated statements of operations for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014 and (iv) our unaudited pro forma consolidated statements of operations for the six months ended June 30, 2015 and the year ended December 31, 2014. We have not presented any other historical financial data because, prior to the completion of the common stock private placements on July 31, 2014, we did not have any corporate activity since our formation other than the issuance of 1,000 shares of our common stock in connection with the initial capitalization of the Company on May 5, 2014.

You should read the following selected financial and operating data in conjunction with: (i) our historical consolidated balance sheets as of June 30, 2015 and December 31, 2014 and our historical consolidated statements of operations for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014; (ii) our unaudited pro forma consolidated financial statements; (iii) the audited and unaudited statements of revenues and certain direct operating expenses of certain acquired properties; and (iv) the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections in this prospectus. We have based the unaudited pro forma adjustments on available information and assumptions that we believe are reasonable. The following unaudited pro forma financial and operating data are presented for informational purposes only and are not necessarily indicative of what our actual financial position would have been as of June 30, 2015 assuming this offering, the BlueMountain Private Placement and certain real estate property acquisitions had all been completed on June 30, 2015, what actual results of operations would have been for the six months ended June 30, 2015 and the year ended December 31, 2014 assuming this offering, the common stock private placements, the BlueMountain Private Placement and certain real estate property acquisitions and healthcare-related debt investments were completed on the first day of the annual period presented, and are not indicative of future results of operations or financial condition and should not be viewed as indicative of future results of operations or financial condition.

Consolidated Balance Sheet Data

(in thousands)


	As of June 30, 2015			Historical as of December 31, 2014
	Pro Forma	Historical		Historical as of December 31, 2014
	(unaudited)	(unaudited)
Assets
Total real estate properties, net	$	$	310,709	$	111,900
Mortgage notes receivable, net			27,736		77,727
Total assets			359,119		211,033

Liabilities and Equity
Total liabilities			86,339		61,156
Total stockholders’ equity			270,463		149,877
Total liabilities and equity	$	$	359,119	$	211,033

Consolidated Income Statement Data

(in thousands, except per share data)


	Six months ended June 30, 2015						Pro Forma for year ended December 31, 2014 (unaudited)			Historical for the period from April 23, 2014 (inception) to December 31, 2014
	Pro Forma (unaudited)			Historical (unaudited)			Pro Forma for year ended December 31, 2014 (unaudited)
Revenues
Rental income	$	29,228		$	13,969		$	58,409		$	4,316
Interest on mortgage notes receivable		455			1,670			1,099			1,078
Interest on note receivable		224			224			53			53

Total revenues		29,907			15,863			59,561			5,447
Expenses
Depreciation and amortization		6,546			3,246			13,037			1,273
Property related		579			579			1,080			308
Acquisition costs		194			194			192			192
Start-up costs		—			—			888			888
Franchise, excise, and other taxes		228			228			72			72
General and administrative		3,671			3,671			3,626			2,391

Total operating expenses		11,218			7,918			18,895			5,124

Operating income		18,689			7,945			40,666			323
Other income (expense)
Interest and other income		9			9			17			17
Interest expense					(1,816	)					(317	)

Net other income (expense)					(1,807	)					(300	)

Net income	$			$	6,138		$			$	23

Less: Preferred stock dividends		—			(2,905	)		—			—
Less: Net income attributable to non-controlling interests		(2,575	)		(1,317	)		(5,142	)		—

Net income attributable to common stockholders					1,916		$			$	23

Earnings per share—basic and diluted
Net income (loss) attributable to common stockholders	$			$	0.17		$			$	(0.00	)
Weighted average shares outstanding:
Basic and diluted					11,092						10,918
Dividends declared per common share					$0.17					$	0.20

Other Data

(in thousands, unaudited)


	Six months ended June 30, 2015			Pro Forma for year ended December 31, 2014	Historical for the period from April 23, 2014 (inception) to December 31, 2014
	Pro Forma	Historical		Pro Forma for year ended December 31, 2014
FFO attributable to common stockholders ⁽¹⁾		$	4,922	$	$	1,291
AFFO attributable to common stockholders ⁽¹⁾			4,262			2,545

(1)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We were formed on April 23, 2014 and did not commence revenue generating operations until July 31, 2014. Therefore, we do not have any historical operations to discuss other than for the period from April 23, 2014 (inception) to December 31, 2014. You should read the following discussion in conjunction with the sections of this prospectus entitled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and “Our Business” and our historical and pro forma consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this prospectus.

Overview and Background

We are a self-managed and self-administered company that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. We were formed on April 23, 2014 and commenced operations upon the completion of our common stock private placements on July 31, 2014. Therefore, there is no comparative information for any prior interim periods.

As of June 30, 2015, we had investments of $339 million, net in 12 real estate properties with an aggregate of 743,764 square feet and two mortgage notes receivable. Upon the acquisition of our properties under contract, our portfolio will be comprised of 24 healthcare facilities with an aggregate gross purchase price of $498.9 million and a total of 2,308 licensed beds located in Texas, California, Nevada and South Carolina, including 17 skilled nursing facilities, two acute care hospitals, two long-term acute care hospitals, one assisted living facility, one inpatient rehabilitation facility and one medical office building, providing aggregate annualized base rent of approximately $45.9 million, with a weighted-average remaining lease term of 16.1 years, and a $10.0 million healthcare-related debt investment that provides annual interest payments of approximately $0.9 million.

Our strategy is to become an integral capital partner with high-quality, facility-based providers of healthcare services, primarily through net-leased real estate investments, and to continue to diversify over time based on our facility types, tenants and geographic locations. We invest primarily in real estate across the acute and post-acute spectrum of care, where our management team has extensive experience and relationships. We believe acute and post-acute healthcare facilities have the potential to provide higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise and insight necessary to own, finance and operate these properties, which are factors that tend to limit competition among owners, operators and finance companies. We target healthcare providers or operators that are experienced, growth-minded and that we believe have shown an ability to successfully navigate a changing healthcare landscape. We expect to invest primarily in the following types of healthcare properties: acute care hospitals, short stay surgical and specialty hospitals (such as those focusing on orthopedic, heart, and other dedicated surgeries and specialty procedures), dedicated specialty hospitals (such as inpatient rehabilitation facilities, long-term acute care hospitals and facilities providing psychiatric care), skilled nursing facilities, large and prominent physician clinics, diagnostic facilities, outpatient surgery centers and facilities that support these services, such as medical office buildings.

We conduct our business through an UPREIT structure, consisting of our operating partnership, MedEquities Realty Operating Partnership, LP, and subsidiaries of our operating partnership, including our TRS, MedEquities Realty TRS, LLC. Through our wholly owned limited liability company, MedEquities OP GP, LLC, we are the sole general partner of our operating partnership, and we presently own all of the OP units of our operating partnership. In the future, we may issue OP units to third parties in connection with healthcare property acquisitions, as compensation or otherwise.

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014.

Recent Developments

Recent Acquisitions

On February 3, 2015, we acquired fee simple ownership of Lakeway Hospital through a negotiated, non-judicial foreclosure and payment of an additional $25.0 million in cash consideration. We initially acquired a note receivable for $50.0 million on December 29, 2014, which had an outstanding principal balance of approximately $163.9 million. The note was secured by a first mortgage lien on Lakeway Hospital, which is a 270,512 square-foot acute care hospital in Lakeway, Texas that opened in April 2012. The operator of the facility defaulted on debt service payments under the mortgage in 2013, and HUD held an auction in December 2014 through which we acquired the note. We own a 51% interest in the facility through a consolidated partnership between us and a neurosurgical physicians group that relocated its practice to Lakeway Hospital.

On February 20, 2015, we acquired Mira Vista, a 51,534 square-foot skilled nursing facility, for an aggregate purchase price of $16.0 million.

On March 31, 2015, we acquired Mountain’s Edge Hospital, a newly developed 72,140 square-foot acute care hospital, for an aggregate gross purchase price of $35.4 million, which includes a tenant allowance of $6.0 million that we paid to the tenant for certain furnishings, fixtures and equipment installed at the facility.

On March 31, 2015, we acquired four skilled nursing facilities and one assisted living facility from Life Generations for an aggregate purchase price of $80.0 million.

On July 30, 2015, we acquired the Texas SNF Portfolio, which is comprised of nine skilled nursing facilities located throughout Texas, for an aggregate gross purchase price of $133.4 million.

For additional information regarding our recently completed acquisitions and information regarding our properties under contract, see “Our Business—Our Portfolio.”

Properties under Contract

On August 13, 2015, we entered into a definitive agreement pursuant to our option under our Amarillo Mortgage Loan to acquire Vibra Rehabilitation Hospital of Amarillo, a 37,834 square-foot inpatient rehabilitation hospital, for an aggregate purchase price of $19.4 million, plus an earn-out of up to $10.6 million that may be paid to the seller 24 months after the closing of the acquisition based on the tenant’s EBITDAR for the previous 12 months. The $18.0 million principal balance of the Amarillo Mortgage Loan will be applied towards the $19.4 million purchase price, resulting in a cash expenditure of approximately $1.4 million to acquire the property. We expect to close this transaction by the end of 2015, subject to the satisfaction of customary closing conditions and the receipt of approval from the seller’s working capital lender.

On July 29, 2015, in connection with our acquisition of the Texas SNF Portfolio, we entered into a definitive agreement to acquire Graham Oaks, a 32,391 square-foot skilled nursing facility, for a gross purchase price of $11.6 million, which we intend to fund with available cash and additional borrowings under our secured credit facility. We expect this transaction to close by the end of the third quarter of 2015, subject to the satisfaction of customary closing conditions and receipt of certain regulatory consents.

In connection with our acquisition of the Life Generations Portfolio, we entered into an exclusive option with Life Generations to acquire Kearny Mesa, a 96-bed skilled nursing facility located in San Diego, California, for $15.0 million, plus an earn-out of up to $10.0 million. On August 10, 2015, we deposited $100,000 pursuant to the purchase option agreement and we expect the transaction to close by the end of the third quarter of 2015, subject to customary closing conditions.

Series B Preferred Stock

In March and April of 2015, we issued an aggregate of 125,000 shares of newly classified 7.875% Series B Preferred Stock to the Carter Validus Operating Partnership for gross proceeds of $125.0 million, which we used

to fund our acquisitions in the first quarter of 2015 and repay amounts outstanding under our secured credit facility. We intend to use a portion of the net proceeds from this offering to redeem all of the Series B Preferred Stock, which is redeemable at any time at our option, and must be redeemed in connection with a change of control of us or the initial public offering of our common stock, in each case at the $1,000 liquidation preference, plus accumulated and unpaid dividends and a special redemption dividend equal to 1% of the liquidation preference if redeemed prior to December 10, 2015, 3% of the liquidation preference if redeemed after December 10, 2015 but prior to March 10, 2016 and 5% of the liquidation preference if redeemed on or after March 10, 2016.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles, or GAAP, in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management considers accounting estimates or assumptions critical in either of the following cases:

•

the nature of the estimates or assumptions is material because of the levels of subjectivity and judgment needed to account for matters that are highly uncertain and susceptible to change; and

•

the effect of the estimates and assumptions is material to the financial statements.

Management believes the current assumptions used to make estimates in the preparation of the consolidated financial statements are appropriate and not likely to change in the future. However, actual experience could differ from the assumptions used to make estimates, resulting in changes that could have a material adverse effect on our consolidated results of operations, financial position and/or liquidity. These estimates will be made and evaluated on an on-going basis using information that is available as well as various other assumptions believed to be reasonable under the circumstances.

The following presents information about our critical accounting policies including the material assumptions used to develop significant estimates. Since the Company has recently commenced operations, certain of these critical accounting policies contain discussion of judgments and estimates that have not yet been required by management but that it believes may be reasonably required of it to make in the future.

Principles of Consolidation

The consolidated financial statements include the accounts of our wholly owned subsidiaries, and all material intercompany transactions and balances are eliminated in consolidation. We consolidate entities in which we own less than 100% of the equity interest but have a controlling interest through voting rights or other means. For these entities, we record a noncontrolling interest representing the equity held by other parties.

From inception, we continually evaluate all of our transactions and investments to determine if they represent variable interests subject to the variable interest entity, or VIE, consolidation model and then determine which business enterprise is the primary beneficiary of its operations. We make judgments about which entities are VIEs based on an assessment of whether (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We consolidate investments in VIEs when we are determined to be the primary beneficiary. This evaluation is based on our ability to direct and influence the activities of a VIE that most significantly impact that entity’s economic performance.

For investments not subject to the variable interest entity consolidation model, we will evaluate the type of rights held by the limited partner(s) or other member(s), which may preclude consolidation in circumstances in which the sole general partner or managing member would otherwise consolidate the limited partnership. The

assessment of limited partners’ or members’ rights and their impact on the presumption of control over a limited partnership or limited liability corporation by the sole general partner or managing member should be made when an investor becomes the sole general partner or managing member and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners or members, (ii) the sole general partner or member increases or decreases its ownership in the limited partnership or corporation, or (iii) there is an increase or decrease in the number of outstanding limited partnership or membership interests.

Our ability to assess correctly our influence or control over an entity at inception of our involvement or on a continuous basis when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. Subsequent evaluations of the primary beneficiary of a VIE may require the use of different assumptions that could lead to identification of a different primary beneficiary, resulting in a different consolidation conclusion than what was determined at inception of the arrangement.

Revenue Recognition, Mortgage Loans and Receivables

Leases of Real Estate Properties

Upon inception of new lease arrangements, including new leases that arise from amendments, we assess the terms and conditions to determine the proper lease classification. A lease arrangement is classified as an operating lease if none of the following criteria are met: (i) transfer of ownership to the lessee, (ii) lessee has a bargain purchase option during or at the end of the lease term, (iii) the lease term is equal to 75% or more of the underlying property’s economic life, or (iv) the future minimum lease payments (excluding executory costs) are equal to 90% or more of the excess estimated fair value of the leased building. If one of the four criteria is met and the minimum lease payments are determined to be reasonably predicable and collectible, the lease arrangement is generally accounted for as a direct financing lease, or DFL. Currently, all of our lease arrangements are classified as operating leases. If the assumptions utilized in the above classification assessments were different, our lease classification for accounting purposes may have been different; thus the timing and amount of our revenue recognized would have been impacted, which may be material to our consolidated financial statements.

We recognize rental revenue for operating leases on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of a leased asset. For assets acquired subject to leases, we recognize revenue upon acquisition of the asset provided the tenant has taken possession or control of the physical use of the leased asset. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements, any tenant improvement allowance funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. The determination of ownership of the tenant improvements is subject to significant judgment. If our assessment of the owner of the tenant improvements for accounting purposes were different, the timing and amount of our revenue recognized would be impacted.

In addition to minimum rental payments, some lease agreements may provide for contingent rents based on the lessee’s operations, such as a percentage of a lessee’s gross revenue increase over a specified base amount. Rental revenue related to any contingent rents is recognized only when the change in factor(s) on which the contingent rental payments are based actually occur.

We monitor the liquidity and creditworthiness of our tenants and operators on a continuous basis to determine the need for an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make

contractual rent and tenant recovery payments. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, our assessment is based on income recoverable over the term of the lease. We exercise judgment in establishing allowances and consider payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to our consolidated financial statements. At December 31, 2014, we have determined that no allowance for doubtful accounts is necessary.

Mortgage Loans, Other Receivables and Investments in Direct Financing Leases

The direct finance method of accounting is required to record income from DFLs. For leases accounted for as DFLs, future minimum lease payments are recorded as a receivable. The net investment in the DFL represents receivables for the sum of minimum lease payments receivable and the estimated residual values of the leased properties, less the unearned income. Unearned income is deferred and amortized to income over the lease terms to provide a constant yield when collectability of the lease payments is reasonably assured. Investments in DFLs are presented net of unamortized unearned income. The determination of estimated useful lives and residual values are subject to significant judgment. If these assessments for accounting purposes were to change, the timing and amount of our revenue recognized would be impacted.

Loans receivable, including mortgage notes, are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. We recognize interest income on loans, including the amortization of discounts and premiums, using the interest method applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Premiums, discounts and related costs are recognized as yield adjustments over the term of the related loans.

Loans receivable and DFLs are placed on non-accrual status at such time as management determines that collectability of contractual amounts is not reasonably assured. While on non-accrual status, loans and DFLs are either accounted for on a cash basis, in which income is recognized only upon receipt of cash, or on a cost-recovery basis, where cash receipts reduce the carrying value of the loan or DFL, based on management’s judgment of collectability. Management’s judgments regarding the collectability of amounts outstanding under loans receivable and DFLs can affect the timing of revenue recognized and the financial statement presentation of these arrangements.

Allowances are established for loans and DFLs based upon an estimate of probable losses on an individual basis if they are determined to be impaired. Loans and DFLs are impaired when it is deemed probable that we will be unable to collect all amounts due on a timely basis in accordance with the contractual terms of the loan or lease. Determining the adequacy of the allowance is complex and requires significant judgment by us about the effect of matters that are inherently uncertain. The allowance is based upon our assessment of the borrower’s or lessee’s overall financial condition, resources and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the net realizable value of any collateral. These estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan’s or DFL’s effective interest rate, the fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors. While our assumptions for any such allowances are based in part upon historical data, our estimates may differ from actual results, which could be material to our consolidated financial statements.

Real Estate Investments

We make estimates as part of our allocation of the purchase price of acquisitions (whether an asset acquisition acquired via purchase/leaseback or a business combination via an asset acquired from the current lessor) to the various components of the acquisition based upon the relative fair value of each component for asset acquisitions and at fair value of each component for business combinations. In making estimates of fair values for purposes of allocating purchase prices of acquired real estate, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the

respective property and other market data. We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The most significant components of our allocations are typically the allocation of fair value to land and buildings and, for certain of our acquisitions, in-place leases and other intangible assets. In the case of the fair value of buildings and the allocation of value to land and other intangibles, the estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the value of in-place leases, including the assessment as to the existence of any above-or below-market in-place leases, our management makes its best estimates based on the evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. These assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases. The values of any identified above-or below-market in-place leases are based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, or for below-market in-place leases including any bargain renewal option terms. Above-market lease values are recorded as a reduction of rental income over the lease term while below-market lease values are recorded as an increase to rental income over the lease term. The recorded values of in-place lease intangibles are recognized in amortization expense over the initial term of the respective leases.

We evaluate each purchase transaction to determine whether the acquired assets meet the definition of a business. Transaction costs related to acquisitions that are not deemed to be businesses are included in the cost basis of the acquired assets, while transaction costs related to acquisitions that are deemed to be businesses are expensed as incurred.

Asset Impairment

Real estate asset impairment losses are recorded when events or changes in circumstances indicate the asset is impaired and the estimated undiscounted cash flows to be generated by the asset are less than its carrying amount. Management assesses the impairment of properties individually and impairment losses are calculated as the excess of the carrying amount over the fair value of assets to be held and used, and carrying amount over the fair value less cost to sell in instances where management has determined that we will dispose of the property. In determining fair value, we use current appraisals or other third party opinions of value and other estimates of fair value such as estimated discounted future cash flows.

We evaluate the carrying values of mortgage loans, including mortgage notes receivable, on an individual basis. Management periodically evaluates the realizability of future cash flows from the mortgage loan receivable when events or circumstances, such as the non-receipt of principal and interest payments and/or significant deterioration of the financial condition of the borrower, indicate that we will be unable to collect all the contractual interest and principal payments as scheduled in the mortgage agreement. An impairment charge is recognized in current period earnings and is calculated as the difference between the carrying amount of the mortgage loan receivable and the discounted cash flows expected to be received, or if foreclosure is probable, the fair value of the collateral securing the mortgage.

Stock-Based Compensation

The fair value of stock-based awards is calculated on the date of grant. We amortize the stock-based compensation expense on a straight-line basis over the period that the awards are expected to vest, net of any forfeitures.

The total compensation expense to recognize for awards with performance based vesting conditions including achievement of certain market conditions is based on our estimate of the ultimate fair value of such award after considering our expectation of future performance. Typical market conditions for these awards are

based on our stock price levels or our total stockholder return (stock price and dividends) including comparisons of our total stockholder returns to an index of other REIT stocks. Since the awards are earned based on the achievement of market conditions, we must initially evaluate and estimate the probability of achieving the market conditions in order to determine the fair value of the award and over what period to recognize the stock compensation expense. Due to the complexities inherently involved with these awards, we will typically use an independent consultant to assist in modeling both the value of the award and the various periods over which each tranche of an award will be earned. We expect to use what is termed a Monte Carlo simulation model which determines a value and earnings periods based on multiple outcomes and their probabilities based on significant inputs such as risk-free interest rate, expected volatility and expected service period that are made at the time of grant of the award.

Factors That May Influence Future Results of Operations

Our revenues are derived from rents we earn pursuant to the lease agreements we enter into with our tenants and from interest income from loans that we make to our tenants. Our tenants operate in the healthcare industry, generally providing medical, surgical and rehabilitative care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants’ operations are subject to economic, regulatory and market conditions that may affect their profitability, which could impact our results of operations. Accordingly, we actively monitor certain key factors, including changes in those factors that we believe may provide early indications of conditions that may affect the level of risk in our lease and loan portfolio.

Key factors that we consider in underwriting prospective tenants and borrowers and in monitoring the performance of existing tenants and borrowers include, but are not limited to, the following:

•

the current, historical and projected cash flow and operating margins of each tenant and at each facility;

•

the ratio of our tenants’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;

•

the quality and experience of the tenant and its management team;

•

construction quality, condition, design and projected capital needs of the facility;

•

the location of the facility;

•

local economic and demographic factors and the competitive landscape of the market;

•

the effect of evolving healthcare legislation and other regulations on our tenants’ profitability and liquidity; and

•

the payor mix of private, Medicare and Medicaid patients at the facility.

We also actively monitor the credit risk of our tenants. The methods we use to evaluate a tenant’s liquidity and creditworthiness include reviewing certain periodic financial statements, operating data and clinical outcomes data of the tenant. Over the course of a lease, we also have regular meetings with the facility management teams. Through these means we are able to monitor a tenant’s credit quality. Our approach to our investments in real estate-related debt investments is similar to our process when seeking to purchase the underlying property. We service our mortgage and mezzanine loans in-house and monitor both the credit quality of the borrower as well as the value of our collateral on an ongoing basis. If we originate construction loans, we may retain third parties to monitor the progress of developments and to service the loans.

Certain business factors, in addition to those described above that directly affect our tenants and borrowers, will likely materially influence our future results of operations:

•

the financial and operational performance of our tenants and borrowers, particularly those that we expect to account for a significant portion of the income generated by our portfolio, such as Fundamental Healthcare, GruenePointe, the Lakeway Operator and Life Generations;

•

trends in the cost and availability of capital, including market interest rates, that our prospective tenants may use for their real estate assets financing their real estate assets through lease structures;

•

unforeseen changes in healthcare regulations that may limit the incentives for physicians to participate in the ownership of healthcare providers and healthcare real estate;

•

reductions in reimbursements from Medicare, state healthcare programs and commercial insurance providers that may reduce our tenants’ profitability our lease rates; and

•

competition from other financing sources.

Results of Operations

For the three months ended June 30, 2015


	Three months ended June 30, 2015
	(unaudited, in thousands)
Revenues
Rental income	$	10,283
Interest on mortgage notes receivable		641
Interest on notes receivable		—

		10,924
Expenses
Depreciation and amortization		2,169
Property related		288
Acquisition costs		126
Franchise, excise and other taxes		121
General and administrative		1,796

Total operating expenses		4,500

Operating income		6,424
Other income (expense)
Interest and other income		3
Interest expense		(1,026	)

		(1,023	)
Net income	$	5,401
Less: Preferred stock dividends		(2,465	)
Plus: Net loss attributable to noncontrolling interest		(1,332	)

Net income attributable to common stockholders	$	1,604

Revenues totaled approximately $10.9 million for the three months ended June 30, 2015, which were comprised of:

•

Rental income of $10.3 million, which was comprised of the following:

•

$10.0 million of contractual rent and straight-line rent related to triple-net leases on our owned real estate properties;

•

$0.2 million of operating expense reimbursement revenue from our medical office building; and

•

$0.1 million of contractual base rent and straight-line rent related to a ground lease.

•

Mortgage interest of $0.6 million from the Company’s two originated mortgage notes receivable investments.

Operating expenses totaled $4.5 million for the period, which were comprised of the following:

•

Depreciation and amortization expense of $2.2 million that was primarily related to the real estate properties and related intangible lease assets;

•

Property operating expense of $0.3 million related to our one medical office building, which included:

•

$0.2 million of recoverable operating expenses; and

•

$0.1 million of ground lease and other non-reimbursable expenses.

•

Acquisition costs of $0.1 million on real estate properties acquired that have been accounted for as business combinations and potential acquisitions that are no longer being pursued; and

•

General and administrative expenses of $1.8 million, which included:

•

$1.2 million of salary and benefits-related costs, including $0.3 million of stock-based compensation expense;

•

$0.3 million of professional fees; and

•

$0.3 million of other expenses.

Interest expense was $1.0 million, including unused credit facility fees and interest on borrowings totaling $0.7 million and amortization of deferred financing costs totaling $0.3 million.

Preferred stock dividends totaled $2.5 million, which primarily related to the Series B Preferred Stock issued in March and April 2015.

For the six months ended June 30, 2015


	Six months ended June 30, 2015
	(unaudited, in thousands)
Revenues
Rental income	$	13,969
Interest on mortgage notes receivable		1,670
Interest on notes receivable		224

		15,863
Expenses
Depreciation and amortization		3,246
Property related		579
Acquisition costs		194
Franchise, excise and other taxes		228
General and administrative		3,671

Total operating expenses		7,918

Operating income		7,945
Other income (expense)
Interest and other income		9
Interest expense		(1,816	)

		(1,807	)
Net income	$	6,138
Less: Preferred stock dividends		(2,905	)
Plus: Net loss attributable to noncontrolling interest		(1,317	)

Net income attributable to common stockholders	$	1,916

Revenues totaled approximately $15.9 million for the six months ended June 30, 2015, which were comprised of:

•

Rental income of $14.0 million, which was comprised of the following:

•

$13.5 million of contractual rent and straight-line rent related to triple-net leases on our owned real estate properties;

•

$0.4 million of operating expense reimbursement revenue from our medical office building; and

•

$0.1 million of contractual base rent and straight-line rent related to a ground lease.

•

Mortgage interest of $1.7 million, which was comprised of the following:

•

$1.3 million from the two originated mortgage notes receivable investments; and

•

$0.4 million from the acquired Lakeway mortgage note receivable prior to foreclosure in February 2015.

•

Interest on notes receivable of $0.2 million.

Operating expenses totaled $7.9 million for the period, which were comprised of the following:

•

Depreciation and amortization expense of $3.2 million that was primarily related to the real estate properties and related intangible lease assets;

•

Property operating expense of $0.6 million related to our one medical office building, which included:

•

$0.4 million of recoverable operating expenses; and

•

$0.2 million of ground lease and other non-reimbursable expenses.

•

Acquisition costs of $0.2 million on real estate properties acquired that have been accounted for as business combinations and potential acquisitions that are no longer being pursued;

•

Franchise, excise, and other taxes of $0.2 million related to states where we own property; and

•

General and administrative expenses of $3.7 million, which included:

•

$2.3 million of salary and benefits-related costs, including $0.6 million of stock-based compensation expense;

•

$0.9 million of professional fees; and

•

$0.5 million of other expenses.

Interest expense was $1.8 million, including unused credit facility fees and interest on borrowings totaling $1.2 million and amortization of deferred financing costs totaling $0.6 million.

Preferred stock dividends totaled $2.9 million, which primarily related to the Series B Preferred Stock issued in March and April 2015.

For the period from April 23, 2014 (inception) to December 31, 2014


	For the period from April 23, 2014 (inception) to December 31, 2014
	(in thousands)
Revenues
Rental income	$	4,316
Interest on mortgage notes receivable		1,078
Interest on note receivable		53

		5,447
Expenses
Depreciation and amortization		1,273
Property related		308
Acquisition costs		192
Start-up costs		888
Franchise, excise, and other taxes		72
General and administrative		2,391

Total operating expenses		5,124

Operating income		323

Other income (expense)
Interest and other income		17
Interest expense		(317	)

		(300	)

Net income	$	23

We recognized an insignificant amount of net income for the period from April 23, 2014 (inception) to December 31, 2014. For the period from inception through July 31, 2014, the closing date of the common stock private placements, we incurred a net loss of approximately $0.9 million, primarily due to amounts owed to vendors and professional service providers and reimbursements to certain members of our management team for employment compensation and for expenses incurred in connection with our organization and the common stock private placements, including legal and accounting, and expenses related to our formation activities, identification and negotiation of the acquisitions and investments in our portfolio and other potential investment opportunities. We do not consider the results of our operations from inception to July 31, 2014 to be meaningful with respect to an analysis of our operations for periods after which we commenced revenue generating activities.

Revenues totaled approximately $5.4 million for the period from April 23, 2014 (inception) to December 31, 2014, which were comprised of:

•

Rental income of $4.3 million, which was comprised of the following:

•

$4.1 million of contractual rent and straight-line rent related to triple-net leases on our four owned real estate properties; and

•

$0.2 of operating expense reimbursement revenue on our medical office building.

•

Mortgage interest of $1.0 million from the two originated mortgage notes receivable investments; and

•

Interest on note receivable of $0.1 million from a note receivable.

Operating expenses totaled $5.1 million for the period from April 23, 2014 (inception) to December 31, 2014, which were comprised of the following:

•

Depreciation and amortization expense of $1.3 million that is primarily related to the real estate properties and related intangible lease assets;

•

Property operating expense of $0.3 million related to our one medical office building which included:

•

$0.2 million of recoverable operating expenses; and

•

$0.1 million of ground lease expense;

•

Acquisition costs of $0.2 million on real estate properties acquired that have been accounted for as business combinations and acquisitions that are no longer being pursued;

•

Start-up costs of $0.9 million;

•

Franchise, excise, and other taxes of $0.1 million related to taxes in California, Tennessee, and Texas; and

•

General and administrative expenses of $2.4 million, which included:

•

$1.6 million of salary and benefits-related costs, including $0.4 million of stock-based compensation expense; and

•

$0.8 million of other costs primarily related to professional fees.

Interest expense was $0.3 million, including amortization of deferred financing costs totaling $0.2 million and unused credit facility fees and interest on borrowings totaling $0.1 million.

Liquidity and Capital Resources

Overview

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. Our primary sources of cash include the net proceeds from this offering and the BlueMountain Private Placement, operating cash flows and borrowings, including borrowings under our secured credit facility. Our primary uses of cash include funding the pending acquisitions in our portfolio and other acquisitions and investments consistent with our investment strategy, repay principal and interest on any outstanding borrowings, make distributions to our stockholders, fund our operations and pay accrued expenses.

Our long-term liquidity needs consist primarily of funds necessary to pay for the costs of acquiring additional healthcare properties and making additional loans and other investments, including potential future developments and redevelopments, and principal and interest payments on our debt. In addition, although the terms of our net leases generally obligate our tenants to pay capital expenditures necessary to maintain and improve our net-leased properties, we from time to time may fund the capital expenditures for our net-leased properties through loans to the tenants or advances, some of which may increase the amount of rent payable with respect to the properties. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances (including OP units) or debt offerings, net cash provided by operations, borrowings under our secured credit facility, long-term mortgage indebtedness and other secured and unsecured borrowings.

We may utilize various types of debt to finance a portion our acquisition and investment activities, including long-term, fixed-rate mortgage loans, variable-rate term loans, secured revolving lines of credit, such as our secured credit facility, and construction financing facilities. Under our secured credit facility, we are subject to continuing covenants and are required to make continuing representations and warranties, and future indebtedness that we may incur may contain similar provisions. In addition, our secured credit facility is secured

by pledges of substantially all of our assets. In the event of a default, the lenders could accelerate the timing of payments under the debt obligations and we may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on our liquidity, financial condition, results of operations and ability to make distributions to our stockholders.

Sources and Uses of Cash

Six months ended June 30, 2015

The sources and uses of cash reflected in our consolidated statement of cash flow for the six months ended June 30, 2015 is summarized below:


	For the six months ended June 30, 2015
	(unaudited, in thousands)
Cash and cash equivalents at beginning of period	$	10,493
Net cash provided by operating activities		4,650
Net cash used in investing activities		(153,090	)
Net cash provided by financing activities		142,360

Cash and cash equivalents at end of period	$	4,413

Operating Activities —Net cash provided by operating activities was $4.7 million, which primarily consisted of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends to common stockholders of $3.2 million and for certain investing activities.

Investing Activities— Net cash used in investing activities included the acquisition of eight properties totaling $153.1 million.

Financing Activities— Net cash provided by financing activities included $142.3 million in net proceeds from the issuance of preferred stock, borrowings on our secured credit facility totaling $28.0 million, and a $1.0 million contribution by a noncontrolling interest. Cash outflows included the payment of dividends on preferred stock of $2.1 million and common stock of $3.2 million.

April 23, 2014 (inception) to December 31, 2014

The sources and uses of cash reflected in our consolidated statement of cash flow for the period from April 23, 2014 (inception) to December 31, 2014 is summarized below (dollars in thousands):


	For the period from April 23, 2014 (inception) to December 31, 2014
Cash and cash equivalents at beginning of period	$	—
Net cash provided by operating activities		1,591
Net cash used in investing activities		(189,263	)
Net cash provided by financing activities		198,165

Cash and cash equivalents at end of period	$	10,493

Operating Activities —Net cash used in operating activities was impacted by $0.9 million of start-up costs related to our formation. See “Results of Operations” for further discussion. Our board of directors declared cash dividends for the period from July 31, 2014 through December 31, 2014 totaling $2.2 million, which exceeded cash flows from operating activities primarily because of the start-up costs incurred. We expect on an annual basis that our cash flows from operating activities will exceed our cash distributions to stockholders. However, from time to time, cash distributions to stockholders may exceed cash flows from operating activities. We will fund any excess distributions with available cash on hand or borrowings under our secured credit facility.

Investing Activities —Net cash used in investing activities includes the acquisition of four properties totaling $108.4 million, the origination or acquisition of three mortgage notes receivable totaling a net $77.7 million, the funding on a note receivable of $2.5 million, and the payment of capitalized pre-acquisition costs of $0.6 million.

Financing Activities —Net cash provided by financing activities includes the $151.7 million in net proceeds from the issuance of common stock in the private placements that were completed in July and August 2014, and borrowings on the secured credit facility totaling $50.0 million. Cash outflows include payments for credit facility origination fees totaling $2.4 million and dividends of $0.9 million.

Secured Revolving Credit Facility

On July 30, 2015, we entered into an amended and restated $375 million secured revolving credit facility, which replaced our prior $200 million facility. The credit facility includes an accordion feature, which allows the total borrowing capacity under our secured credit facility to be increased to up to $600 million, subject to certain conditions, including obtaining additional commitments from lenders. Upon completion of this offering, amounts outstanding under our secured credit facility will bear interest at LIBOR plus a margin between 2.00% and 2.50% or a base rate plus a margin between 1.00% and 1.50%, in each case depending on our leverage. In addition, we are required to pay a fee equal to 0.25% of the amount of the unused portion of our secured credit facility if amounts borrowed are greater than 50% of our secured credit facility or 0.35% if amounts borrowed are less than 50% of the secured credit facility.

The amount available to borrow under our secured credit facility is limited according to a borrowing base valuation of pledged assets owned by subsidiaries of our operating partnership that guarantee our secured credit facility. We have the option to remove assets from the pool of borrowing base assets and to add different assets, subject to our continued compliance with the financial covenants and other terms of our secured credit facility. As of the date of this prospectus, we had $216 million outstanding under our secured credit facility and approximately $29 million of available capacity, based on the current borrowing base. The amount available to borrow under our secured credit facility will increase with each acquisition of unencumbered healthcare properties that are added to the borrowing base.

Our ability to borrow under our secured credit facility is subject to our ongoing compliance with various customary restrictive covenants, including with respect to liens, indebtedness, investments, distributions, mergers and asset sales. In addition, our secured credit facility requires us to satisfy certain financial covenants, including:

•

total consolidated indebtedness not exceeding 55% of gross asset value;

•

a minimum fixed charge coverage ratio (defined as the ratio of adjusted consolidated EBITDA to consolidated fixed charges) of 1.75 to 1.00;

•

a minimum tangible net worth (defined as gross asset value less total consolidated indebtedness) of $350.0 million plus 75% of the sum of any additional net offering proceeds;

•

a minimum aggregate occupancy rate of 85% for borrowing base properties;

•

a minimum weighted-average remaining initial lease term of seven years for borrowing base properties;

•

a minimum debt service coverage ratio (defined as the ratio of the adjusted net operating income of borrowing base properties to the actual interest and letter of credit fees paid under our secured credit facility) of 2.00 to 1.00; and

•

a minimum borrowing base assets of at least ten borrowing base properties with an aggregate appraised value of at least $300.0 million.

Our secured credit facility also contains customary events of default, including among others, nonpayment of principal or interest, material breach of representations and warranties, and failure to comply with our

covenants. An event of default, if not cured or waived, could result in the acceleration of any outstanding indebtedness under our secured credit facility.

Our operating partnership is the borrower under our secured credit facility, and we and each of our subsidiaries other than our operating partnership serve as guarantors under our secured credit facility.

Contractual Obligations

The following table sets forth our contractual obligations as of June 30, 2015, excluding the impact of subsequent events (amounts in thousands):


	Remainder of 2015		2016-2017		2018-2019		2020- Thereafter		Total
Secured Credit Facility ⁽¹⁾	$	1,369	$	80,322	$	—	$	—	$	81,691
Operating lease commitments ⁽²⁾		163		664		693		20,358		21,878
Tenant renovation funding allowance ⁽³⁾		3,390		—		—		—		3,390
Tenant allowance ⁽⁴⁾		1,475		—		—		—		1,475

	$	6,397	$	80,986	$	693	$	20,358	$	108,434

(1)

Does not reflect our amended and restated credit facility, which closed on July 30, 2015. Assumes the balance outstanding of $78.0 million and interest rate in effect of 2.9% at June 30, 2015 remain in effect until maturity of our secured credit facility. Amounts also include unused secured credit facility fees assuming the balance outstanding at June 30, 2015 remains outstanding through maturity of our secured credit facility.

(2)	All of our contractual obligations to make operating lease payments are related to our corporate office lease and one ground lease.

(3)

As a part of the acquisition of the long term acute care hospital in Kentfield, California, we agreed to advance $7.0 million to the seller/tenant to fund ongoing tenant renovations, which the seller/tenant will draw in full no later than October 31, 2015. Approximately $3.6 million had been advanced as of June 30, 2015. The monthly rent will be increased each month by 8.75% of the amount that has been advanced as of the end of the preceding month.

(4)

We made a tenant allowance of $6.0 million in advance of closing on the acquisition of Mountain’s Edge Hospital to fund the tenant’s purchase of certain furnishings, fixtures and equipment to be installed at the facility. As of June 30, 2015, we had funded $4.5 million of the tenant allowance. On July 31, 2015, the remaining available funds under the $6.0 million tenant allowance were paid to the tenant and the annual base rent under the lease increased by 8.75% of the aggregate gross purchase price, including the $6.0 million tenant allowance.

In connection with our investment in Lakeway Hospital, we agreed to provide the Lakeway Operator with a line of credit of up to $11.0 million to fund ordinary working capital needs, capital expenditures and other non-operating expenditures of the Lakeway Operator, including up to $11.0 million to fund a litigation judgment that is currently under appeal. The Lakeway Operator’s ability to draw under the line of credit is subject to certain conditions, including the Lakeway Operator’s having drawn in full the amount available under its existing accounts receivable line of credit with no uncured defaults thereunder. If funded, the line of credit would have a maturity date of February 3, 2020 and would bear interest at a rate of 10% to 12% per annum. As of June 30, 2015, no amounts were available or outstanding under this line of credit.

Off-Balance Sheet Arrangements

As of the date of this prospectus, we have no off-balance sheet arrangements.

Inflation

We are exposed to inflation risk as income from long-term leases are a main source of our cash flows from operations. For our leased properties, we expect there to be provisions in the majority of our leases that will protect us from the impact of inflation. These provisions may include rent escalators, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square foot allowance. However, due to the long-term nature of the anticipated leases, among other factors, the leases may not re-set frequently enough to cover inflation.

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: FFO attributable to common stockholders and AFFO attributable to common stockholders.

Funds from Operations

FFO is a non-GAAP measure used by many investors and analysts that follow the real estate industry. FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, represents net income (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairments of real estate assets, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We compute FFO in accordance with NAREIT’s definition, which may differ from the methodology for calculating FFO, or similarly titled measures, used by other companies.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. We believe that the presentation of FFO and AFFO provides useful information to investors regarding our operating performance by excluding the effect of depreciation and amortization, gains or losses from sales for real estate, including impairments, extraordinary items and the portion of items related to unconsolidated entities, all of which are based on historical cost accounting, and that FFO and AFFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO and AFFO do not represent an amount that accrues directly to common stockholders.

Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. FFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

FFO attributable to common stockholders for the period from April 23, 2014 (inception) to December 31, 2014 was adversely affected by the $0.9 million in start-up costs incurred related to our formation activities through July 31, 2014.

Adjusted Funds from Operations

AFFO is a non-GAAP measure used by many investors and analysts to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO for certain items that are not added to net income in NAREIT’s definition of FFO, such as acquisition expenses, equity based compensation expenses, and any other non-comparable or non-cash expenses, which are costs that do not relate to the operating performance of our properties.

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. AFFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

The following table reconciles historical and pro forma net income (loss), the most directly comparable GAAP metric, to historical and pro forma FFO and AFFO for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014 (in thousands, except per share amounts):


	The six months ended June 30, 2015				Pro Forma for year ended December 31, 2014	Historical for the period from April 23, 2014 (inception) to December 31, 2014
	Pro Forma	Historical			Pro Forma for year ended December 31, 2014
Net income attributable to common stockholders	$	$	1,916		$	$	23
Real estate depreciation and amortization			3,219				1,268
Real estate depreciation attributable to noncontrolling interests			(213	)			—

FFO attributable to common stockholders			4,922				1,291
Start-up costs			—				888
Acquisition costs on completed acquisitions			90				90
Stock-based compensation expense			628				443
Deferred financing costs amortization			629				182
Non-real estate depreciation and amortization			17				(2	)
Straight-line rent expense			85				47
Straight-line rent revenue			(3,618	)			(394	)
Straight-line revenue attributable to noncontrolling interests			1,509				—

AFFO attributable to common stockholders	$	$	4,262		$	$	2,545

Weighted average common shares outstanding—basic and diluted			11,092				10,918
FFO per common share—basic and diluted		$	0.44			$	0.12
AFFO per common share—basic and diluted		$	0.38			$	0.23

Quantitative and Qualitative Disclosures about Market Risks

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business and investment objectives, we expect that the primary market risk to which we will be exposed is interest rate risk.

We may be exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other investments, including future borrowings under our secured credit facility. As of August 13, 2015, we had $216 million outstanding under our secured credit facility, which bears interest at a variable rate, and no other outstanding debt. At June 30, 2015, LIBOR was 19 basis points. Assuming no increase in the amount of our variable interest rate debt, if LIBOR increased 100 basis points, our cash flow would decrease by approximately $2.2 million. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. We also may enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We will not enter into derivative transactions for speculative purposes.

In addition to changes in interest rates, the value of our future investments is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants/operators and borrowers, which may affect our ability to refinance our debt if necessary.

OUR BUSINESS

Overview

We are a self-managed and self-administered company that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. We have elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014. As of the date of this prospectus, our portfolio is comprised of 21 healthcare facilities, including two long-term acute care hospitals, two acute care hospitals, 15 skilled nursing facilities, one medical office building and one assisted living facility, which we acquired for an aggregate gross purchase price of $452.9 million, and two healthcare-related debt instruments in the aggregate principal amount of $28.0 million. In addition, we have two transactions under contract, consisting of Graham Oaks and Vibra Rehabilitation Hospital of Amarillo, and an option to purchase Kearny Mesa for an initial aggregate purchase price of $46.0 million. Upon the acquisition of our properties under contract, our portfolio will be comprised of 24 healthcare facilities with an initial aggregate gross purchase price of $498.9 million and a total of 2,308 licensed beds located in Texas, California, Nevada and South Carolina, including 17 skilled nursing facilities, two acute care hospitals, two long-term acute care hospitals, one assisted living facility, one inpatient rehabilitation facility and one medical office building, providing aggregate annualized base rent of approximately $45.9 million, and a $10.0 million healthcare-related debt investment that provides annual interest payments of approximately $0.9 million. See “—Our Portfolio.”

While our preferred form of investment is fee ownership of a facility with a long-term triple-net lease with the healthcare provider or operator, we also may provide debt financing to healthcare providers, typically in the form of mortgage or mezzanine loans. In addition, we may provide capital to finance the development of healthcare properties, which we may use as a pathway to the ultimate acquisition of pre-leased properties by including purchase options or rights of first offer in the loan agreements. We intend to conduct our operations so that neither we nor any of our subsidiaries will meet the definition of investment company under the 1940 Act. Therefore, neither we nor any of our subsidiaries will be required to register as an investment company under the 1940 Act.

Our management team has extensive experience in acquiring, owning, developing, financing, operating, leasing and disposing of many types of healthcare properties and portfolios, as well as acquiring, owning, financing, operating and selling healthcare operating companies. We believe that our management team’s depth of experience in healthcare real estate, operations and finance positions us favorably to take advantage of healthcare investment opportunities. Our management team is led by John W. McRoberts, our chief executive officer and chairman of our board of directors, William C. Harlan, our president and chief operating officer and a member of our board of directors, and Jeffery C. Walraven, our chief financial officer. Each of Messrs. McRoberts and Harlan has over 30 years of experience investing in healthcare real estate and operating companies, having completed over 170 acquisitions of healthcare-related facilities through various investment vehicles. Mr. Walraven has 23 years of experience, including 22 years of public accounting experience, serving many public REIT clients since 1999, most recently as an assurance managing partner of the Memphis, Tennessee office of BDO USA, LLP, where his primary responsibilities included providing core and peripheral assurance services and business operational and tax consulting services, including with respect to numerous public and private REIT offerings. We believe that our management team’s depth of experience in healthcare real estate, operations, accounting and finance positions us favorably to take advantage of healthcare investment opportunities.

Market Opportunity

Continued Growth in Healthcare Spending

CMS and the U.S. Office of the Actuary estimate that healthcare expenditures and/or services comprised 17.4% of U.S. GDP in 2013 and has risen from just 5.0% of GDP in 1960. As highlighted in the chart below, healthcare spending in the U.S. continues to grow. According to the latest National Health Expenditures report by CMS, healthcare spending is projected to reach 18.4% of GDP by 2020. Similarly, overall healthcare expenditures have risen sharply from $1.4 trillion in 2000 to $2.8 trillion in 2012. CMS projects national healthcare expenditures to grow at a relatively stable rate of approximately 5.7% per year to reach $4.3 trillion by 2020.

National Healthcare Expenditures

(2004-2020)

LOGO

Source: HHS, CMS.

We believe that there are several fundamental drivers behind the expected sustained growth in demand for healthcare services, including:

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Aging and growing U.S. population : Between 2013 and 2050, the U.S. population over 65 years of age is projected to more than double from about 43 million to nearly 90 million people, according to the U.S. Census Bureau. Furthermore, various factors, including advances in healthcare treatments, are resulting in longer life expectancies. According to the Centers for Disease Control and Prevention, from 1950 to 2009, the average life expectancy at birth in the U.S. increased from 68.2 years to 78.5 years. By 2050, the average life expectancy at birth is projected to increase to 83.8 years, according to the U.S. Census Bureau.

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Disproportionate spending across older Americans : The chart below highlights the distribution of median healthcare expenditures by age. According to HHS, those age 65 and over spend more per person on healthcare than all other age categories combined. We believe that healthcare expenditures for the U.S. population over 65 years of age will continue to rise as a disproportionate share of healthcare dollars is spent on older Americans due to increasing requirements for treatment and management of chronic and acute health ailments.


U.S. Population Age 65 and Over		Median Healthcare Spending per Person by Age Group


Source: U.S. Census Bureau, the Statistical Abstract of the United States		Source: Department of Health and Human Services Agency for Healthcare Research and Quality, Medial Expenditure Panel Survey, 2012

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Healthcare is less impacted by macroeconomic conditions : Demand for healthcare and healthcare properties is based primarily on demographics and healthcare needs rather than macroeconomic conditions. This is evidenced by the steady growth of both healthcare related expenditures and healthcare employment through the 2008-2009 recession. For example, during 2008 and 2009 virtually all industries experienced widespread job losses while the healthcare industry continued to create jobs. During 2008 and 2009, a total of 317,000 and 234,000 new healthcare-related jobs, respectively, were created, corresponding to employment gains of 2.4% and 1.7%, according to the Bureau of Labor Statistics. By comparison, total non-farm employment declined by 2.6% and 3.8% in 2008 and 2009, respectively.

Annual Percent Change in Employment

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Affordable Care Act increases market size : The Affordable Care Act requires that every American have health insurance beginning in 2014 or be subject to a penalty. Implementation of the Affordable Care Act is still in its early stages and the ultimate impacts on the healthcare industry generally and healthcare properties specifically are difficult to predict. We expect millions of additional Americans to gain access to health insurance and participate in healthcare services that were once difficult to access. To that end, according to the Congressional Budget Office, implementation of the Affordable Care Act is expected to result in 24 million additional insured Americans by the end of 2017. One of the provisions of the Affordable Care Act is the expansion of Medicaid, which provides health coverage to low-income families. According to the Kaiser Family Foundation, 29 states and the District of Columbia are implementing Medicaid expansion, with expansion under discussion in two other states. The healthcare industry will need to adapt and expand its capabilities in order to accommodate this once uninsured segment of the population as they participate more broadly in the healthcare system and utilization of hospital facilities rises.

We believe that delivery of healthcare is shifting toward greater use of specialized facilities and is becoming less reliant on traditional “one-stop” acute care hospitals and that the evolving regulatory environment has led to increased focus on reducing healthcare costs while improving patient outcomes. We believe that specialized acute and post-acute care facilities, which are less costly to build, maintain, and operate compared to traditional hospitals, will be an increasingly important factor in lowering healthcare delivery costs while improving patient quality of care particularly with the trend of operators operating across the acute and post-acute spectrum of care. As a result, we believe the market is experiencing rising demand for newer, more convenient, technologically advanced and efficient healthcare properties.

We believe that several trends in the healthcare industry will provide us with an attractive environment to pursue investment opportunities in healthcare real estate assets. Healthcare has traditionally been a capital intensive industry, with a large proportion of available capital being dedicated to investments in real estate related assets, such as hospital buildings, medical offices and specialized facilities. With advancements in technology and changes in consumer preferences, healthcare providers now must also invest heavily in expensive equipment, such as magnetic resonance imaging technology, CT scanners and other specialized equipment used to diagnose and treat patients. Moreover, ongoing changes in government regulation, especially regulations relating to patient privacy, have resulted in a need for substantial investments in software and other information technology. Finally, as outlined above, healthcare expenditures continue to grow at a rapid pace, brought about by an aging population and new government regulation providing insurance to previously uninsured individuals.

Faced with the need for capital to invest in new equipment, information technology and new, modernized and/or expanded facilities to meet the demand of an increasing patient population and employee base, healthcare providers are increasingly turning to healthcare REITs as a source of financing. Healthcare REITs typically provide long-term financing to healthcare operators in the form of purchase and lease, sale and leaseback transactions, mortgage loans, and mezzanine debt. Some healthcare REITs specialize in certain segments of the healthcare industry, while others invest across a broader spectrum of healthcare real estate. Healthcare REITs typically seek to diversify their tenant or borrower base across a range of healthcare operators.

Increasing Demand for Healthcare Properties

In addition to the expected growth in healthcare spending and demand for healthcare services, we believe that demand for healthcare properties, particularly the type of facilities we intend to target, will increase due to a number of factors, including:

•

We believe that delivery of healthcare services is shifting toward greater use of specialized facilities and is becoming less reliant on traditional “one stop” acute care hospitals. Increasingly, more specialized surgeries and long-term and post-acute care occur at off-campus facilities. We believe the following factors are key drivers behind the growing use of specialized facilities:

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Specialized acute and post-acute care facilities are less costly to build, maintain, and operate, creating a meaningful cost advantage over traditional hospitals. While the shift to greater use of lower-cost facilities has been ongoing, the Affordable Care Act provides an additional catalyst for acceleration of this trend.

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Technological advances have aided the growth of specialty facilities that provide services and procedures in areas such as orthopedics, cardiology, gastroenterology, ophthalmology, gynecology, plastic surgery, rehabilitation therapy, pain management, diagnostic imaging and cancer treatment. Previous delivery of these services was generally not feasible outside of large long-term acute care centers.

•

Consumer preferences for more accessible and more conveniently located facilities are expected to drive demand as customers favor visiting a suburban facility located near population centers over a hospital located in an urban center.

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Traditional hospitals have limited space and admissions are increasingly being reserved for critically ill patients who are then moved to lower cost facilities once stabilized.

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The proportion of healthcare professionals who practice a specialty has been rising for years and this trend creates a need for specialized facilities used in the treatment of complicated or difficult medical conditions.

•

Healthcare-related jobs account for 13 of the 20 fastest growing occupations in the U.S., and the healthcare industry was one of the largest industries in the U.S., providing 12.2 million jobs in 2012, according to the U.S. Department of Labor’s Bureau of Labor Statistics. The Bureau of Labor Statistics estimates that the healthcare industry will generate approximately 2.9 million new wage and salary jobs between 2012 and 2022, more than any other industry. Wage and salary employment in the healthcare industry is projected to increase 23.8% through 2022, compared with 10.8% for all industries combined. The trend toward continued growth in healthcare-related employment creates growing demand for facilities that serve and house the healthcare industry.

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While the number of physicians in the healthcare industry is expected to grow, we believe that the increased costs associated with running a practice as a result of the Affordable Care Act is likely to reduce the relative number of small independent practices. We expect more physicians to join healthcare delivery systems that offer cost sharing in addressing compliance and regulatory matters and in accessing expensive information technology and equipment.

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The Affordable Care Act also contains provisions targeting reduced reimbursements under Medicare and ties quality of service and patient outcomes to reimbursement levels. We believe these terms will push healthcare providers to make greater use of efficient facilities (such as the facilities in which we intend to invest), lower costs, and make substantial investments in technology and equipment. As a result, demand for efficient, modern, and specialized facilities that are able to generate improved patient outcomes in the most cost-effective setting is likely to rise and drive more health care providers to outsource real estate ownership to third parties.

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Over the past several years, increases in uncompensated care have burdened the industry and the Affordable Care Act offers a solution to the uninsured patient problem. We believe the increase in availability of healthcare coverage is likely to translate into improved collection and reduced uncompensated care. As a result, this incremental volume of patients with the ability to pay for services should help drive a meaningful increase in margins, which should lead to improved tenant credit quality.

Growth in Third-Party Ownership of Healthcare Real Estate

We believe that increased demand for more convenient, technologically-advanced and clinically-efficient healthcare properties will cause existing and newly formed medical service providers to modernize their facilities by renovating existing properties and building new facilities. Additionally, in order to operate profitably within a managed care environment, medical service providers are aggressively trying to increase patient populations, while maintaining lower overhead costs, through consolidation with other operators and by building new facilities that are more attractive to patients and their families, have greater operating efficiencies, and are increasingly being located in areas of population and patient growth. We believe that many providers prefer to outsource their ownership and management of real estate to third-parties, which has resulted in REITs owning an increasing percentage of institutional-quality healthcare properties. While we believe that an increasing proportion of providers prefer to outsource their ownership and management of real estate to third parties, the ownership of healthcare properties remains highly fragmented. According to the study “Slicing, Dicing and Scoping the Size of the U.S. Commercial Real Estate Market” (a study conducted by Andrew C. Florance, Norm G. Miller, Jay Spivey, and Ruijue Peng who were affiliated with the CoStar Group, Inc. and the University of San Diego), the size of the healthcare real estate market was approximately $1.3 trillion as of 2010. As December 31, 2014, public REITs owned only approximately $14.3 billion of healthcare real estate assets. The high fragmentation that characterizes the market also creates significant investment opportunities for experienced investors like us to grow their businesses by acquiring institutional-quality healthcare facilities.

Our Competitive Strengths

We believe that the following competitive strengths will support the accretive growth of our business and the implementation of our business plan:

•

Experienced Management Team with Successful Track Record. Our management team has a proven track record of successfully investing in and managing a portfolio of healthcare properties, including executing on the acquisition of our current portfolio since July 2014. In 1993, Messrs. McRoberts and Harlan founded Capstone completed a successful initial public offering of Capstone in 1994 and led the merger of Capstone with Healthcare Realty Trust Incorporated in 1998. At the time of the merger, Capstone owned or had investments in 159 healthcare properties located in 30 states. Capstone generated a total return of 62.8% to investors from its initial public offering in June 1994 through the time of its merger with Healthcare Realty Trust Incorporated in October of 1998 (assuming reinvestment of all cash distributions paid by Capstone on its common stock during that period in additional shares of common stock). During the period beginning with the inception of the RMS in December 1994 through Capstone’s merger with Healthcare Realty Trust Incorporated in October of 1998, Capstone generated a total return to its investors of 82.8% (assuming reinvestment of all cash distributions paid by Capstone on its common stock during that period in additional shares of common

stock) compared to an RMS total return of 42.9%. We can provide no assurances, however, that Capstone’s stock performance was not impacted by general market trends and other external factors unrelated to management’s performance. See “Management—Additional Background of Certain of Our Executive Officers.”

In 2001, Mr. McRoberts invested in, and subsequently became president and chief executive officer of, MeadowBrook Healthcare, Inc., a private company that purchased and operationally restructured four under-performing rehabilitation hospitals. Under Mr. McRobert’s leadership, the operating business was sold in July 2005 to RehabCare Group (NYSE: RHB) and the real estate to SunTrust Corp (NYSE: STI) at a sale price higher than the original purchase price.

The information regarding the performance of prior entities with which Messrs. McRoberts and Harlan were affiliated is not a guarantee or prediction of the returns that we may achieve in the future, and we can offer no assurance that we will be able to replicate these returns.

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Access to Attractive Off-Market and Target-Marketed Acquisition and Investment Opportunities through Industry Relationships . As healthcare industry veterans, Messrs. McRoberts and Harlan have long-standing relationships with owners, operators and developers of healthcare properties, who we believe value their industry knowledge and commitment to working in a cooperative and supportive manner. In addition, Messrs. McRoberts and Harlan have extensive relationships with private equity groups, attorneys, contractors and commercial bankers who invest in or otherwise support healthcare services operators. Messrs. McRoberts and Harlan were previously employed by Carter Validus Advisors, LLC, the advisory company to Carter Validus Mission Critical REIT, from October 2010 to April 2012, where they served as the President and Head of Healthcare, respectively, and continued to serve following 2012 as consultants, and where, as leaders of the senior management team, they were involved in sourcing and structuring off-market acquisitions and options to acquire and mezzanine financings on seven healthcare properties involving over $350 million in investment activity. Since our formation, each of the properties that we have acquired or are under contract to acquire was sourced through the existing relationships of our management team, and going forward, we believe these relationships will provide us with off-market acquisition and investment opportunities, as well as target-marketed opportunities that are strategically presented to a limited number of capital providers. We believe such off-market and target-marketed transactions may not be available to many of our competitors and provide us with the opportunity to purchase assets outside the competitive bidding process.

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Experience-Driven Investment Underwriting Process . We believe our management team’s depth of experience in healthcare real estate, operations and finance, including underwriting debt and equity investments in healthcare properties, provides us with unique perspective in underwriting potential investments. Our rigorous investment underwriting process focuses on both real estate and healthcare operations and includes a detailed analysis of the property, including historical and projected cash flow and capital needs, visibility of location, quality of construction and local economic, demographic and regulatory factors, as well as an analysis of the financial strength and experience of the healthcare operator and its management team. We believe our underwriting process will support our ability to deliver attractive risk-adjusted returns to our stockholders.

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The single-tenant properties in our portfolio generally are leased to high-quality, experienced providers covering the acute and post-acute spectrum of care, are subject to long-term non-cancellable triple-net leases and are supported by parent guarantees, cross-default provisions and/or cross-collateralization provisions. In addition, leases for our single-tenant properties contain rent escalators, which protect us against inflation and potential increases in interest rates. With the exception of Lakeway Hospital, all of the single-tenant facilities in our portfolio also benefit, and all of our single-tenant properties under contract will benefit, from parent guarantees. As a result, approximately 77% of our total annualized base rent after the acquisition of our properties under contract will benefit from an additional layer of credit protection by requiring the guarantors to make our tenants’ rental payments to us in the event that a facility on a stand-alone basis cannot generate sufficient cash flow to meet its rental obligations to us. One key advantage of this credit enhancement is that it minimizes our risk associated with the performance of one facility because our rental income is reinforced by the financial performance across a more diversified pool of facilities.


Facility Type	Guarantor Coverage Ratio ⁽¹⁾		Facility Coverage Ratio ⁽²⁾
Skilled Nursing Facilities/Assisted Living Facility ⁽³⁾		2.1x		1.3x
Long-Term Acute Care Hospitals /Inpatient Rehabilitation Facility		1.6x		1.5x

Total		2.0x		1.3x

(1)

(2)

(3)

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shares of restricted common stock, which will vest on the third anniversary of the grant date, and an aggregate of 358,125 restricted stock units that will vest on the third anniversary of the grant date only if certain performance metrics are achieved. See “Management—Executive Compensation—Equity Grants.” As a result, as of the date of this prospectus, our management team and directors collectively own approximately 5.7% of our common stock on a fully diluted basis, which we believe aligns their interests with those of our stockholders.

Our Business and Growth Strategies

Focus on Multiple Types of Acute and Post-Acute Healthcare Properties

The market for healthcare real estate is extensive and includes real estate owned by a variety of healthcare operators. We focus on acquiring, financing and otherwise investing in healthcare properties that reflect long-term trends in healthcare delivery methods, including:

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Long-Term Acute Care Hospitals . Long-term acute care hospitals are hospitals that focus on extended hospital care, generally at least 25 days, for the medically complex patient. Long-term acute care hospitals have arisen from a need to provide care to patients in lower-cost, more focused acute care settings, including daily physician observation and treatment, before they are able to go home or into a rehabilitation hospital.

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Acute Care Hospitals . Acute care hospitals are general medical and surgical hospitals providing both inpatient and outpatient medical services and are owned and/or operated either by a non-profit or for-profit hospital or hospital system. These facilities often act as feeder hospitals to dedicated specialty facilities.

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Skilled Nursing Facilities . Skilled nursing facilities provide restorative, rehabilitative and nursing care for people not requiring the more extensive and sophisticated treatment available at acute care hospitals or long-term acute care hospitals but require higher levels of care than provided in assisted living facilities. Many provide ancillary services that include occupational, speech, physical, respiratory and IV therapies, as well as sub-acute care services.

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Medical Office Buildings . Medical office buildings are buildings occupied by physician practices located near or adjacent to acute care hospitals or other facilities where healthcare services are rendered. Medical office buildings can be leased by physicians, physician practice groups, hospitals, hospital systems or other healthcare providers and can include outpatient surgical centers, diagnostic labs, physical therapy providers and physician office space in a single building.

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Inpatient Rehabilitation Facilities . Inpatient rehabilitation facilities are hospitals that provide inpatient rehabilitation services for patients recovering from injuries, organ transplants, amputations, cardiovascular surgery, strokes, and complex neurological, orthopedic and other conditions. These hospitals are often the best medical alternative to traditional acute care hospitals, which receive reimbursements based upon diagnostic-related groups and, thus are pressured to discharge patients to lower-cost, post-acute care settings after patients become medically stable.

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Ambulatory Surgery Centers . Ambulatory surgery centers are freestanding facilities designed to allow patients to have surgery, spend a short time recovering at the center and then return home to complete their recovery. Ambulatory surgery centers offer a lower cost alternative to general acute care hospitals for many surgical procedures in an environment that is more convenient for both patients and physicians. Procedures commonly performed include those related to dermatology, ear, nose and throat/audiology, pain, ophthalmology, orthopedics and sports health, and urology.

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Other Dedicated Specialty Acute Care Hospitals . Other dedicated specialty acute care hospitals are medical and surgical hospitals dedicated to specialized services, such as orthopedic hospitals, cardiac hospitals, hospitals and psychiatric hospitals. These hospitals typically are located in urban and suburban areas, and offer their specialized services in a lower cost setting than in a general acute care hospital.

We believe that by investing in facilities that span the entire acute and post-acute spectrum of care, we will be able to adapt to, and capitalize on, changes in the healthcare industry and support, grow and develop long-term relationships with providers that serve the highest number of patients at the highest-yielding end of the healthcare real estate market.

Employ Multiple Investment Structures to Maximize Investment Returns

We intend to continue to employ the following investment structures:

Direct Property Investments . We intend primarily to acquire and own healthcare properties and lease those properties to healthcare operators and developers pursuant to long-term “triple-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and provide for inflation protection through rental rates that increase in fixed percentage amounts or in amounts tied to increases in CPI. In addition, we may lease certain of our properties on an arms’ length basis to our TRS, and contract with third-party managers to manage the healthcare operations at these properties. By leasing certain of our properties to our TRS, we will be able to benefit from the growth in facility-specific cash flows generated by the operator engaged by our TRS, and will have more control over operator performance.

Property Investments through Joint Ventures and Other Partnerships . We may from time to time make investments in healthcare facilities through joint ventures or other partnerships with operators or other healthcare providers in order to leverage our strength as a healthcare real estate funding source and our partners’ strengths in healthcare operations and/or services. These structures can enhance our ability to expand our existing network of relationships and allow us to make larger scale investments with potentially higher returns while limiting our risk exposure to such investments. Any investment opportunities that we may pursue through a joint venture, partnership or equivalent structure would be subject to our same due diligence processes and investment underwriting criteria.

Debt Investments . We also intend to make mortgage and mezzanine loans to our tenants and other healthcare operators that are collateralized by their real estate assets or a pledge of ownership interests of an entity or entities that directly or indirectly owns properties. Under such loans, we seek to obtain annual interest escalators, lease deposits, covenants regarding minimum working capital and net worth, liens on accounts receivable and other operating assets, and various provisions for cross-default, cross-collateralization and corporate or personal guarantees, when appropriate. In addition, we may provide capital to finance the development of healthcare properties, which we may use as a pathway to the ultimate acquisition of pre-leased properties by including purchase options or rights of first offer in the loan agreements.

RIDEA Investments . From time to time, we may make equity investments, loans (with equity like returns) and obtain profits interests in certain of our tenants. This investment falls under a structure permitted by the REIT Investment and Diversification and Empowerment Act of 2007, or RIDEA. Under the provisions of RIDEA, a REIT may lease “qualified health care properties” on an arms’ length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view RIDEA as a structure primarily to be used on properties that present attractive valuation entry points.

We believe that providing operators and developers with a variety of financing options enhances yield, provides a pathway to additional investments and positions us as a favorable capital partner that can accommodate creative and flexible capital structures.

Negotiate Well-Structured Net Leases with Strong Coverage

Our primary ownership structure is a facility purchase with a long-term triple-net lease with the healthcare provider. We intend to continue to enter into leases that generally have minimum lease coverage ratio requirements (the ratio of the tenant’s EBITDAR to its annualized base rent) and fixed charge coverage ratio requirements (the ratio of the tenant’s EBITDAR to its annualized fixed charges (rent, interest and current maturities of long-term debt). We believe our coverage ratios achieve the proper balance between maintaining our profitability and providing comfort that our tenants will be able to pay the rent due under our leases. Under our net leases, our tenants will be responsible for all operating costs and expenses related to the property, including maintenance and repair obligations and other required capital expenditures. For single-tenant properties, we also seek to structure our leases with lease terms ranging from 10 to 25 years and rent escalators that provide a steadily growing cash rental stream. We also intend to enter into lease extensions during the term of the lease in connection with additional acquisitions, reinvestment projects and other opportunities that arise from our close tenant relationships. Our lease structures also are designed to provide us with key credit support for our rents, including, in certain cases, lease deposits, covenants regarding liquidity, minimum working capital and net worth, liens on accounts receivable and other operating assets, and various provisions for cross-default, cross-collateralization and corporate or parent guarantees, when appropriate. We believe these features help insulate us from variability in operator cash flows and enable us to minimize our expenses while we continue to build our portfolio.

Leverage Existing and Develop New Operator Relationships.

Our management team has long-standing relationships in the healthcare industry through which we have sourced our existing portfolio and properties under contract and under evaluation, and we intend to continue to expand our portfolio by leveraging these existing relationships. Many of our operators have demonstrated a desire, as well as the resources, to grow, and we expect our strong relationships with these operators to lead to other acquisition and investment opportunities going forward. In addition, we intend to develop new relationships with healthcare providers and operators in order to diversify our tenant base and reduce our dependence on any single tenant or operator.

Adhere to Rigorous Investment Underwriting Criteria

We have adopted a rigorous investment underwriting process based on extensive analysis and due diligence with respect to both the healthcare real estate and the healthcare operations. We seek to utilize our network of relationships with healthcare operators and third-party owners to source acquisition or other investment opportunities in properties that have the following attributes:

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Strong Asset Quality —properties that are suitable for their intended use with a quality of construction that is capable of sustaining the property’s long-term investment potential, assuming funding of budgeted maintenance, repairs and capital improvements;

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Experienced and Creditworthy Operators —properties with well-qualified, experienced and creditworthy operators or guarantors;

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Strong Healthcare Regulatory Compliance —properties and operators with a proven record of strong healthcare regulatory compliance programs;

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Favorable Demographic Trends —local or regional markets that support the potential for stable and growing property-level cash flow over the long term, based in part on an evaluation of local economic, demographic and regulatory factors;

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Attractive Locations —properties located in established or otherwise appropriate markets for comparable properties, with access and visibility suitable to meet the needs of its occupants;

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Stable Cash Flow —historical and projected cash flow that comfortably support the ability to meet operational needs, capital expenditure requirements and lease or debt service obligations; and

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Predictable Capital Needs —future capital needs that can be reasonably projected and allow us to meet our objectives of growth in cash flow and preservation of capital.

Actively Monitor the Performance of Our Facilities and Industry Trends

We actively monitor the financial and operational performance of our tenants and lease guarantors and of the specific facilities in which we invest through a variety of methods, such as reviews of periodic financial statements, operating data and clinical outcomes data, regular meetings with the facility management teams and joint strategic planning with the facility operators. Integral to our asset management philosophy is our desire to continue our existing, and develop new, long-term relationships with our tenants so that they view us as a valuable partner and member of their teams. The value of our investments depends, in part, on our tenants’ ability to prosper. Therefore, pursuant to the terms of our leases, our tenants are required to provide us with certain periodic financial statements and operating data, and, during the terms of such leases, we conduct joint evaluations of local facility operations and participate in discussions about strategic plans that may ultimately require our approval pursuant to the terms of our lease agreements. Our management team also communicates regularly with their counterparts at our tenants, and others who closely follow the healthcare industry, in order to maintain knowledge about changing regulatory and business conditions. We believe this knowledge, combined with our management team’s experience in the healthcare industry, allows us to anticipate changes in our tenants’ operations in sufficient time to strategically and financially plan for changing economic, market and regulatory conditions.

Conservatively Utilize Leverage in Our Investing Activities

We intend to use leverage conservatively, assessing the appropriateness of new equity or debt capital based on market conditions, future cash flows, the creditworthiness of tenants/operators and future rental rates, with the ultimate objective of becoming an issuer of investment grade debt. We intend to target a ratio of debt to gross undepreciated asset value of between 30% and 40%. However, our charter and bylaws do not limit the amount of debt that we may incur and our board of directors has not adopted a policy limiting the total amount of our borrowings. In addition, subject to satisfying the annual distribution requirements applicable to REITs, we intend to target a dividend payout ratio that allows us to retain some of our operating cash flow and thereby reduce our need to rely on additional debt.

Our board of directors will consider a number of factors in evaluating the amount of debt that we may incur, and, as our portfolio becomes more seasoned, may change the metrics used to determine our leverage. If we adopt a debt policy, our board of directors may from time to time modify such policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the market for debt and equity securities, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors. Our decision to use leverage in the future to finance our assets will be at our discretion and will not be subject to the approval of our stockholders.

Our financing sources include the net proceeds from this offering and the BlueMountain Private Placement and our secured credit facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Secured Revolving Credit Facility.” Over time, subject to maintaining our qualification as a REIT, we intend to finance our growth with issuances of common equity, preferred or convertible securities and secured and unsecured debt.

Our Portfolio

100

medical office building, providing aggregate annualized base rent of approximately $45.9 million, with a weighted-average remaining lease term of 16.1 years, and a $10.0 million healthcare-related debt investment that provides annual interest payments of approximately $0.9 million. We own 100% of all of our properties, other than Lakeway Hospital, in which we own a 51% interest through the Lakeway Partnership. After taking into account our acquisitions under contract, our single-tenant properties will be leased to five operators with experienced management teams, with no single tenant/guarantor representing more than 27% of our annualized base rent.

Overall payor mix for the single-tenant operating properties in our portfolio and under contract, excluding Lakeway Hospital, was composed of approximately 42% Medicare, 27% Medicaid, 20% commercial payors and 11% other payors for the year ended December 31, 2014 and approximately 40% Medicare, 26% Medicaid, 22% commercial payors and 12% other payors for the six months ended June 30, 2015.

101

Healthcare Facilities

Current Portfolio and Properties under Contract


Property	Major Tenant(s) ⁽¹⁾	Location	Property Type		% Leased			Gross Purchase Price			Annualized Base Rent ⁽²⁾			Lease Expiration(s)	GLA/ Square Feet
*Current Properties*
Texas SNF Portfolio (9 properties)	GruenePointe	Texas		SNF		100.0	%	$	133,360		$	11,336		July 2030		307,342

Lakeway Hospital ⁽³⁾	Lakeway Operator	Lakeway, TX		ACH		100.0			75,000			9,439	⁽³⁾	February 2040		270,512

Life Generations Portfolio ⁽⁴⁾ (5 properties)	Life Generations	CA		SNF/ ALF		100.0			80,000	⁽⁴⁾		7,000		March 2030		154,199

Kentfield Rehab & Specialty Hospital	Vibra Healthcare	Kentfield, CA		LTACH		100.0			58,000	⁽⁵⁾		4,760	⁽⁵⁾	December 2029		40,091

Mountain’s Edge Hospital	Fundamental Healthcare	Las Vegas, NV		ACH		100.0			35,370	⁽⁶⁾		3,095	⁽⁶⁾	March 2030		72,140

Magnolia Place of Spartanburg	Fundamental Healthcare	Spartanburg, SC		SNF		100.0			20,000			1,800		July 2026		50,397

Horizon Specialty Hospital of Henderson	Fundamental Healthcare	Las Vegas, NV		LTACH		100.0			20,010			1,710	⁽⁷⁾	July 2029		37,209

Mira Vista	Fundamental Healthcare	Fort Worth, TX		SNF		100.0			16,000			1,400		February 2027		51,534

North Brownsville Medical Plaza ⁽⁸⁾	VBOA ASC Partners and Pain & Anesthesia Associates	Brownsville, TX		MOB		78.7			15,128			1,331	⁽⁹⁾	December 2017 and February 2018		67,682

Subtotal						98.6	%	$	452,868		$	41,871				1,051,106

*Properties under Contract*

Vibra Rehabilitation Hospital of Amarillo	Vibra Healthcare	Amarillo, TX		IRF		100.0			19,399	⁽¹⁰⁾		1,697	⁽¹⁰⁾	September 2030		37,834

Kearny Mesa ⁽¹¹⁾	Life Generations	San Diego, CA		SNF		100.0			15,000	⁽¹¹⁾		1,313	⁽¹¹⁾	March 2030		26,950

Graham Oaks	GruenePointe	Graham, TX		SNF		100.0			11,640			989		July 2030		32,391

Subtotal						100.0	%	$	46,039		$	3,999				97,175

Total						98.7	%	$	498,907		$	45,870				1,148,281

(1)

For properties other than Lakeway Hospital and North Brownsville Medical Plaza, the tenant listed is the parent guarantor. With respect to Fundamental Healthcare, the guarantor is THI of Baltimore, Inc., a wholly owned subsidiary of Fundamental Healthcare. For additional information, see “—Description of Properties and Investments in Our Portfolio.”

102

(2)

(3)

We own a 51% interest in Lakeway Hospital through the Lakeway Partnership. The annualized base rent for Lakeway Hospital as presented in this table and throughout this prospectus represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. We expect the Lakeway Partnership to contribute approximately $5.4 million of incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Lakeway Hospital.”

(4)

The Life Generations Portfolio is comprised of four skilled nursing facilities and one assisted living facility, of which three are located in San Diego County and two are located in San Bernardino County. The gross purchase price excludes approximately $1.6 million of transaction costs, which are capitalized under generally accepted accounting principles in the United States. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Life Generations Portfolio.”

(5)

(6)

The gross purchase price includes a tenant allowance of $6.0 million that we paid to the tenant for certain furnishings, fixtures and equipment installed at the facility. The annual base rent under the lease is approximately $3.1 million, or 8.75% of the aggregate gross purchase price, including the $6.0 million tenant allowance. Contractual rent for the first six months of the lease accrues from the commencement of the lease on April 1, 2015, but payment is deferred until April 2016, at which time the amounts are payable in monthly installments over the next twelve months in addition to the contractual rent then due. Interest accrues on the deferred rent at a rate of 8.75% per annum. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Mountain’s Edge Hospital.”

(7)	Excludes $1.3 million in a lease incentive that we have granted to the tenant under the terms of the lease.

(8)

This property is subject to a ground lease that expires in 2081, with two ten-year extension options, and provides for annual base rent of approximately $0.2 million in 2015. For additional information, see “—Description of Properties and Investments in Our Portfolio—Current Properties—North Brownsville Medical Plaza.”

(9)	Annualized base rent excludes certain property operating expenses that are reimbursable by tenants, which are included as rental income. For the six months ended June 30, 2015, the property operating expenses reimbursed by tenants were approximately $0.4 million.

(10)

The gross purchase price and annualized base rent do not reflect an earn-out of up to $10.6 million that may be paid to the seller approximately 24 months after closing of the acquisition, based on the tenant’s EBITDAR, for the prior 12 months. The base rent will increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing. See “—Description of Properties and Investments in Our Portfolio—Properties under Contract—Vibra Rehabilitation Hospital of Amarillo.”

(11)

We have an option to purchase this property for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of the property for 2015 and 2016, respectively. The base rent will increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017. See “—Description of Properties and Investments in Our Portfolio—Properties under Contract—Kearny Mesa.”

103

Debt Investment

Loan

Borrower

Principal
Amount

Term

Initial

Interest

Rate

First Lien
Mortgage

Guarantors

Vibra Mortgage Loan

Vibra
Healthcare, LLC
and Vibra
Healthcare II,
LLC

10,000

5/20 years

⁽¹⁾

9.00

Vibra
Hospital of
Western
Massachusetts

Vibra Healthcare Real
Estate Company II, LLC
and Vibra Hospital of
Western Massachusetts,
LLC

(1)

Acquisitions under Evaluation

Our management team has an extensive network of long-standing relationships with owners, operators and developers of healthcare properties. We believe this network of relationships will provide us access to attractive acquisition and other investment opportunities, which may not be available to our competitors.

In addition to our properties under contract, we have identified and are in various stages of reviewing in excess of $ million of additional potential acquisitions of healthcare properties, which amount is estimated in each case based on our preliminary discussions with the sellers and/or our internal assessment of the values of the properties. Of these acquisitions under evaluation, we have entered into non-binding letters of intent for the acquisition of an aggregate of $ million of healthcare facilities. We expect these potential acquisitions to provide yields consistent with our current portfolio. We have engaged in preliminary discussions with the owners, commenced the process of conducting diligence on certain of these properties and/or submitted or entered into non-binding indications of interest or term sheets to the owners of these properties. However, we have not entered into binding commitments with respect to any of the properties under evaluation, and the pricing and terms of such transactions are subject to negotiation and ongoing due diligence and, therefore, we do not believe any of these transactions are probable as of the date of this prospectus. Facilitating any acquisition under evaluation into a binding commitment with the seller is influenced by many factors including, but not limited to, the existence of other competitive bids, the satisfactory completion of all due diligence items by both parties and regulatory or lender approval, if required. The impact of these factors on the timing of any acquisition can vary based on the nature and size of each transaction. Once a binding commitment is reached with a seller, in the form of an executed purchase and sale agreement, closing on the transaction is generally expected to occur within 30 to 60 days subject to the completion of routine property due diligence that is customary in real estate transactions. Accordingly, there can be no assurance that we will enter into definitive agreements to acquire or ultimately complete the acquisition of any healthcare property under evaluation on the terms currently anticipated, or at all, and cannot predict the timing of any potential acquisitions if any are completed.

104

Our Tenants

Current Portfolio

The following table contains information regarding the tenants in our portfolio, excluding tenants at our properties under contract, as of the date of this prospectus (dollars in thousands).


Tenant	Weighted Average Remaining Lease Term		Total Leased GLA		Percent of Total Leased GLA			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
GruenePointe		14.9		307,342		29.6	%	$	11,336			27.1	%
Lakeway Operator		24.5		270,512		26.1			9,439	⁽²⁾		22.5
Fundamental Healthcare		12.8		211,280		20.4			8,005			19.1
Life Generations		14.6		154,199		14.9			7,000			16.7
Vibra Healthcare		14.4		40,091		3.9			4,760			11.4
MOB Tenants		2.4		53,295		5.1			1,331			3.2

Total / Weighted Average		16.2		1,036,719		100.0	%	$	41,871			100.0	%

Current Portfolio and Properties under Contract

The following table contains information regarding the tenants in our portfolio, including tenants at our properties under contract, as of the date of this prospectus (dollars in thousands).


Tenant	Weighted Average Remaining Lease Term		Total Leased GLA		Percent of Total Leased GLA			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
GruenePointe		14.9		339,733		29.9	%	$	12,325			26.8	%
Lakeway Operator		24.5		270,512		23.9			9,439	⁽²⁾		20.6
Life Generations		14.6		181,149		16.0			8,313	⁽³⁾		18.1
Fundamental Healthcare		12.8		211,280		18.6			8,005			17.5
Vibra Healthcare		14.7		77,925		6.9			6,457	⁽⁴⁾		14.1
MOB Tenants		2.4		53,295		4.7			1,331			2.9

Total / Weighted Average		16.1		1,133,894		100.0	%	$	45,870			100.0	%

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except as otherwise noted. For properties under contract, annualized base rent represents the base rent for the first month of the lease multiplied by 12. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments.

(2)

We own a 51% interest in Lakeway Hospital through the Lakeway Partnership. The annualized base rent for Lakeway Hospital as presented in this table and throughout this prospectus represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. We expect the Lakeway Partnership to contribute approximately $5.4 million of incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Lakeway Hospital.”

(3)

Annualized base rent for Life Generations does not reflect the $10.0 million earn-out that we will pay Life Generations in the first quarters of 2016 and 2017 based on the 2015 and 2016 EBITDARM of Kearny Mesa. The base rent will increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017. See “—Description of Properties and Investments in Our Portfolio—Properties under Contract—Kearny Mesa.”

105

(4)

Annualized base rent for Vibra Healthcare does not reflect an earn-out of up to $10.6 million that may be paid to the seller approximately 24 months after closing of the acquisition of Vibra Rehabilitation Hospital of Amarillo based on the tenant’s EBITDAR for the prior 12 months. The base rent will increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing. See “—Description of Properties and Investments in Our Portfolio—Properties under Contract—Vibra Rehabilitation Hospital of Amarillo.”

Description of Top Tenants

Lakeway Operator

The Lakeway Operator is the privately owned operator of Lakeway Hospital, which provides services in emergency medicine, family practice, cardiology, cardiothoracic surgery, radiation, oncology, general surgery, gastroenterology, women’s health, infusion therapy, diagnostic and therapeutic radiology, respiratory, physical therapy and sports medicine, occupational therapy, speech-language pathology and pain management. Based on the information provided to us by the Lakeway Operator, Lakeway Hospital recognized net revenues of $56.9 million for the year ended December 31, 2014 and $28.5 million for the six months ended June 30, 2015.

GruenePointe

GruenePointe was formed in 2014 as a partnership focused on acquiring and developing skilled nursing facilities. An affiliate of OnPointe Health, which is one of the owners of GruenePointe, will manage the operations of facilities owned or leased by GruenePointe, including the Texas SNF Portfolio. OnPointe Health is a privately owned operator of post-acute facilities and, as of June 30, 2015, operated six skilled nursing facilities, two assisted living facilities and a home health company. OnPointe Health’s senior management team has extensive experience owning, operating, managing and developing skilled nursing facilities, primarily located in Texas, New Mexico and Louisiana. Based on information provided to us by OnPointe Health, OnPointe Health recognized combined net revenues of $51.8 million for the year ended December 31, 2014 and $34.7 million for the six months ended June 30, 2015.

Life Generations

Fundamental Healthcare

Fundamental Healthcare is a privately owned owner-operator headquartered in Sparks, Maryland. Fundamental Healthcare, through its subsidiaries, operates 77 healthcare facilities in nine states, including skilled nursing facilities, long-term acute care hospitals and rehabilitation centers, and has longstanding, industry-wide relationships. Fundamental Healthcare’s facilities are largely concentrated in Texas, Nevada, Missouri and South Carolina.

Fundamental Healthcare’s wholly owned subsidiary, THI of Baltimore, serves as guarantor for each of our leases with subsidiaries of Fundamental Healthcare. Subsidiaries of THI of Baltimore operate 67 skilled nursing facilities, three long-term acute care hospitals and two acute care hospitals and, based on information provided to us by Fundamental Healthcare, recognized consolidated net revenues of approximately $504.0 million for the year ended December 31, 2014 and $274.5 million for the six months ended June 30, 2015.

106

Vibra Healthcare

Vibra Healthcare is a privately owned, nationwide owner-operator of freestanding long-term acute care hospitals and inpatient rehabilitation facilities, headquartered in Mechanicsburg, Pennsylvania. Vibra Healthcare was founded in 2004 and began the company through the acquisition of six long-term acute care hospitals. Vibra Healthcare and its subsidiaries serve as guarantors for the lease for the Kentfield Rehabilitation & Specialty Hospital and will serve as guarantors under the lease for Vibra Rehabilitation Hospital of Amarillo. With the support of a highly experienced management team, Vibra Healthcare has grown to more than 9,000 employees and operates more than 50 long-term acute care hospitals, inpatient rehabilitation facilities and outpatient physical therapy centers. These facilities have more than 2,900 licensed beds in 18 states, with the highest concentration in Texas and California. Vibra Healthcare is one of the largest privately owned post-acute owner-operators in the United States.

Based on information provided to us by Vibra Healthcare, Vibra Healthcare recognized consolidated net revenues, less provision for doubtful accounts, of approximately $749.0 million for the year ended December 31, 2014 and $384.8 million for the six months ended June 30, 2015.

Lease Expirations

Current Portfolio

The following table contains information regarding the expiration dates of the leases in our portfolio, excluding leases at our properties under contract, as of the date of this prospectus (dollars in thousands, except per square foot amounts).


Year of Lease Expiration	Number of Leases Expiring			Total GLA of Expiring Leases		Percent of GLA Represented by Expiring Leases			Annualized Base Rent Under Expiring Leases ⁽¹⁾		Percent of Total Annualized Base Rent of Expiring Leases			Annualized Rent Per Leased Square Foot
2015		—			—		—	%	$	—		—	%	$	—
2016		—			—		—			—		—			—
2017		8	⁽²⁾		37,830		3.6			928		2.2			24.54
2018		2	⁽²⁾		15,465		1.5			403		1.0			26.04
2019		—			—		—			—		—			—
2020		—			—		—			—		—			—
2021		—			—		—			—		—			—
2022		—			—		—			—		—			—
2023		—			—		—			—		—			—
2024		—			—		—			—		—			—
Thereafter		8			983,424		94.9			40,540		96.8			41.22

Total		18			1,036,719		100.0	%	$	41,871		100.0	%	$	40.39

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except for Lakeway Hospital, which represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments.

(2)	Represents leases of tenants at North Brownsville Medical Plaza.

107

Current Portfolio and Properties under Contract

As of the date of this prospectus, the healthcare properties in our portfolio and under contract have a weighted-average remaining lease term of 16.1 years. The following table contains information regarding the expiration dates of the leases in our portfolio, including leases at our properties under contract, as of the date of this prospectus (dollars in thousands, except per square foot amounts).


Year of Lease Expiration	Number of Leases Expiring			Total GLA of Expiring Leases		Percent of GLA Represented by Expiring Leases			Annualized Base Rent Under Expiring Leases ⁽¹⁾		Percent of Total Annualized Base Rent of Expiring Leases			Annualized Rent Per Leased Square Foot
2015		—			—		—	%	$	—		—	%	$	—
2016		—			—		—			—		—			—
2017		8	⁽²⁾		37,830		3.3			928		2.0			24.54
2018		2	⁽²⁾		15,465		1.4			403		0.9			26.04
2019		—			—		—			—		—			—
2020		—			—		—			—		—			—
2021		—			—		—			—		—			—
2022		—			—		—			—		—			—
2023		—			—		—			—		—			—
2024		—			—		—			—		—			—
Thereafter		9			1,080,599		95.3			44,539		97.1			41.22

Total		19			1,133,894		100.0	%	$	45,870		100.0	%	$	40.45

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except for Lakeway Hospital, which represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. For properties under contract, annualized base rent represents the base rent for the first month of the lease multiplied by 12. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments.

(2)	Represents leases of tenants at North Brownsville Medical Plaza.

Geographic Concentration

Current Portfolio

The following table contains information regarding the geographic concentration of the properties in our portfolio, excluding our properties under contract, as of the date of this prospectus (dollars in thousands).


Market	Number of Buildings		GLA		% of Total GLA			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
Texas		12		697,070		66.3	%	$	23,506	⁽²⁾		56.1	%
California		6		194,290		18.5			11,760			28.1
Nevada		2		109,349		10.4			4,805			11.5
South Carolina		1		50,397		4.8			1,800			4.3

Total		21		1,051,106		100.0	%	$	41,871			100.0	%

108

Current Properties and Properties under Contract

The following table contains information regarding the geographic concentration of the properties in our portfolio, including our properties under contract, as of the date of this prospectus (dollars in thousands).


Market	Number of Buildings		GLA		% of Total GLA			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
Texas		14		767,295		66.8	%	$	26,192	⁽²⁾ ⁽³⁾		57.1	%
California		7		221,240		19.3			13,073	⁽⁴⁾		28.5
Nevada		2		109,349		9.5			4,805			10.5
South Carolina		1		50,397		4.4			1,800			3.9

Total		24		1,148,281		100.0	%	$	45,870			100.0	%

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except as otherwise noted. For properties under contract, annualized base rent represents the base rent for the first month of the lease multiplied by 12. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments. For information on the expiration of these leases, see “—Lease Expirations.”

(2)

Includes Lakeway Hospital, in which we own a 51% interest through the Lakeway Partnership. The annualized base rent for Lakeway Hospital as presented in this table and throughout this prospectus represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. We expect the Lakeway Partnership to contribute approximately $5.4 million of incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Lakeway Hospital.”

(3)

Includes Vibra Rehabilitation Hospital of Amarillo. Annualized base rent for this facility does not reflect an earn-out of up to $10.6 million that may be paid to the seller approximately 24 months after closing of the acquisition of Vibra Rehabilitation Hospital of Amarillo based on the tenant’s EBITDAR for the prior 12 months. The base rent will increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing. See “—Description of Properties and Investments in Our Portfolio—Properties under Contract—Vibra Rehabilitation Hospital of Amarillo.”

(4)

Includes Kearny Mesa, a skilled nursing facility that we have an option to purchase this property for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of the property for 2015 and 2016, respectively. The base rent will increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Life Generations Portfolio.”

109

Facility-Type Concentration

Current Portfolio

The following table contains information regarding the healthcare facilities in our portfolio, excluding our properties under contract, as of the date of this prospectus (dollars in thousands).


Facility Type	Number of Buildings		Gross Purchase Price			% of Total Gross Purchase Price			% Leased			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
Skilled Nursing Facilities/ Assisted Living Facility ⁽²⁾		16	$	249,360	⁽²⁾		55.1	%		100.0	%	$	21,536	⁽²⁾		51.4	%
Acute Care Hospital ⁽³⁾		2		110,370			24.4			100.0			12,534	⁽³⁾		29.9
Long-Term Acute Care Hospital		2		78,010			17.2			100.0			6,470			15.5
Medical Office Building		1		15,128			3.3			78.7			1,331			3.2

Total		21	$	452,868			100.0	%		98.6	%	$	41,871			100.0	%

Current Properties and Properties under Contract

The following table contains information regarding the concentration of facility types in our portfolio, including our properties under contract, as of the date of this prospectus (dollars in thousands).


Facility Type	Number of Buildings		Gross Purchase Price			% of Total Gross Purchase Price			% Leased			Annualized Base Rent ⁽¹⁾			Percent of Total Annualized Base Rent
Skilled Nursing Facilities/Assisted Living Facility ⁽²⁾ ⁽⁴⁾		18	$	276,000	⁽⁴⁾		55.3	%		100.0	%	$	23,838	⁽⁴⁾		52.0	%
Acute Care Hospitals ⁽³⁾		2		110,370	⁽³⁾		22.2			100.0			12,534	⁽³⁾		27.3
Long-Term Acute Care Hospitals		2		78,010			15.6			100.0			6,470			14.1
Inpatient Rehabilitation Facility ⁽⁵⁾		1		19,399	⁽⁵⁾		3.9			100.0			1,697	⁽⁵⁾		3.7
Medical Office Building		1		15,128			3.0			78.7			1,331			2.9

Total		24	$	498,907			100.0	%		98.7	%	$	45,870			100.0	%

(1)

Annualized base rent does not represent historical rental amounts. Rather, annualized base rent represents the actual aggregate base rent for in-place leases for the month ended June 30, 2015, multiplied by 12, except as otherwise noted. For properties under contract, annualized base rent represents the base rent for the first month of the lease multiplied by 12. Base rent does not include tenant recoveries, additional rents or other lease-related adjustments. For information on the expiration of these leases, see “—Lease Expirations.”

(2)	Includes one assisted living facility that we acquired as part of our acquisition of a portfolio from Life Generations Healthcare, LLC, or Life Generations. See “—Description of Properties and Investments in Our Portfolio—Life Generations Portfolio.”

(3)

Includes Lakeway Hospital, in which we own a 51% interest through the Lakeway Partnership. The annualized base rent for Lakeway Hospital as presented in this table and throughout this prospectus represents the incremental AFFO that we expect this investment to contribute to us based on our proportionate share of the approximately $12.8 million of stabilized annual rent payable to the Lakeway Partnership under the lease and the interest we receive under the Lakeway Intercompany Mortgage Loan. We expect the Lakeway Partnership to contribute approximately $5.4 million of incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually. See “—Description of Properties and Investments in Our Portfolio—Current Properties—Lakeway Hospital.”

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(4)

Includes Kearny Mesa, a skilled nursing facility that we have an option to purchase for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of Kearny Mesa for 2015 and 2016, respectively. The gross purchase price and annualized base rent do not reflect the $10.0 million earn-out. See “—Description of Properties and Investments in Our Portfolio—Properties under Contract—Kearny Mesa.”

(5)

Description of Properties and Investments in Our Portfolio

Current Properties

Texas SNF Portfolio

Portfolio Description. On July 30, 2015, we acquired the Texas SNF Portfolio for an aggregate gross purchase price of $133.4 million. The Texas SNF Portfolio contains an aggregate 1,025 licensed beds and approximately 307,342 square feet. Our purchase agreement for the Texas SNF Portfolio also covered a tenth skilled nursing facility, Graham Oaks, which we expect to acquire by the end of the third quarter of 2015 for approximately $11.6 million, resulting in an aggregate gross purchase price of $145.0 million for the Texas SNF Portfolio and Graham Oaks. See “—Properties under Contract—Graham Oaks.” The aggregate gross purchase price includes $12.0 million of refundable contingent consideration, $3.0 million of which will become fully earned and non-forfeitable on January 1 of each year from 2016 through 2019, subject to the tenants’ compliance with certain financial covenants under the master lease agreement and other provisions in the purchase and sale agreement on such dates. If any of the refundable contingent consideration has not been earned as of January 1, 2019, GruenePointe will have until January 1, 2020 to achieve compliance with all of the applicable financial covenants and earn such remaining refundable contingent consideration. If GruenePointe has not achieved such compliance by January 1, 2020, GruenePointe must repay to us any refundable contingent consideration that has not been earned, together with interest from the closing date of our acquisition to January 1, 2020, at a rate of 3.0% per annum. The following table provides additional details regarding the healthcare facilities in the Texas SNF Portfolio:


Facility	City, State	# of Licensed Beds
Greenhill Villas	Mt. Pleasant, Texas		150
Songbird Lodge	Brownwood, Texas		125
Casa Rio Healthcare & Rehabilitation	San Antonio, Texas		124
Kemp Care Center	Kemp, Texas		124
St. Teresa Nursing & Rehabilitation Center	El Paso, Texas		124
Whispering Pines Lodge	Longview, Texas		116
River City Care Center	San Antonio, Texas		100
Sunflower Park Health Care	Kaufman, Texas		92
Kerens Care Center	Kerens, Texas		70

Grand Total			1,025

Lease Terms . Upon the closing of the acquisition, we leased 100% of the Texas SNF Portfolio to wholly owned subsidiaries of GruenePointe, pursuant to a triple-net master lease with the tenant responsible for all costs of the facilities, including taxes, utilities, insurance, maintenance and capital improvements. The master lease has

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a non-cancelable 15-year term, with two five-year extension options. The annual base rent under the master lease is approximately $11.3 million, or 8.5% of the $133.4 million paid at closing. The annual base rent will increase each year by 2.0% of the prior year’s base rent. The annual base rent will not be adjusted down in the event that GruenePointe is required to repay any portion of the refundable contingent consideration described above. In addition to the base rent, commencing in the second year of the lease, the master lease provides for additional rent equal to 20% of the amount by which the aggregate gross patient care revenues (i.e., gross revenues less supplemental management fees) of four facilities (Songbird Lodge, Graham Oaks (upon closing on the acquisition of the facility), River City Care Center and Kerens Care Center) exceed the aggregate gross patient care revenues of such facilities in the first year of the lease, until the aggregate rent under the master lease for these four facilities equals 10.0% of the gross purchase price allocated to these facilities, subject to increases pursuant to the annual rent escalator.

Guaranty and Security. The master lease is unconditionally guaranteed by GruenePointe and is guaranteed by an affiliate of OnPointe Health in an amount up to one year’s management fee from the Texas SNF Portfolio and by certain members of GruenePointe up to $6.0 million. The GruenePointe guaranty is cross-defaulted and cross-collateralized with all other obligations of GruenePointe to us. In addition, the master lease is secured by (i) a first priority pledge of and security interest in the equity interests in each of the single-asset holding subsidiaries of GruenePointe subject to the master lease and (ii) an assignment and pledge of substantially all of the assets of the single-asset holding subsidiaries of GruenePointe subject to the master lease.

Investment Rationale.

•

Flexible master lease structure with potential for increasing yields and credit protections . The minimum lease payments due under the master lease for the Texas SNF Portfolio provide an initial lease yield of 8.5% on the $133.4 million aggregate gross purchase price. The master lease includes an additional rent provision as described above that will enhance the return on our investment from the Texas SNF Portfolio if the underlying facility operations grow under the direction of GruenePointe.

The master lease also includes several guaranty provisions, including an unconditional guaranty from GruenePointe, a limited guaranty from an affiliate of OnPointe Health and personal guarantees of $6.0 million from certain individual members of GruenePointe. The master lease also requires an initial lease deposit of $2.1 million, which is equal to two months of base rent. In addition, GruenePointe is required to hold $6.0 million in escrow that is subject to reductions of $2.0 million beginning in the second quarter of 2016 and then annually for 2017 and 2018 if GruenePointe maintains a rent coverage ratio (ratio of EBITDAR to base rent) of 1.5x, subject to certain exceptions with our consent.

•

Establish relationship with a growing operator. We believe the acquisition of the Texas SNF Portfolio creates a significant new relationship with GruenePointe and OnPointe Health as we can be a source of real estate investment capital to fund the expansion of their operations. OnPointe Health, which is one of the owners of GruenePointe, is a privately owned operator of post-acute facilities and, as of June 30, 2015, operated six skilled nursing facilities, two assisted living facilities and a home health company.

•

Properties located in less competitive markets with future growth potential. We believe the locations of the Texas SNF Portfolio are in areas with less competition and a stable-to-growing demand for additional patient services, particularly higher acuity services, that can sustain high occupancy levels, which are characteristics similar to markets in which OnPointe Health has existing facilities and experience. We believe that OnPointe Health’s experience and specialties in higher acuity services can allow these facilities to meet the needs of growing patient populations in markets previously underserved while achieving efficiencies within GruenePointe and OnPointe Health’s existing network of operations that would translate into higher profitability and solid regulatory compliance.

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Life Generations Portfolio

Portfolio Description. On March 31, 2015, we acquired a portfolio of four skilled nursing facilities and one assisted living facility from Life Generations for $80.0 million. The Life Generations Portfolio contains an aggregate of 429 beds and is located in the southern California markets. The following table provides additional details regarding the healthcare facilities in the Life Generations Portfolio:


Facility	Facility Type		City, State	Number of Licensed Beds
Friendship Manor		SNF	National City, CA		104
Arbor Hills		SNF	La Mesa, CA		100
Castle Manor		SNF	National City, CA		99
Heritage Park		SNF	Upland, CA		70
Heritage Court		ALF	Upland, CA		56

Total					429

In connection with our acquisition of the Life Generations Portfolio, we acquired an option to purchase Kearny Mesa, a 96-bed skilled nursing facility located in San Diego, California, which we expect to acquire by the end of the third quarter of 2015, using available cash and borrowings under our secured credit facility. See “—Properties under Contract—Kearny Mesa.”

Lease Terms. Upon the closing of the acquisition, we leased 100% of the Life Generations Portfolio to wholly owned subsidiaries of Life Generations pursuant to a triple-net master lease agreement, with the tenants responsible for all costs of the facilities, including taxes, insurance, maintenance and capital improvements. The lease has a non-cancelable 15-year term, with two five-year extension options. The initial annual base rent under the lease is approximately $7.0 million, or 8.75% of the $80.0 million purchase price, plus annual escalators beginning in the fifth year that are the lesser of (i) 2.0% and (ii) the percentage change in the consumer price index. Commencing in the tenth year of the initial lease term, base rent will increase each year by 2.5% of the prior year’s base rent.

Guaranty and Security. The master lease agreement is unconditionally guaranteed by Life Generations. The master lease is also cross-defaulted with (i) any material uncured default by Life Generations under its credit facility that results in the actual acceleration of any amounts outstanding under its credit facility and (ii) any material uncured default under any material obligations related to the Life Generations Portfolio.

Investment Rationale.

•

High quality portfolio with an attractive yield . The Life Generations Portfolio is comprised of high-quality facilities located in attractive markets in San Diego and the greater Los Angeles, California area. All but three of the healthcare facilities operated by Life Generations are rated four stars or higher by CMS and three out of the five facilities in the Life Generations Portfolio are rated either four or five stars by CMS, which differentiates them from other facilities in the same markets. In addition, the above average quality of care provided at the facilities operated by Life Generations, as indicated by the CMS star ratings, has been a prominent factor in achieving robust patient occupancy levels. Occupancy levels at the Life Generations Portfolio averaged approximately 93.0% for the six months ended June 30, 2015.

•

Attractive locations . We believe the locations of the facilities in major metropolitan areas and in close proximity to large population centers will allow the Life Generations Portfolio to continue to maintain high occupancy levels. The considerable replacement costs and development within these California markets should limit future development of competing facilities. Furthermore, the Health and Safety Code regulations imposed by the California Office of Statewide Health Planning and Development, or OSHPD, create substantial barriers to the development of new skilled nursing facilities in California. These regulatory hurdles imposed by OSHPD restrict the supply of skilled nursing facilities throughout

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the state and often lead operators and investors to pursue opportunities where there are fewer barriers to entry. These factors are likely to provide support for the long-term value of the Life Generations Portfolio.

•

Corporate guarantee and strong rent coverage . The master lease agreement is guaranteed by Life Generations. The guarantee specifies that the consolidated operations of Life Generations will be used to support our rental income at each of the facilities, including profits from operations of properties not included in our sale-leaseback transaction. We will therefore benefit from additional coverages above the property-level Life Generations Portfolio. Based on representations made to us by Life Generations, on a consolidated basis, Life Generations generated a rent coverage ratio of approximately 3.7x for the six months ended June 30, 2015.

•

Experienced and respected operator . Life Generations has a well-known reputation for providing high quality care in key California markets, which has allowed Life Generations to build relationships with managed-care payors and key referral sources in local markets for patients.

Lakeway Hospital

Property Description. Lakeway Hospital is a 270,512 square-foot acute care hospital located at 100 Medical Parkway, Lakeway, Texas. The hospital opened in April 2012 and is licensed for 106 beds and has six operating rooms.

Investment Description . On February 3, 2015, we acquired fee simple ownership of Lakeway Hospital through a negotiated, non-judicial foreclosure and payment of an additional $25.0 million in cash consideration for a total investment by the Lakeway Partnership of $75.0 million. We initially acquired a note receivable for $50.0 million on December 29, 2014, which had an outstanding principal balance of approximately $163.9 million and was secured by a first mortgage lien on Lakeway Hospital. The operator of the facility defaulted on debt service payments under the mortgage in 2013, and HUD held an auction in December 2014 through which we acquired the note.

We own the facility through the Lakeway Partnership, which, based on a total equity contribution of $2.0 million, is owned 51% by us and 49% by a neurosurgical physicians group that relocated its practice to Lakeway Hospital. Our equity contribution to the Lakeway Partnership was $1.0 million, and our transfer of the original $50.0 million note and $23.0 million of cash to the Lakeway Partnership is structured as the Lakeway Intercompany Mortgage Loan to the Lakeway Partnership that is secured by a first mortgage lien on Lakeway Hospital. The Lakeway Intercompany Mortgage Loan has a ten-year term and requires payments of principal and interest at a rate of 8.0% per annum based on a 25-year amortization schedule. The interest rate on the Lakeway Intercompany Mortgage Loan will reset after five years based upon then-current market rates. The Lakeway Intercompany Mortgage Loan, the related interest income to us and the related interest expense to the Lakeway Partnership are eliminated in our consolidated financial statements.

In addition, in connection with our acquisition of Lakeway Hospital, we assumed the seller’s rights as lessor under the ground lease for the medical office building that is part of Lakeway Hospital. The ground lease expires on October 1, 2061, subject to two ten-year extension options, and provides for annual base rent to the Lakeway Partnership of approximately $0.2 million, which will increase each year by 3.0% of the prior year’s base rent.

Lakeway Partnership. We have a 51% interest in the Lakeway Partnership, which is managed by a two-person board, with one member appointed by us and one member appointed by our partner. Each board member has a number of votes equal to the percentage interest of the member that designated such board member. Our board designee is the managing board member in charge of the day-to-day operations of the Lakeway Partnership. However, the approval of both board members will be required for certain major decisions, including, among others, the sale of all or a material portion of Lakeway Hospital, the termination or

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modification of the lease with the Lakeway Operator, the incurrence or modification of any debt in excess of $100,000, the prepayment of the Lakeway Intercompany Mortgage Loan and merging or consolidating with another entity.

Under the Lakeway Partnership agreement, if the neurosurgical physicians group terminates its professional services agreement with the Lakeway Operator for any reason except default by the Lakeway Operator not resulting from its insolvency, we have the option to purchase our partner’s 49% interest in the Lakeway Partnership at its original $1.0 million equity investment plus an accrued return of 8.0% from the date of its investment. In addition, as long as the neurosurgical physicians group is a member of the Lakeway Partnership and for a period of two years thereafter, the physicians group and its members are prohibited from directly or indirectly owning or participating in the ownership of any entity that operates a competing facility within 15 miles of Lakeway Hospital.

Lease Terms . We lease 100% of Lakeway Hospital to Lakeway Regional Medical Center, LLC pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease has a non-cancelable 25-year term, with two ten-year extension options. The stabilized annualized base rent payable to the Lakeway Partnership under the lease is approximately $12.8 million, or 17.0% of the Lakeway Partnership’s total $75.0 million investment in the facility, payable in equal monthly installments. However, the monthly rent is approximately $0.5 million for the second and third quarters of 2015 and will increase to approximately $1.1 million for the fourth quarter of 2015, which represents the stabilized monthly rent under the lease. The monthly rent will increase to approximately $1.6 million for the first two quarters of 2016 to account for the lower monthly rent in the first six months of the lease and will then return to the stabilized monthly rent of approximately $1.1 million. Beginning in the third year of the lease term, the annual base rent will increase each year by 3.0% of the prior year’s base rent. The lease contains a provision for a $1.0 million lease deposit at inception of the lease, with additional monthly deposits required during the fourth year of the lease, until the total deposit is $6.3 million.

Investment Rationale

•

Generates attractive yield. The Lakeway Partnership is expected to contribute approximately $5.4 million in incremental AFFO to us for the year ending December 31, 2015 and thereafter approximately $9.4 million annually based upon the stabilized monthly rent of $1.1 million.

•

Attractive location . Lakeway Hospital is located in the highly affluent area of Lakeway, Texas, which is approximately 20 miles northwest of Austin, Texas. The population of the Lakeway area has grown

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rapidly as the area has experienced strong investment in residential and commercial development. We anticipate that the limited number of nearby competing facilities will allow Lakeway Hospital to service the growing demand for the high-acuity services in the Lakeway area. We believe the attractive demographic characteristics of the area combined with the need for both specialized acute care services in the local market will support the long-term value of Lakeway Hospital.

•

Acquired at significant discount to cost. Lakeway Hospital had a total gross property and equipment original development and acquisition cost of approximately $202.0 million in 2012. The total consideration of $75 million paid by the Lakeway Partnership to acquire the facility represents a substantial discount to the originally invested capital and has the ability to provide additional value within our portfolio.

•

Structure that protects our invested capital. Under the terms of the partnership agreement, $73.0 million of our investment is structured as an intercompany loan to the Lakeway Partnership that is secured by a first mortgage lien on Lakeway Hospital. As a result, proceeds from any future disposition would first be applied to any outstanding amount under our loan to the partnership. The partnership agreement also provides us with the right to buyout the 49% owner in the partnership at their original $1.0 million equity investment plus an accrued return of 8.0% from the date of their investment if the operator defaults on their rent payment and does not cure the default. This provides us with the flexibility to bring in a replacement specialty physician group or operator. Furthermore, in the event of a sale or recapitalization of the Lakeway Operator, we will receive a priority payment of $6.4 million plus a scaled percentage of the proceeds to the operator.

•

Partner with prestigious neurosurgical group. The neurosurgical physicians group that relocated its practice to Lakeway Hospital is highly respected and has material geographic coverage in the local market. We estimate that this physicians group represents approximately 20% of the neurosurgical capacity in the Austin, Texas area and will bring a heavy patient caseload to Lakeway Hospital. The physician group’s patient flow historically has been consistent due to referral sources from primary care physicians and pain management physicians, as well as patient recommendations. We believe that the combination of these factors provides a distinct operational advantage that will contribute meaningfully to Lakeway Hospital’s financial performance and provide us with greater rental income security.

•

Newly constructed facility. Lakeway Hospital began operations in the newly constructed campus in April 2012. We believe the state-of-the-art structure makes the Lakeway Hospital more attractive than other hospitals in the metropolitan area, which should increase patient volumes and enhance Lakeway Hospital’s ability to attract additional specialty doctors and staff.

Kentfield Rehabilitation & Specialty Hospital

Property Description . On August 1, 2014, we acquired Kentfield Rehabilitation & Specialty Hospital, or Kentfield Hospital, from Vibra Healthcare for a gross purchase price of $58.0 million and leased the property back to 1125 Sir Francis Drake Boulevard Operating Company, LLC, or the Kentfield Operator, a subsidiary of Vibra Healthcare. Kentfield Hospital is a 40,091 square-foot facility located at 1125 Sir Francis Drake Boulevard, Kentfield, California, within the highly affluent Marin County in the San Francisco Bay area. Kentfield Hospital consists of an approximately 29,000 square-foot long-term acute care hospital with 60 licensed long-term acute care hospital beds and an approximately 11,000 square-foot adjoining medical office building. Kentfield Hospital is currently undergoing an approximately $15.0 million renovation project that began in early 2012 and is expected to be completed in the second half of 2015. The gross purchase price includes $7.0 million that will be paid to the seller/tenant to fund ongoing renovations, which the seller/tenant must draw in full no later than October 31, 2015.

Lease Terms . Upon the closing of the acquisition, we leased 100% of Kentfield Hospital to the Kentfield Operator pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes,

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utilities, insurance, maintenance and capital improvements. The lease has a 15-year term with two five-year extension options. The initial annual base rent under the lease is approximately $4.5 million, or 8.75% of the initial $51.0 million purchase price, payable in equal monthly installments. The monthly base rent will increase each month by 8.75% of the amount of the $7.0 million that we have advanced to fund ongoing renovations. As of June 30, 2015, approximately $3.6 million of this amount had been advanced. In addition, the annual base rent will increase (i) by 1.5% of the prior year’s base rent on the first and second anniversaries of the initial lease term and (ii) for each year thereafter, by the percentage by which the consumer price index has increased over the prior twelve months, subject to an annual cap of 2.0% of the prior year’s base rent.

Guaranty and Security . The lease is unconditionally guaranteed by each of Vibra Healthcare and Vibra Healthcare II, LLC, or Vibra Healthcare II. In addition, the lease is secured by an assignment and pledge of substantially all of the assets, other than accounts receivable, of Kentfield Hospital, subject to the terms of an intercreditor agreement between us and the Kentfield Operator’s existing lender. The obligations of the Kentfield Operator and of Vibra Healthcare and Vibra Healthcare II as guarantors is cross-collateralized and cross-defaulted with the obligations and all collateral, if any, securing any existing and future obligations of the Kentfield Operator, Vibra Healthcare, Vibra Healthcare II and their respective affiliates to us, including the Vibra Mortgage Loan.

Investment Rationale. Located in the highly affluent Marin County, California, Kentfield Hospital is one of only two licensed long-term acute care hospitals in the San Francisco Bay Area market and benefits from a surrounding population of approximately 7.2 million, according to the 2010 U.S. Census, which supports its bed demand. Kentfield Hospital has been one of Vibra Healthcare’s top performing facilities. Services provided at Kentfield Hospital, in addition to servicing patients with complex medical needs requiring long-term hospitalization in an acute setting, include dialysis, advanced wound care, bronchoscopy, ventilator management, total parenteral nutrition, spasticity management and nerve blocks, fluoroscopy, barium swallow studies and diagnostic EMG studies. In addition, we believe Kentfield Hospital receives referrals from Marin General Hospital, a 235-bed general acute-care hospital that is approximately one mile from Kentfield Hospital. As a result of this relationship, Kentfield Hospital has benefitted from a consistent step-down patient flow.

We believe that the competitive barriers to entry for any new long-term acute care hospital in the San Francisco Bay Area market are high, as a result of land and construction costs in the California market and a long, extensive and costly regulatory process, which have helped generate a robust flow of patients and high patient occupancy rates for the Kentfield Hospital. In addition, as part of the Medicare, Medicaid and SCHIP Extension Act of 2007 and the Affordable Care Act, construction of new long-term acute care hospitals were under a moratorium from December 2007 until December 2012. With the passage of the Bipartisan Budget Act of 2013, the moratorium was reinstated in January 2015. These restrictions on new construction limit the supply, and therefore competition, from newly constructed long-term acute care hospitals.

Mountain’s Edge Hospital

Property Description . On March 31, 2015, we acquired Mountain’s Edge Hospital for an aggregate gross purchase price of $35.4 million, which includes a tenant allowance of $6.0 million that we paid the tenant for certain furnishings, fixtures and equipment installed at the facility. Mountain’s Edge Hospital is a newly developed 72,140 square foot acute care hospital that began accepting patients in early July 2015 and is located at 8656 West Patrick Lane, Las Vegas, Nevada. Mountain’s Edge Hospital is licensed for 130 beds.

Lease Terms . On April 1, 2015, we leased 100% of Mountain’s Edge Hospital to Vegas Hospital Care, LLC, or Vegas HC, a wholly owned subsidiary of Fundamental Healthcare, pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease has a non-cancelable 15-year term, with two five-year extension options. The initial annual base rent under the lease is approximately $3.1 million, or 8.75% of the aggregate gross purchase price, including the $6.0 million tenant allowance. Contractual rent for the first six months of the lease accrues from the

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lease date, but payment is deferred until April 2016, at which time the amounts are payable in monthly installments over the next twelve months in addition to the contractual rent then due. Interest accrues on the deferred rent at a rate of 8.75% per annum. Beginning in the sixth year of the initial lease term, the annual base rent will increase each year by 1.5% of the prior year’s base rent.

Guaranty and Security. The lease is unconditionally guaranteed by THI of Baltimore, and the guaranty is cross-defaulted and cross-collateralized with all other obligations of THI of Baltimore to us. In addition, the lease is secured by an assignment and pledge of substantially all of the assets of Mountain’s Edge Hospital, subject to the terms of an intercreditor agreement between us and Vegas HC’s existing lender.

Investment Rationale. The seller acquired the property in July 2012 to develop the hospital on behalf of Fundamental Healthcare, which recognized the potential opportunities that a new hospital could afford in the rapidly expanding and affluent western section of Las Vegas. Fundamental Healthcare has extensive experience in the Las Vegas market, having operated there for more than 20 years. Prior to developing the property, a detailed bed need analysis was performed to estimate potential demand for a new hospital. Using a census of acute care hospitals and skilled nursing facilities operating in the Las Vegas market in combination with zip-code level population and patient discharge data, Fundamental Healthcare determined areas of the Las Vegas market were underserved. The location of Mountain’s Edge Hospital was strategically chosen to take advantage of the unmet demand in the area, particularly among elderly residents. The facility is also expected to benefit from favorable demographic trends as the Nevada State Demographer estimates an increase of approximately 61% in the population of those aged 65 and older from 2010 to 2030 in Clark County, which includes Las Vegas.

We believe the new state-of-the-art hospital will be a significant upgrade from existing in-patient rehabilitation facilities in the Las Vegas market. Mountain’s Edge Hospital replaces an existing hospital which is expected to be converted to a skilled nursing facility, with Mountain’s Edge Hospital intended to be the principal hospitalization site for the Health Plan of Nevada’s managed care patient population. As a result, Mountain’s Edge Hospital is expected to benefit from an immediate flow of patients. In addition, Mountain’s Edge Hospital is expected to benefit from a daily 75-bed minimum guarantee from a leading national managed care company. Mountain’s Edge Hospital includes imaging services, an intensive care unit and comprehensive rehabilitation modalities. We believe that the supportive demographic trends and immediate source of patient referrals will allow Mountain’s Edge Hospital to quickly ramp up its operations.

Magnolia Place of Spartanburg

Property Description . On August 1, 2014, we acquired Magnolia Place of Spartanburg, or Magnolia Place, from Spartanburg Healthcare Realty, LLC for $20.0 million. Magnolia Place is a 32,885 square-foot skilled nursing facility that has recently been developed by Fundamental Healthcare to expand the facility to approximately 50,397 square feet and increase the number of licensed beds from 88 to 120. The property is located at 8020 White Avenue, Spartanburg, South Carolina.

Lease Terms . Upon the closing of the acquisition, we leased 100% of Magnolia Place to THI of South Carolina at Magnolia Place Spartanburg, LLC, or THI South Carolina, a subsidiary of Fundamental Healthcare and the tenant of Magnolia Place at the time of our acquisition, pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease has a non-cancelable 12-year term, with two five-year extension options. The initial annual base rent under the lease is approximately $1.8 million, or 9.0% of the purchase price, payable in equal monthly installments. The annual base rent will increase each year by 1.5% of the prior year’s base rent.

Guaranty and Security . The lease is unconditionally guaranteed by THI of Baltimore, and the guaranty of THI of Baltimore is cross-defaulted with all other obligations of THI of Baltimore to us. In addition, the lease is secured by an assignment and pledge of substantially all of the assets of Magnolia Place, subject to the terms of an intercreditor agreement between us and THI South’s Carolina’s existing lender.

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Investment Rationale . Magnolia Place of Spartanburg is located in Spartanburg, South Carolina and benefits from significant entry barriers in the state. The state of South Carolina regulates the supply of certain healthcare providers through its Certificate of Need Program. The Certificate of Need Program is a regulatory review process that requires some healthcare providers, like hospitals and nursing homes, to obtain state authorization before making major capital expenditures or expanding medical services. The requirement to receive state authorization before developing new nursing and hospital facilities or expanding existing facilities creates a substantial barrier for bed expansion in South Carolina. According to South Carolina Department of Health and Environmental Control, there was a need for 389 additional beds in Spartanburg County as of 2012, which is where Magnolia Place is located. Furthermore, in the South Carolina counties adjacent to Spartanburg County, there was a need for an additional 740 beds as of 2012. Fundamental Healthcare’s management recognized the bed shortage in the Spartanburg market and chose to pursue an expansion of the facility to accommodate demand and, as part of the process, received a Certificate of Need from the state. Fundamental Healthcare has been able to capitalize on the facility’s CMS rating and high demand to achieve an average occupancy of 93% in 2013. We believe the expansion at Magnolia Place and restriction of skilled nursing facility beds related to the Certificate of Need Program will enhance profitability of the hospital and provide us with a more financially sound operator for the already successful facility.

Services provided at Magnolia Place, include skilled nursing care and related services for residents who require medical or nursing care, and rehabilitation services for injured, disabled, or sick persons. The facility caters to patients who either need short-term rehabilitation services while recovering from surgery or require long-term nursing and medical supervision. In addition to these services, DaVita Healthcare Partners Inc. (NYSE: DVA) constructed a 17-chair dialysis center adjacent to Magnolia Place. Dialysis services became available to Magnolia Place residents beginning in the second quarter of 2015.

In addition, we believe Magnolia Place receives referrals from Spartanburg Regional Hospital, a 540-bed general acute care hospital that is approximately two miles from Magnolia Place. As a result of this relationship, Magnolia Place has benefitted from a consistent step-down patient flow.

Horizon Specialty Hospital of Henderson

Property Description . On August 1, 2014, we acquired Horizon Specialty Hospital of Henderson, or Horizon Hospital, from Eastern LTAC, LLC for $20.0 million. Horizon Hospital is a 37,209 square-foot long-term acute care hospital located at 8550 South Eastern Avenue, Henderson, Nevada. Horizon Hospital is licensed for 39 beds.

Lease Terms . Upon the closing of the acquisition, we leased 100% of Horizon Hospital to THI of Nevada II at Desert Lane, LLC, or THI Nevada, a subsidiary of Fundamental Healthcare and the tenant of Horizon Hospital at the time of our acquisition, pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease has a 15-year term, with one five-year extension option. The initial annual base rent under the lease is approximately $1.7 million, or 8.5% of the purchase price, payable in equal monthly installments. Beginning in the sixth year of the initial lease term, the annual base rent will increase each year by 1.5% of the prior year’s base rent. In addition, upon executing the amended and restated lease agreement with THI Nevada, we paid THI Nevada $1.3 million as a lease inducement.

Guaranty and Security. The lease is unconditionally guaranteed by THI of Baltimore. In addition, the lease is secured by an assignment and pledge of substantially all of the assets of Horizon Hospital, subject to the terms of an intercreditor agreement between us and THI Nevada’s existing lender.

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Investment Rationale . Horizon Hospital is located in the affluent eastern section of the Las Vegas area and began admitting patients in February 2013. The facility offers acute-care services, including cardiopulmonary rehabilitation, ventilator weaning, tracheotomy care, pulmonary rehabilitation, cardiac monitoring and case management-discharge planners.

Prior to developing the property, a detailed bed need analysis was performed to estimate potential demand for a new hospital. Using a census of acute care hospitals and skilled nursing facilities operating in the Las Vegas market in combination with zip-code level population and patient discharge data, Fundamental Healthcare determined areas of the Las Vegas market were currently underserved. The location of the Horizon Hospital was strategically chosen to take advantage of the unmet demand in the area, particularly among elderly residents. Importantly, the Nevada State Demographer estimates 61% growth in people aged 65 and older from 2010 to 2030 in Clark County, which includes Las Vegas and Henderson, Nevada. We believe that current capacity constraints will encourage hospitals to move patients, once stabilized, out of high-cost acute care hospitals to step-down facilities, such as long-term acute care hospitals, where the cost of continued care is significantly lower than that of an acute care hospital. In addition, Fundamental Healthcare has extensive experience in the Las Vegas market, having operated there for more than 20 years.

Mira Vista Court

Property Description . On February 20, 2015, we acquired Mira Vista from Performance Care Centers, LLC for $16.0 million and leased the property to a subsidiary of Fundamental Healthcare. Mira Vista is a 51,534 square foot skilled nursing facility located at 7021 Bryant Irvin Road, Fort Worth, Texas. Mira Vista is licensed for 142 beds.

Lease Terms . Upon the closing of the acquisition, we leased 100% of Mira Vista to an affiliate of THI of Baltimore, a wholly owned subsidiary of Fundamental Healthcare, pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease has a non-cancelable 12-year term, with two five-year extension options. The initial annual base rent under the lease is approximately $1.4 million, or 8.75% of the purchase price, payable in equal monthly installments. The annual base rent will increase each year by 2.0% of the prior year’s base rent.

Guaranty and Security . The lease is unconditionally guaranteed by THI of Baltimore, and the guaranty of THI of Baltimore is cross-defaulted and cross-collateralized with all other obligations of THI of Baltimore to us. In addition, the lease is secured by an assignment and pledge of substantially all of the assets of Mira Vista, subject to the intercreditor agreement between us and THI of Baltimore’s existing lender.

Investment Rationale . Mira Vista is located in the expanding southwest section of Fort Worth, Texas. Mira Vista began admitting patients in January 2014 and provides skilled nursing care and related services for residents who either need short-term rehabilitation services while recovering from surgery or require long-term nursing and medical supervision. Mira Vista also operates two in-house pulmonary designated wings. We believe the new state-of-the-art campus has been a significant upgrade from existing skilled nursing facilities in the southwest Fort Worth market.

In addition, we believe Mira Vista receives referrals from Texas Health Harris Methodist Hospital Southwest, a 222-bed general acute care hospital, as well as the 62-bed HealthSouth City View Rehabilitation Hospital, which are both approximately two miles from Mira Vista. As a result of these relationships, Mira Vista has benefited from a consistent step-down patient flow.

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North Brownsville Medical Plaza

Property Description . On September 19, 2014, we acquired North Brownsville Medical Plaza, including the seller’s rights under the ground lease for the real property on which North Brownsville Medical Plaza is located, or the Brownsville Ground Lease, for approximately $15.2 million. North Brownsville Medical Plaza is a 67,682 square-foot medical office building located at 5700 North Expressway, Brownsville, Texas. As of June 30, 2015, the property was 78.7% leased.

Ground Lease Terms . The Brownsville Ground Lease expires in 2081, subject to two ten-year extension options, and provides for annual base rent of approximately $0.2 million in 2015, which will increase each year by 2.0% of the prior year’s annual base rent. Under the Brownsville Ground Lease, we, as lessee, have a right of first refusal in the event that the landlord intends to offer, or accept a third-party offer, for all or a portion of its fee simple interest in the land.

Tenant Leases . As of June 30, 2015, North Brownsville Medical Plaza had a total of 10 tenants under leases that provided for aggregate annualized base rent of approximately $1.3 million and had a weighted-average remaining lease term of 2.4 years. The following table sets forth information with respect to two tenants at North Brownsville Medical Plaza that together account for approximately 59.6% of the annualized base rent for the property as of June 30, 2015:


Tenant	Principal Nature of Business	Lease Expiration	Renewal Options	Total Leased GLA		% of Total Property GLA			Annualized Base Rent ⁽¹⁾		% of Property ABR			ABR per Leased Square Foot
VBOA ASC Partners (Tenet Healthcare)	Surgery Center	December 2017	N/A		19,482		28.8	%	$	511,013		38.4	%	$	26.23

Pain & Anesthesia Associates	Pain Management	February 2018	N/A		10,775		15.9	%	$	282,413		21.2	%	$	26.21

(1)	Annualized base rent excludes certain property operating expenses that are reimbursable by tenants, which are included as rental income.

Investment Rationale . North Brownsville Medical Plaza is a state-of-the-art medical office building located in Brownsville, Texas. The Brownsville metropolitan area population and its sister city of Matamoras, Mexico has a population in excess of 750,000. We believe the building represents the latest in healthcare facility design and was planned to meet the high expectations and demands of the modern healthcare professional, as well as setting the standard for integrated medicine delivery. Physicians and patients have access to the latest in modern technology at the on-site surgery center, full modality diagnostic center, physical therapy center, lab and physician offices.

North Brownsville Medical Plaza also boasts convenient and accessible parking and first-class amenities. The building is currently leased to leading physicians and physician groups in the Brownsville medical community. Approximately 29% of the gross leasable area is leased to VBOA ASC Partners, which operates a large surgery and diagnostic center within the North Brownsville Medical Plaza. VBOA ASC Partners is owned by Tenet Healthcare and benefits from a high volume of patient flow and is one of the premier surgery centers in Brownsville, which provides us with a strong anchor tenant.

Properties under Contract

Vibra Rehabilitation Hospital of Amarillo

Property Description . Vibra Rehabilitation Hospital of Amarillo is a 44-bed inpatient rehabilitation hospital located at 7200 SW 9th Avenue Amarillo, Texas.

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Acquisition Terms . On August 13, 2015, we entered into a definitive agreement to purchase Vibra Rehabilitation Hospital of Amarillo, an inpatient rehabilitation hospital located in Amarillo, Texas, for approximately $19.4 million, plus an earn-out of up to $10.6 million that may be paid to the seller 24 months after the closing of the acquisition, based on the tenant’s EBITDAR for the previous 12 months. We currently hold the Amarillo Mortgage Loan, an $18.0 million loan secured by the first mortgage on this property. The $18.0 million principal balance of the Amarillo Mortgage Loan will be applied towards the $19.4 million purchase price, resulting in a cash expenditure of approximately $1.4 million to acquire the property. We expect to close this transaction by the end of 2015, subject to the satisfaction of customary closing conditions and receipt of approval from the seller’s working capital lender.

Lease Terms . Upon the closing of the acquisition, we will lease 100% of Vibra Rehabilitation Hospital of Amarillo to the existing tenant, a wholly owned subsidiary of Vibra Healthcare, pursuant to a triple-net lease, with the tenant responsible for all costs of the facility, including taxes, utilities, insurance, maintenance and capital improvements. The lease will have a 15-year term, with three five-year extension options. The initial annual base rent under the lease will be approximately $1.7 million, or 8.75% of the initial $19.4 million purchase price, payable monthly. The base rent will thereafter increase by 8.75% of the amount of the $10.6 million earn-out that we ultimately pay Vibra Healthcare 24 months after closing based on the tenant’s EBITDAR for the prior 12 months. Beginning in the second year of the initial lease term, the annual base rent will increase each year by 3.0% of the prior year’s rent.

Guaranty and Security . The lease will be unconditionally guaranteed by Vibra Healthcare and Vibra Healthcare II. The obligations of Vibra Healthcare and Vibra Healthcare II as guarantors will be cross-collateralized and cross-defaulted with the obligations and all collateral, if any, securing any existing and future obligations of Vibra Healthcare and Vibra Healthcare II and their respective affiliates to us, including Kentfield Hospital.

Investment Rationale . Located within the Amarillo Medical District, we believe Vibra Rehabilitation Hospital of Amarillo receives referrals from the Northwest Texas Hospital, Baptist Saint Anthony’s Hospital, as well as Vibra’s own long-term acute care hospital, Vibra Hospital of Amarillo, and other medical providers all located within a two-mile radius of its campus. Vibra Rehabilitation Hospital of Amarillo operates 44 of the 76 rehabilitation beds in the Amarillo market and has generated strong financial results since being acquired in September 2013.

The facility is an inpatient hospital offering intense ongoing patient programs to individuals, primarily seniors, who have been impaired by an injury or illness and are considered by their physicians to be medically stable and physically able to begin a comprehensive rehabilitation program consisting of at least three hours of therapy a day, five days a week. Patients admitted benefit from specialized intense rehabilitation for medical needs that preclude them from being accepted into a lower level of care such as a skilled nursing facility.

All therapy programs are customized based on the individual’s existing abilities, tolerance for therapy and desired outcomes. Prospective patients require daily physician oversight, a minimum of two types of therapy and 24-hour nursing care. As a result of the level of care being provided to patients and the facility’s reputation in the Amarillo market, as well as Vibra Rehabilitation Hospital of Amarillo’s relationships with acute care providers, we believe the facility will continue to be the provider of choice in the Amarillo market for patients requiring rehabilitation services.

Kearny Mesa

Property Description . Kearny Mesa is a 26,950 square-foot, 96-bed skilled nursing facility located at 7675 Family Circle, San Diego, California, and is currently owned and operated by Life Generations.

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Acquisition Terms . In connection with our acquisition of the Life Generations Portfolio, we entered into an exclusive option with Life Generations to acquire Kearny Mesa for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the achievement of certain performance thresholds relating to the EBITDARM of Kearny Mesa for 2015 and 2016, respectively. The option period commenced on July 1, 2015 and expires on September 1, 2015. On August 10, 2015, we deposited $100,000 pursuant to the purchase option agreement. We intend to fund the transaction with available cash and borrowings under our secured credit facility and expect the transaction to close by the end of the third quarter of 2015, subject to customary closing conditions.

Lease Terms . Concurrently with the closing of the acquisition, we will amend the master lease agreement for the Life Generations Portfolio to include Kearny Mesa, and the annual base rent under the master lease agreement will be increased by approximately $1.3 million, or 8.75% of the $15.0 million purchase price for Kearny Mesa. The base rent under the master lease will thereafter increase by 8.75% of the amount of the $10.0 million earn-out that we ultimately pay Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of Kearny Mesa for 2015 and 2016, respectively.

Graham Oaks

Property Description . Graham Oaks is a 32,391 square-foot, 117-bed skilled nursing facility located at 1325 First Street, Graham, Texas, and is currently operated by GruenePointe.

Acquisition Terms . Our purchase agreement for the Texas SNF Portfolio also covered a tenth facility, Graham Oaks, which we expect to acquire for a gross purchase price of approximately $11.6 million. We expect to close on the acquisition of this facility by the end of the third quarter of 2015, subject to the satisfaction of customary closing conditions and receipt of certain regulatory consents.

Lease Terms . Concurrently with the closing of the acquisition, we will amend the master lease agreement for the Texas SNF Portfolio to include Graham Oaks, and the annual base rent under the master lease agreement will be increased by approximately $1.0 million, or 8.75% of the $11.6 million purchase price for Graham Oaks.

Debt Investment

Vibra Mortgage Loan

General . On August 1, 2014, we entered into a term loan and security agreement with Vibra Healthcare and certain of its affiliates to provide Vibra Healthcare and Vibra Healthcare II with a $10.0 million mortgage loan, or the Vibra Mortgage Loan.

Loan Terms . The Vibra Mortgage Loan provides for interest-only payments during the initial five-year term before automatically converting to a 15-year amortizing loan requiring payments of principal and interest. The Vibra Mortgage Loan incurs interest at a rate of 9.00% per annum. The Vibra Mortgage Loan may be prepaid during the initial five-year term only if Vibra Healthcare or Vibra Healthcare II, or one of their respective affiliates, enters into a sale-leaseback transaction with us equal to or exceeding $25.0 million in value.

Guaranty and Security . The Vibra Mortgage Loan is secured by a first mortgage lien on Vibra Hospital of Western Massachusetts, a 257,851 square-foot long-term acute care hospital located in Springfield, Massachusetts. In addition, the Vibra Mortgage Loan is unconditionally guaranteed by Vibra Healthcare Real Estate Company II, LLC and Vibra Hospital of Western Massachusetts, LLC, each a wholly owned subsidiary of Vibra Healthcare II. The obligations of Vibra Healthcare and Vibra Healthcare II, as co-borrowers, and of Vibra Healthcare Real Estate Company II, LLC and Vibra Hospital of Western Massachusetts, LLC, as guarantors, are cross-collateralized and cross-defaulted with the obligations and all collateral, if any, securing any existing and future obligations of such parties and their respective affiliates to us, including the lease of the Kentfield Hospital and Vibra Rehabilitation Hospital of Amarillo.

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Investment Process

We believe our management team’s depth of experience in healthcare real estate, operations and finance provides us with unique perspective in underwriting potential investments. Our real estate and loan underwriting process focuses on both real estate and healthcare operations. The process includes a detailed analysis of the facility and the financial strength and experience of the tenant and its management. Key factors that we consider in the underwriting process include the following:

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the current, historical and projected cash flow and operating margins of each tenant and at each facility;

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the ratio of our tenants’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;

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the quality and experience of the tenant and its management team;

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construction quality, condition, design and projected capital needs of the facility and property condition assessments;

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competitive landscape;

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drivers of healthcare-related needs;

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the location of the facility;

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local economic and demographic factors and the competitive landscape of the market;

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licensure and accreditation;

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the effect of evolving healthcare legislation and other regulations on our tenants’ profitability and liquidity; and

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the payor mix of private, Medicare and Medicaid patients at the facility.

We believe our underwriting process enables us to acquire desirable properties with strong tenants that will support our ability to deliver attractive risk-adjusted returns to our stockholders.

Sourcing and Initial Screening

Our management team has developed and maintains an extensive network of relationships among active participants within the healthcare services industry. These relationships include operators, developers, lawyers, architects, contractors, commercial bankers, investment bankers and private equity firms. We believe these broad reaching relationships will help identify potential healthcare properties for us to acquire and we intend to source acquisitions in off-market and target-marketed transactions from operators and developers with whom we have existing relationships.

Underwriting and Analysis

Once a potential healthcare property has been identified, we commence the initial due diligence process. This process generally consists of an initial meeting with the owner to discuss the salient aspects of a transaction in general terms and to obtain an idea of the physical and operational history of the property, including current use and configuration, and the expected purchase price range. We then typically discuss the general terms of a lease structure and begin to discuss the preliminary aspects of the lease, such as the initial lease payment, annual rent increases, lease payment coverage requirements and other financial covenants, the initial lease term, and any renewal options. If the property is suitable for lease to our TRS lessee, we would also begin discussions regarding the terms of a management agreement with the operator and possible improvements to increase operating performance and efficiency.

We then submit an initial due diligence list that requests information such as the land size, the building size and condition, environmental matters, a detailed description of improvements, a rent roll for properties with multiple tenants, an overview of the operational history which would include financial results, operational statistics, referral patterns and sources, payor mix, the various governmental oversight survey results and responses thereto,

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accreditation surveys and responses and the competitive landscape of the market. After evaluating the due diligence materials our management team makes a decision whether or not to pursue the opportunity.

Approval by Investment Committee and/or Board of Directors

Our investment committee is comprised of Messrs. McRoberts, Harlan, Mandelbaum, Pieri and Walraven. Messrs. Mandelbaum and Pieri are designees of BlueMountain. BlueMountain will continue to have the right to appoint two members of the investment committee for as long as BlueMountain is entitled to designate two nominees to our board of directors, and one member of the investment committee will be appointed by BlueMountain so long as BlueMountain is entitled to one nominee to our board of directors.

For so long as BlueMountain maintains a designee on the investment committee:

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all acquisitions will be presented to the investment committee for approval;

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any acquisition for aggregate consideration of less than 5% of our assets (on a pro forma basis after giving effect to the acquisition) will require the approval of a majority of the members of the investment committee;

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any acquisition for aggregate consideration of greater than 5% of our assets (on a pro forma basis after giving effect to the acquisition) will require the approval of four members of the investment committee; and

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any acquisition for greater than 15% of our assets (on a pro forma basis after giving effect to the acquisition) will require the unanimous approval of the investment committee.

After our management team decides to pursue an acquisition opportunity, our management team prepares an in-depth investment package to be presented to the investment committee and, if applicable, our board of directors for approval. The investment package presented for approval typically includes the facility type, operator, operator parent company (lease guarantor), acquisition price (in gross dollars, per square foot, per bed, or other manner as deemed appropriate), operator and parent financial statements (3-5 years), operator statistical trends (payor mix, referral sources, patient acuity, etc.), initial lease term, initial lease rate, annual increases to lease rate, optional renewal periods, lease coverage, fixed charge coverage, financial covenants required, demographic and competitive information for the location, all of which are accompanied with a general discussion and summary of why our management team believes the acquired property is a good investment for us. If we propose to lease the property to our TRS lessee, the investment package includes lease terms with the TRS lessee, the terms of the engagement agreement with the operator and any plans for operational improvement.

Remaining Due Diligence and Closing

We engage legal counsel to prepare an asset purchase agreement, review the title report and the applicable federal, state or local regulatory compliance requirements. We typically engage third-party consultants to perform property appraisals, environmental assessments, structural analyses, ALTA surveys and other applicable inspections or reports prior to closing on the transaction. These third-party reports must be acceptable to us in our sole discretion prior to closing any transaction. In addition, we engage third-party specialists to conduct clinical due diligence regarding healthcare regulatory compliance, including reviewing healthcare surveys and interviewing clinical directors and other employees at the facility. Legal counsel is responsible for coordinating the flow of documents and reports and we do not close until all items are completed satisfactory to us.

Real Estate-Related Debt Investments

In addition to investing in healthcare facilities themselves, we intend to make additional opportunistic investments in real estate-related debt investments while maintaining compliance with the rules that are applicable to REITs. These real estate-related debt investments may include mortgages that are secured by healthcare properties, mezzanine loans that are subordinate to mortgage debt and are secured by pledges of the borrower’s ownership interests in the property and/or the entity that owns the property and construction loans that finance the development of healthcare properties, which we may use as a pathway to the ultimate acquisition of pre-leased

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properties. Our approach to underwriting and investing in real estate-related debt investments is similar to our process when seeking to directly purchase the underlying healthcare property as described in more detail above.

We intend to service our mortgage and mezzanine loans in-house and will monitor the credit quality of the borrower and the value of our collateral on an ongoing basis. For any construction loans, we may retain third parties to monitor the progress of the developments and service the construction loans.

Competition

The market for making investments in healthcare properties is highly competitive and fragmented, and increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our investment objectives. In acquiring and leasing healthcare properties and providing financing to healthcare operators, we compete with financial institutions, institutional pension funds, private equity funds, real estate developers, other REITs, other public and private real estate companies and private real estate investors, many of whom have greater financial and operational resources and lower costs of capital than we have. We also face competition in leasing or subleasing available facilities to prospective tenants and entering into operating agreements with prospective operators.

Our tenants/operators compete on a local and regional basis with operators of facilities that provide comparable services. The basis of competition for our operators includes the quality of care provided, reputation, the physical appearance of a facility, price, the range of services offered, family preference, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location and the size and demographics of the population and surrounding areas.

Regulation

Healthcare Regulatory Matters

The following discussion describes certain material healthcare laws and regulations that may affect our operations and those of our tenants/operators. The ownership and operation of hospitals, other healthcare properties and other healthcare providers are subject to extensive federal, state and local government healthcare laws and regulations. These laws and regulations include requirements related to licensure, conduct of operations, ownership of facilities, addition or expansion of facilities and services, prices for services, billing for services and the confidentiality and security of health-related information. Different properties within our portfolio may be more or less subject to certain types of regulation, some of which are specific to the type of facility or provider. These laws and regulations are wide-ranging and complex, may vary or overlap from jurisdiction to jurisdiction, and are subject frequently to change. Compliance with these regulatory requirements can increase operating costs and, thereby, adversely affect the financial viability of our tenants/operators’ businesses. Our tenants/operators’ failure to comply with these laws and regulations could adversely affect their ability to successfully operate our properties, which could negatively impact their ability to satisfy their contractual obligations to us. Our leases will require the tenants/operators to comply with all applicable laws, including healthcare laws.

We may be subject directly to healthcare laws and regulations, because of the broad nature of some of these restrictions, such as the Anti-kickback Statute discussed below. In some cases, especially in the event we own properties managed by third parties, regulatory authorities could classify us or our subsidiaries as an operating entity or license holder. Such a designation would significantly increase the regulatory requirements directly applicable to us and subject us to increased regulatory risk. We intend for all of our business activities and operations to conform in all material respects with all applicable laws and regulations, including healthcare laws and regulations. We expect that the healthcare industry will continue to face increased regulations and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services.

Healthcare Reform Measures . The Affordable Care Act has changed how healthcare services are covered, delivered and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid Disproportionate Share Hospital, or DSH payments, and expanding

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efforts to tie reimbursement to quality and efficiency. In addition, the law reforms certain aspects of health insurance, contains provisions intended to strengthen fraud and abuse enforcement, and encourages the development of new payment models, including the creation of Accountable Care Organizations, or ACOs. On June 28, 2012, the United States Supreme Court struck down the portion of the Affordable Care Act that would have allowed HHS to penalize states that do not implement the law’s Medicaid expansion provisions with the loss of existing federal Medicaid funding. As a result, some states may choose not to implement the Medicaid expansion.

Based on the Congressional Budget Office’s March 2015 projection, by 2017, the Affordable Care Act will expand coverage to 24 million additional individuals. This increased coverage will occur through a combination of public program expansion and private sector health insurance and other reforms that generally became effective in 2014. The primary public program coverage expansion will occur through changes in Medicaid with an expansion of the categories of individuals eligible for Medicaid coverage. The private sector expansion will come through new requirements applicable to health insurers, employers and individuals. For example, health insurers will be prohibited from imposing annual coverage limits and from excluding persons based upon pre-existing conditions. Individuals will be required to maintain health insurance for a minimum defined set of benefits or pay a tax penalty. Employers with 50 or more employees that do not offer health insurance will be held subject to a penalty if an employee obtains government-subsidized coverage through an insurance exchange created under the law.

The expansion of health insurance coverage under the Affordable Care Act may result in a material increase in the number of patients using our tenants/operator’s facilities who have either private or public program coverage. In addition, the creation of ACOs and related initiatives may create possible sources of additional revenue. However, our tenants/operators may be negatively impacted by the law’s payment reductions, and it is uncertain what reimbursement rates will apply to coverage purchased through the exchanges. It is difficult to predict the full impact of the Affordable Care Act due to the law’s complexity, limited implementing regulations or interpretive guidance, gradual and potentially delayed implementation, court challenges and possible amendment or repeal, as well as our inability to foresee how individuals, states and businesses will respond to the choices afforded them by the law.

Sources of Revenue and Reimbursement . Our tenants and operators will receive payments for patient services from the federal government under the Medicare program, state governments under their respective Medicaid or similar programs, managed care plans, private insurers and directly from patients. Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons, persons with end-stage renal disease and persons with Lou Gehrig’s Disease. Medicaid is a federal-state program, administered by the states, which provides hospital and medical benefits to qualifying individuals who are unable to afford healthcare. Generally, revenues for services rendered to Medicare patients are determined under a prospective payment system, or PPS. CMS annually establishes payment rates for the PPS for each applicable facility type.

Amounts received under Medicare and Medicaid programs are generally significantly less than established facility gross charges for the services provided and may not reflect the provider’s costs. Healthcare providers generally offer discounts from established charges to certain group purchasers of healthcare services, including private insurance companies, employers, health maintenance organizations, or HMOs, preferred provider organizations, or PPOs and other managed care plans. These discount programs generally limit a provider’s ability to increase revenues in response to increasing costs. Patients are generally not responsible for the total difference between established provider gross charges and amounts reimbursed for such services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, but are responsible to the extent of any exclusions, deductibles or coinsurance features of their coverage. The amount of such exclusions, deductibles and coinsurance continues to increase. Collection of amounts due from individuals is typically more difficult than from governmental or third-party payers.

Payments to providers are being increasingly tied to quality and efficiency. These initiatives include requirements to report clinical data and patient satisfaction scores, reduced Medicare payments to hospitals based on “excess” readmission rates as determined by CMS, denial of payments under Medicare, Medicaid and some

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private payors for services resulting from a hospital or facility-acquired condition, or HAC, and reduced Medicare payments to hospitals with high risk-adjusted HAC rates. Certain provider types, including, but not limited to, inpatient rehabilitation facilities and long-term acute care hospitals, are subject to specific limits and restrictions on admissions which, in turn, affect reimbursement at these facilities.

The amounts of program payments received by our tenants/operators can be changed from time to time by legislative or regulatory actions and by determinations by agents for the programs. The Medicare and Medicaid statutory framework is subject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made under Medicare and Medicaid. Federal healthcare program reimbursement changes may be applied retroactively under certain circumstances. In recent years, the federal government has enacted various measures to reduce spending under federal healthcare programs including required cuts under the Affordable Care Act and “sequestration” reductions as required by the Budget Control Act of 2011. In addition, many states have enacted, or are considering enacting, measures designed to reduce their Medicaid expenditures and change private healthcare insurance, and states continue to face significant challenges in maintaining appropriate levels of Medicaid funding due to state budget shortfalls. Further, non-government payers may reduce their reimbursement rates in accordance with payment reductions by government programs or for other reasons. Healthcare provider operating margins may continue to be under significant pressure due to the deterioration in pricing flexibility and payor mix, as well as increases in operating expenses that exceed increases in payments under the Medicare and Medicaid programs.

Anti-Kickback Statute . A section of the Social Security Act known as the “Anti-kickback Statute” prohibits, among other things, the offer, payment, solicitation or acceptance of remuneration, directly or indirectly, in return for referring an individual to a provider of services for which payment may be made in whole or in part under a federal healthcare program, including the Medicare or Medicaid programs. Courts have interpreted this statute broadly and held that the Anti-kickback Statute is violated if just one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. The Affordable Care Act provides that knowledge of the Anti-kickback Statute or specific intent to violate the statute is not required in order to violate the Anti-kickback Statute. Violation of the Anti-kickback Statute is a crime, punishable by fines of up to $25,000 per violation, five years imprisonment, or both. Violations may also result in civil and administrative liability and sanctions, including civil penalties of up to $50,000 per violation, liability under the False Claims Act, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid, and additional monetary penalties in amounts treble to the underlying remuneration.

There are a limited number of statutory exceptions and regulatory safe harbors for categories of activities deemed protected from prosecution under the Anti-kickback Statute. Currently, there are statutory exceptions and safe harbors for various activities, including the following: certain investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services, warranties, discounts, employees, managed care arrangements, investments in group practices, freestanding surgery centers, ambulance replenishing and referral agreements for specialty services. The safe harbor for space rental arrangements requires, among other things, that the aggregate rental payments be set in advance, be consistent with fair market value and not be determined in a manner that takes into account the volume or value of any referrals. The fact that conduct or a business arrangement does not fall within a safe harbor does not necessarily render the conduct or business arrangement illegal under the Anti-kickback Statute. However, such conduct and business arrangements may lead to increased scrutiny by government enforcement authorities.

Many states have laws similar to the Anti-kickback Statute that regulate the exchange of remuneration in connection with the provision of healthcare services, including prohibiting payments to physicians for patient referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care. Little precedent exists for their interpretation or enforcement. These statutes typically provide for criminal and civil penalties, as well as loss of facility licensure.

We intend to use commercially reasonable efforts to structure our arrangements, including any lease/operating arrangements involving facilities in which local physicians are investors, so as to satisfy, or meet as

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closely as possible, safe harbor requirements. The safe harbors are narrowly structured, and there are not safe harbors available for every type of financial arrangement that we or our tenants/operators may enter. Although it is our intention to fully comply with the Anti-kickback Statue, as well as all other applicable state and federal laws, we cannot assure you that all of our arrangements or the arrangements of our tenants/operators will meet all the conditions for a safe harbor. There can be no assurance regulatory authorities enforcing these laws will determine our financial arrangements or the financial relationships of our tenants/operators comply with the Anti-kickback Statute or other similar laws.

Stark Law . The Social Security Act also includes a provision commonly known as the “Stark Law.” The Stark Law prohibits a physician from making a referral to an entity furnishing “designated health services” paid by Medicare or Medicaid if the physician or a member of the physician’s immediate family has a financial relationship with that entity. Designated health services include, among other services, inpatient and outpatient hospital services, clinical laboratory services, physical therapy services and radiology services. The Stark Law also prohibits entities that provide designated health services from billing the Medicare and Medicaid programs for any items or services that result from a prohibited referral and requires the entities to refund amounts received for items or services provided pursuant to the prohibited referral. Sanctions for violating the Stark Law include denial of payment, civil monetary penalties of up to $15,000 per prohibited service provided for failure to return amounts received in a timely manner, and exclusion from the Medicare and Medicaid programs. The statute also provides for a penalty of up to $100,000 for a circumvention scheme. Failure to refund amounts received pursuant to a prohibited referral may also constitute a false claim and result in additional penalties under the False Claims Act, which is discussed in greater detail below.

There are exceptions to the self-referral prohibition for many of the customary financial arrangements between physicians and providers, including employment contracts, leases and recruitment agreements. There is also an exception for a physician’s ownership interest in an entire hospital, as opposed to an ownership interest in a hospital department. Unlike safe harbors under the Anti-Kickback Statute, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement will be in violation of the Stark Law. Through a series of rulemakings, CMS has issued final regulations implementing the Stark Law. While these regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how the government will interpret many of these exceptions for enforcement purposes.

Although there is an exception for a physician’s ownership interest in an entire hospital, the Affordable Care Act prohibits newly created physician-owned hospitals from billing for Medicare patients referred by their physician owners. As a result, the law effectively prevents the formation after December 31, 2010 of new physician-owned hospitals that participate in Medicare and Medicaid. While the Affordable Care Act grandfathers existing physician-owned hospitals, it does not allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability to expand services.

Many states also have laws similar to the Stark Law that prohibit certain self-referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement. These statutes typically provide for criminal and civil penalties, as well as loss of facility licensure.

Although our lease agreements will require lessees to comply with the Stark Law, we cannot offer assurance that the arrangements entered into by us or by our tenants/operators will be found to be in compliance with the Stark Law or similar state laws.

The False Claims Act . The federal False Claims Act prohibits knowingly making or presenting any false claim for payment to the federal government. The government may use the False Claims Act to prosecute Medicare and other government program fraud in areas such as coding errors, billing for services not provided, submitting false cost reports and failing to report and repay an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later. The False Claims Act defines the term “knowingly” broadly. Though simple negligence will not give rise to liability under the False Claims Act, submitting a claim with reckless disregard to its truth or falsity constitutes a “knowing” submission.

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The False Claims Act contains qui tam, or whistleblower, provisions that allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the federal government. Whistleblowers under the False Claims Act may collect a portion of the government’s recovery. Every entity that receives at least $5 million annually in Medicaid payments must have written policies for all employees, contractors or agents, providing detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the False Claims Act, and similar state laws.

In some cases, whistleblowers and the federal government have taken the position, and some courts have held, that providers who allegedly have violated other statutes, such as the Anti-kickback Statute and the Stark Law, have thereby submitted false claims under the False Claims Act. The Affordable Care Act clarifies this issue with respect to the Anti-kickback Statute by providing that submission of claims for services or items generated in violation of the Anti-kickback Statute constitutes a false or fraudulent claim under the False Claims Act. If a defendant is found liable under the False Claims Act, the defendant may be required to pay three times the actual damages sustained by the government, additional civil penalties of up to $10,000 per false claim, plus reimbursement of the fees of counsel for the whistleblower.

Many states have enacted similar statutes preventing the presentation of a false claim to a state government, and we expect more to do so because the Social Security Act provides a financial incentive for states to enact statutes establishing state level liability.

Other Fraud & Abuse Laws . There are various other fraud and abuse laws at both the federal and state levels that cover false claims and false statements and these may impact our business. For example, the Civil Monetary Penalties law authorizes the imposition of monetary penalties against an entity that engages in a number of prohibited activities. The penalties vary by the prohibited conduct, but include penalties of $10,000 for each item or service, $15,000 for each individual with respect to whom false or misleading information was given, and treble damages for the total amount of remuneration claimed. The prohibited actions include, but are not limited to, the following:

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knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent in any way;

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knowingly giving or causing to be giving false or misleading information reasonably expected to influence the decision to discharge a patient;

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offering or giving remuneration to any beneficiary of a federal healthcare program likely to influence the receipt of reimbursable items or services;

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arranging for reimbursable services with an entity which is excluded from participation from a federal healthcare program; or

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knowingly or willfully soliciting or receiving remuneration for a referral of a federal healthcare program beneficiary.

Any violations of the Civil Monetary Penalties Law by management or our tenants/operators could result in substantial fines and penalties, and could have an adverse effect on our business.

HIPAA Administrative Simplification and Privacy and Security Requirements . HIPAA, as amended by the HITECH Act, and its implementing regulations create a national standard for protecting the privacy and security of individually identifiable health information (called “protected health information”). Compliance with HIPAA is mandatory for covered entities, which include healthcare providers such as tenants/operators of our facilities. Compliance is also required for entities that create, receive, maintain or transmit protected health information on behalf of healthcare providers or that perform services for healthcare providers that involve the disclosure of protected health information, called “business associates.” In January, 2013, HHS issued a final rule to implement regulations pursuant to the HITECH Act and also imposed certain additional obligations for covered entities and their business associates. The final rule became effective March 26, 2013, and covered entities and business associates have until September 23, 2013 to comply with most of these provisions. On September 19, 2013, HHS’s Office for Civil Rights announced a delay in the enforcement, until further notice, of the

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requirement that certain HIPAA—covered laboratories revise their notices of privacy practices to comply with certain provisions of HIPAA and the HITECH Act. In announcing the enforcement delay, HHS indicated that the Office for Civil Rights will issue a public notice at least 30 days in advance of the end of this enforcement delay. HHS previously had announced other enforcement delays under HIPAA and may, in the future, announce additional guidance that could affect the business of our tenants/operators subject to these laws.

Covered entities must report a breach of protected health information that has not been secured through encryption or destruction to all affected individuals without unreasonable delay, but in any case no more than 60 days after the breach is discovered. Notification must also be made to HHS and, in the case of a breach involving more than 500 individuals, to the media. In the final rule issued in January, 2013, HHS modified the standard for determining whether a breach has occurred by creating a presumption that any non-permitted acquisition, access, use or disclosure of protected health information is a breach unless the covered entity or business associate can demonstrate that there is a low probability that the information has been compromised, based on a risk assessment.

Covered entities and business associates are subject to civil penalties for violations of HIPAA of up to $1.5 million per year for violations of the same requirement. In addition, criminal penalties can be imposed not only against covered entities and business associates, but also against individual employees who obtain or disclose protected health information without authorization. The criminal penalties range up to $250,000 and up to 10 years imprisonment. In addition, state Attorneys General may bring civil actions for HIPAA violations, HHS must conduct periodic HIPAA compliance audits of covered entities and business associates. If any of our tenants/operators are subject to an investigation or audit and found to be in violation of HIPAA, such tenants/operators could incur substantial penalties, which could have a negative impact on their financial condition. Our tenants/operators may also be subject to more stringent state law privacy, security and breach notification obligations.

Licensure, Certification and Accreditation . Healthcare property construction and operation are subject to numerous federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate records, fire prevention, rate-setting and compliance with building codes and environmental protection laws. The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified, it may become necessary for our tenants/operators to make changes in their facilities, equipment, personnel and services.

Facilities in our portfolio will be subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. We will require our healthcare properties to be properly licensed under applicable state laws. Except for provider types not eligible for participation in Medicare and Medicaid, we expect our operators/facilities to participate in the Medicare and Medicaid programs and, where applicable, to be accredited by an approved accrediting organization. The loss of Medicare or Medicaid certification would result in our tenants/operators that operate Medicare/Medicaid-eligible providers from receiving reimbursement from federal healthcare programs. The loss of accreditation, where applicable, would result in increased scrutiny by CMS and likely the loss of payment from non-government payers.

In some states, the construction or expansion of healthcare properties, the acquisition of existing facilities, the transfer or change of ownership and the addition of new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory agencies under a Certificate of Need, or CON program. Such laws generally require the reviewing state agency to determine the public need for additional or expanded healthcare properties and services. The requirements for licensure, certification and accreditation also include notification or approval in the event of the transfer or change of ownership or certain other changes. Further, federal programs, including Medicare, must be notified in the event of a change of ownership or change of information at a participating provider. Failure by our tenants/operators to provide required federal and state notifications, obtain necessary state licensure and CON approvals could result in significant penalties as well as

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prevent the completion of an acquisition or effort to expand services or facilities. We may be required to provide ownership information or otherwise participate in certain of these approvals and notifications.

EMTALA . The EMTALA is a federal law that requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every individual who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment. The government broadly interprets EMTALA to cover situations in which individuals do not actually present to a hospital’s emergency room, but present for emergency examination or treatment to the hospital’s campus, generally, or to a hospital-based clinic that treats emergency medical conditions or are transported in a hospital-owned ambulance, subject to certain exceptions.

Penalties for violations of EMTALA include civil monetary penalties and exclusion from participation in the Medicare program. In addition, an injured individual, the individual’s family or a medical facility that suffers a financial loss as a direct result of a hospital’s violation of the law can bring a civil suit against the hospital. Our leases will require any hospitals in our portfolio operate in compliance with EMTALA, but failure to comply could result in substantial fines and penalties.

Antitrust Laws . The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-competitive. These laws prohibit price fixing, concerted refusal to deal, market allocation, monopolization, attempts to monopolize, price discrimination, tying arrangements, exclusive dealing, acquisitions of competitors and other practices that have, or may have, an adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the healthcare industry is currently a priority of the Federal Trade Commission and the Antitrust Division of the Department of Justice. We intend to operate so that we and our tenants/operators are in compliance with such federal and state laws, but future review by courts or regulatory authorities could result in a determination that could adversely affect the operations of our tenants/operators and, consequently, our operations.

Healthcare Industry Investigations . Significant media and public attention has focused in recent years on the healthcare industry. The federal government is dedicated to funding additional federal enforcement activities related to healthcare providers and preventing fraud and abuse. Our tenants/operators will engage in many of routine healthcare operations and other activities that could be the subject of governmental investigations or inquiries. For example, our tenants/operators will likely have significant Medicare and Medicaid billings, numerous financial arrangements with physicians who are referral sources, and joint venture arrangements involving physician investors. In recent years, Congress has increased the level of funding for fraud and abuse enforcement activities. It is possible that governmental entities could initiate investigations or litigation in the future and that such matters could result in significant costs and penalties, as well as adverse publicity. It is also possible that our executives could be included in governmental investigations or litigation or named as defendants in private litigation.

Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the HHS-OIG, CMS and state Medicaid programs, may conduct audits of our tenants/operator’s operations. Private payers may conduct similar post-payment audits, and our tenants/operators may also perform internal audits and monitoring. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could have a material, adverse effect on our portfolio’s financial position, results of operations and liquidity.

Under the Recovery Audit Contractor, or RAC program, CMS contracts with RACs on a contingency basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program, to managed Medicare plans and in the Medicaid program. CMS has also initiated a RAC prepayment demonstration program in 11 states. CMS also employs Medicaid Integrity Contractors, or MICs to perform post-

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payment audits of Medicaid claims and identify overpayments. In addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities. Should any of our tenants/operators be found out of compliance with any of these laws, regulations or programs, our business, our financial position and our results of operations could be negatively impacted.

Environmental Matters

A wide variety of federal, state and local environmental and occupational health and safety laws and regulations affect healthcare property operations. These complex federal and state statutes, and their enforcement, involve a myriad of regulations, many of which involve strict liability on the part of the potential offender. Some of these federal and state statutes may directly impact us. Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property or a secured lender, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property). The cost of any required remediation, removal, fines or personal or property damages and the owner’s or secured lender’s liability therefore could exceed or impair the value of the property, and/or the assets of the owner or secured lender. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our revenues. For a description of the risks associated with environmental matters, see “Risk Factors—We face possible liability for environmental cleanup costs and damages for contamination related to properties we acquire, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.”

Prior to closing any property acquisition or loan, we obtain Phase I environmental assessments in order to attempt to identify potential environmental concerns at the facilities. These assessments will be carried out in accordance with an appropriate level of due diligence and will generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related personnel, review of the property’s chain of title and review of historic aerial photographs and other information on past uses of the property. We may also conduct limited subsurface investigations and test for substances of concern where the results of the Phase I environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures.

Insurance

We have general liability insurance (lessor’s risk) that provides coverage for bodily injury and property damage to third parties resulting from our ownership of the healthcare properties that are leased to and occupied by our tenants. For our single-tenant properties, our leases with tenants also require the tenants to carry general liability, professional liability, all risks, loss of earnings and other insurance coverages and to name us as an additional insured under these policies. We believe that the policy specifications and insured limits are appropriate given the relative risk of loss, the cost of the coverage and industry practice.

Employees

As of the date of this prospectus, we have 11 employees.

Legal Proceedings

We are not currently a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material effect on our financial condition or results of operations if determined adversely to us. We may be party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. There can be no assurance that these matters that arise in the future, individually or in aggregate, will not have a material adverse effect on our financial condition or results of operations in any future period.

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MANAGEMENT

Our Directors, Executive Officers and Other Key Personnel

Our board of directors consists of nine directors, seven of whom are considered independent in accordance with the requirements of the NYSE. Each member of our board of directors will serve for a one-year term expiring in 2016 and when their respective successors are duly elected and qualify.

For any meeting of our stockholders for the election of directors, our board of directors is required to nominate: (i) two BlueMountain directors so long as BlueMountain (A) continues to own 75% or more of the number of shares it purchased in the initial private placement or (B) beneficially owns at least 10% of our outstanding common stock; (ii) one BlueMountain director so long as BlueMountain (X) continues to own 50% or more of the number of shares it purchased in the initial private placement or (Y) beneficially owns at least 5% of our outstanding common stock; and (iii) no BlueMountain directors if BlueMountain has sold more than 50% of the number of shares it purchased in the initial private placement and beneficially owns less than 5% of our outstanding common stock.

The following table sets forth certain information regarding our directors, executive officers and other key personnel:


Name	Age	Position
John W. McRoberts	62	Chief Executive Officer and Chairman of the Board of Directors
William C. Harlan	64	President, Chief Operating Officer and Director
Jeffery C. Walraven	46	Executive Vice President and Chief Financial Officer
Forrest G. Gardner	43	Senior Vice President of Asset and Investment Management
David L. Travis	41	Senior Vice President and Chief Accounting Officer
Michael Hammill	34	Senior Vice President of Finance
Stephen F. Graham	55	Senior Vice President and Director of Post Acute Acquisition & Development
Randall L. Churchey*	55	Director
John N. Foy*	71	Director
Steven I. Geringer*	69	Director
Stephen L. Guillard*	66	Director
Elliott Mandelbaum*†	31	Director
Stuart C. McWhorter*	47	Director
James B. Pieri*†	38	Director

*	Independent within the meaning of the NYSE listing standards.

†	BlueMountain designees.

Biographical Summaries of Executive Officers, Directors and Other Key Personnel

The following is a summary of certain biographical information concerning our directors, executive officers and certain other officers:

John W. McRoberts, Chief Executive Officer and Chairman

Mr. McRoberts has served as our Chief Executive Officer and Chairman of our board of directors since the formation of the company. Mr. McRoberts has over 30 years of experience in financing, acquiring, and disposing of healthcare-related, income producing real estate properties. He also has founded, acquired, expanded and/or monetized several businesses, including a healthcare REIT, an inpatient rehabilitation and long-term acute care hospital company and a home health and hospice company. Mr. McRoberts was a co-founder, President and CEO of Capstone, a Birmingham, Alabama-based, healthcare REIT that became publicly traded in 1994 and was sold to Healthcare Realty Trust Incorporated in 1998.

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After Capstone, Mr. McRoberts founded Forsite, LLC, a communications tower company that was sold to Allied Capital (NYSE: ALD) in 2005. In 2001, Mr. McRoberts invested in, and subsequently become President and CEO of, MeadowBrook Healthcare, Inc., a private company that purchased and operationally restructured four under-performing hospitals that were subsequently sold in July 2005 to RehabCare Group (NYSE: RHB) and the real estate to SunTrust Corp (NYSE: STI). In April 2007, Mr. McRoberts acquired a controlling interest in Care First, Inc., a Birmingham, Alabama-based provider of home health and hospice services, which he sold in February 2015. From October 2010 to April 2012, Mr. McRoberts served as President of, and subsequently as a consultant for Carter Validus Advisors, LLC, the advisory company to Carter Validus Mission Critical REIT, where he was involved in sourcing acquisitions and sourcing and structuring mezzanine financings on healthcare properties.

Prior to his affiliation with Capstone, Mr. McRoberts spent 16 years with AmSouth Bank (now Regions Corp) in Birmingham, Alabama, where he served in several management capacities related to general commercial lending, including serving as the head general corporate banking in the greater Birmingham area, as well as head of communications lending and head of healthcare lending.

Mr. McRoberts holds both a Bachelor’s Degree in Business and a Master of Arts in Finance from The University of Alabama.

Mr. McRoberts was selected to serve as Chairman of our board of directors because of his experience managing healthcare real estate companies and healthcare operators.

William C. Harlan, President, Chief Operating Officer and Director

Mr. Harlan has served as our President, Chief Operating Officer and a director since the formation of our company. Mr. Harlan has nearly 30 years of experience in directly managing the financing, acquisition, and disposition of healthcare-related, income-producing real estate properties and multi-property portfolios located across the United States. He also has been heavily involved in capital formation of, corporate finance for, and executive management activities with, several healthcare-related service companies and healthcare REITs, both publicly traded and privately owned. Mr. Harlan was a co-founder, executive vice president and head of acquisitions & finance of Capstone, a Birmingham, Alabama-based, healthcare REIT that became publicly traded in 1994 and was sold to Healthcare Realty Trust Incorporated in 1998. From October 1999 to April 2002, Mr. Harlan served as executive vice president and head of acquisitions and finance for Cambridge Medical Development, a healthcare real estate firms that develops, owns and manages healthcare facilities. In January 2003, Mr. Harlan founded Healthcare Capital Investors, LLC, a healthcare real estate advisory and investment company, where he served as managing member until December 2010. From October 2010 to April 2012, Mr. Harlan served as head of healthcare of, and subsequently as a consultant for, Carter Validus Advisors, LLC, the advisory company to Carter Validus Mission Critical REIT, where he was involved in sourcing acquisitions and sourcing and structuring mezzanine financings on healthcare properties.

Prior to his affiliation with Capstone, Mr. Harlan spent almost 20 years with SouthTrust Bank in Birmingham, Alabama, or SouthTrust, where he was a member of senior management and sat on several loan committees. While at SouthTrust, Mr. Harlan founded the Healthcare Finance Division and completed in excess of $2.5 billion in aggregate loan transactions representing over 200 projects nationwide, with operators and developers within the healthcare industry.

Mr. Harlan holds a Bachelor’s Degree in Finance from Auburn University.

Mr. Harlan was selected to serve as a director because of his experience managing healthcare real estate companies and his background in finance.

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Jeffery C. Walraven, Executive Vice President and Chief Financial Officer

Mr. Walraven has served as our Executive Vice President and Chief Financial Officer since the formation of our company. Mr. Walraven has 23 years of experience, including 22 years of public accounting experience, serving many public REIT clients since 1999. From 2006 to 2013, Mr. Walraven held several positions with BDO USA, LLP (PSE: BDO), most recently an assurance managing partner of the Memphis, Tennessee office, where his primary responsibilities included providing core and peripheral assurance services and business operational and tax consulting services. Mr. Walraven worked extensively with publicly-traded companies on all aspects of compliance with Securities Act and Exchange Act filings, including quarterly, annual and special reports, and compliance relating to acquisitions, dispositions and securities offerings. Mr. Walraven has had engagement partner responsibility for numerous public and private securities offering by REITs and other clients, including initial public offerings, secondary offerings and private placements.

Mr. Walraven holds a Bachelor’s Degree in Financial Management from Bob Jones University, and a Masters of Professional Accountancy from Clemson University, and is a licensed Certified Public Accountant in Tennessee and Florida.

Forrest G. Gardner, Senior Vice President of Asset and Investment Management

Mr. Gardner has served as our Senior Vice President of Asset and Investment Management since the completion of the initial private placement in July 2014. Mr. Gardner is responsible for evaluating investment opportunities, assisting in the daily asset management of our investments, overseeing third-party property management and leasing, and monitoring actual property performance. Additionally, Mr. Gardner’s responsibilities include identifying new investment opportunities and overseeing the due diligence and financing arrangements for each investment.

Prior to joining our company, Mr. Gardner co-founded in 2006 Ambulatory Services of America, Inc. (“ASA”), a privately-held diversified healthcare provider which was sold in August 2013 to US Renal Care, Inc. for approximately $700 million. During that time, Mr. Gardner served as Vice President of Finance, Controller and Chief Financial Officer of a primary operating subsidiary of ASA. From 2001 to 2006, Mr. Gardner served as Vice President, Finance for Renal Care Group, Inc. (NYSE: RCI), a specialized dialysis company serving 32,000 patients across a 34-state network. Renal Care Group was acquired by Fresenius Medical Care AG & Co. (NYSE: FMS) for $3.5 billion in March 2006.

Mr. Gardner graduated with honors from Harding University with a Bachelor of Science in Accounting.

David L. Travis, Senior Vice President and Chief Accounting Officer

Mr. Travis has served as our Senior Vice President and Chief Accounting Officer since August 1, 2014. Mr. Travis has approximately 18 years of accounting experience and is a certified public accountant. From December 2006 to July 2014, Mr. Travis served as the Senior Vice President and Chief Accounting Officer of Healthcare Realty Trust Incorporated (NYSE: HR). From September 1996 until December 2006, Mr. Travis was an accountant with Ernst & Young LLP, most recently serving as Audit Senior Manager.

Mr. Travis holds a Bachelor of Business Administration degree in Accounting from The University of Memphis.

Michael Hammill, Senior Vice President of Finance

Mr. Hammill has served as our Senior Vice President of Finance since May 2015. Prior to joining the Company, Mr. Hammill was in the investment banking division at FBR Capital Markets & Co. from October 2012 to May 2015, most recently as a Vice President. At FBR, Mr. Hammill advised corporate clients on their financing needs as well as mergers and acquisitions opportunities within the Real Estate and Financial Institutions groups. He also was involved in securities offerings, including initial public offerings and private

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placements, by REITs and other companies, including our initial private placement in July 2014. Prior to FBR, Mr. Hammill worked at the Federal Reserve Bank of Atlanta from September 2005 to October 2012, where he was most recently a specialist focused on assessing credit risks within the commercial banking industry.

Mr. Hammill holds a Bachelor of Science degree in Economics and a Masters of Business Administration from The Pennsylvania State University and holds the Chartered Financial Analyst ^® designation.

Stephen F. Graham, Senior Vice President and Director of Post Acute Acquisition & Development

Mr. Graham has served as our Senior Vice President and Director of Post Acute Acquisition and Development since June 2015. From February 2015 to June 2015, Mr. Graham served as a Principal with Infinium Healthcare where he provided operational, development and mergers and acquisitions services. Prior to Infinium Healthcare, Mr. Graham served as the Managing Director of Mergers & Acquisitions at Lancaster Pollard from May 2014 to January 2015, where he focused on structuring healthcare mergers and acquisitions. From February 2007 to December 2013, Mr. Graham served as a Senior Investment Officer of Nationwide Health Properties, Inc. (NYSE: NHP), which was acquired by Ventas, Inc. (NYSE: VTR) in July 2011 and now operates as its wholly owned subsidiary, where he was responsible for sourcing, structuring and purchasing skilled nursing and senior housing properties. Previously, he gained seven years of operating experience with a private multi-state skilled nursing and senior housing operator.

Mr. Graham holds a Bachelor of Business Administration degree in Business from Southern Methodist University, and a degree in Bank Management from Southwestern Graduate School of Banking at Southern Methodist University.

Randall L. Churchey, Independent Director

Mr. Churchey has served as a director since the completion of the initial private placement in July 2014. Mr. Churchey has served as President, Chief Executive Officer and a member of the board of directors of Education Realty Trust, Inc. (NYSE: EDR) since 2010, and was a member of its board of directors from 2005 to 2007. Mr. Churchey is also the founder and Co-Chairman of the board of directors of MCR Development, LLC, a private hotel construction, ownership and management company. From December 2004 until the sale of the company to a private equity firm in May 2012, Mr. Churchey was a member of the board of directors of Great Wolf Resorts, Inc., a public indoor water park resort company, and was the Interim Chief Executive Officer of Great Wolf from May 2008 until December 2008. He was President and Chief Executive Officer and a member of the board of directors of Golden Gate National Senior Care (the successor to Beverly Enterprises) from March 2006 to September 2007. Mr. Churchey served as President and Chief Operating Officer of RFS Hotel Investors, Inc., a NYSE-listed hotel REIT (NYSE: RFS), from 1999 to 2003, and a director of RFS from 2000 through 2003. From 2004 until its sale in 2008, Mr. Churchey served on the Board of Trustees of Innkeepers USA Trust, a publicly-traded REIT (NYSE: KPA). From 1997 to 1999, he was Senior Vice President and Chief Financial Officer of FelCor Lodging Trust, Inc., a NYSE-listed hotel REIT (NYSE: FCH). Mr. Churchey was added to the board of governors of the National Association of Real Estate Investment Trusts in November 2013.

Mr. Churchey was selected to serve as a director because of his public company experience and his experience in the real estate industry.

John N. Foy, Independent Director

Mr. Foy has served as a director since the completion of the initial private placement in July 2014. John N. Foy retired from CBL & Associates Properties, or CBL, a real estate investment trust, in December 2012. He served as Vice Chairman of the Board of Directors and Treasurer of CBL from February 1999 to December 2012 and as a director and Chief Financial Officer from the completion of CBL’s initial public offering in November 1993 until his retirement in December 2012. From November 1993 until February 1999 he served as Executive

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Vice President—Finance, Chief Financial Officer and Secretary of the CBL, and resumed the role of Secretary in January 1, 2010. Mr. Foy was a member of the Executive Committee of CBL’s board of directors. Prior to CBL’s formation, he served in similar executive capacities with CBL’s predecessor. Mr. Foy has been involved in the shopping center industry since 1968 when he joined the Lebovitz family’s shopping center development business. In 1970, he became affiliated with the shopping center division of Arlen Realty & Development Corp., and, in 1978, joined Charles B. Lebovitz in establishing CBL’s predecessor. Mr. Foy served as the non-executive chairman of the board of directors of First Fidelity Savings Bank in Crossville, Tennessee from December 1985 until April 1994. Mr. Foy has served as chairman of the board of directors of Chattanooga Neighborhood Enterprise, a non-profit organization based in Chattanooga, Tennessee, and currently serves as a member of the Board of Trustees of the University of Tennessee, and as a member of the board of directors of the Electric Power Board of Chattanooga, a non-profit agency of the City of Chattanooga, Tennessee. He is a former member of the Board of Governors of the National Association of Real Estate Investment Trusts.

Upon his retirement from CBL in December of 2012, Mr. Foy formed a group of companies specializing in various industries including business strategy and consulting, wealth management, capital investing, real estate development and health care. Mr. Foy is Chairman, Chief Executive Officer and owner of Noon LLC, and Chairman of Noon Management, LLC, a private equity company headquartered in Chattanooga, Tennessee.

Mr. Foy received his Bachelor of Science degree in History from Austin Peay State University and a Doctor of Jurisprudence degree from the University of Tennessee.

Mr. Foy was selected to serve as a director because of his governance experience and his experience in the real estate industry.

Steven I. Geringer, Independent Director

Mr. Geringer has served as a director since August 2015. Mr. Geringer is currently a Senior Advisor to Alvarez & Marsal, having previously served as Managing Director & Co-Practice Leader-Healthcare Industry Private Equity from December 2012 to April 2015. Mr. Geringer has extensive experience on the boards of several public companies, most notably with Amsurg (NASDAQ: AMSG), where he has been Chairman of the Board since June 2009 and a director since March 1997, and as a director of Addus HomeCare Corp (NASDAQ: ADUS), since 2009. He is also Chairman of Imedex; a director of WoundCare Specialists and Stratasan; and, from December 2009 to July 2012, served as Chief Executive Officer and a director of InfuScience, Inc. He was also a Founder and Chairman of Qualifacts Systems until its sale in July 2014, and Chairman and Operating Partner of CredenceHealth until its sale in April 2011. Mr. Geringer also serves as a Member of the Executives Council of Cressey & Co., a private equity firm investing exclusively in healthcare businesses. Mr. Geringer has also held senior management positions in the hospital management and managed care industry.

Mr. Geringer holds a Bachelor of Science degree in Economics from the Wharton School of the University of Pennsylvania.

Mr. Geringer was selected to serve as a director because of his experience in the healthcare industry and his experience as a senior executive and director of other public companies.

Stephen L. Guillard, Independent Director

Mr. Guillard has served as a director since August 2015. Since January 2012, Mr. Guillard has served as a consultant in the long-term care and post-acute sectors. Previously, from May 2005 to December 2011, Mr. Guillard served as an Executive Vice President, the Chief Operating Officer and a member of the board of directors of HCR ManorCare, an Ohio-based healthcare company. Prior to joining HCR ManorCare, from May 1988 to May 2005, Mr. Guillard was the Chairman and Chief Executive Officer of Harborside Healthcare, a Boston-based, post-acute services firm. Mr. Guillard was a founding member of the Alliance for Quality Nursing

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Home Care and has served as Chairman of this coalition at various times since its inception in May 1999, and as a member of its Executive Committee from inception until its merger with the American Health Care Association in June 2013. He is currently a director of naviHealth, Inc., a Nashville-based manager of post-acute services, and previously served on the board of Health Management Associates (NYSE: HMA) from August 2013 until its merger with Community Health Systems (NYSE: CHS) in February 2014.

Mr. Guillard holds a Bachelor of Science degree in Psychology from King’s College and a Master’s Degree in Public Administration from the Pennsylvania State University.

Mr. Guillard was selected to serve as a director because of his experience in the healthcare industry and his experience as a senior executive and director of other public companies.

Elliott Mandelbaum, Independent Director

Mr. Mandelbaum has served as a director since the completion of the initial private placement in July 2014. Mr. Mandelbaum serves as a portfolio manager at BlueMountain with a focus on healthcare and real estate related strategies. Prior to joining Blue Mountain in July 2013, from July 2009 through June 2013, Mr. Mandelbaum served as a Vice President in the Investment Banking Division of MESA Securities, Inc., where Mr. Mandelbaum led many of the firm’s structured financing transactions. Prior to MESA, Mr. Mandelbaum worked within the Investment Banking Division at Goldman, Sachs & Co., where he advised corporate clients on their financing needs with a particular focus on structured finance markets, originating securities and loans collateralized by insurance, real estate and intellectual property assets.

Mr. Mandelbaum holds a Bachelor of Science degree in Business Management from the Johns Hopkins University.

Mr. Mandelbaum was selected to serve as a director because of his experience in both the healthcare and real estate industries.

Stuart C. McWhorter, Independent Director

Mr. McWhorter has served as a director since the completion of the initial private placement in July 2014. Mr. McWhorter has served as Chairman and Chief Executive Officer of Clayton Associates since he co-founded the firm in 1996. Clayton Associates is an investment firm that makes seed, angel and venture-stage investments in healthcare and technology companies. He also serves on the Investment Committee of Bullpen Ventures and Advisory Board of FCA Venture Partners and Rolling Hills Ventures.

Prior to Clayton Associates, Mr. McWhorter served as Chairman and Chief Executive Officer of Medical Reimbursements of America and was a founding member of OrthoLink Physicians Corporation, where he served as Vice President of Managed Care, and later as Vice President of Acquisitions. OrthoLink was acquired by United Surgical Partners (NASDAQ: USPI). He also served in various operating roles with Brookwood Medical Center, a Tenet-owned hospital system in Birmingham, Alabama.

Mr. McWhorter serves on the board of directors for Haven Behavioral Healthcare (since 2007), FirstBank of Tennessee (since 2005) and Medical Reimbursements of America (since 1999), where he also serves as Chairman.

Mr. McWhorter holds a Bachelor’s Degree in Management from Clemson University and a Masters in Health Administration from the University of Alabama-Birmingham.

Mr. McWhorter was selected to serve as a director because of his experience investing in healthcare companies, as well as his strong connections within the healthcare industry.

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James B. Pieri, Independent Director

Mr. Pieri has served as a director since the completion of the initial private placement in July 2014. Mr. Pieri is a portfolio manager at BlueMountain, where he is responsible for the firm’s Structured Corporate and Commercial Real Estate strategies. Prior to joining BlueMountain in 2012, from January 2011 until July 2012, Mr. Pieri served as Managing Director at Deutsche Bank, running the structuring effort for the Financial Institutions Group. Prior to his role at Deutsche Bank, Mr. Pieri ran the Cross Asset Structuring & Origination group at J.P. Morgan within the Credit & Rates Markets division.

Mr. Pieri holds a Bachelor’s degree in Applied Economics & Business Management from Cornell University and a Masters in Economic Policy & Management from the School of International & Public Affairs at Columbia University.

Mr. Pieri was selected to serve as a director because of his experience in both the healthcare and real estate industries.

Additional Background of Certain of Our Executive Officers

Messrs. McRoberts and Harlan both have at least approximately 30 years of experience in financing, acquiring, and disposing of healthcare-related, income producing real estate properties. In addition, Messrs. McRoberts and Harlan have worked together as co-founders and principals of Capstone, a Birmingham, Alabama-based, healthcare REIT that became publicly traded in 1994 and was sold to Healthcare Realty Trust Incorporated in 1998.

Capstone

Capstone was a publicly traded REIT focused on the ownership of healthcare properties and real-estate debt investments and which, at the time of its merger, owned or had investments in 159 healthcare properties located in 30 states. In 1993 when Capstone was established as a private company, Mr. McRoberts was a co-founder, President and CEO and Mr. Harlan was a co-founder, executive vice president and head of acquisitions & finance. As leaders of the senior management team, Messrs. McRoberts and Harlan were instrumental in the investment decisions of Capstone, but were subject to the oversight of the full board of directors and were not solely responsible for such investment decisions. Capstone completed its initial public offering in June 1994 and merged with Healthcare Realty Trust Incorporated in October 1998. From the time of its initial public offering through the time of its merger, Capstone generated a total return of 62.8% to investors (assuming reinvestment of all cash distributions paid by Capstone on its common stock during that period in additional shares of common stock). During the period beginning with the inception of the RMS, as defined below, in December 1994 through Capstone’s merger with Healthcare Realty Trust Incorporated in October of 1998, Capstone generated a total return to its investors of 82.8% (assuming reinvestment of all cash distributions paid by Capstone on its common stock during that period in additional shares of common stock) compared to an RMS total return of 42.9%. We can provide no assurances, however, that Capstone’s stock performance was not impacted by general market trends and other external factors unrelated to management’s performance.

The MSCI US REIT Index (End of Day Index Symbol: RMS) is a free float-adjusted market capitalization weighted index that represents approximately 85% of the publicly-traded U.S. REIT market, with each REIT in the index having a market capitalization of at least $100 million. It is comprised of equity REIT securities that are included in the MSCI US Investable Market 2500 Index, or the MCSI USA IMI, which includes all securities in the MSCI USA Large Cap, MSCI USA Mid Cap and MSCI USA Small Cap Indexes. All REITs in the MSCI USA IMI are eligible for inclusion except for REITs in the Mortgage REITs Sub-Industry and REITs in the Specialized REITs Sub-Industry that do not generate the majority of their revenue and income from real estate rental and related leasing operations. The MSCI US REIT Index includes only REIT securities that are of reasonable size in terms of full and free float-adjusted market capitalization to ensure that the performance of the

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equity REIT universe can be captured and replicated in actual institutional and retail portfolios of different sizes. The REITs that are included in the MSCI US REIT Index reflect a broad spectrum of real estate sectors, including REITs that operate in the office, retail, hotel, multifamily, industrial, healthcare and storage sectors in one or more regions of the United States or across the entire United States. We believe that the MSCI US REIT Index is an industry benchmark used by investors for purposes of comparing stock performance and stockholder returns. However, comparison of Capstone’s stock performance to the performance of the MSCI US REIT Index may be limited due to the differences between Capstone and the other companies represented in the index, including with respect to size, asset type, geographic concentration and investment strategy. The information regarding total return to stockholders achieved by Capstone is not a guarantee or prediction of the returns that we may achieve in the future, and we can offer no assurance that we will be able to replicate these returns.

The table below provides a comparison of Capstone’s stock performance against the MSCI US REIT Index.

Capstone Total Return


	Partial Year from 1/1/1998 to sale 10/15/1998			Year- End 1997(1)			Year- End 1996			Year- End 1995(2)			6/30/1994 (Inception) to 12/31/1994
Total Return
Capstone Capital Corp		-14.5	%		23.8	%		27.6	%		35.3	%		-11.0	%
RMS		-21.4	%		18.6	%		35.9	%		12.9	%		NA

(1)	Last full calendar year of operation; Capstone was sold to Healthcare Realty Trust Incorporated in October 1998.

(2)	First full calendar year of operation following the initial public offering.

Similar to other REITs, Capstone faced various adverse business developments. For example, in 1998 Capstone experienced a general downturn in its stock price, as did other REITs, reflecting general global economic and market conditions and general weak demand for real estate investments. Also in the mid-1990s, uncertainty related to the health care industry generally posed challenges to those with investments in the health care real estate industry and stemmed from increased governmental and private payor pressure on health care providers to control costs, the migration of patients from acute care facilities into extended care and home care settings, and the vertical and horizontal consolidation of health care providers. These changes, including reductions in reimbursement levels under Medicare, Medicaid and private payor programs, created uncertainty with respect to Capstone being able to meet its financial performance expectations. In addition, from time to time, in the ordinary course of business, Capstone had properties that underperformed or failed to meet operational or financial expectations.

Corporate Governance—Board of Directors and Committees

Our business is managed through the oversight and direction of our board of directors. At least a majority of our directors are considered “independent,” as defined by the rules of the NYSE. Our independent directors must be recommended for nomination by our nominating and corporate governance committee.

Currently, our board of directors consists of nine members. Our directors are not required to devote all of their time to our business and are only required to devote as much time to our affairs as their duties require. Our directors generally meet quarterly or more frequently if necessary. The directors are regularly kept informed about our business at meetings of the board of directors and its committees and through supplemental reports and communications. Our non-management or independent directors meet regularly in executive sessions without the presence of any corporate officers. Our board of directors seeks to maintain high corporate governance standards.

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Our board of directors has established three standing committees, the principal functions of which are briefly described below. Matters put to a vote of any one of our three committees must be approved by a majority of the directors on the committee who are present at a meeting at which there is a quorum or by unanimous written or electronic consent of the directors on that committee.

Investment Committee

We have established an investment committee comprised of Messrs. McRoberts, Harlan, Mandelbaum, Pieri and Walraven. Messrs. Mandelbaum and Pieri are designees of BlueMountain. BlueMountain has the right to appoint two members of the investment committee for as long as BlueMountain is entitled to designate two nominees to our board of directors, and one member of the investment committee will be appointed by BlueMountain so long as BlueMountain is entitled to one nominee to our board of directors.

For so long as BlueMountain maintains a designee on the investment committee:

•

all acquisitions are presented to the investment committee for approval;

•

any acquisition for aggregate consideration of less than 5% of our assets (on a pro forma basis after giving effect to the acquisition) requires the approval of a majority of the members of the investment committee;

•

any acquisition for aggregate consideration of greater than 5% of our assets (on a pro forma basis after giving effect to the acquisition) requires the approval of four members of the investment committee; and

•

any acquisition for greater than 15% of our assets (on a pro forma basis after giving effect to the acquisition) requires the unanimous approval of the investment committee.

Risk Committee

We have established a risk committee comprised of Messrs. McRoberts, Harlan, Mandelbaum, Pieri and Walraven. Messrs. Mandelbaum and Pieri are designees of BlueMountain. The risk committee assists our board of directors in its oversight of our risk management process. Among other things, the risk committee is responsible for setting and reinforcing underwriting standards and monitoring policies and exposure limits in our portfolio, including with respect to geographic, operator and asset-type concentration. One of the directors designated by BlueMountain has the right to serve on our risk committee for so long as such individual serves on our board of directors.

Role of the Board in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors has established a risk committee to assist in its oversight of our risk management process, with support from the audit committee, the compensation committee, the nominating and corporate governance committee, each of which addresses risks specific to their respective areas of oversight. In particular, our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our audit committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Board Committees

Our board of directors has established three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. The principal functions of each committee are briefly described below. We comply with the listing requirements and other rules and regulations of the NYSE,

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as amended or modified from time to time, and each of these committees is comprised exclusively of independent directors. Additionally, our board of directors may from time to time establish certain other committees to facilitate the management of our company.

Audit Committee

Our audit committee is comprised of Messrs. Churchey, Foy and McWhorter. Mr. Foy, the chairman of our audit committee, qualifies as an “audit committee financial expert” as that term is defined by the applicable SEC and NYSE corporate governance listing standards. The audit committee assists the board of directors in overseeing, among other things (1) our accounting and financial reporting processes, (2) the integrity and audits of our consolidated financial statements, (3) our compliance with legal and regulatory requirements, (4) the qualifications and independence of our independent auditors and (5) the performance of our internal and independent auditors.

Compensation Committee

Our compensation committee is comprised of Messrs. Churchey, McWhorter and Pieri, with Mr. Churchey serving as chairman. The compensation committee’s main functions is to (1) evaluate the performance of our executive officers, (2) review and approve the compensation for our executive officers, (3) review and make recommendations to the board with respect to our 2014 Equity Incentive Plan and (4) administer the issuance of any equity incentive awards under our 2014 Equity Incentive Plan to our directors, officers and employees.

The compensation committee also reviews and approves corporate goals and objectives relevant to chief executive officer compensation, evaluates the chief executive officer’s performance in light of those goals and objectives, and establishes the chief executive officer’s compensation levels based on its evaluation. The compensation committee has the authority to retain any compensation consultant to be used to assist in the evaluation of chief executive officer or other executive officer compensation.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is comprised of Messrs. Churchey, Mandelbaum and McWhorter, with Mr. McWhorter serving as chairman. The nominating and corporate governance committee is responsible for seeking, considering and recommending to the board of directors qualified candidates for election as directors and recommending a slate of nominees for election as directors at the annual meeting. It also periodically prepares and submits to the board for adoption the committee’s selection criteria for director nominees. It reviews and makes recommendations on matters involving general operation of our board of directors and our corporate governance, and annually recommends to the board of directors nominees for each committee of the board.

Compensation of Directors

As compensation for serving on our board of directors, each of our independent directors receives an annual fee of $100,000. Directors’ fees are paid 50% in cash and 50% in shares of restricted common stock issued under our 2014 Equity Incentive Plan, which vest ratably on each of the first three anniversaries of the date of grant. The chairmen of the compensation and nominating and corporate governance committees each receive an additional $7,500 per year and the audit committee chairman receives an additional $10,000 per year. Directors who are also officers or employees of our company receive no additional compensation as directors. In addition, we reimburse our directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings. BlueMountain’s director designees contribute to BlueMountain any compensation that they receive as our directors.

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Upon joining our board of directors, each independent director received a grant of $50,000 in restricted shares of our common stock. All restricted shares granted to independent directors vest ratably on each of the first three anniversaries of the date of grant, subject to the director’s continued service on our board of directors. Messrs. Mandelbaum and Pieri transferred to BlueMountain the restricted shares of our common stock that they received upon joining our board of directors.

Our board of directors may change the compensation of our independent directors in its discretion.

The following table provides information on the compensation for our non-employee directors for their services during the year ended December 31, 2014.


Name	Fees Earned or Paid in Cash		Stock Awards		Total
Randall L. Churchey	$	23,958	$	70,815	$	94,773
John N. Foy		25,000		70,815		95,815
Steven I. Geringer ⁽²⁾		—		—		—
Stephen L. Guillard ⁽²⁾		—		—		—
Elliott Mandelbaum		20,833		70,815		91,648
Stuart C. McWhorter		23,958		70,815		94,773
James B. Pieri		20,833		70,815		91,648

(1)	Represents the grant date fair value of awards of restricted shares of common stock granted under our 2014 Equity Incentive Plan.

(2)	Messrs. Geringer and Guillard joined our board of directors in August 2015, and as a result, did not receive any compensation during the year ended December 31, 2014.

Executive Compensation

The table below sets forth a summary of all compensation earned, awarded or paid, as applicable, to our executive officers in the fiscal year ended December 31, 2014.


Name and Principal Position	Year		Salary ⁽¹⁾		Bonus		Stock Awards ⁽²⁾		Total
John W. McRoberts		2014	$	240,625	$	240,625	$	1,083,145	$	1,564,395
Chief Executive Officer

William C. Harlan		2014		240,625		240,625		1,083,145		1,564,395
President and Chief Operating Officer

Jeffery C. Walraven		2014		171,875		171,875		242,502		586,252
Chief Financial Officer

(1)

Amounts represent the portion of annual base salary for the period commencing on April 23, 2014, our date of formation, and ended December 31, 2014, based on the following annual salaries: Mr. McRoberts—$350,000; Mr. Harlan—$350,000; and Mr. Walraven—$250,000. In August 2015, the employment agreements with these executives were amended and restated, and the annual base salaries were increased as described under “—Employment Agreements.”

(2)

Represents the grant date fair value of awards of restricted shares of common stock and restricted stock units granted under our 2014 Equity Incentive Plan upon completion of the initial private placement on July 31, 2014, as described below under “—Equity Grants.” For restricted stock units, the grant date fair value was determined using a Monte Carlo valuation model. See Note 7 of the notes to our consolidated financial statements for the year ended December 31, 2014, included elsewhere in this prospectus.

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Equity Grants

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Time-Vesting Restricted Stock. Concurrently with the completion of the initial private placement and in accordance with our 2014 Equity Incentive Plan, we issued 43,684, 43,684, and 9,780 restricted shares of common stock to Messrs. McRoberts, Harlan and Walraven, respectively, all of which will vest on July 31, 2017, subject to their continued employment on such date. On July 31, 2015, we issued 43,733, 43,733 and 21,866 restricted shares of common stock to Messrs. McRoberts, Harlan and Walraven, respectively, all of which will vest on July 31, 2018, subject to their continued employment on such date.

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Performance-Vesting Restricted Stock Units . Concurrently with the completion of the initial private placement and in accordance with our 2014 Equity Incentive Plan, we granted an aggregate of 65,526, 65,526, and 14,671 performance-vesting restricted stock units to Messrs. McRoberts, Harlan and Walraven, respectively, which will vest on July 31, 2017, based on the achievement of absolute total return to stockholders (“TSR”) (50% weighting) and relative TSR as compared to the performance of the RMS (50% weighting). On July 31, 2015, we granted an aggregate of 65,600, 65,600 and 32,798 performance-vesting restricted stock units to Messrs. McRoberts, Harlan and Walraven, respectively, which will vest on July 31, 2018, based on the achievement of absolute TSR (50% weighting) and relative TSR as compared to the performance of the RMS (50% weighting). For performance between the specified TSR Performance and MSCI US REIT Index Performance hurdles, the amount earned would be interpolated on a linear basis. Dividends on the restricted stock units will accrue but will not be paid unless and until the underlying restricted stock units vest and are converted into shares of common stock. The absolute and relative TSR thresholds are as follows:


Absolute TSR Award
TSR Performance		% of Award Earned
25.5%		0%
27.5%		25%
29.5%		50%
31.5%		75%
33.5%		100%


Relative TSR Award
MSCI US REIT Index Performance		% of Award Earned
= Index		0%
Index +3%		50%
Index +6% or greater		100%

Employment Agreements

We entered into employment agreements with Messrs. McRoberts, Harlan and Walraven on July 31, 2014, which were amended and restated on August 13, 2015. Set forth below is a description of the terms of each employment agreement, as amended and restated.

The employment agreements have initial three-year terms with automatic one-year renewals thereafter, unless the executive or we provides notice of non-renewal to the other party. The employment agreements provide for a base salary of $420,000 to Mr. McRoberts, a base salary of $420,000 to Mr. Harlan and a base salary of $300,000 to Mr. Walraven, in each case, effective August 1, 2015, which may be adjusted annually thereafter at the discretion of our board of directors or the compensation committee. Pursuant to the employment agreements, the executives will be eligible to receive an annual discretionary bonus in the event we or the executive, or both, respectively, achieve certain financial performance and personal performance targets to be established by our board of directors or the compensation committee pursuant to a cash compensation incentive plan or similar plan to be established by us in our sole discretion under our Equity Incentive Plan. Under the employment agreements, during the employment term, we will pay an amount up to $25,000 for Messrs.

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McRoberts and Harlan and $17,750 for Mr. Walraven, per year for policies of life, disability, executive health and wellness, and/or long-term care for the benefit of the executive and beneficiaries of his choosing, which amount will increase each year by the percentage increase in the consumer price index for such year. The executive will also be eligible to participate in other compensatory and benefit plans available to all employees.

The employment agreements provide that, if the executive’s employment is terminated:

•

by us for “cause,” by the executive without “good reason,” as a result of a non-renewal of the employment term by the executive, or due to the executive’s death, then we shall pay the executive: (i) all accrued but unpaid wages through the termination date; (ii) all earned and accrued but unpaid bonuses; (iii) all accrued but unused vacation through the termination date; and (iv) all approved, but unreimbursed, business expenses;

•

by us without “cause,” by the executive for “good reason,” or as a result of a non-renewal of the employment term by us, then we shall pay the executive: (i) all accrued but unpaid wages through the termination date; (ii) all accrued but unused vacation through the termination date; (iii) all approved, but unreimbursed, business expenses; (iv) all earned and accrued but unpaid bonuses; (v) any COBRA continuation coverage premiums required for the coverage of the executive (and his eligible dependents) under our major medical group health plan, generally for a period of 18 to 24 months or until the executive is employed by a third party that provides comparable coverage at no cost to the executive entitled to COBRA coverage; and (vi) a separation payment equal to the sum of three times (3x) for Messrs. McRoberts and Harlan and two times (2x) for Mr. Walraven, of their (A) then current base salary and (B) average annual bonus for the two annual bonus periods completed prior to termination (or target bonus for any fiscal year not yet completed), with such separation payment being payable in equal installments over a period of 12 months following such termination; or

•

due to the executive’s “disability,” then we shall pay the executive (or the executive’s estate and/or beneficiaries, as the case may be): (i) all accrued but unpaid wages through the termination date; (ii) all earned and accrued but unpaid bonuses prorated to the date of his disability; (iii) all accrued but unused vacation through the termination date; (iv) all approved, but unreimbursed, business expenses; and (v) any COBRA continuation coverage premiums required for the coverage of the executive (or his eligible dependents) under our major medical group health plan, generally for a period of 18 months or until the executive is employed by a third party that provides comparable coverage at no cost to the executive.

Additionally, in the event of a change in control (as defined in our 2014 Equity Incentive Plan) or if the executive’s employment is terminated by us without “cause,” by the executive for “good reason” or as a result of a non-renewal of the employment term by us, all of the executive’s outstanding unvested equity-based awards (including but not limited to, restricted common stock and restricted stock units) will vest and become immediately exercisable and unrestricted, without any action by our board of directors or any committee thereof (except vesting may be delayed to qualify as performance-based compensation for purposes of Section 162(m) of the Code).

The executive’s right to receive the severance payments and benefits described above is subject to his delivery and non-revocation of an effective general release of claims in favor of our company and compliance with customary restrictive covenant provisions, including, relating to confidentiality, noncompetition, nonsolicitation, cooperation and nondisparagement.

In addition, under the employment agreements, to the extent any payment or benefit would be subject to an excise tax imposed in connection with Section 4999 of the Code, such payments and/or benefits may be subject to a “best pay cap” reduction to the extent necessary so that the executive receives the greater of the (i) net amount of the payments and benefits reduced such that such payments and benefits will not be subject to the excise tax and (ii) net amount of the payments and benefits without such reduction.

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Under the employment agreements, “cause” is defined as: (i) the executive’s refusal to substantially perform, following notice by us to the executive, the executive’s duties to us, or gross negligence or willful misconduct in connection with the performance of the executive’s duties to us; (ii) the executive’s conviction or plea of guilty or nolo contendere of a felony; (iii) the executive’s conviction of any other criminal offense involving an act of dishonesty intended to result in personal enrichment of the executive at the expense of us or our affiliates; or (iv) the executive’s breach of any material company policy, or term of the employment agreement or any other employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the executive and us or our affiliates. The executive will have rights to cure certain events constituting “cause.”

Under the employment agreements, “good reason” is defined as the occurrence of any of the following events: (i) a reduction in or material delay in payment of the executive’s aggregate base salary (including the target bonus opportunity), excluding any reductions in bonuses caused by the failure to achieve performance targets; (ii) the assignment to the executive of substantial duties or responsibilities inconsistent with the executive’s position, or any other action by us which results in a substantial diminution of the executive’s duties, authorities or responsibilities (other than temporarily while physically or mentally incapacitated or as required by applicable law); (iii) a requirement that the executive work principally from a location that is thirty miles further from the executive’s residence than our principal office; or (iv) our material breach of the employment agreement. In addition, under Messrs. McRoberts’ and Harlan’s employment agreements, “good reason” includes: (x) a material adverse change in the reporting structure applicable to the executive; and (y) any failure of the nominating and corporate governance committee of our board of directors to nominate the executive for re-election to our board of directors at any annual meeting of our stockholders while the executive serves as our chief executive officer or president, as applicable, provided that, at the time of each annual meeting, the executive is not experiencing a disability, we have not notified the executive of our intention to terminate the executive for “cause,” and the executive has not notified us of his intention to resign his employment. In addition, under Mr. Harlan’s employment agreement, “good reason” includes the replacement of Mr. McRoberts as our chief executive officer with anyone other than Mr. Harlan, provided, that such replacement of Mr. McRoberts is not the result of (1) a termination of Mr. McRoberts’ employment agreement with us (a) by us or (b) by Mr. McRoberts with “good reason” (as defined in Mr. McRoberts’ employment agreement), or (2) our non-extension of the term of Mr. McRoberts’ employment agreement with us, if Mr. McRoberts was willing and able to remain employed by us.

2014 Equity Incentive Plan

Our board of directors has adopted and approved our 2014 Equity Incentive Plan for the purpose of attracting and retaining non-employee directors, executive officers and other key employees and service providers, including officers and employees of our affiliates, and to stimulate their efforts toward our continued success, long-term growth and profitability. Our 2014 Equity Incentive Plan provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including LTIP units, which are convertible on a one-for-one basis into OP units. We have reserved a total of 1,356,723 shares of common stock for issuance pursuant to our 2014 Equity Incentive Plan (including an aggregate of 645,476 shares of restricted common stock and restricted stock units previously granted to our executive officers, non-employee directors and certain employees and 709,747 shares of common stock reserved for potential future issuance), subject to certain adjustments set forth in the plan. This summary is qualified in its entirety by the detailed provisions of our 2014 Equity Incentive Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Our 2014 Equity Incentive Plan provides that no participant in the plan will be permitted to acquire, or will have any right to acquire, shares thereunder if such acquisition would be prohibited by the ownership limits contained in our charter or bylaws or would impair our status as a REIT.

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Administration of Our 2014 Equity Incentive Plan

Our 2014 Equity Incentive Plan is administered by our compensation committee. Each member of our compensation committee that administers our 2014 Equity Incentive Plan is a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, an “outside director” for purposes of Section 162(m) of the Code and “independent” within the meaning of the NYSE listing rules and the rules and regulations of the SEC. Our compensation committee determines eligibility for and designates participants of our 2014 Equity Incentive Plan, determines the type and amount of awards to be granted, determines the timing, terms, and conditions of any award (including the exercise price), and makes other determinations and interpretations as provided in our 2014 Equity Incentive Plan. All decisions and interpretations made by our compensation committee with respect to our 2014 Equity Incentive Plan will be binding on us and participants. During any period of time in which we do not have a compensation committee, our 2014 Equity Incentive Plan will be administered by our board of directors or another committee appointed by our board of directors. References below to our compensation committee include a reference to our board of directors or another committee appointed by our board of directors for those periods in which our board of directors or such other committee is acting.

Eligible Participants

All of our employees and the employees of our subsidiaries and affiliates, including our operating partnership, are eligible to receive awards under our 2014 Equity Incentive Plan. In addition, our non-employee directors and consultants and advisors who perform services for us and our subsidiaries and affiliates may receive awards under our 2014 Equity Incentive Plan. Incentive stock options, however, are only available to our employees.

Share Authorization

The maximum number of shares of our common stock that may be issued pursuant to awards under the 2014 Equity Incentive Plan is 1,356,723, which includes an aggregate of 645,476 shares of restricted common stock and restricted stock units previously granted to our executive officers, non-employee directors and certain employees and 709,747 shares of common stock reserved for potential future issuance. In connection with stock splits, distributions, recapitalizations and certain other events, our board of directors or compensation committee will make proportionate adjustments that it deems appropriate in the aggregate number of shares of common stock that may be issued under our 2014 Equity Incentive Plan and the terms of outstanding awards. If any awards terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised or paid or if any awards are forfeited or expire or otherwise terminate without the delivery of any shares of common stock, the shares of common stock subject to such awards will again be available for purposes of our 2014 Equity Incentive Plan.

While our 2014 Equity Incentive Plan allows for the issuance of incentive stock options, no participant in our 2014 Equity Incentive Plan can be granted incentive stock options that are first exercisable in a calendar year for shares of common stock having a total fair market value (determined as of the option grant), exceeding $100,000.

Share Usage

Shares of common stock that are subject to awards are counted against our 2014 Equity Incentive Plan share limit as one share for every one share subject to the award. The number of shares subject to any stock appreciation rights awarded under our 2014 Equity Incentive Plan is counted against the aggregate number of shares available for issuance under our 2014 Equity Incentive Plan regardless of the number of shares actually issued to settle the stock appreciation right upon exercise. Any shares returned as a result of withholding or for net-exercises are counted against the aggregate number of shares available for issuance under our 2014 Equity Incentive Plan.

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Prohibition on Repricing without Stockholder Approval

Except in connection with certain corporate transactions, no amendment or modification may be made to an outstanding stock option or stock appreciation right, including by replacement with or substitution of another award type, that would be treated as a repricing under applicable stock exchange rules or would replace stock options or stock appreciation rights with cash, in each case without the approval of the stockholders (although appropriate adjustments may be made to outstanding stock options and stock appreciation rights to achieve compliance with applicable law, including the Code).

Stock Options

Our 2014 Equity Incentive Plan authorizes our compensation committee to grant incentive stock options (under Section 422 of the Code) and options that do not qualify as incentive stock options. The exercise price of each option will be determined by our compensation committee, provided that the price cannot be less than 100% of the fair market value of shares of our common stock on the date on which the option is granted. If we were to grant incentive stock options to any 10% stockholder, the exercise price may not be less than 110% of the fair market value of our shares of common stock on the date of grant.

The term of an option cannot exceed ten years from the date of grant. If we were to grant incentive stock options to any 10% stockholder, the term cannot exceed five years from the date of grant. Our compensation committee determines at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. Options may be made exercisable in installments. The vesting and exercisability of options may be accelerated by our compensation committee. The exercise price of an option may not be amended or modified after the grant of the option, and an option may not be surrendered in consideration of or exchanged for or substituted for a grant of a new option having an exercise price below that of the option which was surrendered or exchanged or substituted for without stockholder approval.

The exercise price for any option or the purchase price for restricted common stock, if any, is generally payable (i) in cash or cash equivalents, (ii) to the extent the award agreement provides, by the surrender of shares of common stock (or attestation of ownership of such shares) with an aggregate fair market value, on the date on which the option is exercised, of the exercise price, (iii) with respect to an option only, to the extent the award agreement provides, by payment through a broker in accordance with procedures set forth by us or (iv) to the extent the award agreement provides and/or unless otherwise specified in an award agreement, any other form permissible by applicable laws, including net exercise and service to us.

Share Awards

Our 2014 Equity Incentive Plan also provides for the grant of share awards, including restricted common stock and restricted stock units. A share award is an award of shares of common stock or stock units that may be subject to restrictions on transferability and other restrictions as our compensation committee determines in its sole discretion on the date of grant. The restrictions, if any, may lapse over a specified period of time or through the satisfaction of conditions, in installments or otherwise, as our compensation committee may determine. Restricted stock units are contractual promises to deliver shares of common stock in the future and may be settled in cash, shares, other securities or property (as determined by our compensation committee) upon the lapse of restrictions applicable to the award and otherwise in accordance with the award agreement. A participant who receives restricted common stock will have all of the rights of a stockholder as to those shares, including, without limitation, the right to vote and the right to receive dividends or distributions on the shares, except that our compensation committee may require any dividends to be reinvested in shares. A participant who receives restricted stock units will have no rights of a stockholder with respect to the restricted stock units but may be granted the right to receive dividend equivalent rights. During the period, if any, when share awards are non-transferable or forfeitable, a participant is prohibited from selling, transferring, assigning, pledging, exchanging, hypothecating or otherwise encumbering or disposing of his or her award shares.

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Stock Appreciation Rights

Our 2014 Equity Incentive Plan authorizes our compensation committee to grant stock appreciation rights that provide the recipient with the right to receive, upon exercise of the stock appreciation right, cash, common stock or a combination of the two. The amount that the recipient will receive upon exercise of the stock appreciation right generally will equal the excess of the fair market value of shares of our common stock on the date of exercise over the shares’ fair market value on the date of grant. Stock appreciation rights will become exercisable in accordance with terms determined by our compensation committee. Stock appreciation rights may be granted in tandem with an option grant or independently from an option grant. The term of a stock appreciation right cannot exceed ten years from the date of grant.

Performance Awards

Our 2014 Equity Incentive Plan also authorizes our compensation committee to grant performance awards. Performance awards represent the participant’s right to receive a compensation amount, based on the value of our common stock, if performance goals established by our compensation committee are met. Our compensation committee will determine the applicable performance period, the performance goals and such other conditions that apply to the performance award. Performance goals may relate to our financial performance or the financial performance of our OP units, the participant’s performance or such other criteria determined by our compensation committee. If the performance goals are met, performance awards will be paid in cash, shares of common stock or a combination thereof.

Under our 2014 Equity Incentive Plan, one or more of the following business criteria, on a consolidated basis, and/or with respect to specified subsidiaries (except with respect to the total stockholder return and earnings per share criteria), will be used by our compensation committee in establishing performance goals: FFO; AFFO; earnings before any one or more of the following: interest, taxes, depreciation, amortization and/or stock compensation; operating (or gross) income or profit; pretax income before allocation of corporate overhead and/or bonus; operating efficiencies; operating income as a percentage of net revenue; return on equity, assets, capital, capital employed or investment; after tax operating income; net income; earnings or book value per share; financial ratios; cash flow(s); total rental income or revenues; capital expenditures as a percentage of rental income; total operating expenses, or some component or combination of components of total operating expenses, as a percentage of rental income; stock price or total stockholder return, including any comparisons with stock market indices; appreciation in or maintenance of the price of the common stock or any of our publicly-traded securities; dividends; debt or cost reduction; comparisons with performance metrics of peer companies; comparisons of our stock price performance to the stock price performance of peer companies; strategic business objectives, consisting of one or more objectives based on meeting specified cost, acquisition or leasing targets, meeting or reducing budgeted expenditures, attaining division, group or corporate financial goals, meeting business expansion goals and meeting goals relating to leasing, acquisitions, joint ventures or collaborations or dispositions; economic value-added models; or any combination thereof. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, our past performance or the past performance of any of our subsidiaries, operating units, business segments or divisions and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, stockholders’ equity and/or shares outstanding, or to assets or net assets. Our compensation committee may appropriately adjust any evaluation of performance under the foregoing criteria to exclude any of the following events that occurs during a performance period: asset impairments or write-downs; litigation or claim judgments or settlements; the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in our annual report to stockholders for the applicable year; the effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or regulatory action; or any other event either not directly related to our operations or not within the reasonable control of our management.

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Bonuses

Cash performance bonuses payable under our 2014 Equity Incentive Plan may be based on the attainment of performance goals that are established by our compensation committee and relate to one or more performance criteria described in the plan. Cash performance bonuses must be based upon objectively determinable bonus formulas established in accordance with the plan.

Dividend Equivalents

Our compensation committee may grant dividend equivalents in connection with the grant of any equity-based award. Dividend equivalents may be paid in cash or may be deemed reinvested in additional shares of stock and may be payable in cash, common stock or a combination of the two. To the extent the dividend equivalents are provided with respect to another award that vests or is earned based upon achievement of performance goals, any dividend equivalents will not be paid currently, but instead will be paid only to the extent the award vests. Our compensation committee will determine the terms of any dividend equivalents.

Other Equity-Based Awards

Our compensation committee may grant other types of equity-based awards under our 2014 Equity Incentive Plan, including LTIP units. Other equity-based awards are payable in cash, common stock or other equity, or a combination thereof, and may be restricted or unrestricted, as determined by our compensation committee. The terms and conditions that apply to other equity-based awards are determined by our compensation committee.

LTIP units are a special class of OP units. Each LTIP unit awarded under our 2014 Equity Incentive Plan will be equivalent to an award of one share under our 2014 Equity Incentive Plan, reducing the number of shares available for other equity awards on a one-for-one basis. We will not receive a tax deduction with respect to the grant, vesting or conversion of any LTIP unit. The vesting period for any LTIP units, if any, will be determined at the time of issuance. Each LTIP unit, whether vested or not, will receive the same quarterly per unit profit distribution as the other outstanding OP units, which profit distribution will generally equal the per share distribution on a share of common stock. This treatment with respect to quarterly distributions is similar to the expected treatment of our restricted common stock awards, which will receive full distributions whether vested or not. Initially, each LTIP unit will have a capital account of zero and, therefore, the holder of the LTIP unit would receive nothing if our operating partnership were liquidated immediately after the LTIP unit is awarded. However, the partnership agreement requires that “book gain” or economic appreciation in our assets realized by our operating partnership, whether as a result of an actual asset sale or upon the revaluation of our assets, as permitted by applicable regulations promulgated by the U.S. Treasury Department, or Treasury Regulations, be allocated first to LTIP units until the capital account per LTIP unit is equal to the capital account per unit of our operating partnership. The applicable Treasury Regulations provide that assets of our operating partnership may be revalued upon specified events, including upon additional capital contributions by us or other partners of our operating partnership or a later issuance of additional LTIP units. Upon equalization of the capital account of the LTIP unit with the per unit capital account of the OP units and full vesting of the LTIP unit, the LTIP unit will be convertible into an OP unit at any time. There is a risk that a LTIP unit will never become convertible because of insufficient gain realization to equalize capital accounts and, therefore, the value that a grantee will realize for a given number of vested LTIP units may be less than the value of an equal number of shares of common stock. See “Our Operating Partnership and the Partnership Agreement,” for a further description of the rights of limited partners in our operating partnership.

Recoupment

If we adopt a “clawback” or recoupment policy, any awards granted pursuant to our 2014 Equity Incentive Plan will be subject to repayment to us to the extent provided under the terms of such policy. We reserve the right in any award agreement to cause a forfeiture of the gain realized by a recipient if such recipient is in

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violation of or in conflict with certain agreements with us (including but not limited to an employment or non-competition agreement) or upon termination for “cause” as defined in our 2014 Equity Incentive Plan, applicable award agreement or any other agreement between us or an affiliate and the recipient.

Change in Control

If we experience a change in control in which outstanding awards that are not exercised prior to the change in control will not be assumed or continued by the surviving entity: (1) except for performance awards, all restricted common stock, LTIP units and restricted stock units will vest and the underlying shares of common stock and all dividend equivalent rights will be delivered immediately before the change in control; or (2) at our Board of Director’s or compensation committee’s discretion, either all options and stock appreciation rights will become exercisable 15 days before the change in control and terminate upon completion of the change in control, or all options, stock appreciation rights, restricted common stock and restricted stock units will be cashed out before the change in control. In the case of performance awards denominated in shares or LTIP units, if more than half of the performance period has lapsed, the awards will be converted into restricted common stock or restricted stock units based on actual performance to date. If less than half of the performance period has lapsed, or if actual performance is not determinable, the awards will be converted into restricted common stock assuming target performance has been achieved.

In summary, a change in control under our 2014 Equity Incentive Plan occurs if:

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a person, entity or affiliated group (with certain exceptions) acquires, in a transaction or series of transactions, 50% or more of the total combined voting power of our outstanding securities;

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the consummation of a merger or consolidation, unless (1) the holders of our voting shares immediately prior to the merger have at least 50.1% of the combined voting power of the securities in the surviving entity or its parent or (2) no person owns 50% or more of the shares of the surviving entity or the combined voting power of our outstanding voting securities;

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we sell or dispose of all or substantially all of our assets; or

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individuals who constitute our board of directors cease for any reason to constitute a majority of our board of directors, treating any individual whose election or nomination was approved by a majority of the incumbent directors as an incumbent director for this purpose.

Adjustments for Stock Dividends and Similar Events

Our compensation committee will make appropriate adjustments in outstanding awards and the number of shares available for issuance under our 2014 Equity Incentive Plan, including the individual limitations on awards, to reflect stock splits and other similar events.

Transferability of Awards

Except as otherwise permitted in an award agreement or by our compensation committee, awards under the 2014 Equity Incentive Plan are not transferable other than by a participant’s will or the laws of descent and distribution.

Term and Amendment

Our board of directors may amend or terminate our 2014 Equity Incentive Plan at any time; provided that no amendment may adversely impair the benefits of participants with respect to outstanding awards without the participants’ consent or violate our equity incentive plan’s prohibition on repricing. Our stockholders must approve any amendment if such approval is required under applicable law or stock exchange requirements. Our stockholders also must approve any amendment that changes the no-repricing provisions of the plan. Unless terminated sooner by our board of directors or extended with stockholder approval, our 2014 Equity Incentive Plan will terminate on the tenth anniversary of the adoption of the plan.

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Certain U.S. Federal Income Tax Consequences

Parachute Limitation. Unless a recipient is party to another agreement that addressed Sections 280G and 4999 of the Code, to the extent any payment or benefit would be subject to an excise tax imposed in connection with Section 4999 of the Code, such payments and/or benefits may be subject to a “best pay cap” reduction to the extent necessary so that the executive receives the greater of the (i) net amount of the payment and benefits reduced such that such payments and benefits will not be subject to the excise tax and (ii) net amount of the payments and benefits without reduction but with the executive paying the excise tax liability.

Section 162(m). Section 162(m) of the Code generally disallows a public company’s tax deduction for compensation paid in excess of $1.0 million in any tax year to its chief executive officer and certain other most highly compensated executives. However, compensation that qualifies as “performance-based compensation” is excluded from this $1.0 million deduction limit and therefore remains fully deductible by the company that pays it. We generally intend that, except as otherwise determined by our compensation committee, performance awards and stock options granted with an exercise price at least equal to 100% of the fair market value of the underlying shares of common stock at the date of grant to employees our compensation committee expects to be named executive officers at the time a deduction arises in connection with such awards, will qualify as “performance-based compensation” so that these awards will not be subject to the Section 162(m) deduction limitations. Our compensation committee will not necessarily limit executive compensation to amounts deductible under Section 162(m) of the Code, however, if such limitation is not in the best interests of us and our stockholders.

Section 409A. We intend to administer our 2014 Equity Incentive Plan so that awards will be exempt from, or will comply with, the requirements of Section 409A of the Code; however, we do not warrant that any award under our 2014 Equity Incentive Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local or foreign law. We will not be liable to any participant for any tax, interest, or penalties that such participant might owe as a result of the grant, holding, vesting, exercise, or payment of any award under our 2014 Equity Incentive Plan.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Private Placement

Concurrently with the closing of the initial private placement, certain of our officers, directors and their family members purchased 405,833 shares of our common stock directly from us at the offering price of $15.00 per share.

Equity Grants

We have issued an aggregate of 48,602 shares of restricted common stock to our independent directors and an aggregate of 238,749 shares of restricted common stock to our executive officers and certain other employees in accordance with our 2014 Equity Incentive Plan. Shares of restricted common stock granted to our independent directors will vest ratably on each of the first three anniversaries of the date of grant, subject to the director’s continued service on our board of directors. The shares of restricted common stock granted to our executive officers and certain other employees will vest with respect to 100% of the granted shares on the third anniversary of the grant date, subject to continued employment through such date.

In addition, we have granted an aggregate of 358,125 performance-vesting restricted stock units to our executive officers and certain other employees in accordance with our 2014 Equity Incentive Plan. These restricted stock units will vest on the third anniversary of the grant date, subject to continued employment and the achievement of certain operating metrics through such date. See “Management—Executive Compensation—Equity Grants” for additional information regarding equity grants to our executive officers and certain other employees.

Indemnification Agreements with Executive Officers and Directors

We have entered into indemnification agreements with our executive officers and directors providing for, to the maximum extent permitted by law, indemnification by us and advancements by us of certain expenses and costs relating to claims, suits or proceedings arising from their service to us.

Employment Agreements with Executive Officers

We have entered into employment agreements with our executive officers. See “Management—Employment Agreements” for a description of the terms of these agreements.

Reimbursement of Offering and Formation Expenses to our Founders

We used approximately $163,000 of the net proceeds from the initial private placement to reimburse certain members of our management team for expenses incurred by them in connection with our organization and the initial private placement, including legal, accounting and printing costs.

BlueMountain Rights Agreement

In connection with BlueMountain’s purchase of 2,583,686 shares of our common stock in the initial private placement, we granted BlueMountain the right to designate two of the members of our board of directors, whose terms began on July 31, 2014. For any meeting of our stockholders for the election of directors, our board of directors is required to nominate: (i) two BlueMountain directors so long as BlueMountain (A) continues to own 75% or more of the number of shares it purchased in the initial private placement or (B) beneficially owns at least 10% of our outstanding common stock; (ii) one BlueMountain director so long as BlueMountain (X) continues to own 50% or more of the number of shares it purchased in the initial private placement or (Y) beneficially owns at least 5% of our outstanding common stock; and (iii) no BlueMountain directors if BlueMountain has sold more than 50% of the number of shares it purchased in the initial private placement and

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beneficially owns less than 5% of our outstanding common stock. In addition, two of the members of the investment committee were appointed by BlueMountain so long as BlueMountain is entitled to two nominees to our board of directors, and one member of the investment committee will be appointed by BlueMountain so long as BlueMountain is entitled to one nominee to our board of directors. One of BlueMountain’s designees has the right to serve on our risk committee for so long as such individual serves on our board of directors.

In addition, for as long as BlueMountain owns greater than 10% of the outstanding shares of our common stock, the vote of at least one of the BlueMountain designees on our board of directors shall be required in order for our board of directors to approve the issuance of any shares of our common stock for consideration less than the lower of (i) the then-current market price of our common stock if our common stock is then listed for trading on a national securities exchange or (ii) $15.00 per share, in each case as may be adjusted for any stock splits, stock dividends or other similar recapitalizations.

Furthermore, so long as BlueMountain maintains at least one designee on our board of directors, the number of members constituting our board of directors shall be no more than seven, subject to increase or decrease by the board of directors from time to time, provided that any such increase or decrease shall require the approval of at least one BlueMountain board designee.

In connection with this offering, BlueMountain has the right to purchase in a concurrent private placement a number of shares necessary to allow BlueMountain to maintain its ownership percentage in us following the completion of this offering, without payment by us of any underwriting discount or commissions on such shares. Pursuant to this right, BlueMountain is purchasing shares of our common stock in the BlueMountain Private Placement.

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INVESTMENT POLICIES AND POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of our policies with respect to investments, financing and certain other activities. The policies with respect to these activities may be amended and revised from time to time at the discretion of our board of directors without notice to or a vote of our stockholders.

Investment Policies

Investments in Real Estate or Interests in Real Estate

We conduct all of our investment activities through our operating partnership and its subsidiaries. Our primary business objective is to provide our stockholders with stable distributions and an opportunity for value enhancement through investments in a diversified mix of healthcare properties, coupled with proactive management and prudent financing of our healthcare property investments. Our business is focused primarily on healthcare properties and activities directly related thereto. We focus on multiple types of acute and post-acute healthcare properties, including acute care hospitals, short-stay surgical and specialty hospitals (such as those focusing on orthopedic, heart and other dedicated surgeries and specialty procedures), dedicated specialty hospitals (such as inpatient rehabilitation facilities, long-term acute care hospitals and facilities providing psychiatric care), skilled nursing facilities, large and prominent physician clinics, diagnostic facilities, outpatient surgery centers and facilities that support the aforementioned, such as medical office buildings (including those providing outpatient surgery, diagnostics, physical therapy and physician office space in a single building), in order to capture a larger share of healthcare expenditures and diversify our risk. For a discussion of the acquisitions and investments in our portfolio, our business and other strategic objectives, see “Our Business.”

We intend to employ multiple investment structures to maximize investment returns, including: facility purchases with triple-net leases back to facility operators, first mortgage loans secured by healthcare properties, mezzanine loans secured by ownership interests in entities that own healthcare properties, leasehold mortgages, loans to healthcare operators and equity investments in healthcare operators. We anticipate that future investment and development activity will be focused in the United States but will not be limited to any geographic area. We intend to engage in such future investment activities in a manner that is consistent with requirements applicable to REITs for U.S. federal income tax purposes. Provided we comply with these requirements, however, there are no limitations on the percentage of our assets that may be invested in any one real estate asset.

We may enter into joint ventures from time to time, if we determine that doing so would be the most effective means of raising capital. Equity investments may be subject to existing mortgage financing and other indebtedness or such financing or indebtedness may be incurred in connection with acquiring investments. Any such financing or indebtedness will have priority over our equity interest in such property. Investments are also subject to our policy not to be treated as an investment company under the 1940 Act.

From time to time, we may make investments or agree to terms that support the objectives of tenants without necessarily maximizing our short-term financial return, which may allow us to build long-term relationships and acquire properties otherwise unavailable to our competition. We believe that these dynamics create long-term, sustainable relationships and, in turn, profitability for us.

Purchase and Development of Properties

Our policy is to acquire properties primarily for cash flow growth potential and long-term value. From time to time, we may engage in strategic development opportunities. These opportunities may involve replacing or renovating properties in our portfolio that have become economically obsolete or identifying new sites that present an attractive opportunity and complement our existing portfolio.

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Investments in Real Estate Mortgages and Mezzanine Loans

We do not have a policy limiting our ability to make loans to other persons. Subject to REIT qualification rules, we may make loans to third parties. For example, we may consider offering purchase money financing in connection with the sale of properties where the provision of that financing will increase the value to be received by us for the property sold or we may consider making loans to joint ventures in which we or they participate or may participate in the future. We have not engaged in any significant lending activities in the past nor do we currently intend to in the future. We may choose to guarantee the debt of certain joint ventures with third parties. Consideration for those guarantees may include, but are not limited to, fees, long-term management contracts, options to acquire additional ownership and promoted equity positions. Our board of directors may, in the future, adopt a lending policy without notice to or the vote of our stockholders.

As part of our investment strategy, we may, at the discretion of our board of directors, invest in mortgages and other real estate related debt investments consistent with the rules applicable to REITs. The mortgages in which we may invest may be either first mortgages or junior mortgages, and may or may not be insured by a governmental agency. We also may invest in mezzanine loans, which are loans made to property owners that are subordinate to mortgage debt and are secured by pledges of the borrower’s ownership interests in the property and/or the entity that owns the property. Investments in mortgage loans and mezzanine loans are subject to the risk that one or more borrowers may default and that the collateral securing mortgages may not be sufficient to enable us to recover our full investment. Investments are also subject to our policy not to be treated as an investment company under the 1940 Act.

Investments in Securities or Interests in Entities Primarily Engaged in Real Estate Activities and Other Issuers

Subject to the gross income and asset requirements required for REIT qualification, we may in the future invest in securities of entities engaged in real estate activities or securities of other issuers (normally partnership interests, limited liability company interests or other joint venture interests in special purpose entities owning properties), including for the purpose of exercising control over such entities. We may acquire some, all or substantially all of the securities or assets of other REITs or entities engaged in real estate activities where such investment would be consistent with our investment policies and the REIT requirements. There are no limitations on the amount or percentage of our total assets that may be invested in any one issuer, other than those imposed by the gross income and asset tests we must meet in order to qualify as a REIT under the Code. In any event, we do not intend that our investments in securities will require us to register as an “investment company” under the 1940 Act, and we would generally divest appropriate securities before any such registration would be required. We do not intend to underwrite securities of other issuers.

Financing Policies

We expect to employ leverage in our capital structure in amounts determined from time to time by our board of directors. Although our board of directors has not adopted a policy that limits the total amount of indebtedness that we may incur, it considers a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that is either fixed or variable rate. Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur nor do they restrict the form in which our indebtedness will be taken (including recourse or non-recourse debt, cross collateralized debt, etc.). Although our board of directors has not yet adopted a policy limiting the total amount of debt that we may incur, we initially intend to target a ratio of debt to gross undepreciated asset value of between 30% and 40%. Our board of directors may from time to time modify our debt policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general market conditions for debt and equity securities, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors.

To the extent that our board of directors determines to obtain additional capital, we may, without stockholder approval, issue debt or equity securities, including additional operating partnership units, retain

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earnings (subject to the REIT distribution requirements for U.S. federal income tax purposes) or pursue a combination of these methods. As long as our operating partnership is in existence, the proceeds of all equity capital raised by us will be contributed to our operating partnership in exchange for additional interests in our operating partnership, which will dilute the ownership interests of the limited partners in our operating partnership.

We may, under certain circumstances, purchase shares of our common stock or other securities in the open market or in private transactions with our stockholders, provided that those purchases are approved by our board of directors. Our board of directors has no present intention of causing us to repurchase any shares of our common stock or other securities, and any such action would only be taken in conformity with applicable federal and state laws and the applicable requirements for qualification as a REIT.

Reporting Policies

Prior to the time when we become subject to the information reporting requirements of the Exchange Act, we intend to make available to our stockholders audited annual financial statements and unaudited quarterly financial statements. We intend to become a public reporting company subject to the information reporting requirements of the Exchange Act in connection with the initial public offering of our common stock in the future. Pursuant to those requirements, we will be required to file annual and periodic reports, proxy statements and other information, including audited financial statements, with the SEC.

Conflict of Interest Policies

Our governing instruments do not restrict any of our directors, officers, stockholders or affiliates from having a pecuniary interest in an investment or transaction in which we have an interest or from conducting, for their own account, business activities of the type we conduct. However, our policies will be designed to eliminate or minimize potential conflicts of interest. A “conflict of interest” occurs when a director’s, officer’s or employee’s private interest interferes in any way, or appears to interfere, with the interests of the Company as a whole. Our board of directors plans to adopt a policy that prohibits personal conflicts of interest. This policy will provide that any situation that involves, or may reasonably be expected to involve, a conflict of interest must be disclosed immediately to a supervisor or a member of our audit committee.

Our board of directors has adopted a written Related Person Transaction Policy. The purpose of this policy will be to describe the procedures used to identify, review, approve and disclose, if necessary, any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which (x) the Company was, is or will be a participant, (y) the aggregate amount involved exceeds $120,000 and (z) a related person has or will have a direct or indirect interest. For purposes of this policy, a related person is (i) any person who is, or at any time since the beginning of our last fiscal year was, an executive officer, director or director nominee of the Company, (ii) any person who is known to be the beneficial owner of more than 5% of our common stock, (iii) any immediate family member of any of the foregoing persons, or (iv) any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position, or in which all the related persons, in the aggregate, have a 10% or greater beneficial interest. Under this policy, our audit committee will be responsible for reviewing, approving or ratifying each related person transaction or proposed transaction. In determining whether to approve or ratify a related person transaction, the audit committee will consider all relevant facts and circumstances of the related person transaction available to it and will approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the audit committee determines in good faith. No member of the audit committee will be permitted to participate in any consideration of a related person transaction with respect to which that member or any of his or her immediate family is a related person.

These policies may not be successful in eliminating the influence of conflicts of interest or related person transactions. If they are not successful, decisions could be made that might fail to reflect fully the interests of all stockholders.

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Interested Director and Officer Transactions

Pursuant to the MGCL, a contract or other transaction between us and a director or between us and any other corporation or other entity in which any of our directors is a director or has a material financial interest is not void or voidable solely on the grounds of such common directorship or interest, the presence of such director at the meeting at which the contract or transaction is authorized, approved or ratified or the counting of the director’s vote in favor thereof, provided that:

•

the fact of the common directorship or interest is disclosed or known to our board of directors or a committee of our board, and our board or committee authorizes, approves or ratifies the transaction or contract by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum;

•

the fact of the common directorship or interest is disclosed or known to our stockholders entitled to vote thereon, and the transaction or contract is authorized, approved or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director or corporation, firm or other entity; or

•

the transaction or contract is fair and reasonable to us.

Furthermore, under Delaware law (where our operating partnership is formed), we, as the sole member of the general partner, have a fiduciary duty to our operating partnership and, consequently, such transactions are also subject to the duties of care and loyalty that we, as the sole member of the general partner, owe to limited partners in the operating partnership (to the extent such duties have not been eliminated pursuant to the terms of the partnership agreement). Our policy requires that all contracts and transactions between us, our operating partnership or any of our subsidiaries, on one hand, and any of our directors or executive officers or any entity in which such director or executive officer is a director or has a material financial interest, on the other hand, must be approved by the affirmative vote of a majority of the disinterested directors even if less than a quorum. Where appropriate in the judgment of the disinterested directors, our board of directors may obtain a fairness opinion or engage independent counsel to represent the interests of nonaffiliated securityholders, although our board of directors will have no obligation to do so.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial ownership of our common stock as of August 14, 2015 by:

•

each of our directors;

•

each of our executive officers;

•

each beneficial owner of 5% or more of our outstanding common stock; and

•

all of our directors and executive officers as a group.

The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power of such security. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (i) the exercise of any option, warrant or right, (ii) the conversion of a security, (iii) the power to revoke a trust, discretionary account or similar arrangement, or (iv) the automatic termination of a trust, discretionary account or similar arrangement.

Each person named in the table has sole voting and investment power with respect to all of the shares of common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. Unless otherwise indicated, the address of each named person is c/o MedEquities Realty Trust, Inc., 3100 West End Avenue Suite 1000, Nashville, Tennessee 37203. No shares beneficially owned by any executive officer or director have been pledged as security.


	Shares Beneficially Owned Before the Offering						Shares Beneficially Owned After the Offering and BlueMountain Private Placement
Beneficial Owner	Shares			Percentage ⁽¹⁾			Shares	Percentage
John W. McRoberts		270,750	⁽²⁾		2.0	%
William C. Harlan		270,751	⁽³⁾		2.0	%
Jeffery C. Walraven		31,646	⁽⁴⁾		*
Randall L. Churchey		21,387	⁽⁵⁾		*
John D. Foy		21,387	⁽⁶⁾		*
Steven I. Geringer		4,166			*
Stephen L. Guillard		4,166			*
Elliott Mandelbaum		—			—
Stuart C. McWhorter		11,387	⁽⁷⁾		*
James B. Pieri		—			—
All executive officers and directors as a group (10 persons)		635,640			5.7	%
Other 5% Stockholders
BlueMountain Capital Management, LLC ⁽⁸⁾		2,599,794			23.1	%
Forward Management, LLC ⁽⁹⁾		1,625,000			14.5	%
Allstate Investments, LLC ⁽¹⁰⁾		1,000,000			8.9	%
Pine River Capital Management L.P. ⁽¹¹⁾		925,000			8.2	%
Ardsley Partners ⁽¹²⁾		800,000			7.1	%
Credit Suisse Securities (USA) LLC ⁽¹³⁾		666,667			5.9	%
Centerbridge Partners, L.P. ⁽¹⁴⁾		637,000			5.7	%

*	Represents less than 1% of the number of shares of common stock outstanding upon completion of the offering.

(1)	Based on 11,233,345 shares of common stock outstanding as of August 14, 2015.

(2)

Includes (i) 183,333 shares purchased by Mr. McRoberts in the management/director private placement, (ii) 43,684 shares of restricted common stock granted upon completion of the initial private placement and (iii) 43,733 shares of restricted common stock granted on July 31, 2015, which shares of restricted common

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stock vest on the third anniversary of the date of grant, subject to continued employment through such date. Excludes (i) 65,526 restricted stock units granted upon completion of the initial private placement and (ii) 65,600 restricted stock units granted on July 31, 2015, all of which are performance-based and will not vest unless certain operating metrics are achieved.

(3)

Includes (i) 166,667 shares purchased by Mr. Harlan in the management/director private placement, (ii) 16,667 shares purchased by Mr. Harlan’s wife in such management/director private placement, of which he may be deemed the beneficial owner, (iii) 43,684 shares of restricted common stock granted upon completion of the initial private placement, and (iv) 43,733 shares of restricted common stock granted on July 31, 2015, which shares of restricted common stock vest on the third anniversary of the date of grant, subject to continued employment through such date. Excludes (i) 65,526 restricted stock units granted upon completion of the initial private placement and (ii) 65,600 restricted stock units granted on July 31, 2015, all of which are performance-based and will not vest unless certain operating metrics are achieved. The shares purchased by Mr. Harlan in the management/director private placement and Mr. Harlan’s restricted common stock and restricted stock units are held by The SJC Trust, an irrevocable trust for the benefit of Mr. Harlan’s wife, for which she is the sole trustee.

(4)

Includes (i) 9,780 shares of restricted common stock granted upon completion of the initial private placement and (ii) 21,866 shares of restricted common stock granted on July 31, 2015, which shares of restricted common stock vest on the third anniversary of the date of grant, subject to continued employment through such date. Excludes (i) 14,671 restricted stock units granted upon completion of the initial private placement and (ii) 32,798 restricted stock units granted on July 31, 2015, all of which are performance-based and will not vest unless certain operating metrics are achieved.

(5)

Includes (i) 13,333 shares purchased by Mr. Churchey in the management/director private placement, and (ii) 8,054 shares of restricted common stock that vest ratably on each of the first three anniversaries of the date of grant, subject to continued service on our board of directors through such date.

(6)	Includes (i) 13,333 shares purchased by Mr. Foy in the management/director private placement, and (ii) 8,054 shares of restricted common stock that vest ratably on each of the first three anniversaries of the date of grant, subject to continued service on our board of directors through such date.

(7)

Includes (i) 3,333 shares purchased by Mr. McWhorter in the management/director private placement, and (ii) 8,054 shares of restricted common stock that vest ratably on each of the first three anniversaries of the date of grant, subject to continued service on our board of directors through such date.

(8)

Includes (i) 2,583,686 shares purchased in the initial private placement, of which 541,797 are held by BlueMountain Credit Alternatives Fund L.P., 541,797 are held by BlueMountain Credit Opportunities Master Fund I L.P., 541,797 are held by BlueMountain Montenvers Master Fund SCA SICAV-SIF, 541,797 are held by BlueMountain Strategic Credit Master Fund L.P. and 416,498 are held by BlueMountain Guadalupe Peak Fund L.P. and (ii) 16,108 shares of restricted common stock transferred to BlueMountain by Messrs. Mandelbaum and Pieri. The address of the principal business office of BlueMountain is 280 Park Avenue, 12th Floor East, New York, NY 10017. The following individuals, as members of the Management Committee of BlueMountain, have shared voting and investment power over the common stock directly owned by various entities affiliated with BlueMountain: Andrew Feldstein, Stephen Siderow, Derek Smith, Bryce Markus, Alan Gerstein, Peter Greatrex, Michael Liberman, David Rubenstein and James Staley. BlueMountain has two designees on our board of directors, investment committee and risk committee and has certain other rights under an agreement with us. See “Certain Relationship and Related Transactions – BlueMountain Rights Agreement.”

(9)

Represents (i) 1,575,000 shares held by Forward Select Income Fund and (ii) 50,000 shares held by Forward Real Estate Long Short Fund. Forward Capital Management, LLC has voting and investment control over all of the shares held by these entities. The address of the principal business office of Forward Management, LLC is 101 California Street, Suite 1600, San Francisco, CA 94111.

(10)

Represents (i) 670,000 shares held by Allstate Insurance Company and (ii) 330,000 shares held by Allstate Life Insurance Company, which entities are controlled by Allstate Investments, LLC. We have been advised by these entities that Jerry Zinkula has voting and investment control over such shares. The address of the principal business office of Allstate Investments, LLC is 3075 Sanders Road, Suite G4A, Northbrook, IL 60062.

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(11)

Represents shares held by Pine River Master Fund Ltd., Pine River Baxter Fund Ltd., Pine River Fixed Income Master Fund Ltd. and Crossover Master L.P. We have been advised by these entities that Pine River Capital Management L.P. (“Pine River”) is the investment manager of these entities. Brian Taylor is the managing member of Pine River Capital Management LLC, an entity which is the general partner of Pine River. However Mr. Taylor, Pine River and Pine River Capital Management LLC disclaim beneficial ownership of any of the securities owned by these entities, other than to the extent of his or its pecuniary interest therein, and the foregoing shall not be deemed an admission that Mr. Taylor, Pine River or Pine River Capital Management LLC is the beneficial owner of such securities for purposes of Section 16 under the Exchange Act or for any other purpose. The address of the principal business office of Pine River Capital Management L.P. is 601 Carlson Parkway, Suite 330, Minnetonka, MN 55305.

(12)

Represents (i) 133,000 shares held by Philip J. Hempleman, (ii) 356,000 shares held by Ardsley Partners Fund II, L.P. and (iii) 311,000 shares held by Ardsley Partners Institutional Fund, L.P. We have been advised that Philip J. Hempleman has voting and investment control over all such shares. The address of the stockholder is 262 Harbor Drive, Stamford, CT 06902.

(13)	The address of the principal business office of Credit Suisse Securities (USA) LLC is Eleven Madison Avenue, New York, NY 10016.

(14)

Represents shares held by Centerbridge Credit Partners Master Fund, L.P., Centerbridge Credit Partners, L.P. and Centerbridge Special Credit Partners II, L.P. We have been advised by these entities that Jeffrey H. Aronson and Mark T. Gallogly share voting and investment control over such shares. The address of the principal business office of Centerbridge Partners, L.P. is 375 Park Avenue, 12th Floor, New York, NY 10152.

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SELLING STOCKHOLDERS

The following table sets forth information, as of , 2015, with respect to the selling stockholders and common stock beneficially owned by the selling stockholders that the selling stockholders propose to offer pursuant to this prospectus. In accordance with SEC rules, each listed person’s beneficial ownership includes:

•

all shares the investor actually owns beneficially or of record;

•

all shares over which the investor has or shares voting or dispositive control; and

•

all shares the investor has the right to acquire within 60 days (such as upon exercise of options that are currently vested or which are scheduled to vest within 60 days or warrants that are immediately exercisable or exercisable within 60 days). The shares issuable under those options are treated as if they were outstanding for computing the percentage ownership of the person holding those options but are not treated as if they were outstanding for purposes of computing percentage ownership of any other person.

The common stock offered by the selling stockholders pursuant to this prospectus were originally issued and sold by us in connection with the initial private placement. The term selling stockholder includes the holders of our common stock listed below and the beneficial owners of our common stock and their transferees, pledgees, donees or other successors.

Percentage ownership calculations are based on shares of common stock outstanding as of , 2015. To our knowledge, except as indicated in the footnotes to the following table and under applicable community property laws, the persons or entities identified in the table below have sole voting and investment power with respect to all of the common stock shown as beneficially owned by them.


Name of Beneficial Owner	Shares Beneficially Owned Before the Offering		Number of Shares Being Offered	Shares Beneficially Owned After the Offering
Name of Beneficial Owner	Shares	Percentage	Number of Shares Being Offered	Shares	Percentage

Except as indicated above, the selling stockholders do not have, and have not had since our inception, any position, office or other material relationship with us or any of our affiliates. The selling stockholders identified above may have sold, transferred or otherwise disposed of all or a portion of their securities (other than the securities to be sold in this offering) since the date on which they provided the information regarding their securities, in transactions exempt from the registration requirements of the Securities Act.

Each selling stockholder has agreed with us not to directly or indirectly sell, offer to sell, grant any option or otherwise transfer or dispose of our common stock not sold in this offering for 180 days after the date of this prospectus. We have agreed not to waive or otherwise modify this agreement without the prior written consent of FBR.

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DESCRIPTION OF CAPITAL STOCK

The following is a summary of the material terms of our capital stock and certain terms of our charter and bylaws. For a complete description, we refer you to the MGCL and to our charter and bylaws. For a more complete understanding of our capital stock, we encourage you to read carefully this entire prospectus, as well as our charter and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part.

General

Our charter provides that we may issue up to 400,000,000 shares of common stock, par value $0.01 per share, or common stock, and 50,000,000 shares of preferred stock, $0.01 par value per share, or preferred stock. As of August 14, 2015, we had outstanding 11,233,345 shares of our common stock, 125 shares of our Series A Preferred Stock and 125,000 shares of our Series B Preferred Stock. We intend to use a portion of the net proceeds from this offering and the BlueMountain Private Placement to redeem all of our Series A Preferred Stock and our Series B Preferred Stock. Upon completion of this offering and the BlueMountain Private Placement, there will be shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. Our charter authorizes our board of directors, with the approval of a majority of the entire board of directors and without any action by our stockholders, to amend our charter to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of any class or series of our stock.

Under Maryland law, stockholders generally are not personally liable for our debts or obligations solely as a result of their status as stockholders.

Common Stock

Subject to the preferential rights, if any, of holders of any other class or series of stock and to the provisions of our charter regarding restrictions on ownership and transfer of our stock, holders of our common stock:

•

have the right to receive ratably any distributions from funds legally available therefor, when, as and if authorized by our board of directors and declared by us; and

•

are entitled to share ratably in the assets of our company legally available for distribution to the holders of our common stock in the event of our liquidation, dissolution or winding up of our affairs.

There are generally no redemption, sinking fund, conversion, preemptive or appraisal rights with respect to our common stock.

Subject to the provisions of our charter regarding restrictions on ownership and transfer of our stock and except as may otherwise be specified in the terms of any class or series of stock, each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares will possess the exclusive voting power. There is no cumulative voting in the election of our directors, and directors will be elected by a plurality of the votes cast in the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the outstanding shares of our common stock can elect all of the directors then standing for election, and the holders of the remaining shares will not be able to elect any directors.

Power to Reclassify and Issue Stock

Our board of directors may classify any unissued shares of preferred stock, and reclassify any unissued shares of common stock or any previously classified but unissued shares of preferred stock into other classes or series of stock, including one or more classes or series of stock that have priority over our common stock with

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respect to voting rights or distributions or upon liquidation, and authorize us to issue the newly classified shares. Prior to the issuance of shares of each class or series, our board of directors is required by the MGCL and our charter to set, subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series. These actions can be taken without stockholder approval, unless stockholder approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which our stock may be then listed or quoted.

Power to Increase or Decrease Authorized Stock and Issue Additional Shares of Our Common Stock and Preferred Stock

Our charter authorizes our board of directors, with the approval of a majority of the entire board of directors, to amend our charter to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without stockholder approval. We believe that the power of our board of directors to increase or decrease the number of authorized shares of stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to cause us to issue such shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series, as well as the additional shares of stock, will be available for future issuance without further action by our stockholders, unless such action is required by applicable law, the terms of any other class or series of stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Our board of directors could authorize us to issue a class or series that could, depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change in control of our company that might involve a premium price for our stockholders or otherwise be in their best interests.

Restrictions on Ownership and Transfer

In order to qualify as a REIT under the Code, our shares of stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made).

Because our board of directors believes it is at present essential for us to qualify as a REIT, among other purposes, our charter, subject to certain exceptions, contains restrictions on the number of our shares of stock that a person may own. Our charter provides that, subject to certain exceptions, no person may beneficially or constructively own more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock, or the ownership limit.

Our charter also prohibits any person from:

•

beneficially owning shares of our capital stock to the extent that such beneficial ownership would result in our being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of the taxable year);

•

transferring shares of our capital stock to the extent that such transfer would result in our shares of capital stock being beneficially owned by fewer than 100 persons (determined under the principles of Section 856(a)(5) of the Code);

•

beneficially or constructively owning shares of our capital stock to the extent such beneficial or constructive ownership would cause us to constructively own ten percent or more of the ownership

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interests in a tenant (other than a TRS) of our real property within the meaning of Section 856(d)(2)(B) of the Code;

•

beneficially or constructively owning or transferring shares of our capital stock if such beneficial or constructive ownership or transfer would otherwise cause us to fail to qualify as a REIT under the Code including, but not limited to, as a result of any person that operates a “qualified healthcare facility” on behalf of a TRS failing to qualify as an “eligible independent contractor” under the REIT rules; or

•

transferring or attempting to transfer shares of capital stock to the extent such transfer would result in 25% or more of any class or series of shares of our capital stock (excluding shares of our capital stock held by persons or their affiliates who have discretionary authority or control over our assets, or who provide investment advice for a fee with respect to our assets), being beneficially owned by one or more Benefit Plan Investors at any time prior to the date that either a class or series of our capital stock qualifies as a class of “publicly-offered securities” (as defined in our charter) for purposes of ERISA or another exception under ERISA applies.

Our board of directors, in its sole discretion, may prospectively or retroactively exempt a person from certain of the limits described in the paragraph above and may establish or increase an excepted holder percentage limit for that person. The person seeking an exemption must provide to our board of directors any representations, covenants and undertakings that our board of directors may deem appropriate in order to conclude that granting the exemption will not cause us to lose our status as a REIT. Our board of directors may not grant an exemption to any person if that exemption would result in our failing to qualify as a REIT. Our board of directors may require a ruling from the IRS or an opinion of counsel, in either case in form and substance satisfactory to our board of directors, in its sole discretion, in order to determine or ensure our status as a REIT.

Notwithstanding the receipt of any ruling or opinion, our board of directors may impose such guidelines or restrictions as it deems appropriate in connection with granting such exemption. In connection with granting a waiver of the ownership limit or creating an exempted holder limit or at any other time, our board of directors from time to time may increase or decrease the ownership limit, subject to certain exceptions.

Any attempted transfer of shares of our capital stock which, if effective, would violate any of the restrictions described above will result in the number of shares of our capital stock causing the violation (rounded up to the nearest whole share) to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries, except that any transfer that results in the violation of the restriction relating to shares of our capital stock being beneficially owned by fewer than 100 persons will be null and void. In either case, the proposed transferee will not acquire any rights in those shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the purported transfer or other event that results in the transfer to the trust. Shares held in the trust will be issued and outstanding shares. The proposed transferee will not benefit economically from ownership of any shares held in the trust, will have no rights to dividends or other distributions and will have no rights to vote or other rights attributable to the shares held in the trust. The trustee of the trust will have all voting rights and rights to dividends or other distributions with respect to shares held in the trust. These rights will be exercised for the exclusive benefit of the charitable beneficiary. Any dividend or other distribution paid prior to our discovery that shares have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or other distribution paid to the trustee will be held in trust for the charitable beneficiary. Subject to Maryland law, the trustee will have the authority (i) to rescind as void any vote cast by the proposed transferee prior to our discovery that the shares have been transferred to the trust and (ii) to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote.

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Within 20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares to a person, designated by the trustee, whose ownership of the shares will not violate the above ownership and transfer limitations. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds from the sale to the proposed transferee and to the charitable beneficiary as follows. The proposed transferee will receive the lesser of (i) the price paid by the proposed transferee for the shares or, if the proposed transferee did not give value for the shares in connection with the event causing the shares to be held in the trust ( e.g. , a gift, devise or other similar transaction), the market price (as defined in our charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price per share received by the trustee (net of any commission and other expenses of sale) from the sale or other disposition of the shares. The trustee may reduce the amount payable to the proposed transferee by the amount of dividends or other distributions paid to the proposed transferee and owed by the proposed transferee to the trustee. Any net sale proceeds in excess of the amount payable to the proposed transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that our shares of our stock have been transferred to the trust, the shares are sold by the proposed transferee, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to the extent that the proposed transferee received an amount for the shares that exceeds the amount he or she was entitled to receive, the excess shall be paid to the trustee upon demand.

In addition, shares of our stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee, accept the offer, which we may reduce by the amount of dividends and distributions paid to the proposed transferee and owed by the proposed transferee to the trustee. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds from the sale to the proposed transferee.

If a transfer to a charitable trust, as described above, would be ineffective for any reason to prevent a violation of a restriction, the transfer that would have resulted in a violation will be null and void, and the proposed transferee shall acquire no rights in those shares.

Any certificate representing shares of our capital stock, and any notices delivered in lieu of certificates with respect to the issuance or transfer of uncertificated shares, will bear a legend referring to the restrictions described above.

Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock that will or may violate any of the foregoing restrictions on transferability and ownership, or any person who would have owned shares of our capital stock that resulted in a transfer of shares to a charitable trust, is required to give written notice immediately to us, or in the case of a proposed or attempted transaction, to give at least 15 days’ prior written notice, and provide us with such other information as we may request in order to determine the effect of the transfer on our status as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

Every owner of more than 5% (or any lower percentage as required by the Code or the regulations promulgated thereunder) in number or value of the outstanding shares of our capital stock, within 30 days after the end of each taxable year, is required to give us written notice, stating his or her name and address, the number of shares of each class and series of shares of our capital stock that he or she beneficially owns and a description of the manner in which the shares are held. Each of these owners must provide us with additional information that we may request in order to determine the effect, if any, of his or her beneficial ownership on our status as a REIT and to ensure compliance with the ownership limits. In addition, each stockholder will upon demand be required to provide us with information that we may request in good faith in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine our compliance.

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These ownership limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for shares of our common stock or otherwise be in the best interests of our stockholders.

Transfer Agent and Registrar

The transfer agent and registrar for our shares of common stock is American Stock Transfer & Trust Company.

Registration Rights

The purchasers of common stock in the initial private placement are entitled to the benefits of a registration rights agreement between us and FBR, the initial purchaser and placement agent in that offering, acting for itself and for the benefit of the investors in that offering, which has been filed as an exhibit to the registration statement of which this prospectus forms a part.

Under the registration rights agreement, we are obligated, among other things, to use our commercially reasonable efforts to cause a resale shelf registration statement registering all of the shares of our common stock sold in the initial private placement that are not sold by selling stockholders in this offering to be declared effective by the SEC as soon as practicable after the filing of the resale registration statement, and in any event, subject to certain exceptions, no later than December 31, 2015. The original deadline under the registration rights agreement was extended by the stockholders in accordance with the terms of the registration rights agreement.

If, prior to December 31, 2015 (or, if we complete this offering prior to December 31, 2015, on a date that is on or before 60 days after the completion of this offering), the resale registration statement has not been declared effective by the SEC and the registrable shares have not been listed for trading on a national securities exchange, then the registration rights agreement and our bylaws require that we hold a special meeting of our stockholders for the purpose of considering and voting on the removal of our directors then in office and electing the successors of any directors so removed, unless the holders of at least two-thirds of the outstanding registrable shares (other than shares of our common stock held by our directors and executive officers) waive or defer the requirement that we hold the special election meeting. The registration rights agreement also prohibits holders of shares of our common stock issued to our directors, officers and their affiliates from nominating, or participating in the nomination of, any individual for election as a director at the special election meeting.

All purchasers of common stock in the initial private placement and each of their respective direct and indirect transferees may elect to participate in this offering as selling stockholders, subject to:

•

execution of a customary underwriting agreement;

•

completion and execution of any questionnaires, powers of attorney, indemnities, custody agreements, securities escrow agreements and other documents, including opinions of counsel, reasonably required under the terms of such underwriting agreement;

•

provision to us of such information as we may reasonably request in writing for inclusion in this prospectus;

•

compliance with the registration rights agreement;

•

cutback rights on the part of the underwriters; and

•

other conditions and limitations that may be imposed by the underwriters.

The holders of shares of our common stock purchased in the initial private placement who elect, pursuant to the registration rights agreement, to include their shares of our common stock for resale in the initial public offering will not be able to sell any of their shares of our common stock that are not included in the initial public offering for 180 days following the effective date of the registration statement for the initial public offering of our common stock (other than to donees or partners of the stockholder who agree to be bound by the terms the

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lock-up). Those holders of shares of our common stock purchased in the initial private placement who do not elect, despite their right to do so under the registration rights agreement, to include their shares of our common stock for resale in the initial public offering may not directly or indirectly sell, offer to sell, grant any option or otherwise dispose of any shares of our common stock (or securities convertible into such shares) for a period of up to 60 days following the effective date of the registration statement for the initial public offering of our common stock (other than to donees or partners of the stockholder who agree to be bound by the terms the lock-up).

We have agreed to indemnify each selling stockholder for certain violations of federal or state securities laws in connection with any registration statement in which such selling stockholder sells our common stock pursuant to these registration rights.

The preceding summary of certain provisions of the registration rights agreement is not intended to be complete, and is subject to, and qualified in its entirety by reference to, all of the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part.

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MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS

Although the following summary describes certain provisions of Maryland law and the material provisions of our charter and bylaws, it is not a complete description of our charter and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus is a part, or of Maryland law. See “Where You Can Find More Information.”

Our Board of Directors

Our charter and bylaws provide that the number of directors of our company may be established, increased or decreased by our board of directors, but may not be less than the minimum number required under the MGCL, which is one, or, unless our bylaws are amended, more than fifteen. Additionally, so long as BlueMountain maintains at least one designee on our board of directors, the number of members constituting our board of directors shall be no more than seven, subject to increase or decrease by the board of directors from time to time, in accordance with the Company’s charter and bylaws, provided that any such increase or decrease shall require the approval of at least one BlueMountain board designee. We have elected by a provision of our charter to be subject to a provision of Maryland law requiring that, subject to the rights of holders of one or more classes or series of preferred stock, any vacancy may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the full term of the directorship in which such vacancy occurred and until his or her successor is duly elected and qualifies.

Each member of our board of directors is elected by our stockholders to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Holders of shares of our common stock will have no right to cumulative voting in the election of directors, and directors will be elected by a plurality of the votes cast in the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the shares of our common stock will be able to elect all of our directors.

Removal of Directors

Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, a director may be removed only for cause (as defined in our charter) and only by the affirmative vote of holders of shares entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors. Except as described below, this provision, when coupled with the exclusive power of our board of directors to fill vacant directorships, may preclude stockholders from removing incumbent directors except for cause and by a substantial affirmative vote and filling the vacancies created by such removal with their own nominees.

As described under the caption “Description of Capital Stock—Registration Rights,” we may be required by the registration rights agreement and our bylaws to hold a special meeting of our stockholders for the purpose of considering and voting on the removal of our directors then in office and electing the successors of any directors so removed, which we refer to as a special election meeting, unless the requirement is waived or deferred in accordance with the registration rights agreement and our bylaws. At a special election meeting, a director may be removed with or without cause by the affirmative vote of holders of shares entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors.

Business Combinations

Under the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested stockholder ( i.e. , any person (other than the corporation or any subsidiary) who beneficially owns 10% or more of the voting power of the corporation’s outstanding voting stock after the date on which the corporation had 100 or more beneficial owners of its stock, or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in

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question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation after the date on which the corporation had 100 or more beneficial owners of its stock) or an affiliate of an interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. The board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by it.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder became an interested stockholder. As permitted by the MGCL, our board of directors has adopted a resolution exempting any business combination between us and any other person from the provisions of this statute, provided that the business combination is first approved by our board of directors (including a majority of directors who are not affiliates or associates of such persons). However, our board of directors may repeal or modify this resolution at any time in the future, in which case the applicable provisions of this statute will become applicable to business combinations between us and interested stockholders.

Control Share Acquisitions

The MGCL provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights with respect to those shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast by stockholders entitled to vote generally in the election of directors, excluding votes cast by (1) the person who makes or proposes to make a control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is also a director of the corporation. “Control shares” are voting shares of stock which, if aggregated with all other such shares of stock previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (1) one-tenth or more but less than one-third, (2) one-third or more but less than a majority or (3) a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders

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may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The control share acquisition statute does not apply to, among other things, (1) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (2) acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the control share acquisition statute any acquisition by any person of shares of our stock. There can be no assurance that such provision will not be amended or eliminated at any time in the future by our board of directors.

Subtitle 8

Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors, without stockholder approval, and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions of the MGCL which provide, respectively, that:

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the corporation’s board of directors will be divided into three classes;

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the affirmative vote of two-thirds of the votes cast in the election of directors generally is required to remove a director;

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the number of directors may be fixed only by vote of the directors;

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a vacancy on its board of directors be filled only by the remaining directors and that directors elected to fill a vacancy will serve for the remainder of the full term of the class of directors in which the vacancy occurred; and

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the request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting is required for stockholders to require the calling of a special meeting of stockholders.

Our charter provides that, at such time as we become eligible to make a Subtitle 8 election, we elect to be subject to the provisions of Subtitle 8 relating to the filling of vacancies on our board of directors. In addition, without our having elected to be subject to Subtitle 8, our charter and bylaws already (1) require the affirmative vote of holders of shares entitled to cast at least two-thirds of all the votes entitled to be cast generally in the election of directors to remove a director from our board of directors, (2) vest in our board of directors the exclusive power to fix the number of directors and (3) require, unless called by our chairman, our president and chief executive officer or our board of directors, the request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at the meeting to call a special meeting. Our board of directors is not currently classified. In the future, our board of directors may elect, without stockholder approval, to classify our board of directors or elect to be subject to any of the other provisions of Subtitle 8.

Amendment to Our Charter and Bylaws

Under the MGCL, a Maryland corporation generally cannot amend its charter unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Except for certain amendments related to the removal of directors and the restrictions on ownership and transfer of our stock and the vote required to amend those provisions (which must be declared advisable by our board of directors and approved by the affirmative vote of stockholders entitled to cast not less than two-thirds of all the votes entitled to be cast on the matter), our charter generally may be amended only if the amendment is declared advisable by our board of directors and approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Our board of directors, with the approval of a majority of the entire board, and without any action by our stockholders, may also amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series we are authorized to issue.

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Our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.

Extraordinary Transactions

Under the MGCL, a Maryland corporation generally cannot dissolve, merge, sell all or substantially all of its assets, engage in a statutory share exchange or engage in similar transactions outside the ordinary course of business unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. As permitted by the MGCL, our charter provides that any of these actions may be approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Many of our operating assets will be held by our subsidiaries, and these subsidiaries may be able to merge or sell all or substantially all of their assets without the approval of our stockholders.

Appraisal Rights

Our charter provides that our stockholders generally will not be entitled to exercise statutory appraisal rights.

Dissolution of Our Company

Our dissolution must be declared advisable by a majority of our entire board of directors and approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.

Meetings of Stockholders

Pursuant to our bylaws, an annual meeting of our stockholders for the purpose of the election of directors and the transaction of any business will be held on a date and at the time and place set by our board of directors. Each of our directors is elected by our stockholders to serve until the next annual meeting and until his or her successor is duly elected and qualifies under Maryland law. In addition, our chairman, our president and chief executive officer or our board of directors may call a special meeting of our stockholders. Subject to the provisions of our bylaws, a special meeting of our stockholders to act on any matter that may properly be considered by our stockholders will also be called by our secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting on such matter, accompanied by the information required by our bylaws. Our secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including our proxy materials), and the requesting stockholder must pay such estimated cost before our secretary may prepare and mail the notice of the special meeting.

In addition, as described above under “Description of Capital Stock—Registration Rights,” we may be required to hold a special election meeting of our stockholders for the purpose of considering and voting on the removal of our directors then in office and electing successors of any directors so removed unless the requirement is waived or deferred in accordance with the registration rights agreement and our bylaws.

Advance Notice of Director Nominations and New Business

Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of other business to be considered by our stockholders at an annual meeting of stockholders may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors or (3) by a stockholder who was a stockholder of record both at the time of giving of notice and at the time of the meeting, who is entitled to vote at the meeting on the election of the individual so nominated or such other business and who has complied with the advance notice procedures set forth in our bylaws, including a requirement to provide certain information about the stockholder and its affiliates and the nominee or business proposal, as applicable.

With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to our board of directors may be made at

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a special meeting of stockholders at which directors are to be elected only (1) by or at the direction of our board of directors or (2) provided that the special meeting has been properly called in accordance with our bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record both at the time of giving of notice and at the time of the meeting, who is entitled to vote at the meeting on the election of each individual so nominated and who has complied with the advance notice provisions set forth in our bylaws, including a requirement to provide certain information about the stockholder and its affiliates and the nominee.

Anti-takeover Effect of Certain Provisions of Maryland Law and Our Charter and Bylaws

Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders, including:

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supermajority vote and cause requirements for removal of directors;

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requirement that stockholders holding at least a majority of our outstanding common stock must act together to make a written request before our stockholders can require us to call a special meeting of stockholders;

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provisions that vacancies on our board of directors may be filled only by the remaining directors for the full term of the directorship in which the vacancy occurred;

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the power of our board of directors, without stockholder approval, to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock;

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the power of our board of directors to cause us to issue additional shares of stock of any class or series and to fix the terms of one or more classes or series of stock without stockholder approval;

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the restrictions on ownership and transfer of our stock; and

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advance notice requirements for director nominations and stockholder proposals.

Likewise, if the resolution opting out of the business combination provisions of the MGCL was repealed, or the business combination is not approved by our board of directors, or the provision in the bylaws opting out of the control share acquisition provisions of the MGCL were rescinded, these provisions of the MGCL could have similar anti-takeover effects.

Indemnification and Limitation of Directors’ and Officers’ Liability

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages, except for liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2) active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our charter contains a provision that eliminates such liability to the maximum extent permitted by Maryland law.

Our charter and bylaws provide for indemnification of our officers and directors against liabilities to the maximum extent permitted by the MGCL, as amended from time to time.

The MGCL requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in that capacity. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made, or threatened to be made, a party by reason of their service in those or other capacities unless it is established that:

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the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty;

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the director or officer actually received an improper personal benefit in money, property or services; or

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in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

However, under the MGCL, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, and then only for expenses. In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer upon its receipt of:

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a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and

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a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director or officer did not meet the standard of conduct.

Our charter authorizes us, and our bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of such a proceeding to:

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any present or former director or officer of our company who is made, or threatened to be made, a party to the proceeding by reason of his or her service in that capacity; or

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any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made, or threatened to be made, a party to the proceeding by reason of his or her service in that capacity.

Our charter and bylaws also permit us to indemnify and advance expenses to any individual who served our Predecessor in any of the capacities described above and to any employee or agent of our company or our Predecessor.

We have entered into indemnification agreements with each of our directors and executive officers that provide for indemnification to the maximum extent permitted by Maryland law.

Restrictions on Ownership and Transfer

Subject to certain exceptions, our charter provides that no person or entity may actually or beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding shares of our common stock or more than 9.8% in value of the aggregate outstanding shares of our stock. For a more detailed description of this and other restrictions on ownership and transfer of our stock, see “Description of Capital Stock—Restrictions on Ownership and Transfer.”

REIT Qualification

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

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OUR OPERATING PARTNERSHIP AND THE PARTNERSHIP AGREEMENT

The following is a summary of the material provisions of the First Amended and Restated Agreement of Limited Partnership of our operating partnership, or the partnership agreement, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part. This summary does not purport to be complete and is subject to and qualified in its entirety by reference to applicable provisions of the Delaware Revised Uniform Limited Partnership Act, as amended, and the partnership agreement. See “Where You Can Find More Information.” For purposes of this section, references to “we,” “our,” “us” and “our company” refer to MedEquities Realty Trust, Inc. alone, and not to its subsidiaries. For the purposes of this section, references to the “general partner” refer to MedEquities OP GP, LLC, a wholly owned subsidiary of MedEquities Realty Trust, Inc.

General

Pursuant to the partnership agreement, subject to certain protective rights of the limited partners described below, we have, through our control of the general partner, full, exclusive and complete responsibility and discretion in the management and control of our operating partnership, including the ability to cause our operating partnership to enter into certain major transactions including a merger of our operating partnership or a sale of substantially all of the assets of our operating partnership. The limited partners have no power to remove the general partner without the general partner’s consent.

The general partner may not conduct any business without the consent of a majority of the limited partners other than in connection with: the ownership, acquisition and disposition of partnership interests; the management of the business of our operating partnership; our operation as a reporting company with a class of securities registered under the Exchange Act; the offering, sale syndication, private placement or public offering of stock, bonds, securities or other interests, financing or refinancing of any type related to our operating partnership or its assets or activities; and such activities as are incidental to those activities discussed above. In general, we must contribute any assets or funds that we acquire to our operating partnership in exchange for additional partnership interests. We may, however, in our sole and absolute discretion, from time to time hold or acquire assets in our own name or otherwise other than through our operating partnership so long as we take commercially reasonable measures that the economic benefits and burdens of such property are otherwise vested in our operating partnership. We and our affiliates may also engage in any transactions with our operating partnership on such terms as we may determine in our sole and absolute discretion.

We, as the parent of the general partner, are under no obligation to give priority to the separate interests of our stockholders or the limited partners in deciding whether to cause our operating partnership to take or decline to take any actions. If there is a conflict between the interests of our stockholders on the one hand and the limited partners (including us) on the other, we, as the parent of the general partner, will endeavor in good faith to resolve the conflict in a manner that is not adverse to either our stockholders or the limited partners (including us). The general partner is not liable under the partnership agreement to our operating partnership or to any partner for monetary damages for losses sustained, liabilities incurred, or benefits not derived by limited partners (including us) in connection with such decisions, unless the general partner acted in bad faith and the act or omission was material to the matter giving rise to the loss, liability or benefit not derived.

Substantially all of our business activities, including all activities pertaining to the acquisition and operation of properties, must be conducted through our operating partnership, and our operating partnership must be operated in a manner that will enable us to satisfy the requirements for qualification as a REIT.

Operating Partnership Units

Interests in our operating partnership are denominated in units of limited partnership interest. Pursuant to the partnership agreement, our operating partnership has designated the following classes of units of limited partnership interest, or operating partnership units: OP units and LTIP units.

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OP Units

We own 100% of the OP units. To the extent that we issue OP units, on or after the date that is 12 months after the date of the original issuance of the OP units, each holder of OP units (other than us) will have the right, subject to the terms and conditions set forth in the partnership agreement, to require our operating partnership to redeem all or a portion of the OP units held by such limited partner in exchange for a cash amount equal to the number of tendered OP units multiplied by the price of a share of our common stock (determined in accordance with, and subject to adjustment under, the terms of the partnership agreement), unless the terms of such OP units or a separate agreement entered into between our operating partnership and the holder of such OP units provide that they are not entitled to a right of redemption or provide for a shorter or longer period before such limited partner may exercise such right of redemption or impose conditions on the exercise of such right of redemption. On or before the close of business on the tenth business day after the general partner receives a notice of redemption, we may, as parent of the general partner, in our sole and absolute discretion, but subject to the restrictions on the ownership of our common stock imposed under our charter and the transfer restrictions and other limitations thereof, elect to acquire some or all of the tendered OP units from the tendering partner in exchange for cash or shares of our common stock, based on an exchange ratio of one share of our common stock for each OP unit (subject to anti-dilution adjustments provided in the partnership agreement).

LTIP Units

In the future, we, as the parent of the general partner, may cause our operating partnership to issue LTIP units to our independent directors, executive officers and certain other employees and persons who provide services to our operating partnership. These LTIP units will be subject to certain vesting requirements. In general, LTIP units are similar to OP units and will receive the same quarterly per-unit profit distributions as OP units. The rights, privileges, and obligations related to each series of LTIP units will be established at the time the LTIP units are issued. As profits interests, LTIP units initially will not have full parity, on a per-unit basis, with OP units with respect to liquidating distributions. Upon the occurrence of specified events, LTIP units can over time achieve full parity with OP units and therefore accrete to an economic value for the holder equivalent to OP units. If such parity is achieved, vested LTIP units may be converted on a one-for-one basis into OP units, which in turn are redeemable by the holder for cash or, at our election, exchangeable for shares of our common stock on a one-for-one basis. However, there are circumstances under which LTIP units will not achieve parity with OP units, and until such parity is reached, the value that a participant could realize for a given number of LTIP units will be less than the value of an equal number of shares of our common stock and may be zero.

Management Liability and Indemnification

To the maximum extent permitted under Delaware law, neither we, the general partner nor any of our directors and officers will be liable to our operating partnership or the limited partners or assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission, unless such person acted in bad faith and the act or omission was material to the matter giving rise to the loss, liability or benefit not derived. The partnership agreement provides for indemnification of the general partner, us, our affiliates and each of our respective officers, directors, employees and any persons we may designate from time to time in our sole and absolute discretion, to the fullest extent permitted by applicable law against any and all losses, claims, damages, liabilities (whether joint or several), expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of our operating partnership, provided that our operating partnership will not indemnify such person if (i) an act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the person actually received an improper personal benefit in money, property or services, or (iii) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful, as set forth in the partnership agreement (subject to the exceptions described below under “—Fiduciary Responsibilities”).

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Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Fiduciary Responsibilities

Our directors and officers have duties under applicable Maryland law to manage us in a manner consistent with our best interests. At the same time, the general partner has fiduciary duties to manage our operating partnership in a manner beneficial to our operating partnership and its partners. Our duties, as the parent of the general partner, to our operating partnership and its limited partners, therefore, may come into conflict with the duties of our directors and officers to us and our stockholders. We will be under no obligation to give priority to the separate interests of the limited partners of our operating partnership in deciding whether to cause our operating partnership to take or decline to take any actions. The limited partners of our operating partnership have agreed that in the event of a conflict in the duties owed by our directors and officers to us and our stockholders and the fiduciary duties owed by us, in our capacity as the parent of the general partner of our operating partnership, to such limited partners, we will fulfill our fiduciary duties to such limited partners by acting in the best interests of our stockholders.

The limited partners of our operating partnership have expressly acknowledged that we are acting for the benefit of our operating partnership, the limited partners and our stockholders collectively.

Distributions

The partnership agreement provides that we, as the parent of the general partner, shall cause our operating partnership to make quarterly (or more frequent) distributions of all of its available cash (which is defined to be cash available for distribution as determined by us, as general partner) (i) first, with respect to any OP units that are entitled to any preference in accordance with the rights of such operating partnership unit (and, within such class, pro rata according to their respective percentage interests) and (ii) second, with respect to any OP units that are not entitled to any preference in distribution, in accordance with the rights of such class of OP units (and, within such class, pro rata in accordance with their respective percentage interests).

Allocations of Net Income and Net Loss

Net income and net loss of our operating partnership are determined and allocated with respect to each fiscal year of our operating partnership as of the end of the year. Except as otherwise provided in the partnership agreement, an allocation of a share of net income or net loss is treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing net income or net loss. Except as otherwise provided in the partnership agreement, net income and net loss are allocated to the holders of OP units holding the same class or series of OP units in accordance with their respective percentage interests in the class or series at the end of each fiscal year. The partnership agreement contains provisions for special allocations intended to comply with certain regulatory requirements, including the requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2. Except as otherwise required by the partnership agreement or the Code and the Treasury Regulations, each operating partnership item of income, gain, loss and deduction is allocated among the limited partners of our operating partnership for U.S. federal income tax purposes in the same manner as its correlative item of book income, gain, loss or deduction is allocated pursuant to the partnership agreement. In addition, under Section 704(c) of the Code, items of income, gain, loss and deduction with respect to appreciated or depreciated property which is contributed to a partnership, such as our operating partnership, in a tax-free transaction must be specially allocated among the partners in such a manner so as to take into account such variation between the tax basis and the fair market value of the property at the time of contribution. Our operating partnership will allocate tax items to the holders of operating partnership units taking into consideration the requirements of Section 704(c) of the Code. See “Material U.S. Federal Income Tax Considerations.”

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The general partner has sole discretion to ensure that allocations of income, gain, loss and deduction of our operating partnership are in accordance with the interests of the partners of our operating partnership as determined under the Code, and all matters concerning allocations of tax items not expressly provided for in the partnership agreement may be determined by the general partner in its sole discretion.

Redemption Rights

On or after twelve months after becoming a holder of OP units, each limited partner, other than us, will have the right, subject to the terms and conditions set forth in the partnership agreement, to require our operating partnership to redeem all or a portion of such units in exchange for a cash amount equal to the number of tendered units multiplied by the fair market value of a share of our common stock (determined in accordance with, and subject to adjustment under, the terms of the partnership agreement), unless the terms of such units or a separate agreement entered into between our operating partnership and the holder of such units provide that they do not have a right of redemption or provide for a shorter or longer period before such holder may exercise such right of redemption or impose conditions on the exercise of such right of redemption. On or before the close of business on the tenth business day after we receive a notice of redemption, we may, as the parent of the general partner, in our sole and absolute discretion, but subject to the restrictions on the ownership of our common stock imposed under our charter and the transfer restrictions and other limitations thereof, elect to acquire some or all of the tendered units in exchange for cash or shares of our common stock, based on an exchange ratio of one share of our common stock for each OP unit (subject to anti-dilution adjustments provided in the partnership agreement). If we give the limited partners notice of our intention to make an extraordinary distribution of cash or property to our stockholders or effect a merger, a sale of all or substantially all of our assets, or any other similar extraordinary transaction, each limited partner may exercise its right to redeem its OP units, regardless of the length of time such limited partner has held its OP units.

Transferability of Operating Partnership Units; Extraordinary Transactions

The general partner generally is not be able to withdraw voluntarily from our operating partnership or transfer any of its interest in our operating partnership unless the transfer is: (i) to our affiliate; (ii) to a wholly owned subsidiary of the general partner or the owner of all of the ownership interests of the general partner; or (iii) otherwise expressly permitted under the partnership agreement.

The partnership agreement permits the general partner or us, as the parent of the general partner, to engage in a merger, consolidation or other combination, or sale of substantially all of our assets if:

•

we receive the consent of a majority in interest of the limited partners (excluding us);

•

following the consummation of such transaction, substantially all of the assets of the surviving entity are owned directly or indirectly by the operating partnership or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with the operating partnership; or

•

as a result of such transaction all limited partners will receive, or will have the right to receive, for each operating partnership unit an amount of cash, securities or other property equal in value to the greatest amount of cash, securities or other property paid in the transaction to a holder of one share of our common stock, provided that if, in connection with the transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding shares of our common stock, each holder of operating partnership units shall be given the option to exchange such units for the greatest amount of cash, securities or other property that a limited partner would have received had it exercised its redemption right (described above) and received shares of our common stock immediately prior to the expiration of the offer.

With certain limited exceptions, the limited partners may not transfer their interests in our operating partnership, in whole or in part, without the prior written consent of the general partner, which consent may be withheld in its sole and absolute discretion. Except with the general partner’s consent to the admission of the

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transferee as a limited partner, transferees shall not have any rights by virtue of the transfer other than the rights of an assignee and will not be entitled to vote or effect a redemption with respect to their operating partnership units in any matter presented to the limited partners for a vote. The general partner will have the right to consent to the admission of a transferee of the interest of a limited partner, which consent may be given or withheld by in our sole and absolute discretion.

Issuance of Our Stock and Additional Partnership Interests

Pursuant to the partnership agreement, upon the issuance of our stock other than in connection with a redemption of OP units, we generally are obligated to contribute or cause to be contributed the cash proceeds or other consideration received from the issuance of our stock to our operating partnership in exchange for, in the case of common stock, OP units or, in the case of an issuance of preferred stock, preferred operating partnership units with designations, preferences and other rights, terms and provisions that are substantially the same as the designations, preferences and other rights, terms and provisions of the preferred stock. In addition, the general partner may cause our operating partnership to issue additional operating partnership units or other partnership interests and to admit additional limited partners to our operating partnership from time to time, on such terms and conditions and for such capital contributions as we, as the parent of the general partner, may establish in our sole and absolute discretion, without the approval or consent of any limited partner, including: (i) upon the conversion, redemption or exchange of any debt, units or other partnership interests or other securities issued by our operating partnership; (ii) for less than fair market value; or (iii) in connection with any merger of any other entity into our operating partnership.

Tax Matters

Pursuant to the partnership agreement, the general partner is the tax matters partner of our operating partnership and has certain other rights relating to tax matters. Accordingly, as both the general partner and tax matters partner, we have the authority to handle tax audits and to make tax elections under the Code, in each case, on behalf of our operating partnership. Our operating partnership is currently treated as an entity disregarded from its owner for U.S. federal income tax purposes.

Term

The term of our operating partnership commenced on April 23, 2014 and will continue perpetually, unless earlier terminated in the following circumstances:

•

a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the general partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the general partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless, prior to the entry of such order or judgment, a majority in interest of the remaining outside limited partners agree in writing, in their sole and absolute discretion, to continue the business of our operating partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a successor general partner;

•

an election to dissolve our operating partnership made by the general partner in its sole and absolute discretion, with or without the consent of a majority in interest of the outside limited partners;

•

entry of a decree of judicial dissolution of our operating partnership pursuant to the provisions of the Delaware Revised Uniform Limited Partnership Act;

•

the occurrence of any sale or other disposition of all or substantially all of the assets of our operating partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of our operating partnership;

•

the redemption (or acquisition by the general partner) of all operating partnership units that we have authorized other than those held by us; or

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•

the incapacity or withdrawal of the general partner, unless all of the remaining partners in their sole and absolute discretion agree in writing to continue the business of our operating partnership and to the appointment, effective as of a date prior to the date of such incapacity, of a substitute general partner.

Amendments to the Partnership Agreement

Amendments to the partnership agreement may be proposed by the general partner or by any limited partner holding 25% or more of the percentage interest of OP units designated as Class A Units. Generally, the partnership agreement may be amended with the general partner’s approval and the approval of the limited partners holding a majority of all outstanding limited partner units (excluding limited partner units held by us or our subsidiaries). Certain amendments that would, among other things, have the following effects, must be approved by each partner adversely affected thereby:

•

conversion of a limited partner’s interest into a general partner’s interest (except as a result of the general partner acquiring such interest);

•

modification of the limited liability of a limited partner; alteration or modification of the rights of any partner to receive the distributions to which such partner is entitled (subject to certain exceptions);

•

alteration or modification of the redemption rights provided by the partnership agreement; or

•

alteration or modification of the provisions governing transfer of the general partner’s partnership interest.

Notwithstanding the foregoing, we, as the parent of the general partner, will have the power, without the consent of the limited partners, to amend the partnership agreement as may be required to:

•

add to the general partner’s obligations or surrender any right or power granted to the general partner or any of its affiliates for the benefit of the limited partners;

•

reflect the admission, substitution, or withdrawal of partners or the termination of our operating partnership in accordance with the partnership agreement and to cause our operating partnership or our operating partnership’s transfer agent to amend its books and records to reflect our operating partnership unit holders in connection with such admission, substitution or withdrawal;

•

reflect a change that is of an inconsequential nature or does not adversely affect the limited partners as such in any material respect, or to cure any ambiguity, correct or supplement any provision in the partnership agreement not inconsistent with the law or with other provisions, or make other changes with respect to matters arising under the partnership agreement that will not be inconsistent with the law or with the provisions of the partnership agreement;

•

satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a U.S. federal or state agency or contained in U.S. federal or state law;

•

set forth or amend the designations, preferences, conversion or other rights, voting powers, duties restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of the holders of any additional operating partnership units issued or established pursuant to the partnership agreement;

•

reflect such changes as are reasonably necessary for us to maintain or restore our qualification as a REIT, to satisfy the REIT requirements or to reflect the transfer of any operating partnership units between us and any qualified REIT subsidiary or entity that is disregarded as an entity separate from us for U.S. federal income tax purposes;

•

modify either or both the manner in which items of net income or net loss are allocated or the manner in which capital accounts are computed (but only to the extent set forth in the partnership agreement, or to the extent required by the Code or applicable income tax regulations under the Code);

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•

issue additional partnership interests;

•

impose restrictions on the transfer of operating partnership units if we receive an opinion of counsel reasonably to the effect that such restrictions are necessary in order to comply with any federal or state securities laws or regulations applicable to our operating partnership or the operating partnership units;

•

reflect any other modification to the partnership agreement as is reasonably necessary for our business or operations or those of our operating partnership and which does not otherwise require the consent of each partner adversely affected; and

•

reflect an increase or decrease in the amount that a limited partner is obligated to contribute to our operating partnership upon the occurrence of certain events.

Certain provisions affecting the general partner’s rights and duties ( e.g. , restrictions relating to certain extraordinary transactions involving us, the general partner or our operating partnership) may not be amended without the approval of the holders of a majority of the operating partnership units (excluding operating partnership units held by us).

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SHARES ELIGIBLE FOR FUTURE SALE

General

Upon completion of this offering, we will have outstanding shares of our common stock ( shares if the underwriters’ over-allotment option is exercised in full), including shares issued in this offering ( shares if the underwriters’ over-allotment option is exercised in full), shares purchased by BlueMountain in a concurrent private placement, 10,945,394 shares issued in the common stock private placements and an aggregate of 287,351 restricted shares of our common stock issued to our executive officers, non-employee directors and certain employees under our 2014 Equity Incentive Plan. In addition 709,747 shares of our common stock are available for future issuance under our 2014 Equity Incentive Plan. See “Management—2014 Equity Incentive Plan.”

Of these shares, the shares sold in this offering ( shares if the underwriters’ over-allotment option is exercised in full) will be freely transferable without restriction or further registration under the Securities Act, subject to the limitations on ownership set forth in our charter, except for any shares purchased in this offering by our “affiliates,” as that term is defined by Rule 144 under the Securities Act. The remaining shares of common stock issued to our officers, directors and affiliates pursuant to the Equity Incentive Plan and the shares of our common stock issuable to officers, directors and affiliates upon redemption of OP units will be “restricted shares” as defined in Rule 144.

Prior to this offering, there has been no public market for our common stock. Trading of our common stock on the NYSE is expected to commence immediately following the completion of this offering. No assurance can be given as to (1) the likelihood that an active market for our shares of common stock will develop, (2) the liquidity of any such market, (3) the ability of the stockholders to sell the shares or (4) the prices that stockholders may obtain for any of the shares. No prediction can be made as to the effect, if any, that future sales of shares, or the availability of shares for future sale, will have on the market price prevailing from time to time. Sales of substantial amounts of our common stock, or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock. In particular, BlueMountain owns 23.1% of the outstanding shares of our common stock as of date of this prospectus. If BlueMountain sells all or a substantial portion of their shares, it could have a material adverse impact on the market price of our common stock. See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—Common stock eligible for future sale could have an adverse effect on the value of our common stock.”

For a description of certain restrictions on transfers of our shares of common stock held by certain of our stockholders, see “Description of Capital Stock—Restrictions on Ownership and Transfer.”

Rule 144

Shares of our common stock that are “restricted” securities under the meaning of Rule 144 under the Securities Act may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption provided by Rule 144.

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale and who has beneficially owned shares considered to be restricted securities under Rule 144 for at least six months would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned shares considered to be restricted securities under Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

An affiliate of ours who has beneficially owned shares of our common stock for at least six months would be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

•

1% of the shares of our common stock then outstanding; or

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•

the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to manner of sale provisions, notice requirements and the availability of current public information about us.

Registration Rights

In the initial private placement, we issued and sold an aggregate of 10,539,561 shares of our common stock and entered into a registration rights agreement for the benefit of the purchasers in the initial private placement. Pursuant to the registration rights agreement, the purchasers in the initial private placement have a right to participate in this offering, subject to certain conditions, and holders of shares of our common stock have exercised their rights to sell in this offering. In addition, under this registration rights agreement, we have agreed to use our commercially reasonable efforts to cause a resale shelf registration statement to become effective under the Securities Act as promptly as practicable after the filing of the resale shelf registration statement, and in any event, subject to certain exceptions, no later than December 31, 2015 and to maintain the resale shelf registration statement continuously effective under the Securities Act for a specified period. See “Description of Capital Stock—Registration Rights.”

Lock-Up Agreements

For a description of certain lock-ups see “Underwriting—Lock-Up Agreements.”

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

This section summarizes the material U.S. federal income tax considerations that you, as a prospective investor, may consider relevant in connection with the acquisition, ownership and disposition of our common stock and our election to be taxed as a REIT. As used in this section, the terms “we” and “our” refer solely to MedEquities Realty Trust, Inc. and not to our subsidiaries and affiliates, which have not elected to be taxed as REITs for U.S. federal income tax purposes.

This discussion does not exhaust all possible tax considerations and does not provide a detailed discussion of any state, local or foreign tax considerations. Nor does this discussion address all aspects of U.S. federal income taxation that may be relevant to particular investors in light of their personal investment or tax circumstances, or to certain types of investors that are subject to special treatment under the U.S. federal income tax laws, such as insurance companies, tax-exempt organizations (except to the limited extent discussed below under “—Taxation of Tax-Exempt Stockholders”), financial institutions, broker-dealers, persons subject to the alternative minimum tax, persons holding our stock as part of a hedge, straddle or other risk reduction, constructive sale or conversion transaction, non-U.S. individuals and foreign corporations (except to the limited extent discussed below under “—Taxation of Non-U.S. Stockholders”) and other persons subject to special tax rules. Moreover, this summary assumes that our stockholders hold our common stock as a “capital asset” for U.S. federal income tax purposes, which generally means property held for investment.

The statements in this section are based on the current U.S. federal income tax laws, including the Code, the Treasury Regulations, rulings and other administrative interpretations and practices of the IRS, and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. This discussion is for general purposes only and is not tax advice. We cannot assure you that new laws, interpretations of law, or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate.

We urge you to consult your own tax advisor regarding the specific tax consequences to you of the acquisition, ownership and disposition of our common stock and of our election to be taxed as a REIT. Specifically, you should consult your own tax advisor regarding the U.S. federal, state, local, foreign, and other tax consequences of such acquisition, ownership, disposition and election, and regarding potential changes in applicable tax laws.

Taxation of Our Company

We were incorporated on April 23, 2014 as a Maryland corporation. We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2014. Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our stock. We believe that, commencing with such short taxable year, we have been organized and have operated in such a manner as to qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner. However, no assurances can be provided regarding our qualification as a REIT because such qualification depends on our ability to satisfy numerous asset, income, stock ownership and distribution tests described below, the satisfaction of which will depend, in part, on our operating results.

The sections of the Code relating to qualification, operation and taxation as a REIT are highly technical and complex. The following discussion sets forth only the material aspects of those sections. This summary is qualified in its entirety by the applicable Code provisions and the related Treasury Regulations and administrative and judicial interpretations thereof.

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In connection with this offering, Morrison & Foerster LLP will render an opinion prior to effectiveness of the registration statement of which this Prospectus forms a part to the effect that, commencing with our short taxable year ended December 31, 2014, we have been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws, and our proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws. Investors should be aware that Morrison & Foerster LLP’s opinion will be based on the U.S. federal income tax laws governing qualification as a REIT as of the date of such opinion, which will be subject to change, possibly on a retroactive basis, will not be binding on the IRS or any court, and will speak only as of the date issued. In addition, Morrison & Foerster LLP’s opinion will be based on customary assumptions and will be conditioned upon certain representations made by us as to factual matters, including representations regarding the nature of our assets and the future conduct of our business. Moreover, our qualification and taxation as a REIT depend on our ability to meet, on a continuing basis, through actual results, certain qualification tests set forth in the U.S. federal income tax laws. Those qualification tests involve, among other things, the percentage of our gross income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our stock ownership and the percentage of our earnings that we distribute. Morrison & Foerster LLP will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that the actual results of our operations for any particular taxable year will satisfy such requirements. Morrison & Foerster LLP’s opinion will not foreclose the possibility that we may have to use one or more of the REIT savings provisions described below, which may require us to pay a material excise or penalty tax in order to maintain our REIT qualification. For a discussion of the tax consequences of our failure to maintain our qualification as a REIT, see “—Failure to Qualify as a REIT” below.

If we qualify as a REIT, we generally will not be subject to U.S. federal income tax on the taxable income that we distribute to our stockholders because we will be entitled to a deduction for dividends that we pay. Such tax treatment avoids the “double taxation,” or taxation at both the corporate and stockholder levels, that generally results from owning stock in a corporation. In general, income generated by a REIT is taxed only at the stockholder level if such income is distributed by the REIT to its stockholders. However, we will be subject to U.S. federal income tax in the following circumstances:

•

We will be subject to U.S. federal corporate income tax on any REIT taxable income, including net capital gain, that we do not distribute to our stockholders during, or within a specified time period after, the calendar year in which the income is earned.

•

We may be subject to corporate “alternative minimum tax.”

•

We will be subject to tax, at the highest U.S. federal corporate income tax rate, on net income from the sale or other disposition of property acquired through foreclosure (“foreclosure property”) that we hold primarily for sale to customers in the ordinary course of business, and other non-qualifying income from foreclosure property.

•

We will be subject to a 100% tax on net income from sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business.

•

If we fail to satisfy one or both of the 75% gross income test or the 95% gross income test, as described below under “—Gross Income Tests,” but nonetheless maintain our qualification as a REIT because we meet certain other requirements, we will be subject to a 100% tax on:

•

the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, in either case, multiplied by

•

a fraction intended to reflect our profitability.

•

If we fail to distribute during a calendar year at least the sum of: (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain net income for the year, and (3) any undistributed taxable income required to be distributed from earlier periods, then we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amount we actually distributed.

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•

If we fail any of the asset tests, other than a de minimis failure of the 5% asset test, the 10% vote test or the 10% value test, as described below under “—Asset Tests,” as long as (1) the failure was due to reasonable cause and not to willful neglect, (2) we file a description of each asset that caused such failure with the IRS, and (3) we dispose of the assets causing the failure or otherwise comply with the asset tests within six months after the last day of the quarter in which we identify such failure, we will pay a tax equal to the greater of $50,000 or the highest U.S. federal corporate income tax rate (currently 35%) multiplied by the net income from the nonqualifying assets during the period in which we failed to satisfy the asset tests.

•

If we fail to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, and such failure is due to reasonable cause and not to willful neglect, we will be required to pay a penalty of $50,000 for each such failure.

•

We will be subject to a 100% excise tax on transactions with a TRS that are not conducted on an arm’s-length basis.

•

If we acquire any asset from a C corporation, or a corporation that generally is subject to full corporate-level tax, in a merger or other transaction in which we acquire a basis in the asset that is determined by reference either to the C corporation’s basis in the asset or to another asset, we will pay tax at the highest U.S. federal corporate income tax rate applicable if we recognize gain on the sale or disposition of the asset during the 10-year period after we acquire the asset. The amount of gain on which we will pay tax generally is the lesser of:

•

the amount of gain that we recognize at the time of the sale or disposition, and

•

the amount of gain that we would have recognized if we had sold the asset at the time we acquired it.

•

The earnings of our subsidiary entities that are C corporations, including TRSs, will be subject to U.S. federal corporate income tax.

In addition, we may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on our assets and operations. We also could be subject to tax in situations and on transactions not presently contemplated.

Requirements for Qualification as a REIT

A REIT is a corporation, trust or association that satisfies each of the following requirements:

(1)

It is managed by one or more trustees or directors;

(2)

Its beneficial ownership is evidenced by transferable shares of stock, or by transferable shares or certificates of beneficial interest;

(3)

It would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code, i.e. , the REIT provisions;

(4)

It is neither a financial institution nor an insurance company subject to special provisions of the U.S. federal income tax laws;

(5)

At least 100 persons are beneficial owners of its stock or ownership shares or certificates (determined without reference to any rules of attribution);

(6)

Not more than 50% in value of its outstanding stock or shares of beneficial interest are owned, directly or indirectly, by five or fewer individuals, which the U.S. federal income tax laws define to include certain entities, during the last half of any taxable year;

(7)

It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to qualify to be taxed as a REIT for U.S. federal income tax purposes;

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(8)

It uses a calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the U.S. federal income tax laws; and

(9)

It meets certain other requirements described below, regarding the sources of its gross income, the nature and diversification of its assets and the distribution of its income.

We must satisfy requirements 1 through 4, and 8 during our entire taxable year and must satisfy requirement 5 during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Requirements 5 and 6 will not apply to us for our short taxable year ended December 31, 2014. If we comply with certain requirements for ascertaining the beneficial ownership of our outstanding stock in a taxable year and have no reason to know that we violated requirement 6, we will be deemed to have satisfied requirement 6 for that taxable year. For purposes of determining stock ownership under requirement 6, an “individual” generally includes a supplemental unemployment compensation benefits plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes. An “individual,” however, generally does not include a trust that is a qualified employee pension or profit sharing trust under the U.S. federal income tax laws, and beneficiaries of such a trust will be treated as holding our stock in proportion to their actuarial interests in the trust for purposes of requirement 6.

Our charter provides for restrictions regarding the ownership and transfer of shares of our capital stock. We believe that we will issue sufficient stock with enough diversity of ownership to allow us to satisfy requirements 5 and 6 above. The restrictions in our charter are intended, among other things, to assist us in satisfying requirements 5 and 6 described above. These restrictions, however, may not ensure that we will be able to satisfy such share ownership requirements in all cases. If we fail to satisfy these share ownership requirements, our qualification as a REIT may terminate.

For purposes of requirement 8, we have adopted December 31 as our year end for U.S. federal income tax purposes, and thereby satisfy this requirement.

Qualified REIT Subsidiaries. A “qualified REIT subsidiary” generally is a corporation, all of the stock of which is owned, directly or indirectly, by a REIT and that is not treated as a TRS. A corporation that is a “qualified REIT subsidiary” is treated as a division of the REIT that owns, directly or indirectly, all of its stock and not as a separate entity for U.S. federal income tax purposes. Thus, all assets, liabilities, and items of income, deduction, and credit of a “qualified REIT subsidiary” are treated as assets, liabilities, and items of income, deduction, and credit of the REIT that directly or indirectly owns the qualified REIT subsidiary. Consequently, in applying the REIT requirements described herein, the separate existence of any “qualified REIT subsidiary” that we own will be ignored, and all assets, liabilities, and items of income, deduction, and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction, and credit.

Other Disregarded Entities and Partnerships. An unincorporated domestic entity, such as a partnership or limited liability company, that has a single owner, as determined under U.S. federal income tax laws, generally is not treated as an entity separate from its owner for U.S. federal income tax purposes. We own various direct and indirect interests in entities that are classified as partnerships and limited liability companies for state law purposes. Nevertheless, many of these entities currently are not treated as entities separate from their owners for U.S. federal income tax purposes because such entities are treated as having a single owner for U.S. federal income tax purposes. Consequently, the assets and liabilities, and items of income, deduction, and credit, of such entities will be treated as our assets and liabilities, and items of income, deduction, and credit, for U.S. federal income tax purposes, including the application of the various REIT qualification requirements.

An unincorporated domestic entity with two or more owners, as determined under the U.S. federal income tax laws, generally is taxed as a partnership for U.S. federal income tax purposes. In the case of a REIT that is an owner in an entity that is taxed as a partnership for U.S. federal income tax purposes, the REIT is treated as owning its proportionate share of the assets of the entity and as earning its allocable share of the gross income of the entity for purposes of the applicable REIT qualification tests. Thus, our proportionate share of the assets and

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items of gross income of our operating partnership and any other partnership, joint venture, or limited liability company that is taxed as a partnership for U.S. federal income tax purposes is treated as our assets and items of gross income for purposes of applying the various REIT qualification tests. For purposes of the 10% value test (described in “—Asset Tests”), our proportionate share is based on our proportionate interest in the equity interests and certain debt securities issued by the entity. For all of the other asset and income tests, our proportionate share is based on our proportionate interest in the capital of the entity.

We have control of our operating partnership and intend to operate it in a manner consistent with the requirements for our qualification as a REIT. We may from time to time be a limited partner or non-managing member in a partnership or limited liability company. If a partnership or limited liability company in which we own an interest takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a gross income or asset test, and that we would not become aware of such action in time to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to qualify as a REIT unless we were entitled to relief, as described below.

Taxable REIT Subsidiaries. A REIT is permitted to own, directly or indirectly, up to 100% of the stock of one or more TRSs. The subsidiary and the REIT generally must jointly elect to treat the subsidiary as a TRS. However, a corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the securities is automatically treated as a TRS without an election.

Unlike a qualified REIT subsidiary, the separate existence of a TRS is not ignored for U.S. federal income tax purposes and a TRS is a fully taxable corporation subject to U.S. federal corporate income tax on its earnings. We will not be treated as holding the assets of any TRS or as receiving the income earned by any TRS. Rather, we will treat the stock issued by any TRS as an asset and will treat any distributions paid to us from any TRS as income. This treatment may affect our compliance with the gross income test and asset tests.

Restrictions imposed on REITs and their TRSs are intended to ensure that TRSs will be subject to appropriate levels of U.S. federal income taxation. These restrictions limit the deductibility of interest paid or accrued by a TRS to its parent REIT and impose a 100% excise tax on transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis. Dividends paid to us from a TRS, if any, will be treated as dividend income received from a corporation. The foregoing treatment of TRSs may reduce the cash flow generated by us and our subsidiaries in the aggregate and our ability to make distributions to our stockholders and may affect our compliance with the gross income tests and asset tests.

A TRS generally may be used by a REIT to undertake indirectly activities that the REIT requirements might otherwise preclude the REIT from doing directly, such as the provision of noncustomary tenant services or the disposition of property held for sale to customers. See “—Gross Income Tests—Rents from Real Property” and “—Gross Income Tests—Prohibited Transactions.”

A TRS may not directly or indirectly operate or manage any health care facilities or provide rights to any brand name under which any health care facility is operated. However, a TRS may provide such rights to an “eligible independent contractor” (as described below) to operate or manage a health care facility if such rights are held by the TRS as a franchisee, licensee, or in a similar capacity, and such health care facility is either owned by the TRS or leased to the TRS by its parent REIT. A TRS will not be considered to operate or manage a “qualified health care property” (as defined below) solely because the TRS directly or indirectly possesses a license, permit, or similar instrument enabling it to do so.

A “qualified health care property” includes any real property, including interests in real property, and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living

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facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a provider of such services which is eligible for participation in the Medicare program with respect to such facility.

We expect that certain of the properties we intend to acquire generally will be treated as “qualified health care properties,” and we may lease those properties to a TRS lessee in certain cases where the operators from whom we acquire such properties qualify as “eligible independent contractors” and will continue to operate such “qualified health care properties” on behalf of the TRS lessee. However, there can be no assurance that the IRS would not challenge our conclusions as to whether such operators qualify as “eligible independent contractor” or whether such properties qualify as “qualified health care properties”, or that a court would agree with our conclusions. If a challenge to such conclusions were successful, we could potentially lose our REIT status.

Gross Income Tests

We must satisfy two gross income tests annually to qualify and maintain our qualification as a REIT. First, at least 75% of our gross income for each taxable year generally must consist of the following:

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rents from real property;

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interest on debt secured by mortgages on real property or on interests in real property;

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dividends or other distributions on, and gain from the sale of, stock or shares of beneficial interest in other REITs;

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gain from the sale of real estate assets;

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income and gain derived from foreclosure property; and

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income derived from the temporary investment of new capital attributable to the issuance of our stock or a public offering of our debt with a maturity date of at least five years and that we receive during the one-year period beginning on the date on which we receive such new capital.

Second, in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities, or any combination of these.

Cancellation of indebtedness income and gross income from a sale of property that we hold primarily for sale to customers in the ordinary course of business will be excluded from gross income for purposes of the 75% and 95% gross income tests. In addition, gains from “hedging transactions,” as defined in “—Hedging Transactions,” that are clearly and timely identified as such will be excluded from gross income for purposes of the 75% and 95% gross income tests. Finally, certain foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests.

The following paragraphs discuss the specific application of certain relevant aspects of the gross income tests to us.

Rents from Real Property. Rent that we receive for the use of our real property will qualify as “rents from real property,” which is qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met:

First, the rent must not be based in whole or in part on the income or profits of any person. However, participating rent will qualify as “rents from real property” if it is based on percentages of receipts or sales and the percentages generally:

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are fixed at the time the leases are entered into;

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are not renegotiated during the term of the leases in a manner that has the effect of basing percentage rent on income or profits; and

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conform with normal business practice.

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In compliance with the rules above, we intend to set and accept rents which are fixed dollar amounts with an annual percentage increase after a certain fixed number of years based on either a fixed percentage or the “consumer price index”, and not to any extent determined by reference to any person’s income or profits.

Second, we generally must not own, actually or constructively, 10% or more of the stock or the assets or net profits of any tenant, referred to as a “related-party tenant.” The constructive ownership rules generally provide that, if 10% or more in value of our stock is owned, directly or indirectly, by or for any person, we are considered as owning the stock owned, directly or indirectly, by or for such person. Because the constructive ownership rules are broad and it is not possible to monitor direct and indirect transfers of our stock continually, no assurance can be given that such transfers or other events of which we have no knowledge will not cause us to own constructively 10% or more of a tenant (or a subtenant, in which case only rent attributable to the subtenant is disqualified).

There are two exceptions to the related-party tenant rule described above for TRSs. Under the first exception to the related-party tenant rule, rent that we receive from a TRS lessee will qualify as “rents from real property” as long as (1) at least 90% of the leased space in the property is leased to persons other than TRS lessees and related-party tenants, and (2) the amount paid by the TRS lessee to rent space at the property is substantially comparable to rents paid by other tenants of the property for comparable space.

Under the second exception, provided certain conditions are satisfied, a TRS lessee is permitted to lease “qualified health care properties” from its parent REIT. Rents that we receive from a TRS lessee will qualify as “rents from real property” provided the TRS lessee leases a property from us that is a “qualified health care property” and such property is operated on behalf of the TRS lessee by a person who qualifies as an “independent contractor” and who is, or is related to a person who is, actively engaged in the trade or business of operating “qualified health care properties” for any person unrelated to us and the TRS lessee (an “eligible independent contractor”).

As noted above, we expect that certain of the properties we intend to acquire generally will be treated as “qualified health care properties.” We may lease properties that are treated as “qualified health care properties” to a TRS lessee in cases where the operators from whom we acquire such properties qualify as “eligible independent contractors.” However, there can be no assurance that the IRS would not challenge our conclusions, or that a court would agree with such conclusion that such properties are “qualified health care properties” and that such operators are “eligible independent contractors.” If such a challenge were successful, we could fail to satisfy the 75% or 95% gross income test and thus potentially lose our REIT status.

Third, we must not furnish or render noncustomary services, other than a de minimis amount of noncustomary services, to the tenants of our properties other than through (i) an independent contractor from whom we do not derive or receive any income or (ii) a TRS. However, we generally may provide services directly to our tenants to the extent that such services are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not considered to be provided for the tenants’ convenience. In addition, we may provide a minimal amount of noncustomary services to the tenants of a property, other than through an independent contractor from whom we do not derive or receive any income or a TRS, as long as the income attributable to the services (valued at not less than 150% of the direct cost of performing such services) does not exceed 1% of our gross income from the related property. If the rent from a lease does not qualify as “rents from real property” because we furnish noncustomary services having a value (as provided in the previous sentence) in excess of 1% of our gross income from the related property to the tenants of the property, other than through a qualifying independent contractor or a TRS, none of the rent from the property will qualify as “rents from real property.” We do not intend to provide any noncustomary services to our tenants unless such services are provided through independent contractors from whom we do not derive or receive any income or TRSs.

Fourth, rent attributable to any personal property leased in connection with a lease of real property will not qualify as “rents from real property” if the rent attributable to such personal property exceeds 15% of the total

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rent received under the lease. If a portion of the rent that we receive from a property does not qualify as “rents from real property” because the rent attributable to personal property exceeds 15% of the total rent for a taxable year, the portion of the rent attributable to personal property will not be qualifying income for purposes of either the 75% or 95% gross income test. We do not intend to lease significant amounts of personal property pursuant to our leases.

Fifth, the leases must be respected as true leases for U.S. federal income tax purposes and not treated as service contracts, joint ventures or some other type of arrangement. The determination of whether our leases are true leases depends on an analysis of all the surrounding facts and circumstances. We intend to enter into leases that will be treated as true leases.

We believe rents received under our leases generally will qualify as “rents from real property” and any income attributable to noncustomary services or personal property will not jeopardize our ability to qualify as a REIT. However, there can be no assurance that the IRS would not challenge our conclusions, or that a court would agree with our conclusions. If such a challenge were successful, we could fail to satisfy the 75% or 95% gross income test and thus potentially lose our REIT status.

Interest. Interest income constitutes qualifying income for purposes of the 75% gross income test to the extent that the obligation upon which such interest is paid is secured by a mortgage on real property or on an interest in real property. For purposes of the 75% and 95% gross income tests, the term “interest” generally does not include any amount received or accrued, directly or indirectly, if the determination of such amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term “interest” solely because it is based on a fixed percentage or percentages of receipts or sales. Furthermore, to the extent that interest from a loan that is based on the profit or net cash proceeds from the sale of the property securing the loan constitutes a “shared appreciation provision,” income attributable to such participation feature will be treated as gain from the sale of the secured property.

We may provide senior secured first mortgage loans for the purchase of health care facilities. Interest on debt secured by mortgages on real property or on interests in real property, including, for this purpose, prepayment penalties, loan assumption fees and late payment charges that are not compensation for services, generally is qualifying income for purposes of the 75% gross income test. In general, under applicable Treasury Regulations, if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan determined as of the date we agreed to acquire or originate the loan then a portion of the interest income from such loan will not be qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. We anticipate that the interest on our senior secured first mortgage loans generally would be treated as qualifying income for purposes of the 75% gross income test.

Certain mezzanine loans are secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property. IRS Revenue Procedure 2003-65 provides a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests described below, and interest derived from it will be treated as qualifying mortgage interest for purposes of the 75% gross income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We anticipate that any mezzanine loans that we originate typically may not meet all of the requirements for reliance on this safe harbor. Nevertheless, if we invest in mezzanine loans, we intend to do so in a manner that will enable us to satisfy the gross income tests and asset tests.

Prohibited Transactions. A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business. Net income derived from such prohibited transactions is excluded from gross income for purposes of the 75% and 95% gross income tests. We believe that we will not hold any of our

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properties as inventory or primarily for sale to customers in the ordinary course of a trade or business. Whether a REIT holds an asset “primarily for sale to customers in the ordinary course of a trade or business” depends on the facts and circumstances that exist from time to time, including those related to a particular asset. A safe harbor to the characterization of the sale of property by a REIT as a prohibited transaction is available if the following requirements are met:

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the REIT has held the property for not less than two years;

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the aggregate capital expenditures made by the REIT, or any partner of the REIT, during the two-year period preceding the date of the sale do not exceed 30% of the selling price of the property;

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either (1) during the year in question, the REIT did not make more than seven property sales other than sales of foreclosure property or sales to which Section 1033 of the Code applies, (2) the aggregate adjusted bases of all such properties sold by the REIT during the year did not exceed 10% of the aggregate bases of all of the assets of the REIT at the beginning of the year or (3) the aggregate fair market value of all such properties sold by the REIT during the year did not exceed 10% of the aggregate fair market value of all of the assets of the REIT at the beginning of the year;

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in the case of property not acquired through foreclosure or lease termination, the REIT has held the property for at least two years for the production of rental income; and

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if the REIT has made more than seven property sales (excluding sales of foreclosure property) during the taxable year, substantially all of the marketing and development expenditures with respect to the property were made through an independent contractor from whom the REIT derives no income.

We will attempt to comply with the terms of the foregoing safe-harbor. However, we cannot assure you that we will be able to comply with the safe-harbor provisions or that we will avoid owning property that may be characterized as property held “primarily for sale to customers in the ordinary course of a trade or business.” We may hold and dispose of certain properties through a TRS if we conclude that the sale or other disposition of such property may not fall within the safe-harbor provisions. The 100% prohibited transactions tax will not apply to gains from the sale of property by a TRS, although such income will be taxed to the TRS at U.S. federal corporate income tax rates.

Foreclosure Property. We generally will be subject to tax at the maximum corporate rate on any net income from foreclosure property, other than income that otherwise would be qualifying income for purposes of the 75% gross income test. Gross income from foreclosure property will qualify under the 75% and 95% gross income tests.

Hedging Transactions. From time to time, we or our subsidiaries may enter into hedging transactions with respect to one or more of our or our subsidiaries’ assets or liabilities. Our or our subsidiaries’ hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase such items, and futures and forward contracts. Income and gain from “hedging transactions” will be excluded from gross income for purposes of both the 75% and 95% gross income tests. A “hedging transaction” means either (1) any transaction entered into in the normal course of our or our subsidiaries’ trade or business primarily to manage the risk of interest rate, price changes, or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets or (2) any transaction entered into primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% gross income test (or any property which generates such income or gain). We are required to clearly identify any such hedging transaction before the close of the day on which it was acquired, originated, or entered into and to satisfy other identification requirements. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT; however, no assurance can be given that our hedging activities will give rise to income that is excluded from gross income or qualifies for purposes of either or both of the gross income tests.

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Failure to Satisfy Gross Income Tests. We intend to monitor our sources of income, including any non-qualifying income received by us, and manage our assets so as to ensure our compliance with the gross income tests. If we fail to satisfy one or both of the gross income tests for any taxable year, we nevertheless may qualify as a REIT for that year if we qualify for relief under certain provisions of the U.S. federal income tax laws. Those relief provisions are available if:

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our failure to meet the applicable test is due to reasonable cause and not to willful neglect; and

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following such failure for any taxable year, we file a schedule of the sources of our income with the IRS in accordance with the Treasury Regulations.

We cannot predict, however, whether any failure to meet these tests will qualify for the relief provisions. In addition, as discussed above in “—Taxation of Our Company,” even if the relief provisions apply, we would incur a 100% tax on the gross income attributable to the greater of (1) the amount by which we fail the 75% gross income test, or (2) the amount by which we fail the 95% gross income test, multiplied, in either case, by a fraction intended to reflect our profitability.

Asset Tests

To qualify as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year.

First, under the “75% asset test,” at least 75% of the value of our total assets generally must consist of:

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cash or cash items, including certain receivables and shares in certain money market funds;

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government securities;

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interests in real property, including leaseholds and options to acquire real property and leaseholds;

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interests in mortgage loans secured by real property;

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stock or shares of beneficial interest in other REITs; and

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investments in stock or debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or public offerings of debt with at least a five-year term.

Second, under the “5% asset test,” of our assets that are not qualifying assets for purposes of the 75% asset test described above, the value of our interest in any one issuer’s securities may not exceed 5% of the value of our total assets.

Third, of our assets that are not qualifying assets for purposes of the 75% asset test described above, we may not own more than 10% of the voting power of any one issuer’s outstanding securities, or the “10% vote test,” or more than 10% of the value of any one issuer’s outstanding securities, or the “10% value test.”

Fourth, no more than 25% of the value of our total assets may consist of the securities of one or more TRSs.

Fifth, no more than 25% of the value of our total assets may consist of the securities of TRSs and other assets that are not qualifying assets for purposes of the 75% asset test.

For purposes of the 5% asset test, the 10% vote test and the 10% value test, the term “securities” does not include securities that qualify under the 75% asset test, securities of a TRS and equity interests in an entity taxed as a partnership for U.S. federal income tax purposes. For purposes of the 10% value test, the term “securities” also does not include: certain “straight debt” securities; any loan to an individual or an estate; most rental agreements and obligations to pay rent; any debt instrument issued by an entity taxed as a partnership for U.S. federal income tax purposes in which we are an owner to the extent of our proportionate interest in the debt and

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equity securities of the entity; and any debt instrument issued by an entity taxed as a partnership for U.S. federal income tax purposes if at least 75% of the entity’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test described above in “—Gross Income Tests.”

As noted above, we may provide senior secured first mortgage loans for the purchase of health care facilities and properties related to health care facilities. Although the law is not entirely clear, if a mortgage loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of the date we agreed to acquire or originate the loan, a portion of the loan likely will be a non-qualifying asset for purposes of the 75% asset test. Unless the mortgage loan falls within one of the exceptions referenced in the previous paragraph, the non-qualifying portion of such a loan may be subject to, among other requirements, the 10% value test. IRS Revenue Procedure 2011-16, as modified and superseded by Revenue Procedure 2014-51, provides a safe harbor under which the IRS has stated that it will not challenge a REIT’s treatment of a loan as being, in part, a qualifying real estate asset in an amount equal to the lesser of: (1) the greater of (x) the fair market value of the real property securing the loan on the date of the relevant quarterly REIT asset testing date or (y) the fair market value of the real property securing the loan determined as of the date the REIT committed to acquire the loan; or (2) the fair market value of the mortgage loan on the date of the relevant quarterly REIT asset testing date. Under the safe harbor, when the current value of a mortgage loan exceeds both the current fair market value of the real property that secures the loan and the fair market value of the real property that secures the loan, determined as of the date we committed to acquire or originate the loan, a portion of the mortgage loan will be treated as a nonqualifying asset. We anticipate that our senior secured first mortgage loans generally would be treated as qualifying assets for the 75% asset test.

We believe that the assets that we will hold after consummation of this offering satisfy the foregoing asset test requirements. We will not obtain, nor are we required to obtain under the U.S. federal income tax laws, independent appraisals to support our conclusions as to the value of our assets and securities or the real estate collateral for the mortgage or mezzanine loans that we may originate. Moreover, the values of some assets may not be susceptible to a precise determination. As a result, there can be no assurance that the IRS will not contend that our ownership of securities and other assets violates one or more of the asset tests applicable to REITs.

Failure to Satisfy Asset Tests. We will monitor the status of our assets for purposes of the various asset tests and will manage our portfolio in order to comply at all times with such tests. Nevertheless, if we fail to satisfy the asset tests at the end of a calendar quarter, we will not lose our REIT status if:

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we satisfied the asset tests at the end of the preceding calendar quarter; and

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the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not caused, in part or in whole, by the acquisition of one or more non-qualifying assets.

If we did not satisfy the condition described in the second bullet point immediately above, we still could avoid REIT disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which the discrepancy arose.

In the event that we violate the 5% asset test, the 10% vote test or the 10% value test described above, we will not lose our REIT status if (1) the failure is de minimis (up to the lesser of 1% of our assets or $10 million) and (2) we dispose of assets causing the failure or otherwise comply with the asset tests within six months after the last day of the quarter in which we identify such failure. In the event of a failure of any of such asset tests other than a de minimis failure, as described in the preceding sentence, we will not lose our REIT status if (1) the failure was due to reasonable cause and not to willful neglect, (2) we file a description of each asset causing the failure with the IRS, (3) we dispose of assets causing the failure or otherwise comply with the asset tests within six months after the last day of the quarter in which we identify the failure, and (4) we pay a tax equal to the greater of $50,000 or the highest U.S. federal corporate income tax rate (currently 35%) multiplied by the net income from the nonqualifying assets during the period in which we failed to satisfy the asset tests.

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Annual Distribution Requirements

Each taxable year, we must make distributions, other than capital gain dividend distributions and deemed distributions of retained capital gain, to our stockholders in an aggregate amount at least equal to:

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the sum of:

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90% of our “REIT taxable income,” computed without regard to the dividends paid deduction and excluding any net capital gain, and

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90% of our after-tax net income, if any, from foreclosure property, minus

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the sum of certain items of non-cash income.

Generally, we must pay such distributions in the taxable year to which they relate, or in the following taxable year if either (1) we declare the distribution before we timely file our U.S. federal income tax return for the year and pay the distribution on or before the first regular dividend payment date after such declaration or (2) we declare the distribution in October, November, or December of the taxable year, payable to stockholders of record on a specified day in any such month, and we actually pay the dividend before the end of January of the following year. In both instances, these distributions relate to our prior taxable year for purposes of the annual distribution requirement to the extent of our earnings and profits for such prior taxable year.

We will pay U.S. federal income tax on any taxable income, including net capital gain, that we do not distribute to our stockholders. Furthermore, if we fail to distribute during a calendar year, or by the end of January of the following calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the sum of:

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85% of our REIT ordinary income for the year,

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95% of our REIT capital gain net income for the year, and

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any undistributed taxable income from prior years,

we will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts we actually distributed.

We may elect to retain and pay U.S. federal income tax on the net long-term capital gain that we receive in a taxable year. If we so elect, we will be treated as having distributed any such retained amount for purposes of the 4% nondeductible excise tax described above. We intend to make timely distributions sufficient to satisfy the annual distribution requirement and to minimize U.S. federal corporate income tax and avoid the 4% nondeductible excise tax.

It is possible that, from time to time, we may experience timing differences between the actual receipt of income and actual payment of deductible expenses and the inclusion of that income and deduction of such expenses in arriving at our REIT taxable income. Further, it is possible that, from time to time, we may be allocated a share of net capital gain from an entity taxed as a partnership for U.S. federal income tax purposes in which we own an interest that is attributable to the sale of depreciated property that exceeds our allocable share of cash attributable to that sale. As a result of the foregoing, we may have less cash than is necessary to make distributions to our stockholders that are sufficient to avoid U.S. federal corporate income tax and the 4% nondeductible excise tax imposed on certain undistributed income or even to meet the annual distribution requirement. In such a situation, we may need to borrow funds or issue additional stock or, if possible, pay dividends consisting, in whole or in part, of our stock or debt securities.

In order for distributions to be counted as satisfying the annual distribution requirement applicable to REITs and to provide us with a REIT-level tax deduction, the distributions must not be “preferential dividends.” A distribution is not a preferential dividend if the distribution is (1) pro rata among all outstanding shares within a particular class, and (2) in accordance with the preferences among different classes of stock as set forth in our organizational documents.

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Under certain circumstances, we may be able to correct a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in a later year. We may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able to avoid income tax on amounts distributed as deficiency dividends, we will be required to pay interest to the IRS based on the amount of any deduction we take for deficiency dividends.

Recordkeeping Requirements

We must maintain certain records in order to qualify as a REIT. To avoid paying monetary penalties, we must demand, on an annual basis, information from certain of our stockholders designed to disclose the actual ownership of our outstanding stock, and we must maintain a list of those persons failing or refusing to comply with such demand as part of our records. A stockholder that fails or refuses to comply with such demand is required by the Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of our stock and other information. We intend to comply with these recordkeeping requirements.

Failure to Qualify as a REIT

If we fail to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, we could avoid disqualification if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. In addition, there are relief provisions available under the Code for a failure of the gross income tests and asset tests, as described in “—Gross Income Tests” and “—Asset Tests.”

If we were to fail to qualify as a REIT in any taxable year, and no relief provision applied, we would be subject to U.S. federal income tax on our taxable income at U.S. federal corporate income tax rates and any applicable alternative minimum tax. In calculating our taxable income for a year in which we failed to qualify as a REIT, we would not be able to deduct amounts distributed to our stockholders, and we would not be required to distribute any amounts to our stockholders for that year. Unless we qualified for relief under the statutory relief provisions described in the preceding paragraph, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to maintain our qualification as a REIT. We cannot predict whether in all circumstances we would qualify for such statutory relief.

Taxation of Taxable U.S. Stockholders

For purposes of our discussion, the term “U.S. stockholder” means a beneficial owner of our common stock that, for U.S. federal income tax purposes, is:

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an individual citizen or resident of the United States;

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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any of its states or the District of Columbia;

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an estate whose income is subject to U.S. federal income taxation regardless of its source; or

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any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes (a “partnership”) holds our common stock, the U.S. federal income tax treatment of an owner of the partnership generally will depend on the status of the owner and the activities of the partnership. Partnerships and their owners should consult their tax advisors regarding the consequences of the ownership and disposition of our common stock by the partnership.

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Distributions. If we qualify as a REIT, distributions made out of our current and accumulated earnings and profits that we do not designate as capital gain dividends will be ordinary dividend income to taxable U.S. stockholders. A corporate U.S. stockholder will not qualify for the dividends-received deduction generally available to corporations. Our ordinary dividends also generally will not qualify for the preferential long-term capital gain tax rate applicable to “qualified dividends” unless certain holding period requirements are met and such dividends are attributable to (i) qualified dividends received by us from non-REIT corporations, such as any TRSs, or (ii) income recognized by us and on which we have paid U.S. federal corporate income tax. We do not expect a meaningful portion of our ordinary dividends to be eligible for taxation as qualified dividends.

Any distribution we declare in October, November, or December of any year that is payable to a U.S. stockholder of record on a specified date in any of those months and is attributable to our current and accumulated earnings and profits for such year will be treated as paid by us and received by the U.S. stockholder on December 31 of that year, provided that we actually pay the distribution during January of the following calendar year.

Distributions to a U.S. stockholder which we designate as capital gain dividends generally will be treated as long-term capital gain, without regard to the period for which the U.S. stockholder has held our stock. A corporate U.S. stockholder may be required to treat up to 20% of certain capital gain dividends as ordinary income.

We may elect to retain and pay U.S. federal corporate income tax on the net long-term capital gain that we receive in a taxable year. In that case, to the extent that we designate such amount in a timely notice to our stockholders, a U.S. stockholder would be taxed on its proportionate share of our undistributed long-term capital gain. The U.S. stockholder would receive a credit or refund for its proportionate share of the U.S. federal corporate income tax we paid. The U.S. stockholder would increase its basis in our common stock by the amount of its proportionate share of our undistributed long-term capital gain, minus its share of the U.S. federal corporate income tax we paid.

A U.S. stockholder will not incur U.S. federal income tax on a distribution in excess of our current and accumulated earnings and profits if the distribution does not exceed the U.S. stockholder’s adjusted basis in our common stock. Instead, the distribution will reduce the U.S. stockholder’s adjusted basis in our common stock. The excess of any distribution to a U.S. stockholder over both its share of our current and accumulated earnings and profits and its adjusted basis will be treated as capital gain and long-term capital gain if the stock has been held for more than one year.

We will notify U.S. stockholders after the close of our taxable year as to the portions of the distributions attributable to that taxable year that constitute ordinary income, return of capital and capital gain.

Dispositions. In general, a U.S. stockholder will recognize gain or loss on the sale or other taxable disposition of our stock in an amount equal to the difference between (i) the sum of the fair market value of any property and the amount of cash received in such disposition and (ii) the U.S. stockholder’s adjusted tax basis in such stock. A U.S. stockholder’s adjusted tax basis in our stock generally will equal the U.S. stockholder’s acquisition cost, increased by the excess of undistributed net capital gains deemed distributed to the U.S. stockholder over the U.S. federal corporate income tax deemed paid by the U.S. stockholder on such gains and reduced by any returns of capital. Such gain or loss generally will be long-term capital gain or loss if the U.S. stockholder has held such stock for more than one year and short-term capital gain or loss otherwise. However, a U.S. stockholder must treat any loss on a sale or exchange of our common stock held by such stockholder for six months or less as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us that such U.S. stockholder treats as long-term capital gain. All or a portion of any loss that a U.S. stockholder realizes on a taxable disposition of shares of our common stock may be disallowed if the U.S. stockholder purchases other shares of our common stock within 30 days before or after the disposition. Capital losses generally are available only to offset capital gains of the stockholder except in the case of individuals, who may offset up to $3,000 of ordinary income each year.

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Other Considerations. U.S. stockholders may not include in their individual U.S. federal income tax returns any of our net operating losses or capital losses. Instead, these losses are generally carried over by us for potential offset against our future income. Taxable distributions from us and gain from the disposition of our common stock will not be treated as passive activity income and, therefore, U.S. stockholders generally will not be able to apply any “passive activity losses” against such income. In addition, taxable distributions from us and gain from the disposition of our common stock generally will be treated as investment income for purposes of the investment interest limitations.

Tax Rates. The maximum U.S. federal income tax rate on ordinary income and short-term capital gains applicable to U.S. stockholders that are taxed at individual rates currently is 39.6%, and the maximum U.S. federal income tax rate on long-term capital gains applicable to U.S. stockholders that are taxed at individual rates currently is 20%. However, the maximum tax rate on long-term capital gain from the sale or exchange of “section 1250 property” (i.e., generally, depreciable real property) is 25% to the extent the gain would have been treated as ordinary income if the property were “section 1245 property” (i.e., generally, depreciable personal property). We generally will designate whether a distribution that we designate as a capital gain dividend (and any retained capital gain that we are deemed to distribute) is attributable to the sale or exchange of “section 1250 property.”

Additional Medicare Tax. Certain U.S. stockholders, including individuals, estates and trusts, will be subject to an additional 3.8% tax, which, for individuals, applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents and capital gains.

Taxation of Tax-Exempt Stockholders

Tax-exempt entities, including qualified employee pension and profit sharing trusts, or “qualified trusts,” and individual retirement accounts and annuities, generally are exempt from U.S. federal income taxation. However, they are subject to taxation on their “unrelated business taxable income,” or UBTI. Amounts that we distribute to tax-exempt stockholders generally should not constitute UBTI. However, if a tax-exempt stockholder were to finance its acquisition of our common stock with debt, a portion of the distribution that it received from us would constitute UBTI pursuant to the “debt- financed property” rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under special provisions of the U.S. federal income tax laws are subject to different UBTI rules, which generally will require them to characterize distributions that they receive from us as UBTI.

Finally, in certain circumstances, a qualified trust that owns more than 10% of the value of our stock must treat a percentage of the dividends that it receives from us as UBTI. Such percentage is equal to the gross income that we derive from unrelated trades or businesses, determined as if we were a qualified trust, divided by our total gross income for the year in which we pay the dividends. Such rule applies to a qualified trust holding more than 10% of the value of our stock only if:

•

we are classified as a “pension-held REIT”; and

•

the amount of gross income that we derive from unrelated trades or businesses for the year in which we pay the dividends, determined as if we were a qualified trust, is at least 5% of our total gross income for such year.

We will be classified as a “pension-held REIT” if:

•

we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our stock be owned by five or fewer individuals that allows the beneficiaries of the qualified trust to be treated as holding our stock in proportion to their actuarial interests in the qualified trust; and

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•

either:

•

one qualified trust owns more than 25% of the value of our stock; or

•

a group of qualified trusts, of which each qualified trust holds more than 10% of the value of our stock, collectively owns more than 50% of the value of our stock.

Taxation of Non-U.S. Stockholders

For purposes of our discussion, the term “non-U.S. stockholder” means a beneficial owner of our common stock that is not a U.S. stockholder, an entity or arrangement taxed as a partnership for U.S. federal income tax purposes or a tax-exempt stockholder. The rules governing U.S. federal income taxation of non-U.S. stockholders, including nonresident alien individuals, foreign corporations, foreign partnerships and other foreign stockholders, are complex. This section is only a summary of certain of those rules.

We urge non-U.S. stockholders to consult their own tax advisors to determine the impact of U.S. federal, state, local and foreign income tax laws on the acquisition, ownership and disposition of our common stock, including any reporting requirements.

Distributions. Distributions to a non-U.S. stockholder (i) out of our current and accumulated earnings and profits, (ii) not attributable to gain from our sale or exchange of a “United States real property interest,” or a USRPI, and (iii) not designated by us as a capital gain dividend will be subject to a withholding tax at a rate of 30% unless:

•

a lower treaty rate applies and the non-U.S. stockholder submits an IRS Form W-8BEN or W-8BEN-E, as applicable (or any applicable successor form), to us evidencing eligibility for that reduced rate; or

•

the non-U.S. stockholder submits an IRS Form W-8ECI (or any applicable successor form) to us claiming that the distribution is income effectively connected to a U.S. trade or business of such stockholder.

A non-U.S. stockholder generally will be subject to U.S. federal income tax at graduated rates on any distribution treated as effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business in the same manner as a U.S. stockholder. In addition, a corporate non-U.S. stockholder may be subject to a 30% branch profits tax with respect to any such distribution.

A non-U.S. stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if such excess does not exceed such non-U.S. stockholder’s adjusted basis in our common stock. Instead, the excess portion of such distribution will reduce the non-U.S. stockholder’s adjusted basis in our common stock. The excess of a distribution over both our current and accumulated earnings and profits and the non-U.S. stockholder’s adjusted basis in our common stock will be taxed, if at all, as gain from the sale or disposition of our common stock. See “—Dispositions” below. Under FIRPTA (discussed below), we may be required to withhold 10% of the portion of any distribution that exceeds our current and accumulated earnings and profits.

Because we generally cannot determine at the time we make a distribution whether the distribution will exceed our current and accumulated earnings and profits, unless such distribution is attributable to capital gains from the sale or exchange or a USRPI, we may withhold tax at a rate of 30% (or such lower rate as may be provided under an applicable tax treaty) on the entire amount of any distribution. To the extent that we do not do so, we nevertheless may withhold at a rate of 10% on any portion of a distribution not subject to withholding at a rate of 30%. A non-U.S. stockholder may obtain a refund of amounts that we withhold if we later determine that a distribution in fact exceeded our current and accumulated earnings and profits.

Under the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, distributions attributable to capital gains from the sale or exchange by us of USRPIs are treated like income effectively connected with the

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conduct of a U.S. trade or business, generally are subject to U.S. federal income taxation in the same manner and at the same rates applicable to U.S. stockholders and, with respect to corporate non-U.S. stockholders, may be subject to a 30% branch profits tax. However, these distributions will not be subject to tax under FIRPTA, and will instead be taxed in the same manner as distributions described above, if:

•

the distribution is made with respect to a class of shares regularly traded on an established securities market in the United States; and

•

the non-U.S. stockholder does not own more than 5% of such class at any time during the one-year period preceding the distribution.

Although we anticipate that our common stock will be regularly traded (as defined in applicable Treasury Regulations) on an established securities market in the United States immediately following this offering, no assurance can be provided that our stock will be regularly traded on an established securities market. If our common stock is not regularly traded on an established securities market in the United States or if a non-U.S. stockholder owned more than 5% of our outstanding common stock any time during the one-year period preceding the distribution, capital gain distributions to such non-U.S. stockholder attributable to our sales of USRPIs would be subject to tax under FIRPTA. Therefore, we may be required to withhold 35% of any distribution to a non-U.S. stockholder owning less than 5% of the relevant class of shares that we designate as a capital gain dividend and will be required to withhold 35% of any distribution to a non-U.S. stockholder owning more than 5% of the relevant class of shares that is designated by us as a capital gain dividend. Any amount so withheld is creditable against the non-U.S. stockholder’s U.S. federal income tax liability.

A distribution to a non-U.S. stockholder attributable to capital gains from the sale or exchange of non-USRPIs will not be subject to U.S. federal income taxation unless such distribution is effectively connected with a U.S. trade or business conducted by such non-U.S. stockholder, in which case such distribution generally would be subject to U.S. federal income taxation in the same manner and at the same rates applicable to U.S. stockholders and, with respect to corporate non-U.S. stockholders, may be subject to a 30% branch profits tax.

Although not free from doubt, amounts we designate as retained capital gains in respect of the common stock held by U.S. stockholders generally should be treated with respect to non-U.S. stockholders in the same manner as actual distributions by us of capital gain dividends. Under this approach, a non-U.S. stockholder would be able to offset as a credit against its U.S. federal income tax liability resulting from its proportionate share of the tax paid by us on such retained capital gains, and to receive from the IRS a refund to the extent the non-U.S. stockholder’s proportionate share of such tax paid by us exceeds its actual U.S. federal income tax liability, provided that the non-U.S. stockholder furnishes required information to the IRS on a timely basis.

Dispositions. Non-U.S. stockholders may incur tax under FIRPTA with respect to gain recognized on a disposition of our common stock unless one of the applicable exceptions described below applies. Any gain subject to tax under FIRPTA generally will be taxed in the same manner as it would be in the hands of U.S. stockholders, except that corporate non-U.S. stockholders also may be subject to a 30% branch profits tax. In addition, the purchaser of such common stock could be required to withhold 10% of the purchase price for such stock and remit such amount to the IRS.

Non-U.S. stockholders generally will not incur tax under FIRPTA with respect to gain on a sale of our common stock as long as, at all times during a specified testing period, we are “domestically controlled,” i.e. , non-U.S. persons hold, directly or indirectly, less than 50% in value of our outstanding stock. We expect to be domestically controlled and, therefore the sale of our common stock should not be subject to taxation under FIRPTA. Because our common stock will be publicly traded, however, we cannot assure you that we will be domestically controlled. In addition, even if we are not domestically controlled, if our common stock is “regularly traded” (as defined in applicable Treasury Regulations) on an established securities market, a non-U.S. stockholder that owned, actually or constructively, 5% or less of our outstanding common stock at all times during the five-year period prior to a sale of our common stock will not incur tax under FIRPTA on gain from a

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sale of such common stock. We expect that shares of our common stock will be “regularly traded” on an established securities market following this offering. Accordingly, we expect that a non-U.S. stockholder that has not owned more than 5% of our common stock at any time during the five-year period prior to such sale will not incur tax under FIRPTA on gain from a sale of our common stock. However, no assurance can be provided that our stock will be regularly traded on an established securities market.

A non-U.S. stockholder generally will incur tax on gain from a disposition of our common stock not subject to FIRPTA if:

•

the gain is effectively connected with the conduct of the non-U.S. stockholder’s U.S. trade or business, in which case the non-U.S. stockholder generally will be subject to the same treatment as U.S. stockholders with respect to such gain, except that a non-U.S. stockholder that is a corporation also may be subject to the 30% branch profits tax; or

•

the non-U.S. stockholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year and certain other conditions are satisfied, in which case the non-U.S. stockholder generally will incur a 30% tax on its capital gains.

Information Reporting Requirements and Backup Withholding

We will report to our stockholders and to the IRS the amount of distributions that we pay during each calendar year, and the amount of tax that we withhold, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding (at a rate of 28%) with respect to distributions unless the stockholder:

•

is a corporation or qualifies for certain other exempt categories and, when required, demonstrates this fact; or

•

provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.

A stockholder who does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder’s U.S. federal income tax liability. In addition, we may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to us.

Backup withholding generally will not apply to payments of dividends made by us or our paying agents, in their capacities as such, to a non-U.S. stockholder provided that such non-U.S. stockholder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as providing a valid IRS Form W-8BEN or W-8BEN-E, as applicable, or W-8ECI (or any applicable successor form), or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a “U.S. person” that is not an exempt recipient. Payments of the proceeds from a disposition or a redemption of our common stock that occurs outside the U.S. by a non-U.S. stockholder made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has certain connections with the U.S. unless the broker has documentary evidence in its records that demonstrates that the beneficial owner is a non-U.S. stockholder and specified conditions are met or an exemption is otherwise established. Payment of the proceeds from a disposition of our stock by a non-U.S. stockholder made by or through the U.S. office of a broker generally is subject to information reporting and backup withholding unless the non-U.S. stockholder certifies under penalties of perjury that it is not a U.S. person and satisfies certain other requirements, or otherwise establishes an exemption from information reporting and backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the stockholder’s U.S. federal income tax liability if certain required information

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is furnished to the IRS. Stockholders should consult their own tax advisors regarding application of backup withholding to them and the availability of, and procedure for obtaining an exemption from, backup withholding.

FATCA

The Foreign Account Tax Compliance Act (“FATCA”) imposes a U.S. federal withholding tax on certain types of payments made to “foreign financial institutions” and certain other non-U.S. entities unless certain due diligence, reporting, withholding, and certification obligation requirements are satisfied. FATCA generally imposes a U.S. federal withholding tax at a rate of 30% on dividends on, and, beginning January 1, 2017, gross proceeds from the sale or other disposition of, our stock if paid to a foreign entity unless either (i) the foreign entity is a “foreign financial institution” that undertakes certain due diligence, reporting, withholding, and certification obligations, or in the case of a foreign financial institution that is a resident in a jurisdiction that is treated as having an intergovernmental agreement to implement FATCA, the entity complies with the diligence and reporting requirements of such agreement, (ii) the foreign entity is not a “foreign financial institution” and identifies certain of its U.S. investors, or (iii) the foreign entity otherwise is excepted under FATCA. If we determine withholding is appropriate in respect of our common stock, we may withhold tax at the applicable statutory rate, and we will not pay any additional amounts in respect of such withholding.

If withholding is required under FATCA on a payment related to our common stock, holders of our common stock that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available). You should consult your own tax advisor regarding the effect of FATCA on an investment in our common stock.

Tax Aspects of Our Investments in Our Operating Partnership and Other Subsidiary Partnerships

We currently hold, directly and indirectly, all of the ownership interests in our operating partnership and our other subsidiaries; therefore, our operating partnership and our other subsidiaries (other than any TRSs) currently are disregarded for U.S. federal income tax purposes. If additional partners or members are admitted to our operating partnership or any of our other subsidiaries, as applicable, we intend for such entity to be treated as a partnership for U.S. federal income tax purposes.

The following discussion summarizes the material U.S. federal income tax considerations that are applicable to our direct and indirect investments in our subsidiaries that are taxed as partnerships for U.S. federal income tax purposes, each individually referred to as a “Partnership” and, collectively, as the “Partnerships.” The following discussion does not address state or local tax laws or any U.S. federal tax laws other than income tax laws.

Classification as Partnerships

We are required to include in our income our distributive share of each Partnership’s income and allowed to deduct our distributive share of each Partnership’s losses but only if such Partnership is classified for U.S. federal income tax purposes as a partnership rather than as a corporation or an association treated as a corporation. An unincorporated entity with at least two owners, as determined for U.S. federal income tax purposes, will be classified as a partnership, rather than as a corporation, for U.S. federal income tax purposes if it:

•

is treated as a partnership under the Treasury Regulations relating to entity classification, or the “check-the-box regulations”; and

•

is not a “publicly traded partnership.”

Under the check-the-box regulations, an unincorporated entity with at least two owners may elect to be classified either as an association treated as a corporation or as a partnership for U.S. federal income tax purposes. If such an entity does not make an election, it generally will be taxed as a partnership for U.S. federal

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income tax purposes. If additional partners are admitted to our operating partnership following this offering, our operating partnership intends to be classified as a partnership for U.S. federal income tax purposes and will not elect to be treated as an association treated as a corporation.

A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. A publicly traded partnership generally is treated as a corporation for U.S. federal income tax purposes, but will not be so treated if, for each taxable year beginning after December 31, 1987 in which it was classified as a publicly traded partnership, at least 90% of the partnership’s gross income consisted of specified passive income, including real property rents, gains from the sale or other disposition of real property, interest, and dividends, or the “90% passive income exception.” The Treasury Regulations provide limited safe harbors from treatment as a publicly traded partnership. Pursuant to one of those safe harbors, interests in a partnership will not be treated as readily tradable on a secondary market or the substantial equivalent thereof if (1) all interests in the partnership were issued in a transaction or transactions that were not required to be registered under the Securities Act of 1933, as amended, and (2) the partnership does not have more than 100 partners at any time during the partnership’s taxable year. In determining the number of partners in a partnership, a person owning an interest in a partnership, grantor trust, or S corporation that owns an interest in the partnership is treated as a partner in such partnership only if (1) substantially all of the value of the owner’s interest in the entity is attributable to the entity’s direct or indirect interest in the partnership and (2) a principal purpose of the use of the entity is to permit the partnership to satisfy the 100-partner limitation. If any Partnership does not qualify for any safe harbor and is treated as a publicly traded partnership, we believe that such Partnership would have sufficient qualifying income to satisfy the 90% passive income exception and, therefore, would not be treated as a corporation for U.S. federal income tax purposes.

We have not requested, and do not intend to request, a ruling from the IRS that any Partnership is or will be classified as a partnership for U.S. federal income tax purposes. If, for any reason, a Partnership were treated as a corporation, rather than as a partnership, for U.S. federal income tax purposes, we may not be able to qualify as a REIT, unless we qualify for certain statutory relief provisions. See “—Gross Income Tests” and “—Asset Tests.” In addition, any change in a Partnership’s status for U.S. federal income tax purposes might be treated as a taxable event, in which case we might incur tax liability without any related cash distribution. See “—Annual Distribution Requirements.” Further, items of income and deduction of such Partnership would not pass through to us, and we would be treated as a stockholder for U.S. federal income tax purposes. Consequently, such Partnership would be required to pay income tax at U.S. federal corporate income tax rates on its net income, and distributions to us would constitute dividends that would not be deductible in computing such Partnership’s taxable income.

Income Taxation of the Partnerships and Their Partners

Partners, Not the Partnerships, Subject to Tax. A partnership is not a taxable entity for U.S. federal income tax purposes. Rather, we are required to take into account our distributive share of each Partnership’s income, gains, losses, deductions, and credits for each taxable year of the Partnership ending with or within our taxable year, even if we receive no distribution from the Partnership for that year or a distribution that is less than our share of taxable income. Similarly, even if we receive a distribution, it may not be taxable if the distribution does not exceed our adjusted tax basis in our interest in the Partnership.

Partnership Allocations. Although an agreement among the owners of an entity taxed as a partnership for U.S. federal income tax purposes generally will determine the allocation of income and losses among the owners, such allocations will be disregarded for tax purposes if they do not comply with the provisions of the U.S. federal income tax laws governing partnership allocations. If an allocation is not recognized for U.S. federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the “partners’ interests in the partnership,” which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the owners with respect to such item.

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Tax Allocations With Respect to Contributed Properties. Income, gain, loss, and deduction attributable to appreciated or depreciated property contributed to an entity taxed as a partnership for U.S. federal income tax purposes in exchange for an interest in such entity must be allocated for U.S. federal income tax purposes in a manner such that the contributing owner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the property at the time of the contribution (the “704(c) Allocations”). The amount of such unrealized gain or unrealized loss, referred to as “built-in gain” or “built-in loss,” at the time of contribution is generally equal to the difference between the fair market value of the contributed property at the time of contribution and the adjusted tax basis of such property at that time, referred to as a book-tax difference.

A book-tax difference attributable to depreciable property generally is decreased on an annual basis as a result of the allocation of depreciation deductions to the contributing owner for book purposes, but not for tax purposes. The Treasury Regulations require entities taxed as partnerships for U.S. federal income tax purposes to use a “reasonable method” for allocating items with respect to which there is a book-tax difference and outline several reasonable allocation methods.

Any gain or loss recognized by a partnership on the disposition of contributed properties generally will be allocated first to the partners of the partnership who contributed such properties to the extent of their built-in gain or loss on those properties for U.S. federal income tax purposes, as adjusted to take into account reductions in book-tax differences described in the previous paragraph. Any remaining gain or loss recognized by the partnership on the disposition of the contributed properties generally will be allocated among the partners in accordance with their partnership agreement unless such allocations and agreement do not satisfy the requirements of applicable Treasury Regulations, in which case such allocation will be made in accordance with the “partners’ interests in the partnership.”

We expect that in the future we may acquire properties pursuant to a contribution of such properties to our operating partnership. As a result, our operating partnership will receive a “carryover” tax basis in such properties. As a result, such properties may have significant built-in gain or loss subject to Section 704(c). We expect our operating partnership will adopt the “traditional” method for purposes of allocating items with respect to any book-tax difference attributable to such built-in gain or loss. Under the “traditional method,” as well as certain other reasonable methods available to us, built-in gain or loss with respect to our depreciable properties (i) could cause us to be allocated lower amounts of depreciation deductions for tax purposes than for economic purposes and (ii) in the event of a sale of such properties, could cause us to be allocated taxable gain in excess of the economic gain allocated to us as a result of such sale, with a corresponding tax benefit to the contributing partners. As a result of the foregoing, a greater portion of our distributions may be treated as a taxable dividend.

Basis in Partnership Interest. Our adjusted tax basis in any Partnership interest we own generally will be:

•

the amount of cash and the basis of any other property we contribute to the Partnership;

•

increased by our distributive share of the Partnership’s income (including tax-exempt income) and any increase in our allocable share of indebtedness of the Partnership; and

•

reduced, but not below zero, by our distributive share of the Partnership’s loss (including any non-deductible items), the amount of cash and the basis of property distributed to us, and any reduction in our allocable share of indebtedness of the Partnership.

Loss allocated to us in excess of our basis in a Partnership interest will not be taken into account for U.S. federal income tax purposes until we again have basis sufficient to absorb the loss. A reduction of our allocable share of Partnership indebtedness will be treated as a constructive cash distribution to us, and will reduce our adjusted tax basis in the Partnership interest. Distributions, including constructive distributions, in excess of the basis of our Partnership interest will constitute taxable income to us. Such distributions and constructive distributions normally will be characterized as long-term capital gain.

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Sale of a Partnership’s Property. Generally, any gain realized by a Partnership on the sale of property held for more than one year will be long- term capital gain, except for any portion of the gain treated as depreciation or cost recovery recapture. Our share of any Partnership’s gain from the sale of inventory or other property held primarily for sale to customers in the ordinary course of the Partnership’s trade or business will be treated as income from a prohibited transaction subject to a 100% tax. See “—Gross Income Tests.”

Possible Legislative or Other Actions Affecting Tax Consequences

Prospective stockholders should recognize that the present U.S. federal income tax treatment of an investment in us may be modified by legislative, judicial or administrative action at any time and that any such action may affect investments and commitments previously made. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. Revisions in U.S. federal tax laws and interpretations of these laws could adversely affect the tax consequences of your investment.

State and Local Taxes

We and/or you may be subject to taxation by various states and localities, including those in which we or a stockholder transacts business, owns property or resides. The state and local tax treatment may differ from the U.S. federal income tax treatment described above. Consequently, you should consult your own tax advisors regarding the effect of state and local tax laws on an investment in our common stock.

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UNDERWRITING

We have entered into an underwriting agreement with FBR Capital Markets & Co., J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and KeyBanc Capital Markets Inc., as the representatives of the underwriters named below, with respect to the shares subject to this offering. Subject to the terms and conditions in the underwriting agreement, we and the selling stockholders have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us and the selling stockholders, the respective number of shares of our common stock set forth opposite its name in the table below:


Underwriters		Number of Shares
FBR Capital Markets & Co.
J.P. Morgan Securities LLC
Citigroup Global Markets Inc.
KeyBanc Capital Markets Inc.
RBC Capital Markets, LLC

Total

The underwriting agreement provides that the obligation of the underwriters to purchase all of the shares being offered to the public is subject to approval of legal matters by counsel and the satisfaction of other conditions. These conditions include, among others, the continued accuracy of representations and warranties made by us and the selling stockholders in the underwriting agreement, delivery of legal opinions and the absence of any material changes in our assets, business or prospects after the date of this prospectus. Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold pursuant to the underwriting agreement, other than those covered by the over-allotment option described below, if they purchase any of those shares. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.

The underwriters propose to offer the shares directly to the public at the public offering price set forth on the cover page of this prospectus and to selected dealers, who may include the underwriters, at the public offering price less a selling concession not in excess of $ per share. The underwriters may allow, and the selected dealers may reallow, a concession not in excess of $ per share to brokers and dealers. After the completion of the offering, the underwriters may change the offering price and other selling terms.

The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Pursuant to the underwriting agreement, we and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

Over-allotment Option

We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the underwriters to purchase up to additional shares from us, to cover over-allotments, if any. If the underwriters exercise all or part of this option, each underwriter will be obligated to purchase its proportionate number of shares covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount.

207

Right of First Refusal

In connection with the initial private placement, we granted FBR Capital Markets & Co. a right of first refusal, for a period of approximately 27 months following the completion of the initial private placement, to act as sole initial purchaser and/or placement agent for each of our private offerings and as an underwriter and bookrunner in connection with any public offering of our equity securities.

Commissions and Expenses

The following table provides information regarding the amount of the underwriting discount to be paid to the underwriters by us and the selling stockholders. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.

Total

Per Share

Without
Over-allotment

With
Over-allotment

Underwriting discount paid by us

Underwriting discount paid by selling stockholders

Proceeds, before expenses, to us

Proceeds, before expenses, to selling stockholders

The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $ . We will pay the filing fees and up to $ of the expenses (including the reasonable fees and disbursements of counsel to the underwriters) related to obtaining the required approval of certain terms of this offering from FINRA. In the ordinary course of its business, an affiliate of FBR Capital Markets & Co. acquired 354,610 shares of our common stock in the initial private placement. To the extent that the price paid for these shares is less than the initial public offering price of the shares, the difference between these amounts is deemed by FINRA to be underwriting compensation and are, therefore, subject to a 180-day lock-up pursuant to FINRA Rule 5110(g)(1). Pursuant to FINRA Rule 5110(g)(1), these shares may not be sold during this offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of these shares by any person for a period of 180 days immediately following the date of the effectiveness or commencement of sales of this offering, subject to certain exceptions set forth in FINRA Rule 5110(g)(2).

Lock-Up Agreements

We, each of our directors and executive officers have agreed not to sell or transfer any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock for 180 days after the date of this prospectus, without the prior written consent of FBR and J.P. Morgan. Specifically, we and these other persons have agreed, subject to certain limited exceptions, not to directly or indirectly:

•

offer, pledge, sell or contract to sell our common stock;

•

sell any option or contract to purchase our common stock;

•

purchase any option or contract to sell our common stock;

•

grant any option for the sale of our common stock;

•

dispose of or transfer (or enter into any transaction or device which is designed or could be expected to, result in the disposition by any person at any time in the future of) our common stock;

•

file any registration statement with respect to our common stock; or

208

•

enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of our common stock, whether any such swap or transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise.

This lock-up provision applies to our common stock and to securities convertible into or exchangeable or exercisable for our common stock. It also applies to common stock owned now or acquired later by the person.

However, with respect to our directors and executive officers, the restrictions described above will not apply to bona fide gifts or transfers to family members or trusts for the direct or indirect benefit of the director or executive officer or his or her family members, provided in each case that the transferee agrees in writing to be bound by the terms of the lock-up agreement. In addition, the restrictions described above will not apply to any registration statement filed by us in accordance with the terms of the registration rights agreement that we entered into with FBR Capital Markets & Co. upon completion of the initial private placement.

FBR and J.P. Morgan, in their sole discretion, may release, or authorize us to release, as the case may be, the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice.

Each selling stockholder has agreed with us not to directly or indirectly sell, offer to sell, grant any option or otherwise transfer or dispose of shares of our common stock not sold in this offering for 180 days after the date of this prospectus without the prior written consent of FBR and J.P. Morgan. Additionally, all of our stockholders that purchased shares in the initial private placement and have not elected to include their shares for resale in this offering have agreed with us not to directly or indirectly sell, offer to sell, grant any option or otherwise transfer or dispose of shares of our common stock for 60 days after the date of this prospectus without the prior written consent of FBR and J.P. Morgan.

Stabilization

Until the distribution of the securities offered by this prospectus is completed, rules of the SEC may limit the ability of the underwriters to bid for and to purchase our common stock. As an exception to these rules, the underwriters may engage in transactions effected in accordance with Regulation M under the Exchange Act that are intended to stabilize, maintain or otherwise affect the price of our common stock. The underwriters may engage in over-allotment sales, syndicate covering transactions, stabilizing transactions and penalty bids in accordance with Regulation M.

•

Stabilizing transactions permit bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, so long as stabilizing bids do not exceed a specified maximum.

•

Over-allotment involves sales by the underwriters of securities in excess of the number of securities the underwriters are obligated to purchase, which creates a short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock overallotted by the underwriters is not greater than the number of shares of common stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of common stock involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing shares of our common stock in the open market.

•

Covering transactions involve the purchase of securities in the open market after the distribution has been completed in order to cover short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. If the underwriters sell more shares of common stock than could be covered

209

by the over-allotment option, creating a naked short position, the position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in this offering.

•

Penalty bids permit the underwriters to reclaim a selling concession from a selected dealer when the securities originally sold by the selected dealer are purchased in a stabilizing or syndicate covering transaction.

These stabilizing transactions, covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of our securities.

Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the prices of our securities. These transactions may occur on any trading market. If any of these transactions are commenced, they may be discontinued without notice at any time.

Electronic Distribution

This prospectus may be made available in electronic format on Internet sites or through other online services maintained by the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. Other than this prospectus in electronic format, any information on the underwriters’ or their affiliates’ websites and any information contained in any other website maintained by the underwriters or any affiliate of the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.

Listing; Pricing of the Offering

We have applied to have our common stock listed on the NYSE under the symbol “MRT.”

Immediately prior to this offering, there was no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters of this offering. Among the factors that will be considered in determining the initial public offering price are our future prospects and those of our industry in general, our revenues, results of operations and certain other financial and operating information in recent periods, and the market prices of securities and certain financial and operating information of companies engaged in activities similar to ours.

Other Relationships

Some of the underwriters and their affiliates have engaged and may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us and/or our affiliates. They have received and may in the future receive customary fees and commissions for these transactions. In addition, affiliates of J.P. Morgan Securities, LLC, Citigroup Global Markets Inc., KeyBanc Capital Markets Inc. and RBC Capital Markets, LLC are lenders under our secured credit facility. As a result, these affiliates will receive their proportionate shares of any amount of our secured credit facility that is repaid with the net proceeds from this offering.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. In the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad

210

array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

211

LEGAL MATTERS

The validity of the issuance of the common stock offered hereby and certain federal income tax matters will be passed upon for us by Morrison & Foerster LLP. Certain legal matters relating to this offering will be passed upon for the underwriters by Clifford Chance US LLP. Sidley Austin LLP has acted as counsel for the selling stockholders.

EXPERTS

The consolidated financial statements of MedEquities Realty Trust, Inc. as of December 31, 2014 and for the period from April 23, 2014 (inception) to December 31, 2014, the financial statement schedule III, real estate and accumulated depreciation, and schedule IV, mortgage loans on real estate, the Historical Statement of Revenues and Certain Direct Operating Expenses of Brownsville I.M.P., Ltd. d/b/a The North Brownsville Medical Plaza for the year ended December 31, 2013, the Historical Statement of Revenues and Certain Direct Operating Expenses of Eastern LTAC, LLC d/b/a Horizon Specialty Hospital of Henderson for the year ended December 31, 2013, and the Historical Statement of Revenues and Certain Direct Operating Expenses of Spartanburg Healthcare Realty, LLC for the year ended December 31, 2013, have been included herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We maintain a website at www.medequities.com. Information contained on, or accessible through our website is not incorporated by reference into and does not constitute a part of this prospectus or any other report or documents we file with or furnish to the SEC.

We have filed with the SEC a Registration Statement on Form S-11, including exhibits, schedules and amendments thereto, of which this prospectus is a part, under the Securities Act with respect to the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the registration statement. For further information with respect to our company and the shares of our common stock to be sold in this offering, reference is made to the registration statement, including the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to in this prospectus are not necessarily complete and, where that contract or other document has been filed as an exhibit to the registration statement, each statement in this prospectus is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference room of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Information about the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0300. Copies of all or a portion of the registration statement can be obtained from the public reference room of the SEC upon payment of prescribed fees. Our SEC filings, including our registration statement, are also available to you, free of charge, on the SEC’s website, www.sec.gov.

As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and will file periodic reports and other information with the SEC. These reports and other information will be available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above.

212

INDEX TO FINANCIAL STATEMENTS


MEDEQUITIES REALTY TRUST, INC.
Unaudited Pro Forma Consolidated Financial Statements:
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2015			F-3
Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2015			F-4
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2014			F-5
Notes to Unaudited Pro Forma Financial Statements			F-6
Historical Financial Statements:
Consolidated Balance Sheet as of June 30, 2015			F-12
Consolidated Statements of Operations for the three and six months ended June 30, 2015			F-13
Consolidated Statement of Equity for the six months ended June 30, 2015			F-14
Consolidated Statement of Cash Flows for the six months ended June 30, 2015			F-15
Notes to Interim Consolidated Financial Statements			F-16
Report of Independent Registered Public Accounting Firm			F-32
Consolidated Balance Sheet as of December 31, 2014			F-33
Consolidated Statement of Operations for the period from April 23, 2014 (inception) to December 31, 2014			F-34
Consolidated Statement of Stockholders’ Equity for the period from April 23, 2014 (inception) to December 31, 2014			F-35
Consolidated Statement of Cash Flows for the period from April 23, 2014 (inception) to December 31, 2014			F-36
Notes to Consolidated Financial Statements			F-37
Schedule III – Real Estate and Accumulated Depreciation			F-52
Schedule IV – Mortgage Loans on Real Estate			F-54
SPARTANBURG HEALTHCARE REALTY, LLC
Independent Auditors’ Report			F-55
Historical Statements of Revenues and Certain Direct Operating Expenses for the six months ended June 30, 2014 (unaudited) and the year ended December 31, 2013			F-56
Notes to Historical Statements of Revenues and Certain Operating Expenses			F-57
EASTERN LTAC, LLC
Independent Auditors’ Report			F-59
Historical Statements of Revenues and Certain Direct Operating Expenses for the six months ended June 30, 2014 (unaudited) and the year ended December 31, 2013			F-60
Notes to Historical Statements of Revenues and Certain Operating Expenses			F-61
BROWNSVILLE I.M.P. LTD
Independent Auditors’ Report			F-63
Historical Statements of Revenues and Certain Direct Operating Expenses for the six months ended June 30, 2014 (unaudited) and the year ended December 31, 2013			F-64
Notes to Historical Statements of Revenues and Certain Operating Expenses			F-65

F-1

MedEquities Realty Trust, Inc.

Pro Forma Consolidated Financial Statements

(Unaudited)

(Dollars in thousands, except share data)

MedEquities Realty Trust, Inc. (the “Company”), a Maryland corporation, was formed on April 23, 2014 as a self-managed and self-administered company that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments and was initially capitalized on May 5, 2014 when 1,000 shares of its common stock were issued to its founder for total cash consideration of $1. The Company did not commence operations until the completion of its initial private placements on July 31, 2014.

The Company conducts its business through an umbrella partnership REIT, or UPREIT, structure, consisting of the Company’s operating partnership, MedEquities Realty Operating Partnership, LP (the “Operating Partnership”), and subsidiaries of the Operating Partnership, including the Company’s taxable REIT subsidiary, MedEquities Realty TRS, LLC. The Company’s wholly owned limited liability company, MedEquities OP GP, LLC, is the sole general partner of the Operating Partnership, and the Company presently owns all of the limited partnership units of the Operating Partnership, or OP units. In the future, the Company may issue OP units to third parties in connection with healthcare property acquisitions, as compensation or otherwise. There are no OP unit holders for any of the periods presented.

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes for the Company’s short taxable year ended December 31, 2014. As a REIT, the Company generally will not be subject to U.S. federal income tax to the extent it distributes its REIT taxable income to its stockholders, subject to other statutory provisions in the Internal Revenue Code of 1986.

The accompanying unaudited pro forma consolidated financial statements have been derived from the historical consolidated financial statements of the Company. The unaudited pro forma consolidated balance sheet as of June 30, 2015 is presented to reflect adjustments to the Company’s historical balance sheet as if the Company’s initial public offering of its common stock (the “Offering”), the concurrent private placement to funds managed by BlueMountain Capital Management, LLC (the “BlueMountain Private Placement”) and certain real estate property acquisitions described herein were completed on June 30, 2015. The unaudited pro forma consolidated income statements for the six months ended June 30, 2015 and the year ended December 31, 2014 is presented as if the Offering, the BlueMountain Private Placement, the initial private placements and certain real estate property acquisitions and healthcare-related debt investments described herein were completed on the first day of the annual period presented.

The accompanying unaudited pro forma consolidated financial statements should be read in conjunction with (i) the Company’s historical consolidated balance sheet as of June 30, 2015 and historical consolidated statements of operations for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014; (ii) the audited and unaudited statements of revenues and certain direct operating expenses of certain acquired properties; and (iii) the “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this prospectus. The Company has based the unaudited pro forma adjustments on available information and assumptions that it believes are reasonable. The following unaudited pro forma combined consolidated financial statements are presented for informational purposes only and are not necessarily indicative of what the Company’s actual financial position would have been as of June 30, 2015 assuming the Offering, the BlueMountain Private Placement and certain real estate property acquisitions had all been completed on June 30, 2015, what actual results of operations would have been for the three months ended June 30, 2015 and the year ended December 31, 2014 assuming the Offering, the BlueMountain Private Placement, the initial private placements and certain real estate property acquisitions and healthcare-related debt investments were completed on the first day of the annual period presented, and are not indicative of future results of operations or financial condition and should not be viewed as indicative of future results of operations or financial condition.

F-2

MedEquities Realty Trust, Inc.

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2015

(Dollars in thousands)


	MedEquities Realty Trust, Inc.			Other Pro Forma Adjustments			Completed Acquisitions		Pending Acquisitions		Pro Forma Before Offering			Proceeds from Offering		Use of Proceeds			Company Pro Forma
	A			B			C		D					E		F
Assets
Real estate assets
Land, buildings and improvements, and intangible lease assets	$	312,912			—			133,360		36,640		482,912			—		19,399		$	502,311
Furniture, fixtures, and equipment		2,284			—			—		—		2,284			—		—			2,284
Mortgage notes receivable, net		27,736			—			—		—		27,736			—		(17,830	)		9,906

		342,932			—			133,360		36,640		512,932			—		1,569			514,501

Accumulated depreciation and amortization		(4,487	)		—			—		—		(4,487	)		—		—			(4,487	)

Net investment in real estate assets		338,445			—			133,360		36,640		508,445			—		1,569			510,014
Cash and cash equivalents		4,413			(3,682	)		—		—		731
Other assets		16,261			3,379			—		—		19,640			—		—			19,640

Total Assets	$	359,119			(303	)		133,360		36,640		528,816			—				$


Liabilities and Equity
Liabilities
Debt	$	78,000			—			133,360		26,640		238,000			—				$
Accounts payable and accrued liabilities		7,793			(303	)		—		10,000		17,490			—		—			17,490
Deferred revenue		546			—			—		—		546			—		—			546

Total liabilities		86,339			(303	)		133,360		36,640		256,036			—

Equity
Preferred Stock		1						—		—		1			—		(1	)		(0	)
Common stock		109			—			—		—		109					—
Additional paid in capital		272,573			—			—		—		272,573					(126,380	)
Dividends paid		(7,064	)		—			—		—		(7,064	)		—		—			(7,064	)
Retained earnings		4,844			—			—		—		4,844			—		170			5,014
Non-controlling interests		2,317			—			—		—		2,317			—		—			2,317

Total Equity		272,780			—			—		—		272,780			—

Total Liabilities and Equity	$	359,119			(303	)		133,360		36,640		528,816			—				$

F-3

MedEquities Realty Trust, Inc.

Unaudited Pro Forma Consolidated Statement of Operations

For the six months ended June 30, 2015

(Dollars in thousands)


	MedEquities Realty Trust, Inc.			2015 Acquisitions and Lakeway Foreclosure			Pending Acquisitions			Other Pro Forma Adjustments			Company Pro Forma
	AA			CC			DD
Revenues
Rental income	$	13,969		$	12,959		$	2,300		$	—		$	29,228
Interest on mortgage notes receivable		1,670			(395	)		(820	)		—			455
Interest on notes receivable		224			—			—			—			224

Total revenues		15,863			12,564			1,480			—			29,907

Expenses
Depreciation and amortization		3,246			2,725			575			—			6,546
Property-related		579			—			—			—			579
Acquisition costs		194			—			—			—			194
Franchise, excise, and other taxes		228			—			—			—			228
General and administrative		3,671			—			—			—			3,671

Total operating expenses		7,918			2,725			575			—			11,218

Operating income		7,945			9,839			905			—			18,689

Other income (expense)
Interest and other income		9			—			—			—			9
Interest expense		(1,816	)		—			—				FF

Net other income (expense)		(1,807	)		—			—

Net Income	$	6,138		$	9,839		$	905		$			$
Less: Preferred stock dividends		(2,905	)		—			—			2,905	HH		—
Less: Net income attributable to non-controlling interests		(1,317	)		(1,258	)		—			—			(2,575	)

Net income attributable to common stockholders	$	1,916		$	8,581		$	905		$			$



Earnings per share	$	0.17														GG

F-4

MedEquities Realty Trust, Inc.

Unaudited Pro Forma Consolidated Statement of Operations

For the year ended December 31, 2014

(Dollars in thousands)


	MedEquities Realty Trust, Inc.			2014 Acquisitions		2015 Acquisitions and Lakeway Foreclosure			Pending Acquisitions			Other Pro Forma Adjustments				Company Pro Forma
	AA			BB		CC			DD
Revenues
Rental income	$	4,316		$	6,709	$	42,784		$	4,600		$	—			$	58,409
Interest on mortgage notes receivable		1,078			534		—			(513	)		—				1,099
Interest on notes receivable		53			—		—			—			—				53

Total revenues		5,447			7,243		42,784			4,087			—				59,561
Expenses
Depreciation and amortization		1,273			2,122		8,491			1,151			—				13,037
Property-related		308			772		—			—			—				1,080
Acquisition costs		192			—		—			—			—				192
Start-up costs		888			—		—			—			—				888
Franchise, excise, and other taxes		72			—		—			—			—				72
General and administrative		2,391			—		—			—			1,235		EE		3,626

Total operating expenses		5,124			2,894		8,491			1,151			1,235				18,895
Operating income		323			4,349		34,293			2,936			(1,235	)			40,666
Other income (expense)
Interest and other income		17			—		—			—			—				17
Interest expense		(317	)		—		—			—					FF

Net other income (expense)		(300	)		—		—			—
Net Income	$	23		$	4,349	$	34,293		$	2,936		$				$

Net income attributable to non-controlling interests		—			—		(5,142	)		—			—				(5,142	)

Net income attributable to common stockholders	$	23		$	4,349	$	29,151		$	2,936		$				$



Earnings per share	$	(0.00	)																GG

F-5

Notes to the Unaudited Pro Forma Consolidated Financial Statements

Note 1 — Adjustments to the Pro Forma Consolidated Balance Sheet

(A)	Represents the historical consolidated balance sheet of the Company as of June 30, 2015.

(B)

Reflects the following: (i) net additional deferred financing costs of $1.9 million related to the Company’s amended and restated $375 million secured revolving credit facility (the “Credit Facility”) entered into on July 30, 2015; (ii) the funding of the remaining $1.5 million tenant allowance to the tenant at Mountain’s Edge Hospital, which was funded on July 31, 2015; and (iii) $0.3 million in advances to the seller/tenant at Kentfield Rehabilitation and Specialty Hospital to fund ongoing tenant renovations, which was funded on July 31, 2015.

(C)

On July 30, 2015, the Company completed the acquisition of nine properties in a portfolio of ten skilled nursing facilities located throughout Texas (the “Texas SNF Portfolio”). Of the aggregate gross purchase price of $145 million for the Texas SNF Portfolio, the gross purchase price for the nine properties acquired on July 31, 2015 was $133.4 million, which was funded primarily with borrowings under the Credit Facility.

(D)

Reflects the acquisition of Graham Oaks Care Center, the remaining property in the Texas SNF Portfolio, for approximately $11.6 million and the acquisition of Kearny Mesa, a 96-bed skilled nursing facility from Life Generations, for approximately $15 million, plus an earn-out of up to $10 million. The $10.0 million earn-out has been included in real estate assets and the accounts payable and accrued liabilities line item since the earn-out is expected to be earned, but has not yet been paid.

(E)

Reflects aggregate gross proceeds from the Offering and the BlueMountain Private Placement of $ million, which will be reduced by $ million, net of amounts paid to date, to reflect underwriters’ discounts and commissions and other expenses of the Offering payable by the Company, resulting in net proceeds to the Company of $ million. These costs will be charged against the gross offering proceeds upon completion of the Offering. A summary is as follows (in thousands):


Gross Proceeds		$
Less:
Underwriters’ discount
Offering expenses

Net proceeds		$

(F)	Reflects the use of proceeds from the Offering, which the Company intends to use as follows:

•

Approximately $126.4 million to redeem the Company’s 12.5% Series A Redeemable Cumulative Preferred Stock (“Series A Preferred Stock”) and the Company’s 7.875% Series B Redeemable Cumulative Preferred Stock (“Series B Preferred Stock”);

•

Approximately $1.4 million to acquire Vibra Rehabilitation Hospital of Amarillo. The Company previously entered into a loan and security agreement with the seller to provide it with a $18.0 million mortgage loan that is secured by Vibra Rehabilitation Hospital of Amarillo (the “Amarillo Mortgage Loan”). The $18.0 million principal balance of the Amarillo Mortgage Loan will be applied towards the $19.4 million gross purchase price, resulting in a cash expenditure of approximately $1.4 million to acquire the property. The gross purchase price is approximately $19.4 million, plus an earn-out of up to $10.6 million that may be paid to the seller 24 months after closing, based upon the tenant’s earnings before interest, taxes, depreciation, amortization, and rent expense (“EBITDAR”) for the previous 12 months;

•

To repay $ million of outstanding indebtedness under the Credit Facility; and

•

The remaining net proceeds, if any, for general corporate purposes, including working capital and future acquisitions.

F-6

Note 2 — Adjustments to the Pro Forma Consolidated Statements of Operations

(AA)

Represents the historical consolidated statements of operations of the Company for the six months ended June 30, 2015 and the period from April 23, 2014 (inception) to December 31, 2014, including the results of operations of the Company’s completed acquisitions and investments as of the date they were acquired (see note BB).

(BB)

Reflects the operations of the Company’s acquisitions and investments that were completed during the year ended December 31, 2014, as if they occurred on January 1, 2014. The adjustment includes pro forma results only for the portion of the period prior to the closing of the acquisition/investment. Rental income includes the effects of straight-line rent calculated based on the estimated amount of base rents contractually due over the initial term of the lease and amortization of lease inducements (e.g. lease incentives and tenant improvement allowances) which are recorded as a reduction to rental income over the initial term of the related facility lease. (in thousands)


	Year Ended December 31, 2014
	Kentfield Rehab & Specialty Hospital		Magnolia Place of Spartanburg		Horizon Specialty Hospital of Henderson		North Brownsville Medical Plaza		Springfield Mortgage Loan		Total
Revenues
Rental income	$	3,044	$	1,141	$	1,005	$	1,519	$	—	$	6,709
Mortgage interest		—		—		—		—		534		534

Total revenues		3,044		1,141		1,005		1,519		534		7,243

Expenses
Depreciation and amortization		832		310		314		666		—		2,122
Property-related		—		—		—		772		—		772

Total expenses		832		310		314		1,438		—		2,894

Net Income	$	2,212	$	831	$	691	$	81	$	534	$	4,349

Net income attributable to non-controlling interests		—		—		—		—		—		—

Net income attributable to common stockholders	$	2,212	$	831	$	691	$	81	$	534	$	4,349

F-7

(CC)

Reflects the operations of the following acquisitions and the Lakeway Regional Medical Center (“Lakeway Hospital”) foreclosure as if they had occurred on January 1, 2014. The Company acquired Mira Vista Court on February 20, 2015, Mountain’s Edge Hospital and the Life Generations Portfolio on March 31, 2015 and nine of the properties in the Texas SNF Portfolio on July 30, 2015. The Company acquired Lakeway Hospital on February 3, 2015 through a negotiated, non-judicial foreclosure. The adjustment includes pro forma results only for the portion of the period prior to the closing of the acquisitions. Rental income includes the effects of straight-line rent calculated based on the estimated amount of base rents contractually due over the initial term of the lease. (in thousands)


	Year Ended December 31, 2014
	Mountain’s Edge Hospital		Life Generations Portfolio		Mira Vista		Lakeway Partnership ⁽¹⁾			Lakeway Partnership Eliminations ⁽²⁾			Texas SNF Portfolio ⁽³⁾		Total
Revenues
Rental income	$	2,873	$	7,255	$	1,565	$	18,022		$	—		$	13,069	$	42,784

Total revenues		2,873		7,255		1,565		18,022			—			13,069		42,784

Expenses
General and administrative		—		—		—		60			(60	)				—
Depreciation and amortization		612		2,541		461		1,543						3,334		8,491
Interest expense		—		—		—		5,924			(5,924	)				—

Total expenses		612		2,541		461		7,527			(5,984	)		3,334		8,491

Net Income	$	2,261	$	4,714	$	1,104	$	10,495		$	5,984		$	9,735	$	34,293

Net income attributable to non-controlling interests		—		—		—		(5,142	)		—					(5,142	)

Net income attributable to MRT common stockholders	$	2,261	$	4,714	$	1,104	$	5,353		$	5,984		$	9,735	$	29,151

(1)

The Company owns Lakeway Hospital through a consolidated partnership (the “Lakeway Partnership”), which is owned 51% by the Company and 49% by a neurosurgical physicians group. The Company made an intercompany $73.0 million loan to the Lakeway Partnership that is secured by a first mortgage lien on Lakeway Hospital (the “Lakeway Intercompany Mortgage Loan”), which has a ten-year term and requires payments of principal and interest at a rate of 8.0% per annum based on a 25-year amortization schedule. The Lakeway Intercompany Mortgage Loan, the related interest income of the Company and the related interest expense to the Lakeway Partnership are eliminated in the Company’s pro forma consolidated financial statements. This column represents the pro forma stand-alone operating results of the Lakeway Partnership prior to consolidation.

(2)	Represents amounts eliminated in the Company’s pro forma consolidated statement of operations due to the consolidation of the Lakeway Partnership.

(3)	Reflects results of the nine properties in the Texas SNF Portfolio that closed on July 30, 2015. See note (DD) for pro forma adjustments for Graham Oaks Care Center, the tenth facility in the Texas SNF Portfolio.

F-8


	Six Months Ended June 30, 2015
	Mountain’s Edge Hospital		Life Generations Portfolio		Mira Vista		Lakeway Partnership ⁽¹⁾			Lakeway Partnership Eliminations/ Adjustments ⁽²⁾			Texas SNF Portfolio ⁽³⁾		Total
Revenues
Rental income	$	735	$	1,814	$	223	$	9,011		$	(5,359	)	$	6,535	$	12,959
Interest on mortgage notes receivable		—		—		—					(395	)				(395	)

Total revenues		735		1,814		223		9,011			(5,754	)		6,535		12,564

Expenses
General and administrative								30			(30	)				—
Depreciation and amortization		153		636		65		771			(567	)		1,667		2,725
Interest expense		—		—		—		2,954			(2,954	)				—

Total expenses		153		636		65		3,755			(3,551	)		1,667		2,725

Net Income	$	582	$	1,178	$	158	$	5,256		$	(2,203	)	$	4,868	$	9,839

Net income attributable to non-controlling interests		—		—		—		(2,575	)		1,317					(1,258	)

Net income attributable to common stockholders	$	582	$	1,178	$	158	$	2,681		$	(886	)	$	4,868	$	8,581

(1)	This column represents the pro forma stand-alone operating results of the Lakeway Partnership prior to consolidation.

(2)

Represents (i) the elimination of amounts included in the Company’s historical consolidated statement of operations to reflect the Lakeway Hospital foreclosure and the formation of the Lakeway Partnership as if they had occurred on January 1, 2014 and (ii) amounts eliminated in the Company’s pro forma consolidated statement of operations due to the consolidation of the Lakeway Partnership.

(3)	Reflects results of the nine properties in the Texas SNF Portfolio that closed on July 30, 2015. See note (DD) for pro forma adjustments for Graham Oaks Care Center, the tenth facility in the Texas SNF Portfolio.

(DD)	Reflects the results of operations from the following pending acquisitions as if the acquisitions had occurred on January 1, 2014.

•

Graham Oaks Care Center, the remaining property in the Texas SNF Portfolio. Concurrently with the closing of the acquisition, the Company will amend the master lease agreement for the Texas SNF Portfolio to include Graham Oaks, and the annual base rent under the master lease agreement will be increased by approximately $1.0 million, or 8.75% of the $11.6 million purchase price for Graham Oaks.

•

Kearny Mesa, which the Company has an option to purchase from Life Generations Healthcare, LLC (“Life Generations”) for $15.0 million, plus an earn-out of up to $10.0 million that may be paid to Life Generations in the first quarters of 2016 and 2017 based on the achievement of certain performance thresholds relating to the earnings before interest, taxes, depreciation, amortization, rent and management fees (“EBITDARM”) of Kearny Mesa for 2015 and 2016, respectively. Concurrently with the closing of the acquisition, the Company will amend the master lease agreement for the Life Generations Portfolio to include Kearny Mesa, and the annual base rent under the master-lease agreement will be increased by approximately $1.3 million, or 8.75% of the $15.0 million purchase price for Kearny Mesa. The base rent under the master lease will thereafter increase by 8.75% of the amount of the $10.0 million earn-out that the Company ultimately pays Life Generations in the first quarters of 2016 and 2017 based on the EBITDARM of Kearny Mesa for 2015 and 2016, respectively.

F-9

•

Vibra Rehabilitation Hospital of Amarillo. The $18.0 million principal balance of the Amarillo Mortgage Loan will be applied towards the $19.4 million gross purchase price, resulting in a cash expenditure of approximately $1.4 million to acquire the property. The Company expects to close this transaction by the end of 2015, subject to the satisfaction of customary closing conditions and receipt of approval from the seller’s working capital lender. This adjustment also eliminates the interest income from the Amarillo Mortgage Loan and includes the recognition in interest on mortgage notes receivable of the fee received from the borrower of 1% of the principal balance of the Amarillo Mortgage Loan, totaling $0.2 million that was collected at the date of origination of the loan. Concurrently with the acquisition, the Company will enter into a lease with the existing tenant, a wholly owned subsidiary of Vibra Healthcare, with an initial 15-year non-cancelable lease term with three five-year renewal options at an initial lease rate of 8.75% of the initial $19.4 million purchase price. The base rent will thereafter increase by 8.75% of the amount of the $10.6 million earn-out that the Company ultimately pays Vibra Healthcare 24 months after closing based on the tenant’s EBITDAR for the prior 12 months. Beginning in the second year of the initial lease term, the annual base rent will increase each year by 3.0% of the prior year’s rent.

Rental income includes the effects of straight-line rent calculated based on the estimated amount of base rents contractually due over the initial term of the lease. (in thousands)


	Year Ended December 31, 2014
	Kearny Mesa		Vibra Rehabilitation Hospital of Amarillo			Graham Oaks Care Center		Total
Revenues
Rental income	$	1,354	$	2,105		$	1,141	$	4,600
Interest on mortgage notes receivable				(513	)				(513	)

Total revenues		1,354		1,592			1,141		4,087

Expenses
Depreciation and amortization		375		485			291		1,151

Total expenses		375		485			291		1,151

Net Income	$	979	$	1,107		$	850	$	2,936

Net income attributable to non-controlling interests		—					—		—

Net income attributable to common stockholders	$	979	$	1,107		$	850	$	2,936


	Six Months Ended June 30, 2015
	Kearny Mesa		Vibra Rehabilitation Hospital of Amarillo			Graham Oaks Care Center		Total
Revenues
Rental income	$	678	$	1,052		$	570	$	2,300
Interest on mortgage notes receivable				(820	)				(820	)

Total revenues		678		232			570		1,480

Expenses
Depreciation and amortization		188		242			145		575

Total expenses		188		242			145		575

Net Income	$	490	$	(10	)	$	425	$	905

Net income attributable to non-controlling interests		—					—		—

Net income attributable to common stockholders	$	490	$	(10	)	$	425	$	905

F-10

(EE)

Reflects adjustments necessary to provide a full year of costs associated with salaries and benefits paid to the Company’s three executive officers in accordance with the provisions of each executive officer’s original employment agreement entered into on July 31, 2014, compensation to the Company’s members of the Board of Directors, stock-based compensation expense for awards granted to Company officers and members of the Board of Directors in July 2014 and certain other costs for general corporate expenses, including contractual office rent and insurance, all of which allowed the Company to commence operations in July 2014. This does not reflect (i) the additional general and administrative expenses that the Company expects to incur as a result of becoming a public company, including but not limited to incremental salaries and equity incentives, Sarbanes-Oxley Act of 2002 compliance costs, and incremental legal, audit, and tax fees, as such costs are not currently quantifiable, (ii) additional equity awards made to the Company’s executive officers, non-management directors and certain other employees in July and August of 2015, or (iii) increased base salaries for the Company’s three executive officers effective August 1, 2015.

(FF)	Reflects interest on outstanding borrowings, unused line fees on the Credit Facility and amortization and expensing of up-front fees paid to originate and amend the Credit Facility that are amortized over the initial two-year term of the Credit Facility.

(GG)

Earnings per share — basic is calculated based on the pro forma weighted average common shares outstanding, which was for each of the periods presented and assumes the issuance of the shares of common stock in the Offering and the BlueMountain Private Placement, totaling shares. Earnings per share — diluted is calculated by including the effect of dilutive securities, which resulted in diluted shares of for each of the periods presented.

Below is a reconciliation of pro forma weighted average shares outstanding for the six months ended June 30, 2015:


Number of shares issued and outstanding — June 30, 2015
Number of shares issued in the Offering and the BlueMountain Private Placement

Total number of shares — basic
Dilutive potential shares — June 30, 2015

Total number of shares — diluted

Below is a reconciliation of pro forma weighted average shares outstanding for the year ended December 31, 2014:


Number of shares issued and outstanding — December 31, 2014
Number of shares issued in the Offering and the BlueMountain Private Placement

Total number of shares — basic
Dilutive potential shares — December 31, 2014

Total number of shares — diluted

(HH)	Represents the elimination of dividends on the Series A Preferred Stock and the Series B Preferred Stock, which will be redeemed with a portion of the net proceeds from the Offering.

F-11

MEDEQUITIES REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

(Amounts in thousands, except per share amounts)


	June 30, 2015
	(unaudited)
Assets
Real estate properties
Land	$	30,466
Building and improvements and intangible lease assets		282,446
Furniture, fixtures, and equipment		2,284
Less accumulated depreciation and amortization		(4,487	)

Total real estate properties, net		310,709
Mortgage notes receivable, net		27,736
Note receivable		—
Cash and cash equivalents		4,413
Other assets, net		16,261

Total Assets	$	359,119

Liabilities and Equity
Liabilities
Debt	$	78,000
Accounts payable and accrued liabilities		7,793
Deferred revenue		546

Total liabilities		86,339

Commitments and contingencies
Equity
Preferred stock, $0.01 par value. Authorized 50,000 shares; 125 shares issued and outstanding at June 30, 2015; no shares issued and outstanding at December 31, 2014		1
Common stock, $0.01 par value. Authorized 400,000 shares; 11,096 and 11,075 issued and outstanding at June 30, 2015 and December 31, 2014, respectively		109
Additional paid in capital		272,573
Dividends declared		(7,064	)
Retained earnings		4,844

Total MedEquities Realty Trust, Inc. stockholders’ equity		270,463
Noncontrolling interest		2,317

Total Equity		272,780

Total Liabilities and Equity	$	359,119

See accompanying notes to interim consolidated financial statements.

F-12

MEDEQUITIES REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statement of Operations

(Amounts in thousands)

(Unaudited)


	Three months ended June 30, 2015			Six months ended June 30, 2015
Revenues
Rental income	$	10,283		$	13,969
Interest on mortgage notes receivable		641			1,670
Interest on notes receivable		—			224

		10,924			15,863
Expenses
Depreciation and amortization		2,169			3,246
Property related		288			579
Acquisition costs		126			194
Franchise, excise and other taxes		121			228
General and administrative		1,796			3,671

Total operating expenses		4,500			7,918

Operating income		6,424			7,945

Other income (expense)
Interest and other income		3			9
Interest expense		(1,026	)		(1,816	)

		(1,023	)		(1,807	)
Net income	$	5,401		$	6,138
Less: Preferred stock dividends		(2,465	)		(2,905	)
Less: Net income attributable to noncontrolling interest		(1,332	)		(1,317	)

Net income attributable to common stockholders	$	1,604		$	1,916

See accompanying notes to interim consolidated financial statements.

F-13

MEDEQUITIES REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

For the six months ended June 30, 2015

(Amounts in thousands)

(Unaudited)


	Series A Preferred Stock				Series B Preferred Stock				Common Stock
	Shares		Par Value		Shares		Par Value		Shares		Par Value		Additional Paid-In Capital		Retained Earnings		Dividends Declared			Non-controlling interest		Total Equity
Balance at December 31, 2014		—		—		—		—		11,075		109		151,991		23		(2,246	)		—		149,877
Issuance of preferred stock, net of costs		—		—		125		1		—		—		119,954		—		—			—		119,955
Issuance of common stock, net of costs		—		—		—		—		21		—		—		—		—					—
Investment in subsidiary by noncontrolling interest		—		—		—		—		—		—		—		—		—			1,000		1,000
Stock-based compensation		—		—		—		—		—		—		628		—		—			—		628
Net income		—		—		—		—		—		—		—		4,821		—			1,317		6,138
Dividends to preferred stockholders		—		—		—		—		—		—		—		—		(2,905	)		—		(2,905	)
Dividends to common stockholders		—		—		—		—		—		—		—		—		(1,913	)		—		(1,913	)

Balance at June 30, 2015		—		—		125	$	1		11,096	$	109	$	272,573	$	4,844	$	(7,064	)	$	2,317	$	272,780

See accompanying notes to interim consolidated financial statements.

F-14

MEDEQUITIES REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statement of Cash Flows

(Amounts in thousands)

(Unaudited)


	For the six months ended June 30, 2015
Operating activities
Net income	$	6,138
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		3,865
Stock-based compensation		628
Straight-line rent receivable		(3,618	)
Straight-line rent liability		85
Changes in operating assets and liabilities
Other assets		(3,023	)
Accounts payable and accrued liabilities		981
Deferred revenues		(406	)

Net cash provided by operating activities		4,650
Investing activities
Acquisitions of real estate		(152,851	)
Capitalized pre-acquisition costs		31
Capital expenditures		(270	)

Net cash used in investing activities		(153,090	)
Financing activities
Proceeds from sale of preferred shares, net of offering costs		119,955
Net borrowings on secured credit facility		28,000
Dividends paid to common shareholders		(3,215	)
Dividends paid to preferred shareholders		(2,085	)
Contributions by noncontrolling interest		1,000
Capitalized pre-offering costs		(1,155	)
Deferred credit facility fees		(140	)

Net cash provided by financing activities		142,360

Decrease in cash and cash equivalents		(6,080	)
Cash and cash equivalents, beginning of period		10,493

Cash and cash equivalents, end of period	$	4,413

See accompanying notes to interim consolidated financial statements.

F-15

MEDEQUITIES REALTY TRUST, INC. AND SUBSIDIARIES

Notes to Interim Consolidated Financial Statements

1.	Organization and Nature of Business

The Company’s investment focus is primarily on the following types of healthcare properties: acute care hospitals, short stay surgical and specialty hospitals (such as those focusing on orthopedic, heart, and other dedicated surgeries and specialty procedures), dedicated specialty hospitals (such as inpatient rehabilitation, long-term acute care hospitals and facilities providing psychiatric care), skilled nursing facilities, large and prominent physician clinics, diagnostic facilities, outpatient surgery centers and facilities that support these services, such as medical office buildings. As of June 30, 2015, the Company had investments of $339 million, net in twelve real estate properties with an aggregate of 743,764 square feet and two mortgage notes receivable.

While the Company’s preferred form of investment is fee ownership of a facility with a long-term triple-net lease with the healthcare provider or operator, the Company also intends to provide debt financing to healthcare providers, typically in the form of mortgage or mezzanine loans. In addition, the Company may provide capital to finance the development of healthcare properties, which the Company may use as a pathway to the ultimate acquisition of pre-leased properties by including purchase options or rights of first offer in loan agreements.

The Company conducts its business through an umbrella partnership REIT, or UPREIT, structure, consisting of the Company’s operating partnership, MedEquities Realty Operating Partnership, LP (the “Operating Partnership”), and subsidiaries of the Operating Partnership, including the Company’s taxable REIT subsidiary (“TRS”), MedEquities Realty TRS, LLC. The Company’s wholly owned limited liability company, MedEquities OP GP, LLC, is the sole general partner of the Operating Partnership, and the Company presently owns all of the limited partnership units of the Operating Partnership (“OP units”). In the future, the Company may issue OP units to third parties in connection with healthcare property acquisitions, as compensation or otherwise.

Holders of OP units, other than the Company, will, after a one-year holding period, subject to earlier redemption in certain circumstances, be able to redeem their OP units for a cash amount equal to the then-current value of the Company’s common stock or, at the Company’s option, for shares of the Company’s common stock on a one-for-one basis, subject to adjustments for stock splits, dividends, recapitalizations and similar events. Holders of OP units will receive distributions equivalent to the dividends the Company pays to holders of the Company’s common stock, but holders of OP units will have no voting rights, except in certain limited circumstances. As the sole owner of the general partner of the Operating Partnership, the Company has the exclusive power to manage and conduct the Operating Partnership’s business, subject to certain limitations.

The Company has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal tax purposes commencing with the Company’s short taxable year ended December 31, 2014. To maintain its qualification as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles).

F-16

federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distributions to stockholders. Even if the Company qualifies for taxation as a REIT, the Company may be subject to state and local taxes on its income and property and federal income and excise taxes on its undistributed income. Taxable income from non-REIT activities managed through the Company’s TRS, if any, is subject to applicable U.S. federal, state and local income taxes. The Company has no activity in its TRS.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for a full year. The financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s audited consolidated financial statements and related notes for the period ended December 31, 2014.

2.	Summary of Significant Accounting Policies

Use of Estimates: The preparation of the interim consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim consolidated financial statements and the amounts of revenue and expense reported in the period. Significant estimates are made for the valuation of real estate and intangibles and fair value assessments with respect to purchase price allocations. Actual results may differ from those estimates.

Principles of Consolidation: The interim consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and all material intercompany transactions and balances have been eliminated in consolidation. There are no material differences between the Company and the Operating Partnership as of June 30, 2015.

Noncontrolling Interest : The portion of equity not owned by the Company in entities controlled by the Company, and thus consolidated, is presented as noncontrolling interest and classified as a component of consolidated equity, separate from total stockholders’ equity in the Company’s consolidated balance sheets. The amount recorded will be based on the noncontrolling interest holder’s initial investment in the consolidated entity, adjusted to reflect the noncontrolling interest holder’s share of earnings or losses in the consolidated entity and any distributions received or additional contributions made by the noncontrolling interest holder. The earnings or losses from the entity attributable to noncontrolling interests are reflected in “net income (loss) attributable to noncontrolling interest” in the consolidated statements of operations.

Segment Reporting: The Company owns, acquires, and finances healthcare-related properties. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore the Company discloses its operating results in a single reportable segment.

Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The majority of the Company’s cash and cash equivalents are held at major commercial banks which at times may exceed the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses to date on invested cash.

F-17

Restricted Cash: Restricted cash consists of amounts funded by tenants and held by the Company for payment of costs and expenses associated with capital improvements, repairs and replacements to be performed at certain of the Company’s facilities. As of June 30, 2015, the restricted cash balance was less than $0.1 million and is included in Other Assets on the Company’s consolidated balance sheet.

Revenue Recognition:

Leases of Real Estate Properties

At the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses the terms and conditions to determine the proper lease classification. Currently, all the Company’s lease arrangements are classified as operating leases. Rental revenue for operating leases is recognized on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of a leased asset. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or by the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. The determination of ownership of the tenant improvements is subject to significant judgment. If the Company’s assessment of the owner of the tenant improvements for accounting purposes were different, the timing and amount of revenue recognized would be impacted.

The Company maintains an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of tenants and operators on a continuous basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, the Company’s assessment is based on income recoverable over the term of the lease. The Company exercises judgment in establishing allowances and considers payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to the interim consolidated financial statements. At June 30, 2015 and December 31, 2014, the Company had no allowance for doubtful accounts.

The Company’s leases are generally “triple-net” leases with terms requiring operating expenses associated with the Company’s facilities, such as taxes, insurance and utilities be paid directly by the Company’s tenants. Failure by a tenant to pay such expenses, or to pay late, would result in a violation of the lease agreement, which could lead to an event of default if not cured timely.

Leases in the medical office building owned by the Company require tenants to make estimated payments to us to cover their proportional share of operating expenses, including, but not limited to, real estate taxes, property insurance, routine maintenance and repairs, utilities, and property management expenses. The Company collects these estimated expenses and is reimbursed by tenants for any actual expense in excess of estimates or reimburses tenants if collected estimates exceed actual operating results. The reimbursements are recorded in rental income as operating expense recoveries, and the expenses are recorded in property-related expenses, as the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the credit risk. For the six months ended June 30, 2015, the Company reported operating expense recoveries for its one medical office building totaling $0.4 million, which is included in rental income on the consolidated statement of income.

Mortgage Notes and Other Receivables

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income on mortgage notes receivable, including the amortization of any discounts and premiums, using the interest method applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Premiums, discounts and related costs are recognized as yield adjustments over the term of the related loans.

Mortgage notes receivable are placed on non-accrual status at such time as management determines that collectability of contractual amounts is not reasonably assured. While on non-accrual status, mortgage notes receivable are either accounted for on a cash basis, in which income is recognized only upon receipt of cash, or on a cost-recovery basis, where cash receipts reduce the carrying value of the loan, based on management’s judgment of collectability. No mortgage notes receivable are currently on non-accrual status.

Allowances are established for loans based upon an estimate of probable losses on an individual basis if they are determined to be impaired. Loans are impaired when it is deemed probable that the Company will be unable to collect all amounts due on a timely basis in accordance with the contractual terms of the loan. The allowance is based upon management’s assessment of the borrower’s overall financial condition, resources and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the net realizable value of any collateral. These estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan’s effective interest rate, the fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors. At June 30, 2015 and December 31, 2014, the Company had no allowance for loan losses.

Commitment, origination and other fees from lending activities are recognized as interest income over the life of the loan.

Allocation of Purchase Price of Acquired Real Estate : As part of the purchase price allocation process of acquisitions (whether an asset acquisition acquired via purchase/leaseback or a business combination via an asset acquired from the current lessor), management makes estimates based upon the relative fair values of each component for asset acquisitions and at a fair value of each component for business combinations. In making estimates of fair values for purposes of allocating purchase prices of acquired real estate, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the assets acquired.

The Company records above-market and below-market in-place lease values, if any, for its facilities, which are based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, or, for below-market in-place leases, including any bargain renewal option terms. The Company amortizes any resulting capitalized above-market lease values as a reduction of rental income over the lease term. The Company amortizes any resulting capitalized below-market lease values as an increase to rental income over the lease term. As of June 30, 2015, the Company did not have any above-market or below-market in-place leases; however, purchase price allocations for real estate acquisitions completed in the first quarter of 2015 are in process.

The Company amortizes the value of in-place leases to amortization expense over the initial term of the respective leases. If a lease is terminated, the unamortized portion of the in-place lease value is charged to amortization expense.

Depreciation and amortization of real estate assets and liabilities is provided for on a straight-line basis over the assets estimated useful life:


Building			30 to 50 years
Improvements			3.5 to 38 years
Lease intangibles			2.7 to 15 years
Furniture, fixtures, and equipment			10 to 14 years

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Asset Impairment:

Real Estate Properties

Real estate asset impairment losses are recorded when events or changes in circumstances indicate the asset is impaired and the estimated undiscounted cash flows to be generated by the asset are less than its carrying amount. Management assesses the impairment of properties individually and impairment losses are calculated as the excess of the carrying amount over the fair value of assets to be held and used, and carrying amount over the fair value less cost to sell in instances where management has determined that the Company will dispose of the property and the criteria is met for the property to be classified as held-for-sale. In determining the fair value, the Company uses current appraisals or other third party opinions of value and other estimates of fair value such as estimated discounted future cash flows.

Mortgage Notes and Other Receivables

The Company evaluates the carrying value of mortgage notes receivable on an individual basis. Management periodically evaluates the realizability of future cash flows from the mortgage note receivable when events or circumstances, such as non-receipt of principal and interest payments and/or significant deterioration of the financial condition of the borrower, indicate that the Company will be unable to collect all the contractual interest and principal payments as scheduled in the mortgage note agreement. An impairment charge is recognized in current period earnings and is calculated as the difference between the carrying amount of the mortgage note receivable and the discounted cash flows expected to be received, or if foreclosure is probable, the fair value of the collateral securing the mortgage.

Income Taxes: Commencing with its short taxable year ended December 31, 2014, the Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Company intends at all times to maintain its qualification as a REIT under Sections 856 through 860 of the Code. The Company has elected that its subsidiary, MedEquities Realty TRS, LLC, be taxed as a TRS under provisions of the Code. A TRS is subject to federal and state income taxes like those applicable to regular corporations. Aside from such income taxes that may be applicable to the taxable income in the Company’s TRS, the Company will not be subject to federal income tax provided that the Company continues to qualify as a REIT and makes distributions to stockholders equal to or in excess of the Company’s taxable income.

The Company’s federal tax returns for the short taxable year ended December 31, 2014 is currently subject to examination by taxing authorities. The Company classifies interest and penalties related to uncertain tax positions, if any, in the Company’s interim consolidated financial statements as a component of income tax expense.

The Company has made no U.S. federal income tax payments.

Stock-Based Compensation: The fair value of stock-based awards is calculated on the date of grant. The Company amortizes the stock-based compensation expense on a straight-line basis over the period that the awards are expected to vest, net of any forfeitures. See Note 6 for further discussion.

Deferred Costs: Costs incurred prior to the completion of offerings of stock or other capital instruments that directly relate to the offering are deferred and netted against proceeds received from the offering.

Fair Value Measurement: Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements.

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A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

•

Level 1 — quoted prices for identical instruments in active markets;

•

Level 2 — quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•

Level 3 — fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads, market capitalization rates, etc. Items valued using such internally-generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified in either Level 2 or 3 even though there may be some significant inputs that are readily observable. Valuation techniques used by the Company include the use of third-party valuations and internal valuations which may include discounted cash flow and Monte Carlo valuation models.

Accumulated Other Comprehensive Income: Certain items must be included in comprehensive income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains or losses on available-for-sale securities. Through June 30, 2015, the Company had no items included in other comprehensive income.

Recent Accounting Developments: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers,” a comprehensive new revenue recognition standard that supersedes most all existing revenue recognition guidance. This standard’s core principle is that a company will recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. However, leasing contracts, representing the major source of the Company’s revenues, are not within the scope of the new standard and will continue to be accounted for under existing standards. This standard is effective for public companies beginning after December 15, 2017 and interim periods therein. Nonpublic companies would be required to adopt the standard beginning January 1, 2019 and interim periods beginning January 1, 2020. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The effects of this standard on the Company’s financial position, results of operations and cash flows are not yet known.

In April 2014, the FASB issued Accounting Standards Update No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This standard changes the requirements for reporting discontinued operations by raising the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The standard limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. The Company adopted this standard on January 1, 2015, which did not have a significant impact on the Company’s consolidated financial position or results of operations.

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3.	Real Estate and Mortgage Notes Receivable

Real Estate Investments

A summary of the preliminary purchase price allocations for the Company’s real estate investment activity for the six months ended June 30, 2015 is as follows (dollars in thousands):


	For the six months ended June 30, 2015
Land	$	23,359
Buildings and improvements		176,281
Intangible lease assets		103
Furniture, fixtures, and equipment		2,284

Total real estate properties		202,027
Foreclosed mortgage note receivable		(50,000	)

Total cash paid	$	152,027

Real Estate Acquisitions

During the six months ended June 30, 2015, the Company completed the following real estate transactions:

•

On February 3, 2015, the Company acquired Lakeway Regional Medical Center (“Lakeway Hospital”), through a negotiated, non-judicial foreclosure and payment of an additional $25.0 million in cash consideration, for a total investment of $75.0 million. Lakeway Hospital, which opened in April 2012, is a 270,512 square-foot acute care hospital located in Lakeway, Texas, a suburb of Austin, that provides services in emergency medicine, family practice, cardiology, cardiothoracic surgery, radiation, oncology, general surgery, gastroenterology, women’s health, infusion therapy, diagnostic and therapeutic radiology, respiratory, physical therapy and sports medicine, occupational therapy, speech-language pathology and pain management. The Company initially acquired a note receivable for $50.0 million on December 29, 2014, which had an outstanding principal balance of approximately $163.9 million and was secured by a first mortgage lien on Lakeway Hospital. The operator of the facility defaulted on debt service payments under the note in 2013, and the U.S. Department of Housing and Urban Development held an auction in December 2014 through which the Company acquired the mortgage note.

The Company owns the facility through a consolidated partnership, the “Lakeway Partnership”, which, based on a total equity cash contribution of $2.0 million, is owned 51% by the Company and 49% by a neurosurgical physicians group that relocated its practice to Lakeway Hospital. The partnership was formed on March 20, 2015. The Company’s equity contribution to the Lakeway Partnership was $1.0 million, and the Company’s transfer of the original $50.0 million note and $23.0 million of cash to the Lakeway Partnership is structured as an intercompany $73.0 million loan ( the “Lakeway Intercompany Mortgage Loan”) to the Lakeway Partnership that is secured by a first mortgage lien on Lakeway Hospital. The Lakeway Intercompany Mortgage Loan has a ten-year term and requires payments of principal and interest at a rate of 8.0% per annum based on a 25-year amortization schedule. The interest rate on the Lakeway Intercompany Mortgage Loan will reset after five years based upon then-current market rates. Lakeway Hospital is leased to Lakeway Regional Medical Center, LLC, pursuant to a non-cancelable 25-year triple-net lease. The stabilized annualized base rent under the lease is approximately $12.8 million. This transaction was accounted for as an asset acquisition and approximately $0.1 million of transaction costs were capitalized in conjunction with this transaction.

In addition, in connection with the acquisition of Lakeway Hospital, the Company assumed the seller’s rights as lessor under the ground lease for the medical office building that is a part of Lakeway Hospital. The ground lease expires on October 1, 2061, subject to two ten-year extension options, and provides for annual base rent to the Lakeway Partnership of approximately $0.2 million, which will increase each year by 3.0% of the prior year’s base rent.

F-22

•

On February 20, 2015, the Company acquired Mira Vista Court, a 142 bed skilled nursing facility located in Fort Worth, Texas, for an aggregate purchase price of $16.0 million. The property is 100% leased pursuant to a 12-year initial term triple-net lease that expires in February 2027. This transaction was accounted for as a business combination.

•

On March 31, 2015, the Company acquired a portfolio of four skilled nursing facilities and one assisted living facility (the “Life Generations Portfolio”) located in California for an aggregate purchase price of $80 million from Life Generations Healthcare (“Life Generations”). These properties are 100% leased pursuant to a 15-year initial term triple net master lease that commenced on April 1, 2015. The transaction was accounted for as an asset acquisition and approximately $1.6 million of transaction costs were capitalized in conjunction with this transaction. In connection with the acquisition of the Life Generations Portfolio, the Company entered into an exclusive option with Life Generations to purchase Kearny Mesa, a 96-bed skilled nursing facility located in San Diego, CA from Life Generations for $15.0 million, which is expected to close by the end of the third quarter of 2015, subject to customary closing conditions. On August 10, 2015, the Company deposited $100,000 pursuant to the purchase option agreement. Under the option agreement, Life Generations is entitled to an earn-out of up to $10.0 million, with the amount contingent upon the achievement of certain performance thresholds relating to the earnings before interest, taxes, depreciation, amortization, rent and management fees of the option property for 2015 and 2016.

•

On March 31, 2015, the Company acquired Mountain’s Edge Hospital, a newly developed 72,140 square-foot acute care hospital located in Las Vegas, Nevada, that began admitting patients in early July 2015 for an aggregate gross purchase price of up to $35.4 million, which includes a tenant allowance included in other assets of the company’s balance sheet of $6.0 million that the Company provided to the tenant for certain furniture, fixtures and equipment installed or to be installed at the facility. As of June 30, 2015, the Company had paid $33.9 million of the aggregate gross purchase price with the remaining $1.5 million paid on July 31, 2015. This property is 100% leased pursuant to a 15-year initial term triple net lease. This transaction was accounted for as an asset acquisition and less than $0.1 million of transaction costs were capitalized in conjunction with this transaction.

The purchase price allocations attributable to the property acquisitions are preliminary as the valuations for each of the acquisitions is still in progress. When all relevant information is obtained, any resulting changes to the preliminary purchase price allocations will be retrospectively adjusted to reflect the new information obtained about the facts and circumstances that existed as of the respective acquisition dates that, if known, would have affected the measurement of the amounts recognized as of those dates.

On July 30, 2015, the Company completed the acquisition of nine properties in a portfolio of ten skilled nursing facilities located throughout Texas (the “Texas SNF Portfolio”) that contain an aggregate 1,142 licensed beds and approximately 339,733 square feet. The aggregate gross purchase price for the nine facilities was $133.4 million which was funded primarily with borrowings under the Company’s secured revolving credit facility. The tenth facility, which is located in Graham, Texas and has 117 licensed beds and 32,391 square feet, is expected to be acquired for approximately $11.6 million, subject to the satisfaction of customary closing conditions and receipt of certain regulatory consents, resulting in an aggregate gross purchase price of $145.0 million for all ten facilities.

The aggregate gross purchase price includes $12.0 million of refundable contingent consideration, $3.0 million of which will become fully earned and non-forfeitable on January 1 of each year from 2016 through 2019, subject to the tenants’ compliance with certain financial covenants under the master lease agreement and other provisions in the purchase and sale agreement on such dates. If any of the refundable contingent consideration has not been earned by January 1, 2019, the tenants will have until January 1, 2020 to achieve compliance with all of the applicable financial covenants and earn such remaining refundable contingent consideration. If the tenants have not achieved such compliance by January 1, 2020, the seller must repay to the Company any refundable contingent consideration that has not been earned, together with interest, at a rate of 3.0% per annum, from the closing date of the acquisition to January 1, 2020.

F-23

Concurrently with the closing of the acquisition of the initial nine facilities, the Company leased the facilities to wholly owned subsidiaries of GruenePointe Holdings, LLC (“GruenePointe”) pursuant to an absolute triple-net master lease with a non-cancelable 15-year term with two five-year extension options. The initial base rent under the master lease is approximately $11.3 million, or 8.5% of the $133.4 million paid at closing for the nine facilities. Concurrently with closing on the acquisition of the tenth facility, the master lease will be amended to include this facility, and the annual base rent under the master lease will be increased by approximately $1.0 million, for total annual base rent of approximately $12.3 million for the entire Texas SNF Portfolio. The annual base rent will increase each year by 2.0% of the prior year’s base rent. The annual rent will not be adjusted down in the event that GruenePointe is required to repay any portion of the refundable contingent consideration.

In addition to the base rent, commencing in the second year of the lease, the master lease provides for additional rent equal to 20% of the amount by which the aggregate gross patient care revenues (i.e., gross revenues less supplemental management fees) of four of the facilities—located in the cities of Brownwood, Graham, San Antonio, and Kerens, Texas with an aggregate 412 licensed beds—exceed the aggregate gross patient care revenues of such facilities in the first year of the master lease, until the aggregate rent under the master lease for these four facilities equals 10.0% of the portion of the $145 million gross purchase price allocated to these facilities, subject to increases pursuant to the annual rent escalator.

Intangible Assets

The following is a summary of the carrying amount of intangible assets as of June 30, 2015 (dollars in thousands):


	Cost		Accumulated Amortization			Net		Weighted Average Life (Years)
In-place leases	$	2,096	$	(316	)	$	1,780		8.1
Leasing commissions		1,294		(142	)		1,152		10.5
Legal/marketing fees		51		(7	)		44		9.0

Total	$	3,441	$	(465	)	$	2,976		9.1

The Company recorded amortization expense related to intangible lease assets of approximately $0.3 million for the six months ended June 30, 2015.

The following table represents expected amortization of existing lease intangible assets at June 30, 2015 (dollars in thousands):


For the year ended December 31:
2015 (remaining six months)	$	287
2016		576
2017		542
2018		177
2019		157
2020		157
Thereafter		1,080

Total	$	2,976

Leasing Operations

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2040. Leases for the Company’s portfolio, including single-tenant properties, generally

F-24

require the lessee to pay minimum rent (which generally increases annually on a fixed percentage basis or based on increases in the consumer price index), all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

Minimum rental payments due to the Company in future periods under operating leases for the Company’s properties that have non-cancelable terms extending beyond one year as of June 30, 2015, are as follows (dollars in thousands):


For the year ended December 31:
2015 (remaining six months)	$	15,236
2016		37,468
2017		34,455
2018		33,629
2019		33,984
2020		34,524
Thereafter		571,561

	$	760,857

Concentrations of Credit Risks

The following table contains information regarding tenant concentration in the Company’s portfolio, based on the percentage of revenue for the six months ended June 30, 2015, related to Lakeway Regional Medical Center, LLC (the “Lakeway Operator”) and affiliates of Vibra Healthcare, Fundamental Healthcare, and Life Generations Healthcare.


	% of Total Revenue
Lakeway Operator		36.4	%
Vibra Healthcare		24.5	%
Fundamental Healthcare		20.5	%
Life Generations Healthcare		11.7	%

The following table contains information regarding the geographic concentration of the properties in the Company’s portfolio as of June 30, 2015, which includes percentage of rental income for the six months ended June 30, 2015 (dollars in thousands).


State	Number of Properties		Gross Investment		% of Total Real Estate Property Investments			% of Rental Income
California ⁽¹⁾		6	$	139,605		44.3	%		31.6	%
Texas		3		106,184		33.7	%		50.2	%
Nevada		2		49,407		15.7	%		11.2	%
South Carolina		1		20,000		6.3	%		7.0	%

		12	$	315,196		100.0	%		100.0	%

(1)	Gross investment includes $7.0 million that will be paid to the seller/tenant of Kentfield Rehabilitation & Specialty Hospital to fund renovations, which the seller/tenant will draw in full no later than October 31, 2015. As of June 30, 2015, approximately $3.6 million of this amount has been paid.

Debt

On July 30, 2015, the Company entered into an amended and restated $375 million secured revolving credit facility, which replaced the Company’s prior $200 million facility. The credit facility includes an accordion

F-25

feature that allows the total borrowing capacity under the credit facility to be increased to up to $600 million, subject to certain conditions, including obtaining additional commitments from lenders. Amounts outstanding under the new credit facility bear interest at LIBOR plus a margin between 2.75% and 3.75% or a base rate plus a margin between 2.00% and 2.50%, in each case depending on the Company’s leverage. As of July 30, 2015 the margins are 3.25% for LIBOR loans and 2.25% for base rate loans. Upon meeting certain conditions, including the completion of the initial public offering of the Company’s common stock, amounts outstanding under the credit facility will bear interest at LIBOR plus a margin between 2.00% and 2.50%, or a base rate plus a margin between 1.00% and 1.50%, in each case depending on the Company’s leverage. The credit facility will mature in November 2016 and has three, 12-month extension options, subject to certain conditions, including the completion of the initial public offering of the Company’s common stock. An extension fee of 0.15% will be required at each extension.

The Company incurred fees associated with amending and restating the credit facility of approximately $2.2 million, which will be amortized over the remaining term of the facility. The Company will expense in the third quarter of 2015 approximately $0.1 million of unamortized deferred financing costs related to the prior credit facility, with the remaining $1.5 million of deferred costs related to the prior credit facility amortized through the maturity date of the amended and restated credit facility.

Prior to amending and restating the credit facility, amounts outstanding under the credit facility bore interest at LIBOR plus a margin between 2.75% and 3.25% or a base rate (as defined in the credit agreement) plus a margin between 1.75% and 2.25%, in each case depending on the Company’s leverage. At June 30, 2015 and December 31, 2014, the interest rate under the credit facility was 2.9%. The credit facility includes an unused fee of 0.25% for usage greater than 50.0% and 0.35% for usage of 50.0% or less.

The amount available for the Company to borrow under the credit facility is limited according to a borrowing base valuation of certain real estate investments owned by subsidiaries of the Operating Partnership that secure this facility. At June 30, 2015, the Company had $78 million outstanding that was repaid with proceeds from the amended and restated credit facility on July 30, 2015. As of August 13, 2015, the Company had $216 million outstanding under the credit facility and approximately $29 million of available capacity.

The Company paid cash interest of approximately $0.5 million and $1.2 million related to the credit facility for the three and six months ended June 30, 2015, respectively.

Covenants

The credit facility contains customary financial and operating covenants, including covenants relating to the Company’s total leverage ratio, fixed charge coverage ratio, tangible net worth, minimum liquidity, maximum distribution/payout ratio and restrictions on recourse debt, secured debt and certain investments. The credit facility also contains customary events of default, including among others, nonpayment of principal or interest, material breach of representations and warranties, and failure to comply with covenants. Any event of default, if not cured or waived, could result in the acceleration of any outstanding indebtedness under the credit facility. In addition, the availability to make additional draws under the credit facility will be suspended if the Company does not complete an initial public offering of its common stock by December 31, 2015. The Company was in compliance with all covenants at June 30, 2015.

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5.	Other Assets

Items included in Other Assets on the Company’s interim consolidated balance sheet as of June 30, 2015 are detailed in the table below (dollars in thousands):


	June 30, 2015		December 31, 2014
Tenant allowance, net	$	4,454	$	—
Straight-line rent receivables		4,013		394
Capitalized pre-offering costs		2,333		1,450
Prepaid assets and deposits		1,948		1,942
Deferred financing costs, net		1,710		2,202
Interest and accounts receivable		1,087		62
Pre-acquisition costs		360		2,317
Corporate property, net		287		42
Restricted cash		69		23

	$	16,261	$	8,432

Approximately $0.3 million and $1.0 million of the pre-acquisition costs and capitalized pre-offering costs, respectively, have not been paid and are included in accrued liabilities on the interim consolidated balance sheet at June 30, 2015.

6.	Incentive Plan

The Company’s 2014 Equity Incentive Plan (the “Plan”) provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including Long Term Incentive Plan (“LTIP”) units, which are convertible on a one-for-one basis into OP units. As of June 30, 2015, the Company had reserved a total of 656,723 shares of common stock for issuance pursuant to the Plan (including an aggregate of 317,147 shares of restricted common stock and restricted stock units granted to the Company’s executive officers, non-employee directors and certain employees as of June 30, 2015 and 339,576 shares of common stock reserved for potential future issuance), subject to certain adjustments set forth in the Plan.

Restricted Equity Awards

As of June 30, 2015, the Company had granted an aggregate of 166,127 performance-vesting restricted stock units to its executive officers and certain other employees under the Plan. These restricted stock units will vest on the third anniversary of the grant date, based on the achievement of absolute total return to stockholders (“TSR”) (50% weighting) and relative TSR as compared to the performance of the MSCI US REIT Index (“RMS”) (50% weighting), subject to continued employment through the vesting date. For performance between the specified TSR Performance and RMS Performance hurdles, the amount earned would be interpolated on a linear basis. Dividends on the restricted stock units will accrue but will not be paid unless and until the underlying restricted stock units vest and are converted to shares of common stock. The absolute and relative TSR thresholds are as follows:


Absolute TSR Award
TSR Performance		% of Award Earned
25.5%		0%
27.5%		25%
29.5%		50%
31.5%		75%
33.5%		100%

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Relative TSR Award
MSCI US REIT Index Performance		% of Award Earned
= Index		0%
Index +3%		50%
Index +6% or greater		100%

The grant date fair value of restricted stock units granted in 2014 was determined to be $6.53 per share by using a Monte Carlo valuation model that assumed the following: risk free interest rate of 1.02%; expected volatility of 25%; and expected service period of 3 years. The total value of these awards is estimated to be $1.0 million.

On January 1, 2015, the Company granted 16,665 restricted shares of common stock to its non-employee directors as part of the annual director compensation, which will vest ratably on each of the first three anniversaries of the date of grant, subject to the director’s continued service on the Company’s board of directors. The total value of these awards is calculated to be $0.3 million.

On May 18, 2015, the Company granted 4,800 restricted shares of common stock and 7,200 restricted share units to an employee. The total value of these awards is calculated to be approximately $0.1 million. The grant date fair value of this award is preliminary. The following summarizes the stock-based award activity for the six months ended June 30, 2015:


	Shares Vesting Based on Service		Shares Vesting Based on Market/ Performance Conditions
Non-vested awards at beginning of the period		129,555		158,927
Awarded		21,465		7,200
Vested		—		—
Forfeited		—		—

Non-vested awards at end of the period		151,020		166,127

The weighted average value of the total restricted shares and restricted stock units outstanding at June 30, 2015 approximates $15.03 and $6.64, respectively.

The value of stock-based awards is charged to compensation expense included in general and administrative expenses over the vesting periods. For the six months ended June 30, 2015, the Company recognized $0.6 million of non-cash compensation expense. The remaining unrecognized cost from stock-based awards at June 30, 2015 is $2.3 million and will be recognized over a weighted-average period of 2.3 years.

Subsequent Share Awards and Vesting; Increased Share Authorization

Subsequent to June 30, 2015, the Company has issued an aggregate of 136,931 restricted shares of common stock and 192,898 restricted stock units to executive officers, certain other employees and newly appointed members of its board of directors, in each case under the Plan. Management has determined the value of these awards to be approximately $2.2 million and $1.4 million, respectively, for the restricted shares of common stock and restricted stock units.

On July 31, 2015, 5,555 restricted shares of common stock granted to members of the Company’s board of directors on July 31, 2014 vested.

On August 13, 2015, the Company’s board of directors approved an amendment and restatement of the Plan, which increased the total number of shares of common stock reserved for issuance under the Plan from 656,723 shares to 1,356,723 shares.

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7.	Commitments and Contingencies

Commitments

As of June 30, 2015, the Company was obligated under operating lease agreements consisting primarily of the Company’s corporate office lease, which expires in 2020, and a ground lease related to one property, which expires in 2081. Annual base rent on the corporate office lease increases approximately 3.0% annually. The Company’s ground lease rent increases 2.0% annually and is included in property-related expense. Rent expense relating to the operating leases for the six months ended June 30, 2015 was approximately $0.2 million.

The Company’s future minimum lease payments for its operating leases as of June 30, 2015 were as follows (dollars in thousands):


2015 (remaining six months)	$	163
2016		330
2017		334
2018		342
2019		351
2020		203
Thereafter		20,155

	$	21,878

As a part of the acquisition of Kentfield Rehabilitation & Specialty Hospital, a long-term acute care hospital in California, the Company agreed to pay the seller/tenant $7.0 million to fund an in-progress renovation project. The entire $7.0 million will be paid by the Company no later than October 31, 2015. Approximately $3.6 million has been advanced as of June 30, 2015.

On November 24, 2014, the Company entered into an interim loan agreement with the lessee of Mountain’s Edge Hospital in advance of closing on the acquisition to loan up to $6.0 million for the purchase of certain furnishing, fixtures and equipment to be installed at the facility. After the closing on the acquisition, the remaining available funds under the interim loan agreement were available to be disbursed as a tenant improvement allowance under the facility lease agreement to facilitate payment for the remaining furniture, fixtures and equipment necessary to equip the facility following the closing date. As of June 30, 2015, the Company has funded $4.5 million of the tenant allowance. As of July 31, 2015, the Company had funded the full amount of the allowance.

Purchase Option

On August 11, 2015, the Company provided notice to the borrower under the Company’s $18 million mortgage note receivable secured by a rehabilitation hospital located in Amarillo, Texas of its intent to exercise its exclusive right to purchase the hospital. The initial purchase price is expected to be $19.4 million which was determined by dividing the facility’s trailing twelve-month earnings before interest, taxes, depreciation, amortization, and rent expense (“EBITDAR”) of the facility and a 1.5 times rent coverage at an initial lease rate of 8.75%. In addition to the initial purchase price, we may be required to pay the seller an earn-out of up to $10.6 million 24 months after the closing of the acquisition, based on the tenant’s then-trailing twelve months EBITDAR. The acquisition of the property is expected to close by the end of 2015, subject to receipt of approval from the borrower’s working capital lender’s approval and customary closing conditions.

Contingencies

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indemnify it against environmental or title problems affecting the real estate underlying such facilities. The Company is not aware of any pending or threatened litigation that if resolved against the Company, would have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

8.	Equity

Preferred Stock Issuances

On January 28, 2015, the Company issued 125 shares of newly classified 12.5% Series A Redeemable Cumulative Preferred Stock for $1,000 per share in order to ensure that the Company meets the beneficial ownership requirement applicable to REITs under the Code.

On March 11, 2015, the Company entered into an agreement to issue and sell up to 125,000 shares of the Company’s newly classified 7.875% Series B Redeemable Cumulative Preferred Stock (“Series B Preferred Stock”), with a liquidation preference of $1,000 per share, to Carter/Validus Operating Partnership, L.P. (“Carter Validus”), for gross proceeds of $125 million. The Company closed the initial sale of 100,000 shares for gross proceeds of $100 million on March 11, 2015 and closed on the additional sale of 25,000 shares to Carter Validus for gross proceeds of $25 million on April 1, 2015. The net proceeds of $119.9 million from the issuances were used to repay amounts outstanding under our revolving credit facility and to fund acquisitions.

Dividends on the Series B Preferred Stock are paid monthly at an annual rate of 7.875% of the $1,000 liquidation preference plus accumulated and unpaid dividends, subject to increases in the event of certain defaults by the Company. Dividends of $2.5 million and $2.9 million were paid or accrued during the three and six months ended June 30, 2015, respectively. The Series B Preferred Stock is redeemable at any time at the Company’s option, and must be redeemed in connection with a change of control of the Company or the initial public offering of the Company’s common stock, in each case at the $1,000 liquidation preference, plus accumulated and unpaid dividends and a special redemption dividend equal to 1% of the liquidation preference if redeemed prior to December 10, 2015, 3% of the liquidation preference if redeemed after December 10, 2015 but prior to March 10, 2016 and 5% of the liquidation preference if redeemed on or after March 10, 2016.

The Series B Preferred Stock is senior to the Company’s common stock with respect to dividends and distributions, including distributions upon liquidation, dissolution or winding up. The Series B Preferred Stock has limited voting rights and does not vote in the election of directors unless the Company fails to pay dividends on the Series B Preferred Stock for 12 consecutive months, fails to maintain a minimum tangible net worth of at least $100 million or fails to qualify or maintain qualification as a REIT. Under such circumstances, the Series B Preferred Stock will be entitled to elect one additional director to the Company’s board of directors until such default is cured for a period of six months.

Beginning on March 6, 2018, each share of Series B Preferred Stock, at the option of the holder, may be converted into a number of shares of the Company’s common stock equal to the $1,000 liquidation preference plus accumulated and unpaid dividends divided by $15.70, subject to certain adjustments in the event of stock splits, stock dividends and other similar capital changes.

In connection with the private placement of these preferred shares, the Company granted Carter Validus a right of first refusal in the event that the Company intends to (i) sell or otherwise transfer any of the Company’s properties or (ii) engage in a transaction that would result in a change of control of the Company, other than an initial public offering of the Company’s common stock. The Company will not pay a special redemption dividend on the Series B Preferred Stock in the case of a mandatory redemption in conjunction with a change in control transaction with Carter Validus or its affiliates prior to December 31, 2015. This right of first refusal will terminate upon redemption of all Series B Preferred Stock held by Carter Validus (including a mandatory redemption upon completion of an initial public offering of the Company’s common stock) or otherwise when Carter Validus no longer owns any Series B Preferred Stock.

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Common Stock Dividends

On December 17, 2014, the Board of Directors declared a cash dividend of $0.12 per share, or $1.3 million in total, for the period from October 1, 2014 through December 31, 2014. The dividend was paid on January 14, 2015 to stockholders of record on December 30, 2014.

On March 25, 2015, the Board of Directors declared a cash dividend of $0.17 per share, or $1.9 million in total, for the period from January 1, 2015 through March 31, 2015. The dividend was paid on April 14, 2015 to stockholders of record on April 2, 2015.

On August 13, 2015, the Board of Directors declared a cash dividend of $0.17 per share, or $2.0 million in total, for the period from April 1, 2015 through June 30, 2015. The dividend will be paid on September 9, 2015 to stockholders of record on August 27, 2015.

9.	Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, receivables and payables are reasonable estimates of their fair value as of June 30, 2015 due to their short-term nature. The fair value of the Company’s mortgage notes receivable as of June 30, 2015 is estimated by using Level 2 inputs such as discounting the estimated future cash flows using current market rates which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

At June 30, 2015, the Company’s indebtedness was comprised of borrowings under our revolving credit facility that bear interest at LIBOR plus a margin. The fair value of borrowings on our revolving credit facility are considered to be equivalent to their carrying value.

Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Settlement at such fair value amounts may not be possible. The following table summarizes fair value estimates for the Company’s financial instruments (dollars in thousands):


	June 30, 2015
	Carrying Value		Fair Value
Mortgage notes receivable	$	28,000	$	28,287

10.

Subsequent Events

Subsequent events have been evaluated through August 13, 2015, the date the consolidated financial statements were available to be issued.

F-31

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

MedEquities Realty Trust, Inc.:

We have audited the accompanying consolidated balance sheet of MedEquities Realty Trust, Inc. and subsidiaries as of December 31, 2014, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the period from April 23, 2014 (inception) to December 31, 2014. In connection with our audit of the consolidated financial statements, we also have audited financial statement schedule III, real estate and accumulated depreciation, and schedule IV, mortgage loans on real estate. These consolidated financial statements and financial statement schedules III and IV are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules III and IV based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MedEquities Realty Trust, Inc. and subsidiaries as of December 31, 2014, and the results of their operations and their cash flows for the period from April 23, 2014 (inception) to December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule III, real estate and accumulated depreciation, and schedule IV, mortgage loans on real estate, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Atlanta, GA

March 10, 2015

F-32

MEDEQUITIES REALTY TRUST, INC.

Consolidated Balance Sheet

(Amounts in thousands, except per share amounts)


	December 31, 2014
Assets
Real estate properties
Land	$	7,107
Building and improvements and intangible lease assets		106,061
Less accumulated depreciation and amortization		(1,268	)

Total real estate properties, net		111,900
Mortgage notes receivable, net		77,727
Note receivable		2,481
Cash and cash equivalents		10,493
Other assets, net		8,432

Total Assets	$	211,033

Liabilities and Stockholders’ Equity
Liabilities
Debt	$	50,000
Accounts payable and accrued liabilities		10,204
Deferred revenue		952

Total liabilities		61,156

Commitments and contingencies
Stockholders’ Equity

Preferred stock, $0.01 par value. Authorized 50,000 shares; no shares outstanding		—
Common stock, $0.01 par value. Authorized 400,000; 11,075 shares issued and outstanding at December 31, 2014		109
Additional paid in capital		151,991
Dividends declared		(2,246	)
Retained earnings		23

Total Stockholders’ Equity		149,877

Total Liabilities and Stockholders’ Equity	$	211,033

See accompanying notes to consolidated financial statements.

F-33

MEDEQUITIES REALTY TRUST, INC.

Consolidated Statement of Operations

(Amounts in thousands, except share and per share data)


	For the period from April 23, 2014 (inception) to December 31, 2014
Revenues
Rental income	$	4,316
Interest on mortgage notes receivable		1,078
Interest on note receivable		53

		5,447
Expenses
Depreciation and amortization		1,273
Property related		308
Acquisition costs		192
Start-up costs		888
Franchise, excise, and other taxes		72
General and administrative		2,391

Total operating expenses		5,124

Operating income		323

Other income (expense)
Interest and other income		17
Interest expense		(317	)

		(300	)

Net income	$	23

Net income per share
Basic and diluted	$	(0.00	)

Weighted average shares outstanding:
Basic and diluted		10,918

Dividends declared per common share	$	0.20

See accompanying notes to consolidated financial statements.

F-34

MEDEQUITIES REALTY TRUST, INC.

Consolidated Statement of Stockholders’ Equity

For the period from April 23, 2014 (inception) to December 31, 2014

(Amounts in thousands)


	Common Stock
	Shares			Par Value		Additional Paid-In Capital			Retained Earnings		Dividends Declared			Total Stockholders’ Equity
Balance at April 23, 2014 (inception)		—		$	—	$	—		$	—	$	—		$	—
Issuance of common stock, net of costs		11,076			109		151,549			—		—			151,658
Common stock redemption		(1	)		—		(1	)		—		—			(1	)
Stock-based compensation		—			—		443			—		—			443
Net income		—			—		—			23		—			23
Dividends to common stockholders		—			—		—			—		(2,246	)		(2,246	)

Balance at December 31, 2014		11,075		$	109	$	151,991		$	23	$	(2,246	)	$	149,877

See accompanying notes to consolidated financial statements.

F-35

MEDEQUITIES REALTY TRUST, INC.

Consolidated Statement of Cash Flows

(Amounts in thousands)


	For the period from April 23, 2014 (inception) to December 31, 2014
Operating activities
Net income	$	23
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,448
Stock-based compensation		443
Straight-line rent receivable		(394	)
Straight-line rent liability		47
Changes in operating assets and liabilities
Other assets		(1,997	)
Accounts payable and accrued liabilities		1,069
Deferred revenues		952

Net cash provided by operating activities		1,591
Investing activities
Acquisitions of real estate		(108,423	)
Funding of mortgage notes receivable, net		(77,720	)
Funding of note receivable		(2,481	)
Capitalized pre-acquisition costs		(592	)
Capital expenditures		(47	)

Net cash used in investing activities		(189,263	)
Financing activities
Proceeds from sale of common shares, net of offering costs		151,657
Borrowings on secured credit facility		50,000
Capitalized pre-offering costs		(226	)
Dividends paid		(885	)
Deferred credit facility origination fees		(2,381	)

Net cash provided by financing activities		198,165

Increase in cash and cash equivalents		10,493
Cash and cash equivalents, beginning of period		—

Cash and cash equivalents, end of period	$	10,493

See accompanying notes to consolidated financial statements.

F-36

MEDEQUITIES REALTY TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1.	Organization and Nature of Business

MedEquities Realty Trust, Inc. (the “Company”), which was incorporated in the state of Maryland on April 23, 2014, is a self-managed and self-administered company that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. The Company was initially capitalized on May 5, 2014, when it issued 1,000 shares of its common stock to its founder for total cash consideration of $1,000. During July and August 2014, the Company completed initial private placements of $163.9 million of its common stock receiving net proceeds, after purchase/placement agent discounts and fees and certain offering expenses, of approximately $151.7 million. Upon completion of the initial private placements, 1,000 shares issued to the Company’s founder were repurchased for $1,000. The Company commenced operations on July 31, 2014 and had no predecessor entity. Therefore, there are no financial statements for any period prior to April 23, 2014.

The Company’s investment focus is primarily on the following types of healthcare properties: acute care hospitals, short stay surgical and specialty hospitals (such as those focusing on orthopedic, heart, and other dedicated surgeries and specialty procedures), dedicated specialty hospitals (such as inpatient rehabilitation, long-term acute care hospitals and facilities providing psychiatric care), skilled nursing facilities, large and prominent physician clinics, diagnostic facilities, outpatient surgery centers and facilities that support these services, such as medical office buildings. As of December 31, 2014, the Company had investments of $190 million, net in four real estate properties with an aggregate of 195,379 rentable square feet and three mortgage notes receivable.

The Company conducts its business through an umbrella partnership REIT, or UPREIT, structure, consisting of the Company’s operating partnership, MedEquities Realty Operating Partnership, LP (the “Operating Partnership”), and subsidiaries of the Operating Partnership, including the Company’s taxable REIT subsidiary (“TRS”), MedEquities Realty TRS, LLC. The Company’s wholly owned limited liability company, MedEquities OP GP, LLC, is the sole general partner of the Operating Partnership, and the Company presently owns all of the limited partnership units of the Operating Partnership (“OP units”). In the future, the Company may issue OP units to third parties in connection with healthcare property acquisitions, as compensation or otherwise.

The Company intends to elect to be taxed as a real estate investment trust (“REIT”) for U.S. federal tax purposes for the Company’s short taxable year ended December 31, 2014. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90%

F-37

of its annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles).

As a REIT, the Company will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distributions to stockholders. Even if the Company qualifies for taxation as a REIT, the Company may be subject to state and local taxes on its income and property and federal income and excise taxes on its undistributed income. Taxable income from non-REIT activities managed through the Company’s TRS, if any, is subject to applicable U.S. federal, state and local income taxes. For the period ended December 31, 2014, the Company had no activity in its TRS.

2.	Summary of Significant Accounting Policies

Use of Estimates: The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the amounts of revenue and expense reported in the period. Significant estimates are made for the valuation of real estate and intangibles and fair value assessments with respect to purchase price allocations. Actual results may differ from those estimates.

Principles of Consolidation: The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and all material intercompany transactions and balances have been eliminated in consolidation. There are no material differences between the Company and the Operating Partnership as of December 31, 2014.

Restricted Cash: Restricted cash consists of amounts funded by tenants and held by the Company for payment of costs and expenses associated with capital improvements, repairs and replacements to be performed at certain of the Company’s facilities. As of December 31, 2014, the restricted cash balance was less than $0.1 million and is included in Other Assets on the Company’s consolidated balance sheet.

Revenue Recognition, Mortgage Notes, and Other Receivables: At the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses the terms and conditions to determine the proper lease classification. Currently, all the Company’s lease arrangements are classified as operating leases. Rental revenue for operating leases is recognized on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of a leased asset. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or by the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical

F-38

leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. The determination of ownership of the tenant improvements is subject to significant judgment. If the Company’s assessment of the owner of the tenant improvements for accounting purposes were different, the timing and amount of revenue recognized would be impacted.

The Company maintains an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of tenants and operators on a continuous basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, the Company’s assessment is based on income recoverable over the term of the lease. The Company exercises judgment in establishing allowances and considers payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to the consolidated financial statements. At December 31, 2014, the Company had no allowance for doubtful accounts.

Mortgage notes receivable are classified as held-for-investment based on management’s intent and ability to hold the mortgage notes receivable for the foreseeable future or to maturity. The Company recognizes interest income on mortgage notes receivable, including the amortization of any discounts and premiums, using the interest method applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Premiums, discounts and related costs are recognized as yield adjustments over the term of the related loans.

Allowances are established for loans upon an estimate of probable losses on an individual basis if they are determined to be impaired. Loans are impaired when it is deemed probable that the Company will be unable to collect all amounts due on a timely basis in accordance with the contractual terms of the loan. The allowance is based upon management’s assessment of the borrower’s overall financial condition, resources and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the net realizable value of any collateral. These estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan’s effective interest rate, the fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors.

Commitment, origination and other fees from lending activities are recognized as interest income over the life of the loan.

F-39

rental income as operating expense recoveries, and the expenses are recorded in property-related expenses, as the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the credit risk. For the period from April 23, 2014 (inception) to December 31, 2014, the Company reported operating expense recoveries for its one medical office building totaling $0.2 million, which is included in rental income on the consolidated statement of income.

Allocation of Purchase Price of Acquired Real Estate: As part of the purchase price allocation process of acquisitions (whether an asset acquisition acquired via purchase/leaseback or a business combination via an asset acquired from the current lessor), management makes estimates based upon the relative fair values of each component for asset acquisitions and at a fair value of each component for business combinations. In making estimates of fair values for purposes of allocating purchase prices of acquired real estate, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the assets acquired.

The Company records above-market and below-market in-place lease values, if any, for its facilities, which are based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, or, for below-market in-place leases, including any bargain renewal option terms. The Company amortizes any resulting capitalized above-market lease values as a reduction of rental income over the lease term. The Company amortizes any resulting capitalized below-market lease values as an increase to rental income over the lease term. As of December 31, 2014, the Company did not have any above-market or below-market in-place leases.

Depreciation and amortization of real estate assets and liabilities is provided for on a straight-line basis over the assets estimated useful life:


Building			35 to 45 years
Improvements			2.7 to 38 years
Lease intangibles			2.7 to 15 years

Asset Impairment: Real estate asset impairment losses are recorded when events or changes in circumstances indicate the asset is impaired and the estimated undiscounted cash flows to be generated by the asset are less than its carrying amount. Management assesses the impairment of properties individually and impairment losses are calculated as the excess of the carrying amount over the fair value of assets to be held and used, and carrying amount over the fair value less cost to sell in instances where management has determined that the Company will dispose of the property and the criteria is met for the property to be classified as held-for-sale. In determining the fair value, the Company uses current appraisals or other third party opinions of value and other estimates of fair value such as estimated discounted future cash flows.

F-40

Earnings Per Share: Basic earnings per common share is computed by dividing net income applicable to common shares by the weighted number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated by including the effect of dilutive securities.

Certain of the Company’s unvested restricted stock awards contain non-forfeitable rights to dividends, and accordingly, these awards are deemed to be participating securities. These participating securities are included in the earnings allocation in computing both basic and diluted earnings per common share.

Income Taxes: Upon filing of its initial federal U.S. tax return, the Company expects to elect to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Company intends at all times to qualify as a REIT under Sections 856 through 860 of the Code. Concurrent with the Company’s election of REIT status, the Company will elect that its subsidiary, MedEquities Realty TRS, LLC, be taxed as a TRS under provisions of the Code. A TRS is subject to federal and state income taxes like those applicable to regular corporations. Aside from such income taxes that may be applicable to the taxable income in the Company’s TRS, the Company will not be subject to federal income tax provided that the Company qualifies, and continues to qualify, as a REIT and makes distributions to stockholders equal to or in excess of the Company’s taxable income.

The Company has filed no tax returns. Therefore, no tax returns are subject to examination by taxing authorities. The Company classifies interest and penalties related to uncertain tax positions, if any, in the Company’s consolidated financial statements as a component of income tax expense.

The Company has made no U.S. federal income tax payments.

Start-up Costs: Start-up costs are expensed as incurred and were approximately $0.9 million. These costs, which relate to the formation of the Company and to the subsequent raising of capital that were incurred by certain members of the Company’s management team, were reimbursed to the members of management.

•

Level 1 — quoted prices for identical instruments in active markets;

•

Level 2 — quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•

Level 3 — fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

F-41

Accumulated Other Comprehensive Income: Certain items must be included in comprehensive income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains or losses on available-for-sale securities. Through December 31, 2014, the Company had no items included in comprehensive income.

In April 2014, the FASB issued Accounting Standards Update No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This standard changes the requirements for reporting discontinued operations by raising the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The standard limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. This standard is effective for the Company on a prospective basis for annual periods beginning on January 1, 2015 and interim periods beginning January 1, 2016. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. As the Company is newly formed and no held-for-sale properties or disposals have been reported in previously issued consolidated financial statements, this standard has been early adopted by the Company.

3.	Real Estate and Mortgage Notes Receivable

Real Estate Investments

A summary of the preliminary purchase price allocations for the Company’s real estate investment activity for the period from inception to December 31, 2014 is as follows (in thousands):


	For the period from April 23, 2014 (inception) to December 31, 2014
Land	$	7,107
Buildings and improvements		102,723
Intangible lease assets		3,338

Total real estate properties		113,168
Mortgage notes receivable acquired/originated, net		77,720
Other assets acquired		27

Total assets acquired/originated	$	190,915
Accrued liabilities assumed		7,000

Total cash paid	$	183,915

F-42

Real Estate Acquisitions

On August 1, 2014, the Company acquired the following properties:

•

A long-term acute care hospital located in Kentfield, California in a sale-leaseback transaction for $58.0 million. The purchase price includes $7.0 million that will be paid to the seller/tenant to fund ongoing renovations, which the seller/tenant will draw in full no later than June 30, 2015. Approximately $2.2 million of this amount has been paid through December 31, 2014, which is included in the acquisitions of real estate line items in the investing activities section of the consolidated statement of cash flows. The unfunded amount of $4.8 million at December 31, 2014 is included in accrued liabilities on the consolidated balance sheet. This transaction was accounted for as an asset acquisition. The property is 100% leased pursuant to a 15-year initial term triple-net lease that expires in December 2029. In connection with this transaction, the Company collected a transaction structuring and closing fee of approximately $0.6 million, which is recorded as deferred revenue on the Company’s consolidated balance sheet.

•

A long-term acute care hospital located in Las Vegas, Nevada for $20.0 million. The property is 100% leased pursuant to a 15-year initial term triple-net lease that expires in July 2029. This transaction was accounted for as a business combination.

•

A skilled nursing facility located in Spartanburg, South Carolina for $20.0 million. The property is 100% leased pursuant to a 12-year initial term triple-net lease that expires in July 2026. This transaction was accounted for as a business combination.

On September 19, 2014, the Company acquired a medical office building located in Brownsville, Texas for $15.1 million that was 83% leased with a weighted-average remaining lease term of approximately 3.3 years. The property is subject to a ground lease that the Company assumed in connection with the acquisition. The ground lease expires in 2081, subject to two ten-year extension options, and provides for an annual base rent of approximately $0.2 million in 2014, which will increase each year by 2.0% of the prior year’s annual base rent. This transaction was accounted for as a business combination.

Mortgage Notes Receivable

Also on August 1, 2014, the Company originated the following mortgage notes receivable:

•

An $18.0 million mortgage note receivable secured by a rehabilitation hospital in Amarillo, Texas. The loan bears interest at 9.0% for the first five years, after which it converts to a 15-year amortizing loan requiring payments of principal and interest. As part of this transaction, the Company received a fee from the borrower of 1% of the principal balance, which is included in the consolidated balance sheet as part of the loan balance. The Company has an exclusive right to purchase the hospital, subject to receipt of consent by the tenant’s third-party working capital lender, at a purchase price ranging between $18 million and $30 million and enter into a lease with the tenant, an affiliate of the borrower, at any time during the initial five-year term, but not within the first year of the mortgage note receivable. The mortgage note receivable may be prepaid during the initial five-year term only if an affiliate of the tenant enters into a replacement asset transaction with the Company equal to or exceeding $20.0 million in value.

•

A $10.0 million mortgage note receivable secured by a rehabilitation hospital in Springfield, Massachusetts. The loan bears interest at 9.0% for the first five years, after which it converts to a 15-year amortizing loan requiring payments of principal and interest. As part of this transaction, the Company received a fee from the borrower of 1% of the principal balance, which is included in the consolidated balance sheet as part of the loan balance. The mortgage note receivable may be prepaid during the initial five-year term only if an affiliate of the tenant enters into a replacement asset transaction with the Company equal to or exceeding $25.0 million in value.

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On December 29, 2014, the Company acquired for $50.0 million a mortgage note receivable with an outstanding principal balance of approximately $163.9 million secured by a first mortgage lien on Lakeway Regional Medical Center (“Lakeway Hospital”), which is a 270,512 square-foot acute care hospital in Lakeway, Texas that opened in April 2012. The operator of the facility defaulted on debt service payments under the mortgage in 2013, and the U.S. Department of Housing and Urban Development held an auction in December 2014 through which the Company acquired the note. The Company is not recognizing interest income on the accrual method. Interest income will be recognized as cash for interest is received. The Company obtained fee simple ownership of Lakeway Hospital on February 3, 2015 through a negotiated, non-judicial foreclosure.

Intangible Assets

The following is a summary of the carrying amount of intangible assets as of December 31, 2014 (dollars in thousands):


	Cost		Accumulated Amortization			Net		Weighted Average Life (Years)
In-place leases	$	1,993	$	(119	)	$	1,874		8.0
Leasing commissions		1,294		(58	)		1,236		10.8
Legal/marketing fees		51		(3	)		48		9.1

Total	$	3,338	$	(180	)	$	3,158		9.1

The Company recorded amortization expense related to intangible lease assets of approximately $0.2 million for the period from April 23, 2014 (inception) to December 31, 2014.

The following table represents expected amortization of existing lease intangible assets at December 31, 2014 (dollars in thousands):


For the year ended December 31:
2015	$	567
2016		567
2017		534
2018		169
2019		148
Thereafter		1,173

Total	$	3,158

Leasing Operations

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2029. Leases for the Company’s portfolio, including single-tenant properties, generally require the lessee to pay minimum rent (which generally increases annually on a fixed percentage basis or based on increases in the consumer price index), all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

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Minimum rental payments due to the Company in future periods under operating leases that have non-cancelable terms extending beyond one year as of December 31, 2014, are as follows (dollars in thousands):


2015	$	9,892
2016		10,171
2017		10,211
2018		8,957
2019		8,871
Thereafter		83,529

	$	131,631

Concentration of Credit Risks

The following table contains information regarding tenant concentration in the Company’s portfolio, based on the percentage of revenue for the period from April 23, 2014 to December 31, 2014, related to affiliates of Vibra Healthcare and Fundamental Healthcare.


	% of Total Revenue
Vibra Healthcare		59.8	%
Fundamental Healthcare		29.1	%

The following table contains information regarding the geographic concentration of the properties in the Company’s portfolio as of December 31, 2014, which includes percentage of rental income from inception to December 31, 2014.


State	Number of Buildings		Gross Investment		% of Total Real Estate Property Investments			% of Rental Income
California ⁽¹⁾		1	$	58,030		51.3	%		50.5	%
Nevada		1		20,010		17.7	%		16.6	%
South Carolina		1		20,000		17.7	%		18.9	%
Texas		1		15,128		13.3	%		14.0	%

		4	$	113,168		100.0	%		100.0	%

(1)	Gross investment includes $7.0 million that will be paid to the seller/tenant to fund renovations, which the seller/tenant will draw in full no later than June 30, 2015. As of December 31, 2014, approximately $2.2 million of this amount has been paid.

Debt

On November 7, 2014, the Company entered into a $200.0 million secured revolving credit facility (the “Credit Facility”) with a syndicate of eight lenders. The Credit Facility has an initial term of two years with two, 12-month extension options subject to certain conditions. An extension fee of 0.25% will be required at each extension. The Credit Facility includes an accordion feature, allowing the total borrowing capacity under the Credit Facility to be increased to up to $350 million, subject to certain conditions, including obtaining additional commitments from lenders. Amounts outstanding under the Credit Facility bear interest at LIBOR plus a margin between 2.75% and 3.25% or a base rate (as defined in the credit agreement) plus a margin between 1.75% and 2.25%, in each case depending on the Company’s leverage. At December 31, 2014, the interest rate under the Credit Facility was 2.9%. The Credit Facility includes an unused fee of 0.25% for usage greater than 50.0% and 0.35% for usage of 50.0% or less. In connection with the Credit Facility, the Company paid up-front fees to the lenders of approximately $2.4 million, which are being amortized over the term of the facility.

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The amount available for the Company to borrow under this facility is limited according to a borrowing base valuation of certain real estate investments owned by subsidiaries of the Operating Partnership that secures this facility. At December 31, 2014, the Company had $50 million outstanding and approximately $13 million of available capacity. As of March 10, 2015, the Company had approximately $72 million of availability under the Credit Facility and $66 million outstanding.

The Company paid cash interest of approximately $0.1 million related to the Credit Facility for the period from April 23, 2014 to December 31, 2014.

Covenants

The Credit Facility contains customary financial and operating covenants, including covenants relating to the Company’s total leverage ratio, fixed charge coverage ratio, tangible net worth, minimum liquidity, distribution/payout ratio and restrictions on recourse debt, secured debt and certain investments. The Credit Facility also contains customary events of default, including among others, nonpayment of principal or interest, material breach of representations and warranties, and failure to comply with covenants. Any event of default, if not cured or waived, could result in the acceleration of any outstanding indebtedness under the Credit Facility. The Company was in compliance with all covenants at December 31, 2014.

5.	Other Assets

Items included in Other Assets on the Company’s consolidated balance sheet as of December 31, 2014 are detailed in the table below (dollars in thousands):


	December 31, 2014
Pre-acquisition costs	$	2,317
Deferred financing costs		2,202
Prepaid assets and deposits		1,942
Capitalized pre-offering costs		1,450
Straight-line rent receivables		394
Interest and accounts receivable		62
Corporate property, net		42
Restricted cash		23

	$	8,432

Approximately $1.7 million and $1.2 million of the pre-acquisition costs and capitalized pre-offering costs, respectively, have not been paid and are included in accrued liabilities on the consolidated balance sheet at December 31, 2014.

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6.	Earnings Per Share

Earnings per share has been presented from July 31, 2014 when the Company commenced operations, rather than the Company’s date of incorporation. The Company applies the two-class method for determining earnings per common share as its outstanding restricted common stock with non-forfeitable dividend rights are considered participating securities. The following table sets forth the computation of basic and diluted earnings per common share for the period from July 31, 2014 to December 31, 2014 (dollars in thousands):


	For the period from July 31, 2014 to December 31, 2014
Numerator:
Net income	$	23
Less: Allocation to participating securities		(26	)

Net loss available to common stockholders	$	(3	)

Denominator
Basic weighted-average common shares		10,918
Dilutive potential common shares		—

Diluted weighted-average common shares		10,918

The effects of 129,555 restricted shares of common stock and 158,927 restricted stock units were excluded from the calculation of diluted income per common share because their effects were not dilutive.

7.	Incentive Plan

The Company’s 2014 Equity Incentive Plan (the “Plan”) provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including Long Term Incentive Plan (“LTIP”) units, which are convertible on a one-for-one basis into OP units. The Company has reserved a total of 656,723 shares of common stock for issuance pursuant to the Plan (including an aggregate of 288,482 shares of restricted common stock and restricted stock units previously granted to the Company’s executive officers, non-employee directors and certain employees and 368,241 shares of common stock reserved for potential future issuance), subject to certain adjustments set forth in the Plan.

Restricted Equity Awards

The Company has granted an aggregate 158,927 performance-vesting restricted stock units to its executive officers and certain other employees under the Plan. These restricted stock units will vest on the third anniversary of the grant date, subject to continued employment and based on the achievement of certain operating metrics through such date. The operating metrics include the achievement of absolute total return to stockholders (“TSR”) (50% weighting) and relative TSR as compared to the performance of the MSCI US REIT Index (“RMS”) (50% weighting). For performance between the specified TSR Performance and RMS Performance hurdles, the amount earned would be interpolated on a linear basis. Dividends on the restricted stock units will accrue but will not be paid unless and until the underlying restricted stock units vest and are converted to shares of common stock. The absolute and relative TSR thresholds are as follows:


Absolute TSR Award
TSR Performance	% of Award Earned
25.5%		0	%
27.5%		25	%
29.5%		50	%
31.5%		75	%
33.5%		100	%

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Relative TSR Award
MSCI US REIT Index Performance	% of Award Earned
= Index		0	%
Index +3%		50	%
Index +6% or greater		100	%

The grant date fair value of these restricted stock units was determined to be $6.53 per share by using a Monte Carlo valuation model that assumed the following: risk free interest rate of 1.02%; expected volatility of 25%; and expected service period of 3 years. The total value of these awards is estimated to be $1.0 million.

In addition, the Company has issued an aggregate of 23,605 restricted shares of common stock to its non-employee directors and an aggregate of 105,950 restricted shares of common stock to its executive officers and certain other employees under the Plan. Shares of restricted common stock granted to the Company’s non-employee directors will vest ratably on each of the first three anniversaries of the date of grant, subject to the director’s continued service on the Company’s board of directors. The restricted shares of common stock granted to the Company’s executive officers and certain other employees will vest with respect to 100% of the granted shares on the third anniversary of the grant date, subject to continued employment through such date. The grant date fair value of these awards was determined to be $15.00. The total value of these awards is calculated to be $1.9 million.

The following summarizes the stock-based award activity for the period from July 31, 2014, the date the Company commenced operations, to December 31, 2014 since no awards were granted prior to July 31, 2014:


	Vesting Based on Service				Vesting Based on Market/Performance Conditions
	Shares		Weighted Average Value at Award Date		Shares		Weighted Average Value at Award Date
Non-vested awards at beginning of the period		—	$	—		—	$	—
Awarded		129,555		15.00		158,927		6.53
Vested		—		—		—		—
Forfeited		—		—		—		—

Non-vested awards at end of the period		129,555	$	15.00		158,927	$	6.53

The value of stock-based awards is charged to compensation expense included in general and administrative expenses over the vesting periods. For the period from July 31, 2014 to December 31, 2014, the Company recognized $0.4 million of non-cash compensation expense. The remaining unrecognized cost from stock-based awards at December 31, 2014 is $2.5 million and will be recognized over a weighted-average period of 2.5 years.

8.	Commitments and Contingencies

Commitments

As of December 31, 2014, the Company was obligated under operating lease agreements consisting primarily of the Company’s corporate office lease, which expires in 2020, and a ground lease related to one real estate investment, which expires in 2081. Annual base rent on the corporate office lease increases approximately 3.0% annually. The Company’s ground lease rent increases 2.0% annually and is included in property-related expense. Rental expense relating to the operating leases for the period from April 23, 2014 (inception) to December 31, 2014 was approximately $0.1 million.

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The Company’s future minimum lease payments for its operating leases as of December 31, 2014 were as follows (in thousands):


2015	$	332
2016		326
2017		334
2018		342
2019		351
Thereafter		20,358

	$	22,043

As a part of the acquisition of the long-term acute care hospital in California, the Company agreed to advance $7.0 million of the purchase price while the seller, which is also the tenant, completes an in-progress renovation project. The entire $7.0 million will be paid by the Company no later than June 30, 2015. Approximately $2.2 million has been advanced through December 31, 2014.

On November 24, 2014, the Company entered into an interim loan agreement with the lessee of Mountain’s Edge Hospital, which is currently under development, to loan up to $6.0 million for the purchase of certain furnishing, fixtures, and equipment to be installed at the facility, which the Company has agreed to purchase as part of the acquisition upon completion of the facility. The Company is collecting interest of 8.75% on the entire $6.0 million loan commitment. As of December 31, 2014, the Company has advanced $2.5 million under the interim loan agreement which, is reflected as note receivable on the consolidated balance sheet.

Completed Acquisition

On February 20, 2015, the Company completed the acquisition of a 142 bed skilled nursing facility located in Fort Worth, Texas, for an aggregate purchase price of $16.0 million. The Company utilized availability under its Credit Facility to fund this acquisition. The property is leased to a subsidiary of Fundamental Healthcare under a triple-net lease.

Purchase and Sale Agreements

The Company has executed a purchase and sale agreement to acquire Mountain’s Edge Hospital, which is currently under development and will be a 72,140 square-foot acute care hospital in Las Vegas, Nevada, for an aggregate purchase price of $29.4 million, of which the Company advanced $1.3 million in January 2015. At closing of the acquisition, any amounts outstanding under the $6.0 million loan commitment discussed above will be included in the gross purchase price of the property. The property will be leased to a subsidiary of Fundamental Healthcare under a triple-net lease. The Company will not acquire the property until the development is completed and the tenant’s executed lease for the property commences, which are expected to occur in March 2015. There can be no assurance that this transaction will close on the terms described herein, or at all.

On February 19, 2015, the Company entered into a purchase and sale agreement with Life Generations Healthcare (“Life Generations”) to purchase four skilled nursing facilities and one assisted living facility, as well as an option agreement to purchase an additional skilled nursing facility, totaling 525 beds in southern California markets for a total purchase price of up to $105 million. The acquisition of five facilities for $80 million is expected to close in March 2015, and the acquisition of the sixth facility under the option agreement for a closing price of $15 million is expected to close in July 2015.

Closing of the acquisition is subject to the execution of a master lease agreement with Life Generations and certain customary closing conditions, including satisfactory completion of the Company’s due diligence. The

F-49

master lease is expected to be enhanced by a corporate guaranty by Life Generations. Under the option agreement, Life Generations is entitled to an earn-out of up to $10 million, which will be subject to the same lease requirements, with the amount of the earn-out contingent upon the achievement of certain performance thresholds relating to 2015 operations of the optioned property.

Contingencies

From time to time, the Company or its properties may be subject to claims and suits in the ordinary course of business. The Company’s lessees and borrowers have indemnified, and are obligated to continue to indemnify the Company, against all liabilities arising from the operations of the properties and are further obligated to indemnify it against environmental or title problems affecting the real estate underlying such facilities. The Company is not aware of any pending or threatened litigation that if resolved against the Company, would have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

9.	Stockholders’ Equity

On July 31, 2014, the Company sold an aggregate of 10,351,040 shares of common stock, at a price per share of $15.00, to certain institutional and individual investors, with FBR Capital Markets & Co. (“FBR”), acting as initial purchaser/placement agent and, on August 22, 2014, the Company sold an additional 188,521 shares of common stock pursuant to the exercise by FBR of its option to purchase shares to cover additional allotments, in each case in reliance upon exemptions from registration provided by Rule 144A, Regulation S and Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). Concurrently with the completion of this private placement, on July 31, 2014, the Company sold an aggregate of 405,833 shares of common stock, at a price per share of $15.00, to certain of the Company’s officers, directors and their family members in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation D thereunder. The aggregate net proceeds to the Company from these private placements, after deducting the initial purchaser’s discount and placement fee and offering expenses payable by the Company, were approximately $151.7 million.

On September 23, 2014, the Board of Directors declared an initial, prorated cash dividend of $0.08 per share, or $0.9 million in total, for the period from July 31, 2014 through September 30, 2014, which was equivalent to a full quarterly dividend of $0.12 per share. The dividend was paid on October 23, 2014 to stockholders of record on October 14, 2014.

All of the Company’s dividends paid were considered as ordinary dividends for U.S. federal tax purposes for the year ended December 31, 2014.

On January 28, 2015, the Company issued 125 shares of newly designated 12.5% Series A redeemable cumulative preferred stock for $1,000 per share in order to ensure that the Company meets the beneficial ownership requirement applicable to REITs under the Code.

10.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, receivables and payables are reasonable estimates of their fair value as of December 31, 2014 due to their short-term nature. The fair value of mortgage and other notes receivable is estimated using level 2 inputs based either on an assumed market rate of interest or

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at a rate consistent with the rates on mortgage and other notes acquired or originated by the Company recently, if any. As the Company originated two mortgage notes on August 1, 2014, acquired one mortgage note on December 29, 2014 and originated a note receivable in late November 2014, the estimated fair values of the mortgage and other notes receivable are considered to be equal to their carrying values at December 31, 2014.

11.

Selected Interim Financial Data (unaudited)

The following is a summary of the unaudited quarterly financial information for the period from April 23, 2014 (inception) to December 31, 2014 (amounts in thousands, except per share data):


	For the period from April 23, 2014 (inception) to September 30, 2014			For the three months ended December 31, 2014
Revenues	$	1,975		$	3,472
Net income (loss)		(457	)		480

Net income (loss) attributable to common stockholders per share:
Basic and diluted	$	(0.04	)	$	0.04

12.

Subsequent Events

Subsequent events have been evaluated through March 10, 2015, the date the consolidated financial statements were available to be issued.

13.

Event (Unaudited) Subsequent to the Date of the Independent Auditors’ Report

On March 11, 2015, the Company issued 100,000 shares of newly classified 7.875% Series B Redeemable Cumulative Preferred Stock (“Series B Preferred Stock”), with a $1,000 liquidation preference per share, for $100.0 million in gross proceeds. The Company has the option to issue an additional 25,000 shares of Series B Preferred Stock on April 1, 2015.

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MedEquities Realty Trust, Inc.

Schedule III- Real Estate and Accumulated Depreciation

(Dollars in thousands)

December 31, 2014


					Initial Cost to Company						Gross Amount at Which Carried at Close of Period
Name	Location	Type of Property ⁽¹⁾	Encumbrances		Land		Building and improvements and intangible lease assets		Cost Capitalized Subsequent to Acquisition		Land		Building and improvements and intangible lease assets		Total ⁽²⁾		Accumulated Depreciation ^(2) (3)			Date of Construction		Date Acquired
Kentfield Rehabilitation & Specialty Hospital	Kentfield, CA	LTACH	$	—	$	6,204	$	51,826	$	—	$	6,204	$	51,826	$	58,030	$	(559	)		1962		2014
Horizon Specialty Hospital of Henderson	Henderson, NV	LTACH		—		733		19,277		—		733		19,277		20,010		(224	)		2012		2014
Magnolia Place of Spartanburg	Spartanburg, SC	SNF		—		170		19,830		—		170		19,830		20,000		(221	)		1989		2014
North Brownsville Medical Plaza	Brownsville, TX	MOB		—		—		15,128		—		—		15,128		15,128		(264	)		2007		2014

Total			$	—	$	7,107	$	106,061	$	—	$	7,107	$	106,061	$	113,168	$	(1,268	)

(1)

LTACH — Long-term acute care hospital; SNF — Skilled nursing facility; MOB — Medical office building

(2)

The changes in total real estate and accumulated depreciation for the period ended December 31, 2014 are as follows (in thousands):


	Total Real Estate		Accumulated Depreciation
Balance as of April 23, 2014 (inception)	$	—	$	—
Acquisitions		113,168		—
Additions		—		1,268
Dispositions		—		—

Balance as of December 31, 2014	$	113,168	$	1,268

The unaudited aggregate tax value of real estate assets for federal income tax purposes as of December 31, 2014 is estimated to be $111,543,000.

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(3)

The cost of building and improvements is depreciated on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging primarily from 2.7 to 45 years. The cost of intangible lease assets are depreciated on a straight-line basis over the initial term of the related lease, ranging primarily from 2.7 to 15 years. See note 2 to the consolidated financial statements for information on useful lives used for depreciation and amortization.

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MedEquities Realty Trust, Inc.

Schedule IV- Mortgage Loans on Real Estate

(Dollars in thousands)

December 31, 2014


Description	Interest Rate			Final Maturity Date			Periodic Payment Terms			Prior Liens			Face Amount of Mortgages		Carrying Amount of Mortgages ⁽⁴⁾		Principal Amount of Loans Subject to Delinquent Principal or Interest
First mortage relating to 1 property in:
Amarillo, Texas — rehabilitation hospital		9.00	%		7/31/2034			(1	)		—		$	18,000	$	18,000		—
Springfield, Massachusetts — rehabilitation hospital		9.00	%		7/31/2034			(2	)		—			10,000		10,000		—
Lakeway, Texas — acute care hospital		(3	)		(3	)		(3	)		(3	)		50,000		50,000		(3	)

													$	78,000	$	78,000

(1)

Following an initial interest-only five year term, the Amarillo, Texas loan will automatically convert to a 15-year amortizing loan requiring payments of principal and interest unless prepaid. The Amarillo, Texas loan may be prepaid during the initial five-year term only if Vibra Healthcare, LLC or Vibra Healthcare II, LLC, or one of their respective affiliates, enters into a sale-leaseback transactions with the Company equal to or exceeding $20.0 million in value.

(2)

Following an initial interest-only five year term, the Springfield, Massachusetts loan will automatically convert to a 15-year amortizing loan requiring payments of principal and interest unless prepaid. The Springfield, Massachusetts loan may be prepaid during the initial five-year term only if Vibra Healthcare, LLC or Vibra Healthcare II, LLC, or one of their respective affiliates, enters into a sale-leaseback transactions with the Company equal to or exceeding $25.0 million in value.

(3)

This mortgage loan was acquired on December 29, 2014. The Company completed non-judicial foreclosure proceedings on February 3, 2015 and now owns the underlying real estate.

Changes in mortgage loans for the period ended December 31, 2014 is summarized as follows (in thousands):


	2014
Balance at April 23, 2014 (inception)	$	—
Additions during year:
New mortgage loans		78,000

		78,000
Deductions during year:
Collection of principal		—

		—

Balance at end of year	$	78,000

(4)

Carrying amount of mortgages represents the contractual amounts outstanding under the mortgage loans as of the date of this Schedule IV and excludes any other fees or costs associated with the mortgage loans and their origination. The aggregate cost for federal income tax purposes as of December 31, 2014 is estimated to be $78.0 million.

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Independent Auditors’ Report

The Board of Directors

MedEquities Realty Trust, Inc:

We have audited the accompanying Historical Statement of Revenues and Certain Direct Operating Expenses of Spartanburg Healthcare Realty, LLC for the year ended December 31, 2013, and the related notes (the financial statement).

Management’s Responsibility for the Financial Statement

Management is responsible for the preparation and fair presentation of the financial statement in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain direct operating expenses described in Note 5 of Spartanburg Healthcare Realty, LLC for the year ended December 31, 2013, in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter

We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the registration statement on Form S-11 of MedEquities Realty Trust, Inc. and is not intended to be a complete presentation of Spartanburg Healthcare Realty, LLC’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ KPMG LLP

Atlanta, Georgia

August 22, 2014

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SPARTANBURG HEALTHCARE REALTY, LLC

Historical Statements of Revenues and

Certain Direct Operating Expenses

(Dollars in thousands)


	Year ended December 31, 2013		Six months ended June 30, 2014
			(Unaudited)
Revenues:
Rental income	$	810	$	404
Other rental revenue—property tax reimbursement		98		51

Total revenues		908		455

Certain direct operating expenses:
Property taxes		98		51

Total certain direct operating expenses		98		51

Revenues in excess of certain direct operating expenses	$	810	$	404

See accompanying notes to historical financial statements.

F-56

SPARTANBURG HEALTHCARE REALTY, LLC

Notes to Historical Statements of Revenues and

Certain Direct Operating Expenses

Note 1—Business

MRT of Spartanburg SC—SNF, LLC, a subsidiary of MedEquities Realty Trust, Inc. (the Company) expects to acquire certain real estate assets of Spartanburg Healthcare Realty, LLC. Spartanburg Healthcare Realty, LLC owns a single 50,397 square foot, 88-bed skilled nursing facility located in Spartanburg, South Carolina (the Property), which is leased to THI of South Carolina At Magnolia Place At Spartanburg, LLC a wholly owned subsidiary of THI of Baltimore, Inc. under a lease agreement, which originated and commenced on November 21, 2011. Upon completion of the proposed acquisition by the Company, the lease will be amended.

Note 2—Basis of Presentation

The accompanying historical statement of revenues and certain direct operating expenses has been prepared for the purpose of complying with Rule 3-14 of the United States Securities and Exchange Commission Regulation S-X and is not intended to be a complete presentation of the Properties’ revenues and expenses. The financial statements have been prepared on the accrual basis of accounting and require management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. See Note 5 for further description of the certain direct operating expenses.

Note 3—Unaudited Interim Information

In the opinion of the Company’s management all normal and recurring adjustments necessary for a fair presentation (in accordance with Basis of Presentation as described in Note 2) have been made to the accompanying unaudited amounts for the six months ended June 30, 2014.

Note 4—Rental Income

The lease is accounted for as an operating lease. Rental income is recognized on a straight-line basis over the five-year term of the lease agreement with initial base annual rent of $770 thousand commencing December 15, 2012, and escalating annually thereafter at 2.5%. Other rental income includes payments from the tenant for property tax reimbursements.

Note 5—Certain Direct Operating Expenses

Certain direct operating expenses include property taxes, and include only those costs expected to be comparable to the proposed future operations of the Property. Other direct operating expenses are the responsibility of, and paid directly by, the lessee. Costs such as depreciation, amortization, interest, and professional fees are excluded from the financial statements.

Note 6—Commitments and Contingencies

Litigation

The Property may be subject to legal claims that arise in the ordinary course of business. Management is not aware of any legal proceedings of which the outcome is reasonably possible to have a material adverse effect on the Property’s financial condition or results of operations for the periods presented.

F-57

SPARTANBURG HEALTHCARE REALTY, LLC

Notes to Historical Statements of Revenues and

Certain Direct Operating Expenses

Other Matters

The Property is subject to various environmental laws of federal, state, and local governments. The Company is not aware of any material environmental liabilities related to the Property that could have a material adverse effect on the Property’s financial condition or results of operations presented.

Note 7—Subsequent Events

The Company has evaluated subsequent events from December 31, 2013 through August 22, 2014, the date at which the financial statements were available to be issued, and determined that there are no other items to disclose.

F-58

Independent Auditors’ Report

The Board of Directors

MedEquities Realty Trust, Inc:

We have audited the accompanying Historical Statement of Revenues and Certain Direct Operating Expenses of Eastern LTAC, LLC d/b/a Horizon Specialty Hospital of Henderson for the year ended December 31, 2013, and the related notes (the financial statement).

Management’s Responsibility for the Financial Statement

Auditors’ Responsibility

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain direct operating expenses described in Note 5 of Eastern LTAC, LLC d/b/a Horizon Specialty Hospital of Henderson for the year ended December 31, 2013, in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter

We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the registration statement on Form S-11 of MedEquities Realty Trust, Inc. and is not intended to be a complete presentation of Eastern LTAC, LLC d/b/a Horizon Specialty Hospital of Henderson’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ KPMG LLP

Atlanta, Georgia

August 22, 2014

F-59

EASTERN LTAC, LLC

d/b/a HORIZON SPECIALTY HOSPITAL OF HENDERSON

Historical Statements of Revenues and

Certain Direct Operating Expenses

(Dollars in thousands)


	Year ended December 31, 2013		Six months ended June 30, 2014
			(Unaudited)
Revenues:
Rental income	$	1,452	$	734
Other rental revenue		161		85

Total revenues		1,613		819

Certain direct operating expenses:
Insurance		9		7
Property taxes		54		34
Repairs and maintenance		29		18

Total certain direct operating expenses		92		59

Revenues in excess of certain direct operating expenses	$	1,521	$	760

See accompanying notes to historical financial statements.

F-60

EASTERN LTAC, LLC

d/b/a HORIZON SPECIALTY HOSPITAL OF HENDERSON

Notes to Historical Statements of Revenues and

Certain Direct Operating Expenses

Note 1—Business

MRT of Las Vegas NV—LTACH, LLC, a subsidiary of MedEquities Realty Trust, Inc. (the Company) expects to acquire certain real estate assets of Eastern LTAC, LLC. Eastern LTAC, LLC owns a single 37,209 square foot, 39-bed long-term acute care hospital located in Las Vegas, Nevada, (the Property) which is leased to THI of Nevada II at Desert Land, LLC a wholly owned subsidiary of THI of Baltimore, Inc. under a lease agreement, which originated on August 20, 2010 with rent commencement on December 15, 2012. Upon completion of the proposed acquisition by the Company of Las Vegas NV—LTACH, LLC, the lease will be amended.

Note 2—Basis of Presentation

The accompanying historical statement of revenues and certain direct operating expenses has been prepared for the purpose of complying with Rule 3-14 of the United States Securities and Exchange Commission Regulation S-X and is not intended to be a complete presentation of the Property’s revenues and expenses. The financial statements have been prepared on the accrual basis of accounting and require management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. See Note 5 for further description of the certain direct operating expenses.

Note 3—Unaudited Interim Information

Note 4—Rental Income

The lease is accounted for as an operating lease. Rental income is recognized as earned over the 16-year term of the lease agreement with initial base annual rent of $1,451,451 commencing December 15, 2012, and escalating annually thereafter at the lesser of the Consumer Price Index For All Urban Consumers, U.S. City Average, “All Items” (as defined in the lease agreement) or 3%. Other rental income includes payments from the tenant for parking, management fees, maintenance, property taxes, and insurance.

Note 5—Certain Direct Operating Expenses

Certain direct operating expenses includes maintenance, property taxes, and insurance, and includes only those costs expected to be comparable to the proposed future operations of the Property. Costs such as management fees, depreciation, amortization, interest, and professional fees are excluded from the financial statements.

Note 6—Commitments and Contingencies

Litigation

F-61

EASTERN LTAC, LLC

d/b/a HORIZON SPECIALTY HOSPITAL OF HENDERSON

Notes to Historical Statements of Revenues and

Certain Direct Operating Expenses

Other Matters

Note 7—Subsequent Events

F-62

Independent Auditors’ Report

The Board of Directors

MedEquities Realty Trust, Inc:

We have audited the accompanying Historical Statement of Revenues and Certain Direct Operating Expenses of Brownsville I.M.P. LTD d/b/a The North Brownsville Medical Plaza for the year ended December 31, 2013, and the related notes (the financial statement).

Management’s Responsibility for the Financial Statement

Auditors’ Responsibility

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain direct operating expenses described in Note 5 of Brownsville I.M.P. LTD d/b/a The North Brownsville Medical Plaza for the year ended December 31, 2013, in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter

We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the registration statement on Form S-11 of MedEquities Realty Trust, Inc. and is not intended to be a complete presentation of Brownsville I.M.P. LTD d/b/a The North Brownsville Medical Plaza’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ KPMG LLP

Atlanta, Georgia

August 22, 2014

F-63

BROWNSVILLE I.M.P. LTD d/b/a THE

NORTH BROWNSVILLE MEDICAL PLAZA

Historical Statements of Revenues and

Certain Direct Operating Expenses

(Dollars in thousands)


	Year ended December 31, 2013		Six months ended June 30, 2014
			(Unaudited)
Revenues:
Rental income	$	1,307	$	654
Other rental revenue		750		364

Total revenues		2,057		1,018

Certain direct operating expenses:
Utilities		188		100
Property taxes		185		88
General and administrative		54		27
Insurance		112		43
Repairs and maintenance		288		90
Ground rent		153		78

Total certain direct operating expenses		980		426

Revenues in excess of certain direct operating expenses	$	1,077	$	592

See accompanying notes to historical financial statements.

F-64

BROWNSVILLE I.M.P. LTD d/b/a THE

NORTH BROWNSVILLE MEDICAL PLAZA

Notes to Historical Statements of Revenues and Certain Direct Operating Expenses

Note 1—Business

MRT of Brownsville TX—MOB, LLC, a subsidiary of MedEquities Realty Trust Inc. (the Company), expects to acquire certain real estate assets of Brownsville I.M.P. LTD. Brownsville I.M.P. LTD owns a single 67,682 square foot, multitenant medical office building located in Brownsville, Texas (the Property).

Note 2—Basis of Presentation

The accompanying historical statement of revenues and certain direct operating expenses has been prepared for the purpose of purpose of complying with Rule 3-14 of the United States Securities and Exchange Commission Regulation S-X and is not intended to be a complete presentation of the Property’s revenues and expenses. The financial statements have been prepared on the accrual basis of accounting and require management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. See Note 5 for further description of the certain direct operating expenses.

Note 3—Unaudited Interim Information

Note 4—Rental Income

The Property contains medical office space occupied under various lease agreements with tenants. All leases are accounted for as operating leases. Rental income is recognized as earned over the life of the lease agreements on a straight-line basis. Some of the leases include provisions under which the Property is reimbursed for common area maintenance and other operating costs, real estate taxes, and insurance. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates.

Future minimum lease payments to be received under the noncancelable operating leases at December 31, 2013 were as follows (in thousands):


2014	$	1,353
2015		1,386
2016		1,424
2017		1,396
2018		125

	$	5,684

Other rental revenue includes payments from tenants for common area maintenance costs, taxes, insurance, and other tenant bill backs.

F-65

BROWNSVILLE I.M.P. LTD d/b/a THE

NORTH BROWNSVILLE MEDICAL PLAZA

Notes to Historical Statements of Revenues and

Certain Direct Operating Expenses

Note 5—Certain Direct Operating Expenses

Certain direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Utilities expense includes electricity, gas, and water. General and administrative expense includes security, cleaning, landscaping, and other general costs associated with operating the Property. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, interest, owner management fees, and professional fees are excluded from the financial statements.

Note 6—Commitments and Contingencies

Operating Lease

As of December 31, 2013, the Company was obligated under operating lease agreement consisting of a 75-year ground lease that commenced in 2006 on which the Property resides with expiration in 2081. The Company’s future minimum lease payment for its operating lease as of December 31, 2013 is as follows (in thousands): 2014—$153; 2015—$156; 2016—$159; 2017—$162; 2018—$165; Thereafter—$20,400.

Litigation

Other Matters

Note 7—Subsequent Events

F-66

Shares

LOGO

MEDEQUITIES REALTY TRUST, INC.

Common Stock

PROSPECTUS

FBR

J.P. Morgan

Citigroup

KeyBanc Capital Markets

RBC Capital Markets

Until , 2015 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as soliciting dealers with respect to their unsold allotments or subscriptions.

, 2015

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 31.

Other Expenses of Issuance and Distribution.

The following table itemizes the expenses incurred by us in connection with the issuance and distribution of the securities being registered hereunder. All amounts shown are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee and the NYSE listing fee.


SEC registration fee	$	17,430
FINRA filing fee	$	22,350
NYSE listing fee	$	*
Printing and engraving fees	$	*
Legal fees and expenses	$	*
Accounting fees and expenses	$	*
Transfer agent and registrar fees	$	*
Miscellaneous expenses	$	*
Total	$	*

*	To be completed by amendment.

Item 32.

Sales to Special Parties.

The information set forth in Item 33 is incorporated herein by reference.

Item 33.

Recent Sales of Unregistered Securities.

On May 5, 2014, we issued 1,000 shares of our common stock to John W. McRoberts, our Chairman and Chief Executive Officer, in connection with the initial capitalization of our company for an aggregate price of $1,000. The issuance of such shares was effected in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, or the Securities Act, and Regulation D thereunder. These shares were repurchased for $1,000 after the initial private placement.

On July 31, 2014, we sold an aggregate of 405,833 shares of our common stock, at a price per share of $15.00, for an aggregate offering price of approximately $6.1 million, to certain of our officers, directors and their family members in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D thereunder.

On July 31, 2014, we sold an aggregate of 10,351,040 shares of our common stock, at a price per share of $15.00, to certain institutional and individual investors, with FBR Capital Markets & Co., or FBR, acting as initial purchaser/placement agent and, on August 22, 2014, we sold an additional 188,521 shares of our common stock pursuant to the exercise by FBR of its option to purchase shares to cover additional allotments, in each case in reliance upon exemptions from registration provided by Rule 144A, Regulation S and Regulation D under the Securities Act, which we collectively refer to as the initial private placement. The aggregate offering price of the initial private placement was $157.8 million, and the net proceeds from the initial private placement was approximately $145.6 million after deducting initial purchaser’s discount and placement fees of approximately $9.2 million and other offering expenses. In the initial private placement, some of the shares were reoffered by FBR to “qualified institutional buyers,” as defined in Rule 144A under the Securities Act, or to certain persons outside of the United States in offshore transactions in reliance on Regulation S under the Securities Act. The remaining shares were offered pursuant to a private placement to “accredited investors,” as defined in Rule 501 under the Securities Act, with FBR acting as the placement agent.

II-1

On July 31, 2014, August 1, 2014, May 18, 2015, July 1, 2015, July 31, 2015 and August 13, 2015, we issued an aggregate of 119,681, 2,934, 4,800, 2,667, 125,332 and 6,060, respectively, restricted shares of our common stock to our executive officers, non-employee directors and certain other employees and an aggregate of 154,526, 4,401, 7,200, 4,000 and 187,998, respectively, restricted stock units to our executive officers and certain other employees, in each case under the 2014 Equity Incentive Plan and in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act and Rule 701 thereunder.

On August 27, 2014, November 10, 2014, January 1, 2015 and August 13, 2015, we issued an aggregate of 2,775, 4,165, 16,665 and 2,272, respectively, restricted shares of our common stock to our non-employee directors as part of their annual fee, in each case under the 2014 Equity Incentive Plan and in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act and Rule 701 thereunder.

On January 28, 2015, we sold 125 shares of our 12.5% Series A Redeemable Cumulative Preferred Stock, for an aggregate offering price of $125,000, to “accredited investors,” as defined under Rule 501 under the Securities Act, with Iroquois Capital Advisors, LLC acting as the placement agent, in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D thereunder. The aggregate placement fee was $12,500.

On March 11, 2015 and April 1, 2015, we sold an aggregate of 125,000 shares of our 7.875% Series B Redeemable Cumulative Preferred Stock to Carter/Validus Operating Partnership, L.P., for an aggregate offering price of $125.0 million in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act.

Item 34.

Indemnification of Trustees and Officers.

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our charter contains a provision which eliminates our directors’ and officers’ liability to the maximum extent permitted by Maryland law.

Maryland law requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. Maryland law permits a Maryland corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that: (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; (b) the director or officer actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. In addition, Maryland law permits a Maryland corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

Our charter authorizes us, to the maximum extent permitted by Maryland law, to obligate ourselves and our bylaws obligate us, to indemnify any present or former director or officer or any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, trustee, member

II-2

or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in any of the foregoing capacities and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding. Our charter and bylaws also permit us to indemnify and advance expenses to any individual who served a predecessor of our company in any of the capacities described above and any employees or agents of our company or a predecessor of our company.

We have entered into indemnification agreements with each of our executive officers and directors whereby we have agreed to indemnify such executive officers and directors to the fullest extent permitted by Maryland law against all expenses and liabilities, subject to limited exceptions. These indemnification agreements also provide that upon an application for indemnity by an executive officer or director to a court of appropriate jurisdiction, such court may order us to indemnify such executive officer or director. In addition, our directors and officers are indemnified for specified liabilities and expenses pursuant to the partnership agreement of MedEquities Realty Operating Partnership, LP, the partnership whose sole general partner is our wholly owned subsidiary.

Furthermore, our officers and directors are indemnified against specified liabilities by the underwriters, and the underwriters are indemnified against certain liabilities by us, under the underwriting agreement relating to this offering. See “Underwriting.” In addition, our directors and officers are indemnified for specified liabilities and expenses pursuant to the partnership agreement of MedEquities OP, GP, LLC, the partnership whose sole general partner is our wholly owned subsidiary.

Insofar as the foregoing provisions permit indemnification of directors, officer or persons controlling us for liability arising under the Securities Act, we have been informed that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 35.

Treatment of Proceeds from Stock Being Registered.

None of the proceeds will be contributed to an account other than the appropriate capital account.

Item 36.

Financial Statements and Exhibits.

(a)	Financial Statements. See page F-1 for an index to the financial statements included in the registration statement.

(b)	Exhibits. The list of exhibits filed with or incorporated by reference in this Registration Statement is set forth in the Exhibit Index following the signature page herein.

Item 37.

Undertakings.

(a)	The undersigned registrant hereby undertakes to provide to the underwriters at the closings specified in the purchase agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b)

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or

II-3

controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.

(c)	The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Nashville, state of Tennessee on the day of August 20, 2015.


MEDEQUITIES REALTY TRUST, INC.

By:		/s/ John W. McRoberts
		John W. McRoberts Chairman and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints John W. McRoberts and William C. Harlan, and each of them, as his attorney-in-fact and agent, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments or post-effective amendments to this Registration Statement, or any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with exhibits thereto and other documents in connection therewith or in connection with the registration of the shares under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.


Name	Capacity	Date

/s/ John W. McRoberts John W. McRoberts	Chairman and Chief Executive Officer (principal executive officer)	August 20, 2015

/s/ William C. Harlan William C. Harlan	President, Chief Operating Officer and Director	August 20, 2015

/s/ Jeffery C. Walraven Jeffery C. Walraven	Executive Vice President and Chief Financial Officer (principal financial officer)	August 20, 2015

/s/ David L. Travis David L. Travis	Senior Vice President and Chief Accounting Officer (principal accounting officer)	August 20, 2015

/s/ Randall L. Churchey Randall L. Churchey	Director	August 20, 2015
/s/ Randall L. Churchey Randall L. Churchey	Director	August 20, 2015

II-5


Name	Capacity	Date

/s/ John N. Foy John N. Foy	Director	August 20, 2015

/s/ Steven I. Geringer Steven I. Geringer	Director	August 20, 2015

/s/ Stephen L. Guillard Stephen L. Guillard	Director	August 20, 2015


/s/ Elliott Mandelbaum Elliott Mandelbaum	Director	August 20, 2015


/s/ Stuart C. McWhorter Stuart C. McWhorter	Director	August 20, 2015


/s/ James B. Pieri James B. Pieri	Director	August 20, 2015

II-6

Exhibit Index


Exhibit Number		Exhibit Document

1.1*		Form of Underwriting Agreement.

3.1		Articles of Amendment and Restatement.

3.2		Articles Supplementary, designating MedEquities Realty Trust, Inc.’s 12.5% Series A Redeemable Cumulative Preferred Stock.

3.3		Articles Supplementary, designating MedEquities Realty Trust, Inc.’s 7.875% Series B Redeemable Cumulative Preferred Stock.

3.4		Amended and Restated Bylaws.

5.1*		Opinion of Morrison & Foerster LLP.

8.1*		Opinion of Morrison & Foerster LLP.

10.1		First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP, dated July 31, 2014.

10.2		Amendment No. 1, dated January 28, 2015, to the First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP.

10.3		Amendment No. 2, dated March 10, 2015, to the First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP.

10.4†		MedEquities Realty Trust, Inc. Amended and Restated 2014 Equity Incentive Plan.

10.5†		Form of Restricted Stock Unit Award Agreement.

10.6†		Form of Restricted Stock Award Agreement for Officers.

10.7†		Form of Restricted Stock Award Agreement for Directors.

10.8†		Amended and Restated Employment Agreement, dated as of August 13, 2015, by and among MedEquities Realty Trust, Inc., MedEquities Realty Operating Partnership, LP and John W. McRoberts.

10.9†		Amended and Restated Employment Agreement, dated as of August 13, 2015, by and among MedEquities Realty Trust, Inc., MedEquities Realty Operating Partnership, LP and William C. Harlan.

10.10†		Amended and Restated Employment Agreement, dated as of August 13, 2015, by and among MedEquities Realty Trust, Inc., MedEquities Realty Operating Partnership, LP and Jeffery C. Walraven.

10.11		Registration Rights Agreement, dated July 31, 2014, by and among MedEquities Realty Trust, Inc. and FBR Capital Markets & Co.

10.12		Stock Purchase Agreement, dated as of July 25, 2014, by and among MedEquities Realty Trust, Inc. and the Purchasers listed on the signature pages thereto.

10.13†*		Indemnification Agreement by and between MedEquities Realty Trust, Inc. and each of its directors and officers listed on Schedule A thereto.

10.14		Purchase and Sale Agreement, dated as of June 1, 2014, by and between Kentfield THCI Holding Company, LLC and MedEquities Realty Trust, Inc.

10.15		First Amendment, dated as of July 28, 2014, to the Purchase and Sale Agreement, by and between Kentfield THCI Holding Company, LLC and MedEquities Realty Trust, Inc.

10.16*		Facility Lease Agreement, dated as of July 1, 2014, by and between MRT of Kentfield CA – LTACH, LLC and 1125 Sir Francis Drake Boulevard Operating Company, LLC d/b/a Kentfield Rehabilitation and Specialty Hospital.


Exhibit Number		Exhibit Document

10.17*		Purchase and Sale Agreement, dated as of February 19, 2015, by and among La Mesa Real Estate, LLC, National City Real Estate II, LLC, National City Real Estate I, LLC, Upland Real Estate, LLC and MRT of La Mesa, CA – SNF, LLC, MRT of National City CA – SNF I, LLC, MRT of National City CA – SNF II, LLC and MRT of Upland CA – SNF/ALF, LLC.

10.18*		First Amendment, dated March 16, 2015, to the Purchase and Sale Agreement, by and among La Mesa Real Estate, LLC, National City Real Estate II, LLC, National City Real Estate I, LLC, Upland Real Estate, LLC and MRT of La Mesa, CA – SNF, LLC, MRT of National City CA – SNF I, LLC, MRT of National City CA – SNF II, LLC and MRT of Upland CA – SNF/ALF, LLC.

10.19*		Master Lease, dated as of March 31, 2015, by and among MRT of La Mesa, CA – SNF, LLC, MRT of National City CA – SNF I, LLC, MRT of National City CA – SNF II, LLC and MRT of Upland CA – SNF/ALF, LLC and GHC of La Mesa, LLC, GHC of National City II, LLC, GHC of National City I, LLC, GHC of Upland SNF, LLC and GHC of Upland RCFE, LLC.

10.20*		Guaranty of Master Lease, dated as of March 31, 2015 by Life Generations Healthcare LLC in favor of MRT of La Mesa, CA – SNF, LLC, MRT of National City CA – SNF I, LLC, MRT of National City CA – SNF II, LLC and MRT of Upland CA – SNF/ALF, LLC.

10.21*		Master Lease Agreement, dated as of February 3, 2015, by and between Lakeway Realty, L.L.C. and Lakeway Regional Medical Center, LLC.

10.22*		Guaranty Agreement, dated as of March 20, 2015 by LRMC Hospital Management Company, LLC in favor of Lakeway Realty, L.L.C.

10.23*		Amended and Restated Operating Agreement of Lakeway Realty, L.L.C., dated as of March 20, 2015.

10.24		First Amended and Restated Credit Agreement, dated as of July 30, 2015, by and among MedEquities Realty Operating Partnership, LP, as borrower, KeyBank National Association, as lender and administrative agent, and the other lenders and agents party thereto.

10.25		BlueMountain Rights Agreement, dated as of July 25, 2014, by and between MedEquities Realty Trust, Inc. and BlueMountain Capital Management, LLC.

10.26*		Form of Stock Purchase Agreement, by and between MedEquities Realty Trust, Inc. and BlueMountain Capital Management, LLC.

10.27*		Securities Purchase Agreement, dated as of March 11, 2015, by and between MedEquities Realty Trust, Inc. and Carter/Validus Operating Partnership, L.P.

10.28*		Purchase and Sale Agreement, dated as of July 29, 2015, by and among GruenePointe Acquisition I, LLC, MRT of San Antonio TX – SNF I, LLC, MRT of San Antonio TX – SNF II, LLC, MRT of Graham TX – SNF, LLC, MRT of Kemp TX – SNF, LLC, MRT of Kerens TX – SNF, LLC, MRT of Brownwood TX – SNF, LLC, MRT of El Paso TX – SNF, LLC, MRT of Kaufman TX – SNF, LLC, MRT of Longview TX – SNF, LLC and MRT of Mt. Pleasant TX – SNF, LLC.

10.29*		Master Lease, dated July 30, 2015, by and between MRT of San Antonio TX – SNF I, LLC, MRT of San Antonio TX – SNF II, LLC, MRT of Graham TX – SNF, LLC, MRT of Kemp TX – SNF, LLC, MRT of Kerens TX – SNF, LLC, MRT of Brownwood TX – SNF, LLC, MRT of El Paso TX – SNF, LLC, MRT of Kaufman TX – SNF, LLC, MRT of Longview TX – SNF, LLC, MRT of Mt. Pleasant TX – SNF, LLC and GruenePoint 1 Graham, LLC, GruenePointe 1 El Paso, LLC, GruenePointe 1 Kerens, LLC, GruenePointe 1 Casa Rio, LLC, GruenePointe 1 River City, LLC, GruenePointe 1 Brownwood, LLC, GruenePointe 1 Longview, LLC, GruenePointe 1 Kemp, LLC, GruenePointe 1 Mt. Pleasant, LLC and GruenePointe 1 Kaufman, LLC.

21.1*		List of subsidiaries.

23.1		Consent of KPMG.

23.2*		Consent of Morrison & Foerster LLP (included in Exhibit 5.1).


Exhibit Number		Exhibit Document

23.3*		Consent of Morrison & Foerster LLP (included in Exhibit 8.1).

24.1		Power of Attorney (included on the signature page to this registration statement).

*	To be filed by amendment.

†	Indicates management contract or compensatory plan.

Exhibit 3.1

MEDEQUITIES REALTY TRUST, INC.

ARTICLES OF AMENDMENT AND RESTATEMENT

MedEquities Realty Trust, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “SDAT”) that:

FIRST : The Corporation desires to amend and restate its charter as currently in effect and as hereinafter amended.

SECOND : The provisions of the charter of the Corporation, which are now in effect and as amended hereby in accordance with the Maryland General Corporation Law, or any successor statute (the “MGCL”), are as follows:

ARTICLE I

INCORPORATION

William C. Harlan, whose address is 201 Seaboard Lane, Suite 100, Franklin, Tennessee 37067, being at least 18 years of age, formed a corporation under the general laws of the State of Maryland on, April 23, 2014.

ARTICLE II

NAME

The name of the Corporation is MedEquities Realty Trust, Inc.

ARTICLE III

PURPOSE

The purposes for which the Corporation is formed are to engage in any lawful act or activity (including, without limitation or obligation, engaging in business as a REIT (as hereinafter defined) under the Internal Revenue Code of 1986, as amended, or any successor statute (the “Code”)) for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force. For purposes of these Articles of Amendment and Restatement of the Corporation (the “Charter”), “REIT” means a real estate investment trust under Sections 856 through 860 of the Code.

ARTICLE IV

PRINCIPAL OFFICE IN MARYLAND AND RESIDENT AGENT

The address of the principal office of the Corporation in the State of Maryland is c/o National Corporate Research Ltd., 836 Park Avenue, Second Floor, Baltimore, Maryland 21201. The name and address of the resident agent of the Corporation in the State of Maryland are National Corporate Research Ltd., 836 Park Avenue, Second Floor, Baltimore, Maryland 21201. The resident agent is a Maryland corporation.

ARTICLE V

PROVISIONS FOR DEFINING, LIMITING

AND REGULATING CERTAIN POWERS OF THE

CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

Section 5.1 Number of Directors . The business and affairs of the Corporation shall be managed under the direction of the board of directors of the Corporation (the “Board of Directors”). The number of directors of the Corporation shall be two, which number may be increased or decreased only by the Board of Directors pursuant to the Bylaws of the Corporation (the “Bylaws”), but shall never be less than the minimum number required by the MGCL. The names of the directors serving until the next annual meeting of stockholders and until his successor is duly elected and qualifies are John W. McRoberts and William C. Harlan.

Any vacancy on the Board of Directors may be filled in the manner provided in the Bylaws; provided , however , that the stockholders shall have the right to fill any vacancy that results from the removal of a director at a duly called and held Special Election Meeting (as defined in Article XVII of the Bylaws). The Corporation, at such time as it becomes eligible to make the election provided for under Section 3-802 of the MGCL , elects that, in accordance with Section 3-804(c) of the MGCL, except as may be provided by the Board of Directors in setting the terms of any class or series of stock, any and all vacancies on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred and until his or her successor is duly elected and qualifies.

Section 5.2 Extraordinary Actions . Except as specifically provided in Section 5.8 (relating to removal of directors) and in the last sentence of Article VIII, notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if declared advisable by the Board of Directors and taken or approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter.

Section 5.3 Authorization by Board of Stock Issuance . The Board of Directors may authorize the issuance from time to time of shares of stock of the Corporation of any class or series, whether now or hereafter authorized, or securities or rights convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable (or without consideration in the case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws.

Section 5.4 Preemptive Rights and Appraisal Rights . Except as may be provided by the Board of Directors in setting the terms of classified or reclassified shares of stock pursuant to

Section 6.4 or as may otherwise be provided by a contract approved by the Board of Directors, no holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of stock of the Corporation or any other security of the Corporation which it may issue or sell. Holders of shares of stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, upon affirmative vote of a majority of the Board of Directors, shall determine that such rights apply, with respect to all or any shares of all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights. Notwithstanding the foregoing, in the event the Corporation is subject to the Maryland Control Share Acquisition Act, holders of shares of stock of the Corporation shall be entitled to exercise rights of an objecting stockholder under Section 3-708(a) of the MGCL.

Section 5.5 Indemnification . (a) The Corporation shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding without requiring a preliminary determination of the ultimate entitlement to indemnification to, (i) any individual who is a present or former director or officer of the Corporation or (ii) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, partnership, joint venture, trust, limited liability company, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her service in any of the foregoing capacities. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described in (i) or (ii) above and to any employee or agent of the Corporation or a predecessor of the Corporation.

(b) The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person described in the preceding paragraph against any liability which may be asserted against such person.

(c) The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the maximum extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

Section 5.6 Determinations by Board . The determination as to any of the following matters, made by or pursuant to the direction of the Board of Directors consistent with the Charter, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its stock: the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions on its stock; the amount of paid-in surplus, net assets,

other surplus, annual or other net profit, cash flow, funds from operations, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); any interpretation or resolution of any ambiguity with respect to any provision in the Charter (including any of the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of any class or series of stock of the Corporation) or of the Bylaws; the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation or of any shares of stock of the Corporation; the number of shares of stock of any class or series of the Corporation; any matter relating to the acquisition, holding and disposition of any assets by the Corporation; or any other matter relating to the business and affairs of the Corporation or required or permitted by applicable law, the Charter or the Bylaws or otherwise to be determined by the Board of Directors.

Section 5.7 REIT Qualification . The Board of Directors, without any action by the stockholders of the Corporation, shall have the authority to cause the Corporation to elect to be taxed as a REIT for U.S. federal income tax purposes. Following any such election, if the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to be taxed as a REIT for federal income tax purposes, the Board of Directors, without any action by the stockholders of the Corporation, may revoke or otherwise terminate the Corporation’s REIT election pursuant to Section 856(g) of the Code. In addition, the Board of Directors, without any action by the stockholders of the Corporation, shall have and may exercise, on behalf of the Corporation, without limitation, the power to determine that compliance with any restriction or limitation on stock ownership and transfers set forth in Article VII of the Charter is no longer required in order for the Corporation to qualify as a REIT.

Section 5.8 Removal of Directors . Subject to the rights of holders of one or more classes or series of Preferred Stock (as defined in Section 6.1) to elect or remove one or more directors, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause, and then only by the affirmative vote of holders of shares entitled to cast at least two-thirds of all the votes entitled to be cast generally in the election of directors. For the purpose of this paragraph, “cause” shall mean, with respect to any particular director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Corporation through bad faith or active and deliberate dishonesty; provided , however , that a director may be removed with or without cause at a duly called and held Special Election Meeting (as defined in Article XVII of the Bylaws), and then only by the affirmative vote of holders of shares entitled to cast at least two-thirds of all votes entitled to be cast generally in the election of directors.

Section 5.9 Advisor Agreements . The Board of Directors may authorize the execution and performance by the Corporation of one or more agreements with any person, corporation, association, company, trust, partnership (limited or general) or other organization whereby, subject to the supervision and control of the Board of Directors, any such other person, corporation, association, company, trust, partnership (limited or general) or other organization shall render or make available to the Corporation managerial, investment, advisory and/or related

services, office space and other services and facilities (including, if deemed advisable by the Board of Directors, the management or supervision of the investments of the Corporation) upon such terms and conditions as may be provided in such agreement or agreements (including, if deemed fair and equitable by the Board of Directors, the compensation payable thereunder by the Corporation).

Section 5.10 Certain Actions Requiring Less Than Unanimous Consent of Stockholders . The holders of shares of Common Stock (as defined in Section 6.1) entitled to vote generally in the election of directors may take action by written consent in lieu of a meeting to (i) waive or defer the requirement to hold a Special Election Meeting in accordance with Article XVII of the Bylaws and Section 3 of the Registration Rights Agreement to be entered into by the Corporation and FBR Capital Markets & Co. on the closing date of the issuance of shares of Common Stock pursuant to the initial offering and placement transaction between the Corporation and FBR Capital Markets & Co. (the “Registration Rights Agreement”) or (ii) amend the Special Election Meeting provisions set forth in Article XVII of the Bylaws. Such action will be deemed taken if the stockholders entitled to cast not less than the minimum number of votes specified in the Bylaws for the approval of such action deliver their consent in writing or by electronic transmission.

ARTICLE VI

STOCK

Section 6.1 Authorized Shares . The Corporation has authority to issue 450,000,000 shares of stock, consisting of 400,000,000 shares of common stock, $0.01 par value per share (“Common Stock”), and 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The aggregate par value of all authorized shares of stock having par value is $4,500,000. If shares of one class of stock are classified or reclassified into shares of another class of stock pursuant to Sections 6.2, 6.3 or 6.4 of this Article VI, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of stock of all classes that the Corporation has authority to issue shall not be more than the total number of shares of stock set forth in the first sentence of this paragraph. The Board of Directors, with the approval of a majority of the entire Board of Directors, and without any action by the stockholders of the Corporation, may amend the Charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has authority to issue.

Section 6.2 Common Stock . Subject to the provisions of Article VII and except as may otherwise be specified in the Charter, each share of Common Stock shall entitle the holder thereof to one vote. The Board of Directors may reclassify any unissued shares of Common Stock from time to time into one or more classes or series of stock.

Section 6.3 Preferred Stock . The Board of Directors may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock.

Section 6.4 Classified or Reclassified Shares . Prior to issuance of classified or reclassified shares of any class or series, the Board of Directors by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the provisions of Article VII and subject to the express terms of any class or series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers (including voting rights exclusive to such class or series), restrictions (including, without limitation, restrictions on transferability), limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the SDAT. Any of the terms of any class or series of stock set or changed pursuant to clause (c) of this Section 6.4 may be made dependent upon facts or events ascertainable outside the Charter (including determinations by the Board of Directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of stock is clearly and expressly set forth in the articles supplementary or other Charter document.

Section 6.5 Distributions . The Board of Directors from time to time may authorize and the Corporation may pay to its stockholders such dividends or other distributions in cash or other property, including in shares of one class of the Corporation’s stock payable to holders of shares of another class of stock of the Corporation, as the Board of Directors in its discretion shall determine.

Section 6.6 Charter and Bylaws . The rights of all stockholders and the terms of all stock are subject to the provisions of the Charter and the Bylaws.

ARTICLE VII

RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

Section 7.1 Definitions . For the purpose of this Article VII, the following terms shall have the following meanings:

Beneficial Ownership . The term “Beneficial Ownership” shall mean ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code. The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

Benefit Plan Investor . The term “Benefit Plan Investor” shall mean any holder of Capital Stock that is (i) an employee benefit plan (as defined in Section 3(3) of ERISA, that it is subject to the provisions of Title I of ERISA; (ii) a plan as defined in Section 4975(e) of the Code that is subject to that section (any such employee benefit plan or “plan” described in clause (i) or this clause (ii) being referred to herein as a “Plan”); (iii) an entity whose underlying assets include (or are deemed to include under ERISA or Section 4975 of the Code) assets of a Plan by reason of such Plan’s investment in such entity; or (iv) any other entity that otherwise constitutes a benefit plan investor within the meaning of the Plan Asset Regulations.

Business Day . The term “Business Day” shall mean any day, other than a Saturday or a Sunday that is neither a legal holiday nor a day on which banking institutions in the State of New York are authorized or required by law, regulation or executive order to close.

Capital Stock . The term “Capital Stock” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

Charitable Beneficiary . The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.6, provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

Charitable Trust . The term “Charitable Trust” shall mean any trust provided for in Section 7.3.1.

Constructive Ownership . The term “Constructive Ownership” shall mean ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

Controlling Person . The term “Controlling Person” shall mean a Person who has discretionary authority or control with respect to the assets of the Corporation or who provides investment advice for a fee (direct or indirect) with respect to such assets, and any affiliate of such Person.

ERISA . The term “ERISA” shall mean the Employee Retirement Security Act of 1974, as amended.

Excepted Holder . The term “Excepted Holder” shall mean a Person for whom an Excepted Holder Limit is created by the Charter or by the Board of Directors pursuant to Section 7.2.7.

Excepted Holder Limit . The term “Excepted Holder Limit” shall mean, provided that the affected Excepted Holder agrees to comply with the requirements established by the Charter or by the Board of Directors pursuant to Section 7.2.7 and subject to adjustment pursuant to Section 7.2.8, the percentage limit established for an Excepted Holder by the Charter or by the Board of Directors pursuant to Section 7.2.7.

Initial Date . The term “Initial Date” shall mean the earlier of (i) the closing date of the issuance of shares of Common Stock pursuant to the initial offering and placement transaction between the Corporation and FBR Capital Markets & Co. or (ii) such other date as determined by the Board of Directors in its sole and absolute discretion.

Insignificant Participation Exception . The term “Insignificant Participation Exception” shall mean the exception to the Plan Asset Regulations which provides that a Benefit Plan Investor’s assets will not include any of the underlying assets of an entity in which it invests if at all times less than 25% of the value of each class of equity interests in the entity is held by Benefit Plan Investors, disregarding equity interests held by Controlling Persons (other than Controlling Persons which are Benefit Plan Investors).

Market Price . The term “Market Price” on any date shall mean, with respect to any class or series of outstanding shares of Capital Stock, the Closing Price for such Capital Stock on such date. The “Closing Price” on any date shall mean the last reported sale price for such Capital Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Capital Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if such Capital Stock is not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Capital Stock is listed or admitted to trading or, if such Capital Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if such Capital Stock is not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Capital Stock selected by the Board of Directors or, in the event that no trading price is available for such Capital Stock, the fair market value of the Capital Stock, as determined by the Board of Directors.

NYSE . The term “NYSE” shall mean the New York Stock Exchange or any successor stock exchange thereto.

Person . The term “Person” shall mean an individual, corporation, partnership, limited liability company, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a “group” as that term is used for purposes of Rule 13d-5(b) or Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group to which an Excepted Holder Limit applies.

Plan Asset Regulations . The term “Plan Asset Regulations” shall mean Section 2510.3-101 of the regulations of the Department of Labor, as modified by Section 3(42) of ERISA, or any successor regulations thereto.

Prohibited Owner . The term “Prohibited Owner” shall mean, with respect to any purported Transfer (or other event), any Person who, but for the provisions of Section 7.2.1, would Beneficially Own or Constructively Own shares of Capital Stock in violation of the provisions of Section 7.2.1(a), and if appropriate in the context, shall also mean any Person who would have been the record owner of the shares of Capital Stock that the Prohibited Owner would have so owned.

Publicly-Offered Securities . The term “Publicly-Offered Securities” shall have the meaning provided in Section 2510.3-101(b)(2) of the Plan Asset Regulations, or any successor regulation thereto.

Restriction Termination Date . The term “Restriction Termination Date” shall mean the first day after the Initial Date on which the Board of Directors determines pursuant to Section 5.7 of the Charter that it is no longer in the best interests of the Corporation to be taxed as a REIT for U.S. federal income tax purposes or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of shares of Capital Stock set forth herein is no longer required in order for the Corporation to qualify as a REIT.

Stock Ownership Limit . The term “Stock Ownership Limit” shall mean nine and eight-tenths percent (9.8%) in value or in number of shares, whichever is more restrictive, of the outstanding shares of any class or series of Capital Stock of the Corporation excluding any outstanding shares of Capital Stock not treated as outstanding for U.S. federal income tax purposes, or such other percentage determined from time to time by the Board of Directors in accordance with Section 7.2.8 of the Charter.

TRS . The term “TRS” shall mean a taxable REIT subsidiary (as defined in Section 856(l) of the Code) of the Corporation.

Transfer . The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire or change such Person’s percentage of Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Capital Stock or the right to vote or receive dividends on Capital Stock, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Capital Stock or any interest in Capital Stock or any exercise of any such conversion or exchange right, and (c) Transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of Capital Stock; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise. The terms “Transferring” and “Transferred” shall have the correlative meanings.

Trustee . The term “Trustee” shall mean the Person unaffiliated with both the Corporation and a Prohibited Owner that is appointed by the Corporation to serve as trustee of the Charitable Trust.

Section 7.2 Capital Stock .

Section 7.2.1 Ownership Limitations . During the period commencing on the Initial Date and prior to the Restriction Termination Date or as otherwise set forth below, and subject to Section 7.4:

(a) Basic Restrictions .

(i) Except as provided in Section 7.2.7 hereof, no Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own shares of Capital

Stock in excess of the Stock Ownership Limit. No Excepted Holder shall Beneficially Own or Constructively Own shares of Capital Stock in excess of the Excepted Holder Limit for such Excepted Holder.

(ii) Except as provided in Section 7.2.7 hereof, no Person shall Beneficially Own shares of Capital Stock to the extent that such Beneficial Ownership of Capital Stock would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year).

(iii) Except as provided in Section 7.2.7 hereof, any Transfer of shares of Capital Stock that, if effective, would result in the Capital Stock being beneficially owned by less than one hundred (100) Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio , and the intended transferee shall acquire no rights in such Capital Stock.

(iv) Except as provided in Section 7.2.7 hereof, no Person shall Beneficially Own or Constructively Own shares of Capital Stock to the extent such Beneficial Ownership or Constructive Ownership would cause the Corporation to Constructively Own ten percent (10%) or more of the ownership interests in a tenant (other than a TRS) of the Corporation’s real property within the meaning of Section 856(d)(2)(B) of the Code.

(v) No Person shall Beneficially Own or Constructively Own shares of Capital Stock to the extent that such Beneficial Ownership or Constructive Ownership would otherwise cause the Corporation to fail to qualify as a REIT under the Code.

(vi) Subject to Section 7.4 and except as provided in Section 7.2.7 hereof, during the period commencing on the Initial Date and prior to the date that either (i) each outstanding class of Capital Stock qualifies as a class of Publicly-Offered Securities, or (ii) the Corporation qualifies for another exception to the Plan Asset Regulations (other than the Insignificant Participation Exception), Benefit Plan Investors shall not Beneficially Own 25.0% or more of any class of Capital Stock, disregarding any shares held by Controlling Persons (other than Controlling Persons that are Benefit Plan Investors).

(vii) Subject to Section 7.4 and except as provided in Section 7.2.7 hereof, during the period commencing on the Initial Date and prior to the date that either (i) each outstanding class of Capital Stock qualifies as a class of Publicly-Offered Securities or (ii) the Corporation qualifies for another exception to the Plan Asset Regulations (other than the Insignificant Participation Exception), no Person shall Transfer Capital Stock unless such Person obtains from its transferee a representation and agreement that (A) its transferee is not (and will not be), and is not acting on behalf of, a Benefit Plan Investor or Controlling Person and (B) such transferee will obtain from its transferee the representation and agreement set forth in this sentence (including without limitation clauses (A) and (B)).

(b) Transfer in Trust/Transfer Void Ab Initio . If any Transfer of shares of Capital Stock (or other event) occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning shares of Capital Stock in violation of Section 7.2.1(a)(i), (ii), (iv) or (v),

(i) then that number of shares of the Capital Stock the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i), (ii), (iv) or (v) (rounded up to the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3, effective as of the close of business on the Business Day prior to the date of such Transfer (or other event), and such Person shall acquire no rights in such shares of Capital Stock; or

(ii) if the transfer to the Charitable Trust described in clause (i) of this Section 7.2.1(b) would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i), (ii), (iv) or (v), then the Transfer of that number of shares of Capital Stock that otherwise would cause any Person to violate Section 7.2.1(a)(i), (ii), (iv) or (v) shall be void ab initio , and the intended transferee shall acquire no rights in such shares of Capital Stock.

Section 7.2.2 Remedies for Breach . If the Board of Directors shall at any time determine that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any shares of Capital Stock in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Directors or a committee thereof or other designees if permitted by the MGCL shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares of Capital Stock, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided , however , that any Transfer or attempted Transfer or other event in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, or, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof or other designee if permitted by the MGCL.

Section 7.2.3 Notice of Restricted Transfer . Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of shares of Capital Stock that will or may violate Section 7.2.1(a) or any Person who would have owned shares of Capital Stock that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b) shall immediately give written notice to the Corporation of such event or, in the case of such a proposed or attempted transaction, give at least fifteen (15) days prior written notice, and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer on the Corporation’s status as a REIT.

Section 7.2.4 Owners Required To Provide Information . From the Initial Date and prior to the Restriction Termination Date:

(a) Every Person that Beneficially Owns more than five percent (5%) (or such lower percentage as required by the Code or the Treasury Regulations promulgated

thereunder) in number or value of the outstanding shares of Capital Stock, within thirty (30) days after the end of each taxable year, shall give written notice to the Corporation stating (i) the name and address of such owner, (ii) the number of shares of Capital Stock Beneficially Owned and (iii) a description of the manner in which such shares are held. Each such owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with the Stock Ownership Limit; and

(b) Each Person who is a Beneficial Owner or Constructive Owner of Capital Stock and each Person (including the stockholder of record) who is holding Capital Stock for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information as the Corporation may request, in good faith, in order to determine the Corporation’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance and to ensure compliance with the Stock Ownership Limit.

Section 7.2.5 Remedies Not Limited . Nothing contained in this Section 7.2 shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to, subject to Section 5.7 of the Charter, protect the Corporation and the interests of its stockholders in preserving the Corporation’s status as a REIT.

Section 7.2.6 Ambiguity . In the case of an ambiguity in the application of any of the provisions of this Article VII, including any definition contained in Section 7.1 of this Article VII, the Board of Directors shall have the power to determine the application of the provisions of this Article VII with respect to any situation based on the facts known to it at such time. In the event Section 7.2 or 7.3 requires an action by the Board of Directors and the Charter fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 7.1, 7.2 or 7.3. Absent a decision to the contrary by the Board of Directors (which the Board of Directors may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Sections 7.2.1 and 7.2.2) acquired Beneficial Ownership or Constructive Ownership of Capital Stock in violation of Section 7.2.1, such remedies (as applicable) shall apply first to the shares of Capital Stock which, but for such remedies, would have been actually owned by such Person, and second to shares of Capital Stock which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such shares of Capital Stock based upon the relative number of the shares of Capital Stock held by each such Person.

Section 7.2.7 Exceptions .

(a) The Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the restrictions contained in Section 7.2.1(a)(i), (ii) or (iv), as the case may be, and may establish or increase an Excepted Holder Limit for such Person if the Board of Directors obtains such representations, covenants and undertakings as the Board of Directors may deem appropriate in order to conclude that granting the exemption and/or establishing or increasing the Excepted Holder Limit, as the case may be, will not cause the Corporation to lose its status as a REIT.

(b) Prior to granting any exception pursuant to Section 7.2.7(a), the Board of Directors may require a ruling from the Internal Revenue Service or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem necessary or advisable in order to determine that granting the exception will not cause the Corporation to lose its status as a REIT. Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

(c) Subject to Section 7.2.1(a)(ii), (iv) and (v), an underwriter, placement agent or initial purchaser that participates in a public offering, a private placement or other private offering of Capital Stock (or securities convertible into or exchangeable for Capital Stock) may Beneficially Own or Constructively Own shares of Capital Stock (or securities convertible into or exchangeable for Capital Stock) in excess of the Stock Ownership Limit, but only to the extent necessary to facilitate such public offering, private placement or immediate resale of such Capital Stock and provided that the restrictions contained in Section 7.2.1(a) will not be violated following the distribution by such underwriter, placement agent or initial purchaser of such shares of Capital Stock.

(d) The Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the restrictions contained in Section 7.2.1(a)(vi) and (vii), as the case may be, if the Board of Directors obtains such representations, covenants and undertakings as the Board of Directors may deem appropriate in order to conclude that granting the exemption will not cause any assets of the Corporation to be deemed “plan assets” (within the meaning of the Plan Asset Regulations).

(e) Prior to granting any exception pursuant to Section 7.2.7(d), the Board of Directors may require a ruling from the Internal Revenue Service or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem necessary or advisable in order to determine that granting the exception will not cause the Corporation to fail to qualify for the Insignificant Participation Exception or another applicable exception to avoid having the assets of the Corporation be deemed “plan assets” (within the meaning of the Plan Asset Regulations). Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

Section 7.2.8 Change in Stock Ownership Limit and Excepted Holder Limits . (a) The Board of Directors may from time to time increase or decrease the Stock Ownership Limit; provided , however , that a decreased Stock Ownership Limit will not be effective for any Person whose percentage ownership of Capital Stock is in excess of such decreased Stock Ownership Limit until such time as such Person’s percentage of Capital Stock equals or falls below the decreased Stock Ownership Limit, but until such time as such Person’s percentage of Capital Stock falls below such decreased Stock Ownership Limit, any further acquisition of Capital Stock will be in violation of the Stock Ownership Limit and, provided further, that the new Stock Ownership Limit would not allow five or fewer individuals (taking into account all Excepted Holders) to Beneficially Own more than forty-nine and nine-tenths percent (49.9%) in value of the outstanding Capital Stock.

(b) The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the then existing Stock Ownership Limit.

Section 7.2.9 Legend . Each certificate, if any, or any notice in lieu of any certificate, for shares of Capital Stock shall bear a legend summarizing the restrictions on ownership and transfer contained herein. Instead of a legend, the certificate, if any, may state that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge.

Section 7.3 Transfer of Capital Stock in Trust .

Section 7.3.1 Ownership in Trust . Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of shares of Capital Stock to a Charitable Trust, such shares of Capital Stock shall be deemed to have been transferred to the Trustee as trustee for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b). The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 7.3.6.

Section 7.3.2 Status of Shares Held by the Trustee . Shares of Capital Stock held by the Trustee shall continue to be issued and outstanding shares of Capital Stock of the Corporation. The Prohibited Owner shall have no rights in the Capital Stock held by the Trustee. The Prohibited Owner shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares held in the Charitable Trust. The Prohibited Owner shall have no claim, cause of action, or any other recourse whatsoever against the purported transferor of such Capital Stock.

Section 7.3.3 Dividend and Voting Rights . The Trustee shall have all voting rights and rights to dividends or other distributions with respect to shares of Capital Stock held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other distribution paid to a Prohibited Owner prior to the discovery by the Corporation that the shares of Capital Stock have been transferred to the Trustee shall be paid with respect to such shares of Capital Stock by the Prohibited Owner to the Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Trustee. Any dividends or other distributions so paid over to the Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that the shares of Capital Stock have been transferred to the Charitable Trust, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that the shares of Capital Stock have

been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided , however , that if the Corporation has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article VII, until the Corporation has received notification that shares of Capital Stock have been transferred into a Charitable Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

Section 7.3.4 Sale of Shares by Trustee . Within twenty (20) days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Charitable Trust, the Trustee of the Charitable Trust shall sell the shares held in the Charitable Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 7.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.4. The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Charitable Trust ( e.g. , in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Charitable Trust and (2) the price per share received by the Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares held in the Charitable Trust. The Trustee may reduce the amount payable to the Prohibited Owner by the amount of dividends and other distributions paid to the Prohibited Owner and owed by the Prohibited Owner to the Trustee pursuant to Section 7.3.3 of this Article VII. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall be paid to the Trustee upon demand.

Section 7.3.5 Purchase Right in Stock Transferred to the Trustee . Shares of Capital Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the amount payable to the Prohibited Owner by the amount of dividends and other distributions paid to the Prohibited Owner and owed by the Prohibited Owner to the Trustee pursuant to Section 7.3.3 of this Article VII. The Corporation may pay the amount of such reduction to the Trustee for the benefit of the Charitable Beneficiary. The Corporation shall have the right to accept such offer until the Trustee has sold the shares held in the Charitable Trust pursuant to Section 7.3.4. Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and any dividends or other distributions held by the Trustee shall be paid to the Charitable Beneficiary.

Section 7.3.6 Designation of Charitable Beneficiaries . By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Charitable Trust such that (i) the shares of Capital Stock held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under one of Sections 170(b)(1)(A), 2055 and 2522 of the Code. Neither the failure of the Corporation to make such designation nor the failure of the Corporation to appoint the Trustee before the automatic transfer provided for in Section 7.2.1(b)(i) shall make such transfer ineffective, provided that the Corporation thereafter makes such designation and appointment.

Section 7.4 NYSE Transactions . Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.

Section 7.5 Enforcement . The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.

Section 7.6 Non-Waiver . No delay or failure on the part of the Corporation or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the Board of Directors, as the case may be, except to the extent specifically waived in writing.

Section 7.7 Deemed ERISA Representations . From and after the date upon which a registration statement with respect to the Common Stock becomes effective, each purchaser and subsequent transferee of Common Stock will be deemed to have represented, warranted, and agreed that its purchase and holding of Common Stock will not constitute or result in (i) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, or (ii) a violation of any applicable other federal, state, local, non-U.S. or other laws or regulations that contain one or more provisions similar to the provisions of Title I of ERISA of Section 4975 of the Code.

Section 7.8 Severability . If any provision of this Article VII or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provisions shall be affected only to the extent necessary to comply with the determination of such court.

ARTICLE VIII

AMENDMENTS

The Corporation reserves the right from time to time to make any amendment to the Charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Charter, of any shares of outstanding stock. All rights and powers conferred by the Charter on stockholders, directors and officers are granted subject to this reservation. Except as otherwise provided in the Charter and except for those amendments permitted to be made without stockholder approval under Maryland law or by specific provision in the Charter, any amendment to the Charter shall be valid only if declared advisable by the Board of Directors and approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter. However, any amendment to Section 5.8 and Article VII or to this sentence of the Charter shall be valid only if declared advisable by the Board of Directors and approved by the affirmative vote of holders of shares entitled to cast at least two-thirds of all the votes entitled to be cast on the matter.

ARTICLE IX

LIMITATION OF LIABILITY

To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no present or former director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. Neither the amendment nor repeal of this Article IX, nor the adoption or amendment of any other provision of the Charter or the Bylaws inconsistent with this Article IX, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

THIRD : The amendment to and restatement of the Charter as hereinabove set forth have been duly advised by the Board of Directors and approved by the sole stockholder of the Corporation as required by law.

FOURTH : The current address of the principal office of the Corporation is as set forth in Article IV of the foregoing amendment and restatement of the Charter.

FIFTH : The name and address of the Corporation’s current resident agent are as set forth in Article IV of the foregoing amendment and restatement of the Charter.

SIXTH : The number of directors of the Corporation and the names of those currently in office are as set forth in Article V of the foregoing amendment and restatement of the Charter.

SEVENTH : The total number of shares of stock which the Corporation had authority to issue immediately prior to this amendment and restatement was 1,000 shares, consisting of 1,000 shares of Common Stock, $0.01 par value per share. The aggregate par value of all shares of stock having par value was $10.00.

EIGHTH : The total number of shares of stock which the Corporation has authority to issue pursuant to the foregoing amendment and restatement of the Charter is 450,000,000, consisting of 400,000,000 shares of Common Stock, $0.01 par value per share, and 50,000,000 shares of Preferred Stock, $0.01 par value per share. The aggregate par value of all authorized shares of stock having par value is $4,500,000.

NINTH : The undersigned Chairman of the Board of Directors and Chief Executive Officer acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chairman of the Board of Directors and Chief Executive Officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its Chairman of the Board of Directors and Chief Executive Officer and attested to by its Chief Financial Officer, Secretary and Treasurer on this 17th day of July, 2014.

Exhibit 3.2

MEDEQUITIES REALTY TRUST, INC.

ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF A SERIES OF SHARES OF PREFERRED STOCK

MedEquities Realty Trust, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “SDAT”) that:

FIRST : Under the authority contained in the Articles of Amendment and Restatement of the Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board”), pursuant to resolutions duly adopted by unanimous written consent of the Board, dated January 14, 2015, has classified and designated 125 shares (the “Shares”) of Preferred Stock (as defined in the Charter), $0.01 par value per share, as 12.5% Series A Redeemable Cumulative Preferred Stock, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, which upon any restatement of the Charter, shall be deemed to be part of Article VI of the Charter, with any necessary or appropriate changes to the enumeration of sections or subsections hereof. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Charter.

12.5% Series A Redeemable Cumulative Preferred Stock

(1) Designation and Number . A series of preferred stock, designated as the “12.5% Series A Redeemable Cumulative Preferred Stock” (the “Series A Preferred Stock”), is hereby established. The par value of the Series A Preferred Stock is $0.01 per share. The number of shares of the Series A Preferred Stock shall be 125.

(2) Ranking . The Series A Preferred Stock will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Common Stock (as defined in the Charter) and any other class of capital stock of the Corporation, now or hereafter issued and outstanding, the terms of which provide that such capital stock ranks, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Corporation, junior to such Series A Preferred Stock, (b) on a parity with any equity securities the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series A Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“Parity Stock”); and (c) junior to any equity securities the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series A Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“Senior Stock”). Any authorization or issuance of Senior Stock or Parity Stock would require the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock (excluding any shares owned by any holder controlling, controlled by, or under common control with, the Corporation). Any convertible or exchangeable debt securities that the Corporation may issue are not considered to be equity securities for these purposes.

(3) Dividends.

(a) The record holders of the then outstanding shares of Series A Preferred Stock shall be entitled to receive cumulative preferential cash dividends, when and as authorized by the Board, out of funds legally available for the payment of dividends, at the rate of 12.5% per annum of the total of (i) the $1,000 liquidation preference (the “Liquidation Preference”) plus (ii) all accumulated and unpaid dividends thereon which are in arrears. Such dividends shall accrue on a daily basis and be cumulative from the first date on which any shares of Series A Preferred Stock are issued, such issue date to be contemporaneous with the first receipt by the Corporation of subscription funds for the Series A Preferred Stock (the “Initial Issue Date”), and shall be payable annually in arrears on June 30 of each year or, if not a business day, the next succeeding business day (each, a “Dividend Payment Date”). Any dividend payable on the Series A Preferred Stock for any partial Dividend Period (as defined below) will be computed on the basis of a 360-day year consisting of twelve 30-day months. The term “Dividend Period” shall mean, with respect to the first Dividend Period, the period from and including the Initial Issue Date to and including the first Dividend Payment Date, and with respect to each subsequent Dividend Period, the period from but excluding a Dividend Payment Date to and including the next succeeding Dividend Payment Date or other date as of which accumulated dividends are to be calculated. Dividends shall be paid to holders of record of the Series A Preferred Stock as their names appear in the stock transfer records of the Corporation at the close of business on the applicable record date, which shall be the 15th day of the calendar month in which the applicable Dividend Payment Date falls or such other date designated by the Board for the payment of dividends that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Dividends in respect of any past Dividend Periods that are in arrears may be authorized and paid at any time to holders of record on the Dividend Record Date related to each such Dividend Period. Any dividend payment made on the Series A Preferred Stock shall be credited first against the earliest accumulated but unpaid dividend due which remains payable.

(b) No dividends on the Series A Preferred Stock shall be authorized by the Board or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.

(c) Notwithstanding the foregoing, dividends on the Series A Preferred Stock shall accumulate whether or not the terms and provisions set forth in Section 3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are authorized or declared. Dividends will be authorized and paid when due in all events to the fullest extent permitted by law and, if revaluation of the Corporation or its assets would permit payment of dividends which would otherwise be prohibited, then such revaluation shall be done. Unpaid dividends on the Series A Preferred Stock will accumulate as of the Dividend Payment Date on which they first become payable.

(d) Except as provided in Section 3(e), unless full cumulative dividends on the Series A Preferred Stock have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past Dividend Periods and the then current Dividend Period, no dividends (other than in shares of Common Stock or other shares of stock ranking junior to the Series A Preferred Stock as to dividends and upon liquidation) shall be authorized or paid or set aside for payment nor shall any other distribution be authorized or made upon the Common Stock, or any other stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends or upon liquidation, nor shall any shares of Common Stock, or any other shares of stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except by conversion into or exchange for other stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and upon liquidation). Holders of the Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends on the Series A Preferred Stock as provided above. Any dividend payment made on the Series A Preferred Stock shall be first credited against the earliest accumulated but unpaid dividend due with respect to such shares which remains payable.

(e) When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series A Preferred Stock, all dividends authorized upon the Series A Preferred Stock shall be authorized pro rata.

(f) Holders of the Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or shares in excess of the full cumulative dividends on the Series A Preferred Stock as described above.

(g) If, for any taxable year, the Corporation elects to designate as “capital gain dividends” (as defined in Section 856 of the Code) any portion (the “Capital Gains Amount”) of the dividends paid or made available for the year to holders of all classes of stock (the “Total Dividends”), then the Capital Gains Amount allocable to holders of the Series A Preferred Stock shall be the amount that the total dividends paid or made available to the holders of the Series A Preferred Stock for the year bears to the Total Dividends.

(4) Liquidation Preference .

(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of the Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation legally available for distribution to its stockholders a distribution in cash in the amount of the Liquidation Preference plus an amount equal to all dividends accumulated and unpaid thereon to the date of payment, plus, if applicable, the Redemption Premium (as defined below) then in effect, before any distribution of assets is made to holders of Common Stock or any other class or series of stock of the Corporation that ranks junior to the Series A Preferred Stock as to liquidation rights.

(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the legally available assets of the Corporation are insufficient to pay the amount of the Liquidation Preference plus an amount equal to all dividends accumulated and unpaid on all outstanding shares of Series A Preferred Stock, then the holders of the Series A Preferred Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be entitled.

(c) After payment of the full amount of liquidating distributions to which they are entitled, the holders of the Series A Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.

(d) Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given not less than 15 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series A Preferred Stock.

(e) Neither the consolidation or merger of the Corporation with or into any other corporation, trust or entity or of any other corporation, trust or entity with or into the Corporation, nor the sale, lease or conveyance of all or substantially all of the property or business of the Corporation, shall be deemed to constitute a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 4.

(5) Redemption .

(a) Right of Optional Redemption . The Corporation, at its option and upon not less than 15 nor more than 60 days’ written notice, may redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time (the “Redemption Date”), for cash at a redemption price of $1,000 per share, plus all accumulated and unpaid dividends thereon to and including the date fixed for redemption (except as provided in Section 5(c) below) (the “Redemption Price”), plus a redemption premium per share (each, a “Redemption Premium”) as follows:


Period	Redemption Premium
Issuance date until December 31, 2016	$	50
January 1, 2017 until December 31, 2017	$	25
Thereafter		0

If less than all of the outstanding shares of Series A Preferred Stock are to be redeemed, the Series A Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the Corporation.

(b) Limitations on Redemption . Unless full cumulative dividends on all of the Series A Preferred Stock have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no Series A Preferred Stock shall be redeemed unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any of the Series A Preferred Stock (except by exchange for capital stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase or acquisition of the Series A Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock or any such purchase or acquisition made in order to ensure that the Corporation remains qualified as a real estate investment trust for federal income tax purposes.

(c) Rights to Dividends on Shares Called for Redemption . Immediately prior to any redemption of the Series A Preferred Stock, the Corporation shall pay, in cash, any accumulated and unpaid dividends through the Redemption Date, unless a Redemption Date falls after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of the Series A Preferred Stock at the close of business on such Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares before such Dividend Payment Date.

(d) Procedures for Redemption .

(i) Notice of redemption will be given by the Corporation not less than 15 nor more than 60 days prior to the Redemption Date, addressed to the respective holders of record of the Series A Preferred Stock to be redeemed. No failure to give such notice or any defect thereof or in the sending thereof shall affect the validity of the proceedings for the redemption of any of the Series A Preferred Stock except as to the holder to whom notice was defective or not given.

(ii) In addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Stock may be listed or admitted to trading, such notice shall state: (A) the Redemption Date; (B) the Redemption Price; (C) the Redemption Premium, if any; (D) the number of shares of Series A Preferred Stock to be redeemed; (E) the place or places where the Series A Preferred Stock are to be surrendered (if so required in the notice) for payment of the Redemption Price; and (F) that dividends on the shares to be redeemed will cease to accrue on such Redemption Date. If less than all of the shares of Series A Preferred Stock held by any holder is to be redeemed, the notice sent to such holder shall also specify the number of shares of Series A Preferred Stock held by such holder to be redeemed.

(iii) If notice of redemption of any of the Series A Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of any of the shares of Series A Preferred Stock so called for redemption, then, from and after the Redemption Date, dividends will cease to

accrue on such shares of Series A Preferred Stock, such shares of Series A Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the Redemption Price. Holders of the Series A Preferred Stock to be redeemed shall surrender such shares of Series A Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates for the shares of Series A Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series A Preferred Stock shall be redeemed by the Corporation at the Redemption Price plus any applicable Redemption Premium and any accumulated and unpaid dividends payable upon such redemption. In case fewer than all of the shares of Series A Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series A Preferred Stock without cost to the holder thereof.

(iv) The deposit of funds with a bank or trust company for the purpose of redeeming the Series A Preferred Stock shall be irrevocable except that:

(A) The Corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holder of any shares redeemed shall have no claim to such interest or other earnings; and

(B) Any balance of money so deposited by the Corporation and unclaimed by the holders of the Series A Preferred Stock entitled thereto at the expiration of two years from the applicable Redemption Date shall be paid, together with any interest or other earnings earned thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.

(e) Legally Available Funds . No shares of Series A Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price.

(f) Status of Redeemed Shares . Any shares of Series A Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation.

(6) Voting Rights . Except as provided in this Section 6, the holders of the Series A Preferred Stock shall not be entitled to vote on any matter submitted to stockholders for a vote. Notwithstanding the foregoing, the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock (excluding any shares owned by any holder controlling, controlled by, or under common control with, the Corporation), voting as a separate class, shall be required for (a) authorization or issuance of any security senior to or on parity with the Series A Preferred Stock, (b) any amendment to the Charter (including these Articles Supplementary) which has a material adverse effect on the rights and preferences of the Series A Preferred Stock or (c) any reclassification of the Series A Preferred Stock.

(7) Conversion . The Series A Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation.

(8) Notice . All notices to be given to the holders of the Series A Preferred Stock shall be given by (i) mail, postage prepaid, (ii) overnight delivery courier service, (iii) facsimile transmission (iv) electronic mail or (v) personal delivery, to the holders of record, addressed to the address or sent to the facsimile number or electronic mail address shown by the records of the Corporation.

(9) Restriction on Ownership and Transfer .

(a) The Series A Preferred Stock constitutes Capital Stock (as defined in the Charter) of the Corporation and is governed by and issued subject to all the ownership and transfer restrictions of the Charter applicable to Capital Stock generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Article VII of the Charter applicable to Capital Stock. The foregoing sentence shall not be construed to limit the applicability to the Series A Preferred Stock of any other term or provision of the Charter.

(b) The Series A Preferred Stock may not be transferred except in the case of “Permitted Transfers.” The term “Permitted Transfers” shall mean transfers or assignments: (i) by the holder to the Corporation; (ii) by bequest or the laws of descent or distribution; (iii) in connection with a transfer to an unaffiliated third party pursuant to a merger, consolidation, stock-for-stock exchange, tender offer or similar transaction; (iv) to a family member or a controlled entity for bona fide estate planning purposes; (v) by a trust to the trust’s beneficiaries; (vi) pursuant to an effective registration statement under the Securities Act of 1933, as amended, simultaneously with registration of the Series A Preferred Stock under Section 12 of the Securities Exchange Act of 1934, as amended; and (vii) in reliance upon an available exemption from the registration requirements of the Securities Act of 1933, as amended. Transfers under clauses (ii), (iii), (iv), (v), (vi) and (vii) shall be subject to the transferee agreeing to be bound by the same restrictions on transfer.

SECOND : These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.

THIRD : These Articles of Amendment shall be effective at the time the SDAT accepts these Articles Supplementary for record.

FOURTH : The undersigned President and Chief Operating Officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President and Chief Operating Officer of the Corporation acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[ Remainder of this page intentionally left blank ]

IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by the President and Chief Operating Officer of the Corporation and attested to by its Executive Vice President, Chief Financial Officer, Secretary and Treasurer on this 20th day of January, 2015.


MEDEQUITIES REALTY TRUST, INC.

By:		/s/ William C. Harlan
		William C. Harlan
		President and Chief Operating Officer


ATTEST:

By:		/s/ Jeffery C. Walraven
		Jeffery C. Walraven
		Executive Vice President, Chief Financial Officer, Secretary and Treasurer

Exhibit 3.3

MEDEQUITIES REALTY TRUST, INC.

ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS

AND PREFERENCES OF A SERIES OF SHARES OF PREFERRED STOCK

MedEquities Realty Trust, Inc., a Maryland corporation (the “ Corporation ”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “ SDAT ”) that:

FIRST : Under the authority contained in the Articles of Amendment and Restatement of the Corporation, as in existence immediately prior hereto (the “ Charter ”), the Board of Directors of the Corporation (the “ Board ”) and a duly authorized committee thereof have classified and designated 125,000 shares (the “ Shares ”) of Preferred Stock (as defined in the Charter), $0.01 par value per share, as 7.875% Series B Redeemable Cumulative Preferred Stock, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption, which upon any restatement of the Charter, shall be deemed to be part of Article VI of the Charter, with any necessary or appropriate changes to the enumeration of sections or subsections hereof. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Charter. References to (i) the “date hereof” shall mean the date these Articles Supplementary are filed with and accepted for record by the SDAT, (ii) Sections in these Articles Supplementary shall be deemed to refer to the applicable sections in these Articles Supplementary and (iii) “hereof” or “herein” shall be deemed to refer to these Articles Supplementary.

7.875% Series B Redeemable Cumulative Preferred Stock

(1) Designation and Number . A series of preferred stock, designated as the “7.875% Series B Redeemable Cumulative Preferred Stock” (the “ Series B Preferred Stock ”), is hereby established. The par value of the Series B Preferred Stock is $0.01 per share. The number of shares of the Series B Preferred Stock shall be 125,000.

(2) Ranking . The Series B Preferred Stock will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Common Stock and any other classes or series of capital stock or other equity securities of the Corporation, now or hereafter issued and outstanding, the terms of which provide that such capital stock or other equity security ranks, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Corporation, junior to the Series B Preferred Stock (collectively, with the Common Stock, the “ Junior Stock ”), (b) on parity with any classes or series of capital stock or any other equity securities of the Corporation hereafter issued and outstanding that are properly approved pursuant to Section 6 below and that, pursuant to the terms thereof, rank on parity with the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“ Parity Stock ”); and (c) junior to the Series A Preferred Stock of the Corporation and to any classes or series of capital stock or any other equity securities of the Corporation hereafter issued and outstanding that are properly approved pursuant to Section 6 below and that, pursuant to the terms thereof, rank senior to the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation

(collectively, with the Series A Preferred Stock, the “ Senior Stock ”). Any authorization or issuance of Senior Stock or Parity Stock requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of Series B Preferred Stock voting together as a separate class.

(3) Dividends .

(a) The record holders of the then outstanding shares of Series B Preferred Stock shall be entitled to receive cumulative preferential cash dividends, junior to cash dividends required to be made with respect to any issued and outstanding Senior Stock, on a parity with any cash dividends required to be made with respect to any issued and outstanding Parity Stock, but prior to and in preference to all cash dividends made with respect to any issued and outstanding Junior Stock, when and as authorized by the Board, out of funds legally available for the payment of dividends, at an annual rate equal to the Applicable Dividend Rate (as defined below) then in effect multiplied by the total of (i) the $1,000 per share Series B Preferred Stock liquidation preference (the “ Liquidation Preference ”) plus (ii) all accumulated and unpaid dividends thereon that are in arrears. Such dividends shall be cumulative from the first date on which any shares of Series B Preferred Stock are issued, such issue date to be contemporaneous with the first receipt by the Corporation of subscription funds for the Series B Preferred Stock (the “ Initial Issue Date ”), and shall be payable monthly in arrears on the first day of each calendar month or, if not a business day, the next succeeding business day (each, a “ Dividend Payment Date ”). Any dividend payable on the Series B Preferred Stock for any partial Dividend Period (as defined below) will be computed on the basis of a 360-day year consisting of twelve 30-day months. The term “ Dividend Period ” shall mean, with respect to the first Dividend Period, the period from and including the Initial Issue Date to and including the first Dividend Payment Date, and with respect to each subsequent Dividend Period, the period from but excluding a Dividend Payment Date to and including the next succeeding Dividend Payment Date or other date as of which accumulated dividends are to be calculated. Dividends shall be paid to holders of record of the Series B Preferred Stock as their names appear in the stock transfer records of the Corporation at the close of business on the applicable record date, which shall be the business day nearest the 23rd day of the calendar month that is immediately prior to the month in which the applicable Dividend Payment Date falls or such other date designated by the Board for the payment of dividends that is not more than 30 nor less than ten days prior to such Dividend Payment Date (each, a “ Dividend Record Date ”). Dividends in respect of any past Dividend Periods that are in arrears may be authorized and paid at any time to holders of record on the Dividend Record Date related to each such Dividend Period. Any dividend payment made on the Series B Preferred Stock shall be credited first against the earliest accumulated but unpaid dividends due that remain payable. After full cumulative cash distributions, including all amounts in arrears, are paid with respect to the Series B Preferred Stock pursuant to this Section 3(a) with respect to a Dividend Period, no further cash distributions shall be required to be made with respect to the Series B Preferred Stock pursuant to this Section 3(a) with respect to such Dividend Period except as provided in Section 3(l) below.

(b) No dividends on the Series B Preferred Stock shall be authorized by the Board or paid or set apart for payment by the Corporation if, at such time, (i) the terms and provisions of any agreement of the Corporation in effect on the date hereof relating to its indebtedness prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder or (ii) such authorization, payment or setting apart for payment shall be restricted or prohibited by law.

(c) Notwithstanding the foregoing, dividends on the Series B Preferred Stock shall accumulate if they are not paid in full for any reason, including, without limitation, whether or not the terms and provisions set forth in Section 3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are authorized or declared. Dividends will be authorized and paid when due in all events to the fullest extent permitted by law and, if revaluation of the Corporation or its assets would permit payment of dividends that would otherwise be prohibited, then such revaluation shall be done. Unpaid dividends on the Series B Preferred Stock will accumulate as of the Dividend Payment Date on which they first become payable.

(d) Except as provided in Section 3(e), unless full cumulative dividends on all the outstanding shares of the Series B Preferred Stock have been or contemporaneously are authorized, declared and paid or declared, authorized and a sum sufficient for the payment thereof is set apart for payment for all past Dividend Periods through the prior Dividend Payment Date, no dividends (other than in shares of Common Stock or other shares of Junior Stock) shall be authorized, declared, or paid or set apart for payment nor shall any other distribution be authorized, declared or made upon any shares of Common Stock or any other Junior Stock, nor shall any shares of Common Stock or any other shares of Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except by conversion into or exchange for shares of Common Stock or other Junior Stock). Notwithstanding anything to the contrary contained herein and for the avoidance of doubt, dividends to the holders of the Common Stock and other Junior Securities shall be permitted and shall not be restricted at any time if the Corporation is not in arrears with regard to the payment of any dividends on any outstanding Series B Preferred Stock in respect of any completed Dividend Period through a prior Dividend Payment Date.

(e) When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series B Preferred Stock, all dividends authorized and paid upon the Series B Preferred Stock shall be authorized and paid pro rata.

(f) Notwithstanding anything to the contrary herein, the Corporation will not be prohibited from declaring and paying dividends on the Series A Preferred Stock or from declaring and paying other dividends in such amounts that are necessary under applicable law for the Corporation to preserve its status as a REIT.

(g) “ Applicable Dividend Rate ” means (i) 7.875% in the absence of a Dividend Default, a Covenant Default or a REIT Default, (ii) 9.50% for so long as a Dividend Default or a Covenant Default (each in the absence of a REIT Default) has occurred and is continuing, (iii) 12.15% for so long as a REIT Default has occurred and is continuing and (iv) 14.62% for so long as a REIT Default and either a Dividend Default or Covenant Default (or both) has occurred and is continuing. Upon the cure of any Dividend Default, Covenant Default or REIT Default, the Applicable Dividend Rate shall revert back to the rate set forth in clause (i) above.

(h) A “ Dividend Default ” shall have occurred if for any reason or for no reason (including due to the operation of Sections 3(b) and 3(c) above) at any time the cash dividend payments on the Series B Preferred Stock are in arrears for twelve consecutive Dividend Payment Dates. A Dividend Default shall be deemed to continue for so long as such condition exists.

(i) A “ Covenant Default ” shall have occurred if (i) the aggregate Investment Amount (as defined below) is less than $100,000,000 and the Tangible Net Worth (as defined below) of either the Corporation or MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Partnership ”), is less than $100,000,000 or (ii) the Investment Amount is $100,000,000 or more and the Tangible Net Worth of either the Corporation or the Partnership is less than $110,000,000. A Covenant Default shall be deemed to continue for so long as either of these conditions exists. “ Investment Amount ” means, from time to time, the gross dollar amount of proceeds paid by the holders of the Series B Preferred Stock to the Corporation for the purchase of the Series B Preferred Stock from the Corporation. “ Tangible Net Worth ” means, with respect to any Person, the amount calculated in accordance with GAAP (as defined below) of (A) the total assets of such Person and its proportionate share of the total assets of its consolidated subsidiaries and joint ventures, adjusted to exclude accumulated depreciation and amortization of real estate properties, minus (B) the Investment Amount, minus (C) the total liabilities of such Person and its proportionate share of the total liabilities of its consolidated subsidiaries and joint ventures minus (D) the intangible assets of such Person and its proportionate share of the intangible assets of its consolidated subsidiaries and joint ventures, including, without limitation, goodwill, prepaid expenses, deferred costs, unamortized deferred charges, debt discounts, trademarks, tradenames, copyrights, patents, patent allocations, licenses and rights in any of the foregoing and other items treated as intangible in accordance with GAAP. “ GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination, consistently applied.

(j) A “ REIT Default ” shall occur upon (i) the failure of the Corporation to qualify on or before June 30, 2015 for the taxable year ended December 31, 2014 as a REIT or (ii) at any time after becoming qualified as a REIT, (A) it is more likely than not that the Corporation will not be taxed as a REIT for the current taxable year, or (B) it is determined finally by the Internal Revenue Service (and not reasonably disputed by the Corporation pursuant to appropriate legal process) that the Corporation fails to qualify as a REIT for any taxable year. A REIT Default shall be deemed to occur retroactively as of the first day of the calendar year in which either of the events described in clauses (i) and (ii) of this definition occurs and shall continue for so long as such failure continues.

(k) If, for any taxable year, the Corporation elects to designate as “capital gain dividends” (as defined in Section 856 of the Code) any portion (the “ Capital Gains Amount ”) of the dividends paid or made available for the year to holders of all classes of stock (the “ Total Dividends ”), then the Capital Gains Amount allocable to holders of the Series B Preferred Stock shall be the amount that the total dividends paid or made available to the holders of the Series B Preferred Stock for the year bears to the Total Dividends.

(l) If it is determined that a REIT Default has occurred, the Applicable Dividend Rate on account of such REIT Default shall apply (and dividends pursuant to Section 3 above shall be deemed to have accumulated at such Applicable Dividend Rate) from the first day of the calendar year during which such REIT Default occurs and shall continue to accumulate at such Applicable Dividend Rate until such REIT Default is cured, with the Applicable Dividend Rate for such period being as set forth in Section 3(g)(iv) above (unless during the period of such REIT Default no Dividend Default or Covenant Default exists, in which case the Applicable Dividend Rate shall be as set forth in Section 3(g)(iii) above) and the Corporation shall promptly and retroactively be obligated to pay to the holders of the Series B Preferred Stock, automatically and without further action by any holder of Series B Preferred Stock, an amount in cash equal to the excess of the amount of the dividends that should have been paid for such period over the amount of dividends actually paid in cash for such period, it being understood and agreed that any such amounts not paid as required shall accrue, accumulate and be required to be paid in accordance with the provisions of Section 3, including but not limited to Section 3(a)(ii). This paragraph shall not limit the rights of the holders of Series B Preferred Stock hereunder or under any other agreement. The Corporation’s obligations under this Section 3(l) shall survive any redemption, conversion or other occurrence with respect to shares of the Series B Preferred Stock that causes such shares of Series B Preferred Stock to no longer be outstanding, and shall survive the cancellation or other termination of the Corporation’s obligations with respect to the Series B Preferred Stock hereunder.

(4) Liquidation Preference .

(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, following any distribution or payment with respect to the Series A Preferred Stock required to be made pursuant to the provisions of the charter of the Corporation as in existence on the Initial Issue Date (or as amended in compliance with the provisions of Section 6 hereof) and any other Senior Stock properly authorized and issued in compliance with the provisions of Section 6 hereof, but prior to and in preference to any distribution or payment being made to holders of any Junior Stock or any other securities of the Corporation that are not authorized and issued in compliance with the provisions of Section 6 hereof, the holders of the Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation legally available for distribution to its stockholders, on account of each share of their Series B Preferred Stock, a distribution in cash in the amount of (i) the Liquidation Preference plus (ii) an amount equal to all dividends accumulated and unpaid thereon to the date of payment plus (iii) the Redemption Dividend (as defined below) then in effect.

(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the legally available assets of the Corporation are insufficient to pay all amounts required to be paid to the holders of the Series B Preferred Stock pursuant to Section 4(a) above, then the holders of the Series B Preferred Stock shall share ratably in any such distribution of assets to be made to them in proportion to the full liquidating distributions to which they would otherwise be entitled.

(c) After payment of the full amount of liquidating distributions to which they are entitled, the holders of the Series B Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.

(5) Redemption .

(a) Right and Obligation of Redemption . The Corporation (i) may, at its option at any time and upon not less than 30 days’ advance written notice, and (ii) shall, immediately prior to a Change of Control (as defined below), redeem the Series B Preferred Stock, in whole but not in part, by the payment in cash to the holders thereof at a redemption price of (A) the Liquidation Preference plus (B) all accumulated and unpaid dividends thereon to and including the date fixed for redemption (except as provided in Section 5(c) below) (the amounts set forth in clauses (A) and (B) being the “ Redemption Price ”), plus (C) a special redemption dividend which is intended to serve as a yield adjustment in light of redemption occurring at a time that the holders of the Series B Preferred Stock would otherwise anticipate the Series B Preferred Stock to remain outstanding (each a “ Redemption Dividend ” and, together with the Redemption Price, the “ Redemption Amount ”) as follows:

The foregoing notwithstanding no Redemption Dividend shall be due with respect to a redemption made in conjunction with a Change of Control resulting from the acquisition of the Corporation or of the Corporation’s or the Partnership’s assets by Carter/Validus Operating Partnership, L.P., a Delaware limited partnership, or any of its affiliates prior to December 31, 2015. “ Change of Control ” means (x) the acquisition by any Person, entity or group of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or a series of related purchases, mergers or other acquisition transactions, entitling such Person, entity or group to exercise more than 50% of the combined voting power of the then outstanding securities of the Corporation, the Partnership or MedEquities OP GP, LLC, a Delaware limited liability company and the general partner of the Partnership (the “ General Partner ”), entitled to vote or exercise control generally on matters affecting the Corporation, the Partnership or the General Partner (“ Voting Securities ”), (y) consummation of a reorganization, merger, consolidation, sale of securities or other combination or exchange or transfer of

securities with or into any other Person regardless of which entity is the survivor, other than a reorganization, merger, consolidation, contribution or exchange or transfer of securities or other combination which would result in the Voting Securities of the Corporation, the Partnership or the General Partner outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the Voting Securities of the Corporation, the Partnership or the General Partner or of the voting securities of the surviving entity outstanding immediately after such reorganization, merger, consolidation, sale of securities or other combination or exchange or transfer of securities, and (z) consummation by the Partnership, the General Partner or the Corporation of any: (1) plan of liquidation, dissolution, or winding-up, other than a liquidation of the General Partner or the Partnership through a distribution in-kind of its assets to the Corporation and subsequent continuation by the Corporation of the historical business(es) theretofor conducted by the Partnership and/or the General Partner, as the case may be, (2) the sale or disposition of all or substantially all of the assets (including, without limitation, securities of subsidiaries) of the Partnership or the Corporation, as applicable, or (3) a distribution to security holders of assets of the Partnership or the Corporation, as applicable, having a value equal to 30% or more of the total value of all assets of the Partnership or the Corporation, as applicable; provided, however , notwithstanding the foregoing, (A) an initial public offering of the Common Stock shall be deemed to be a Change of Control regardless of the number of shares of Common Stock sold in the offering or possessed by any single investor following such initial public offering and (B) any Change in Control of the General Partner to any, or the approval of any new general partner of the Partnership that is, a direct or indirect wholly-owned subsidiary of the Corporation shall not be deemed a Change of Control for purposes of this Section (5)(a).

(b) Limitations on Redemption . No share of Series B Preferred Stock shall be redeemed unless all outstanding shares of Series B Preferred Stock are simultaneously redeemed.

(i) Notice of redemption (including notice of a Change of Control) will be given by the Corporation not less than 30 nor more than 60 days prior to the date upon which redemption will occur and all amounts payable on account of such redemption will be available for payment (the “ Redemption Date ”), addressed to the respective holders of record of the Series B Preferred Stock. The Redemption Date shall be the date of the Change of Control in the case of redemption pursuant to Section 5(a)(ii) above. No failure to give such notice or any defect thereof or in the sending thereof shall affect the validity of the proceedings for the redemption of any of the Series B Preferred Stock except as to the holder to whom notice was defective or not given.

(ii) Such notice shall state: (A) the Redemption Date; (B) the Redemption Price; (C) the Redemption Dividend; (D) the number of shares of Series B Preferred Stock to be redeemed (which shall not be less than all of the shares of Series B Preferred Stock then outstanding); (E) the place or places where the Series B Preferred Stock is to be surrendered (if so required in the notice) for payment of the Redemption Amount; and (F) that dividends on the Series B Preferred Stock to be redeemed will cease to accrue on such Redemption Date unless the Corporation shall default upon its obligations with respect to such redemption as set forth herein.

(iii) If notice of redemption of the Series B Preferred Stock has been given and if the funds necessary for such redemption have been set apart by the Corporation by delivery thereof to a bank or trust company in trust for the benefit of the holders of the Series B Preferred Stock, then, from and after the Redemption Date, dividends will cease to accrue on the Series B Preferred Stock, the shares of Series B Preferred Stock shall no longer be deemed outstanding and all rights of the holders of the Series B Preferred Stock will terminate, except the right to receive the Redemption Amount. Holders of the Series B Preferred Stock shall surrender their shares of Series B Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates, if any, representing the shares of Series B Preferred Stock (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), the Series B Preferred Stock shall be redeemed by the Corporation by payment of the Redemption Amount.

(iv) Any deposit of funds with a bank or trust company for the purposes of redeeming the Series B Preferred Stock shall be irrevocable except that (A) the Corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holder of any shares redeemed shall have no claim to such interest or other earnings; and (B) any balance of money so deposited by the Corporation and unclaimed by the holders of the Series B Preferred Stock entitled thereto at the expiration of two years from the applicable Redemption Date shall be paid, together with any interest or other earnings earned thereon, to the Corporation, and after any such repayment, the holders of the shares of Series B Preferred Stock entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.

(d) Legally Available Funds . No shares of Series B Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Amount.

(e) Status of Redeemed Shares . Any shares of Series B Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board.

(6) Voting Rights and Protective Provisions . Except as provided in this Section 6 and Section 7 below, the holders of the Series B Preferred Stock shall not be entitled to vote on any matter submitted to stockholders for a vote. Notwithstanding the foregoing, without the consent of the holders of a majority of the issued and outstanding shares of Series B Preferred Stock, voting together as a separate class (the “ Majority Holders ”), each of the following shall be prohibited (whether accomplished directly or by amendment, merger, consolidation, reclassification, reorganization or otherwise):

(a) authorizing (including by designation), creating, issuing or reissuing, or increasing the number of authorized shares of, any security or class or series of capital stock or other equity securities of the Corporation senior to or on parity with the Series B Preferred Stock, including any security, class or series convertible into or exercisable for any capital stock or other security, having a preference over, or being on a parity with, the Series B Preferred Stock with respect to dividends, distributions, liquidation or voting or approval rights (it being

understood, for avoidance of doubt, that the general voting or approval rights afforded to the Common Stock that are not otherwise superseded by these Articles Supplementary, shall not be deemed a preference in voting or approval rights within the meaning of this subsection);

(b) amending, modifying or repealing any term, condition or provision hereof;

(c) amending, modifying or waiving any other provision of the Charter, as amended from time to time (including by designation) or any provision of the Amended and Restated Bylaws as in effect on the Initial Issue Date (the “ Bylaws ”) in a manner that would materially and adversely affect the rights, preferences, terms, privileges or powers of the Series B Preferred Stock;

(d) any splitting or combining the Series B Preferred Stock, any reclassification of the Series B Preferred Stock, or issuance of shares of Series B Preferred Stock except pursuant to the Securities Purchase Agreement dated on or about the date hereof by and among the Corporation and the initial purchasers of the Series B Preferred Stock named therein;

(e) redeeming, purchasing or otherwise acquiring (or paying into or setting apart funds for a sinking fund for such purpose) any Junior Stock or redeeming, purchasing or otherwise acquiring (or paying into or setting apart funds for a sinking fund for such purpose) any capital stock or other securities of the Corporation, other than (i) in accordance with the redemption provisions hereof or the redemption provisions of any Senior Stock (including any Senior Stock hereafter authorized and issued in compliance with the provisions of this Section 6) or (ii) in accordance with Article VII of the Charter;

(f) altering or changing the dividend rights of the Series B Preferred Stock with respect to dividends that have accrued but not been paid;

(g) declaring or paying any dividend or other distribution except as allowed herein or pursuant to the terms of any Senior Stock (including any Senior Stock hereafter authorized and issued in compliance with the provisions of this Section 6); and

(h) the Corporation failing to own directly, free and clear of any lien, encumbrance or other adverse claim, 100% of the economic, voting and beneficial interest of the Series B Preferred Partnership Units and the General Partner or failing to control the General Partner; the General Partner (or a wholly-owned subsidiary of the Corporation) failing to be the sole general partner of the Partnership or failing to control the Partnership; or the Corporation permitting, approving or in any other manner prompting the Partnership or the General Partner to: (i) amend, modify or waive any term, condition or provision of Exhibit I to (or any term, condition or provision included in Amendment No. 2 to) the First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partners, LP, as amended (the “ Partnership Agreement ”); (ii) amend, modify or waive any provision of the Partnership Agreement (including by designation) in a manner that would materially and adversely affect the Series B Preferred Partnership Units (as defined in the Partnership Agreement), the Series B Preferred Stock or the rights, preferences, terms, privileges or powers thereof; (iii) effect a liquidation, dissolution or winding up of the Partnership or the General Partner, other than a liquidation of the Partnership or the General Partner through a distribution in-kind of its assets to

the Corporation and subsequent continuation by the Corporation of the historical business(es) theretofor conducted by the Partnership and/or the General Partner, as the case may be; (iv) authorize (including by designation), create or issue any partnership units or other securities of the Partnership, including any security convertible into or exercisable for any partnership unit or other security, having a preference over, or being on a parity with, the Series B Preferred Partnership Units with respect to dividends, distributions, liquidation or voting or approval rights (it being understood, for avoidance of doubt, that the general voting or approval rights afforded to the Common Units that are not otherwise superseded by such Amendment No. 2 to the Partnership Agreement, shall not be deemed a preference in voting or approval rights within the meaning of this subsection); (v) redeem, purchase or otherwise acquire (or pay into or set apart funds for a sinking fund for such purpose) any partnership units that are junior to the Series B Preferred Partnership Units with respect to liquidation or distributions or redeem, purchase or otherwise acquire (or pay into or set apart funds for a sinking fund for such purpose) any partnership units or other securities of the Partnership other than in accordance with the redemption provisions of Section 8.6 of the Partnership Agreement or Exhibit I to the Partnership Agreement; (vi) alter or change the distribution rights of the Series B Preferred Partnership Units with respect to distributions that have accrued but not been paid; or (vii) declare or pay any dividend or other distribution on any partnership units or other securities of the Partnership, except as allowed by Exhibit I of the Partnership Agreement; provided, however, notwithstanding the foregoing, nothing will prevent any Change in Control of the General Partner to any, or the approval of any new general partner of the Partnership that is, a direct or indirect wholly-owned subsidiary of the Corporation.

(7) Right to Elect a Member of the Board following a Default .

(a) In the event of a Dividend Default, a Covenant Default or a REIT Default (each being a “ Default ”), (i) the Corporation shall notify the holders of the issued and outstanding shares of Series B Preferred Stock in writing of such Default within three business days of the occurrence thereof, and (ii) the holders of the Series B Preferred Stock, voting together as a separate class, by a vote of the Majority Holders shall have the right to elect a member of the Board (the “ Series B Director ”) at a meeting of the holders of the Series B Preferred Stock called for such purpose or in an action by written consent by the Majority Holders. In connection therewith, the number of directors constituting the Board shall automatically be increased by one, unless a vacancy on the Board exists and the Series B Director is elected to fill such vacancy. Such Series B Director shall continue to serve as, and not be removed as, a member of the Board, except in accordance with Section 7(c) or Section 7(d) hereof.

(b) After a Default, and for so long as (i) any Default has existed or has continued uncured to the satisfaction of the Majority Holders within the preceding six month period and (ii) any shares of Series B Preferred Stock are outstanding, at each meeting of the stockholders of the Corporation at which members of the Board are to be elected, or whenever members of the Board are to be elected by written consent of the stockholders of the Corporation, the holders of the Series B Preferred Stock, by action of the Majority Holders, shall be entitled to elect one member of the Board, who will be the Series B Director. Any Series B Director elected by the Majority Holders in accordance with this Section 7(b) shall continue to serve as, and not be removed as, a member of the Board, except in accordance with Section 7(c) or Section 7(d) hereof.

(c) Except as expressly provided in Section 7(d) below, a Series B Director may be removed from the Board and the term of the Series B Director may be terminated only upon the consent of the Majority Holders, notwithstanding anything else to the contrary in the Charter or Bylaws (in each case, as amended from time to time), or otherwise. Upon the removal of a Series B Director or a vacancy in the office of a Series B Director occurring upon the resignation, death or incapacity of a Series B Director, in each such case, the Majority Holders shall be entitled to elect a successor to serve for the unexpired term of the Series B Director. Upon election, such successor Series B Director shall thereafter continue to serve (subject to termination of such Series B Director’s term pursuant to Section 7(d) below) and shall not be removed as a member of the Board except in the circumstances described in the first sentence of this Section 7(c), whereupon a replacement for such Series B Director shall be and become a member of the Board as aforesaid.

(d) The rights of the holders of the Series B Preferred Stock to elect a member of the Board pursuant to Section 7(a) or Section 7(b) above shall be suspended if, but only if, the Corporation cures all Defaults thereunder to the reasonable satisfaction of the Majority Holders and such cured status continues uninterrupted (and no other Default occurs) for a period of six consecutive months immediately following such cure (collectively, the “ Suspension Condition ”). If the Suspension Condition is satisfied, then upon written notice from the Corporation to the holders of the Series B Preferred Stock delivered at any time certifying that the Suspension Condition is fully satisfied, the term of office of the Series B Director will terminate and the number of members of the Board will be reduced accordingly; provided , however , that the rights of the holders of the Series B Preferred Stock to elect a director pursuant to Section 7(a) and 7(b) will continue and shall again apply with respect to any subsequent Default, as described above.

(e) For so long as any shares of the Series B Preferred Stock are outstanding, the Corporation shall cause the Charter and Bylaws to provide for the authorized size of the Board of Directors of the Corporation to be a number sufficient to permit the automatic increase in the number of directors pursuant to Section 7(a) hereof.

(f) The rights of the Series B Preferred Stock to elect a Series B Director as set forth in this Section 7 shall apply regardless of any other rights that other stockholders of the Corporation have on the date hereof or may be granted in the future with respect to the appointment, election, removal or replacement of directors.

(8) Conversion Rights . The holders of the Series B Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

(a) Each issued and outstanding share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time on and after March 6, 2018, at the office of the Corporation or any transfer agent for the Common Stock, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the Liquidation Preference plus all accumulated but unpaid dividends with respect to such share of Series B Preferred Stock by (ii) the Conversion Price applicable to such share of

Series B Preferred Stock, determined as hereafter provided (the “ Conversion Price ”), in effect on the date the share of Series B Preferred Stock is surrendered for conversion. The initial Conversion Price per share of Series B Preferred Stock shall be $15.70. Such initial Conversion Price shall be subject to adjustment as set forth in Section 8(c) below.

(b) Before any holder of the Series B Preferred Stock shall be entitled to convert shares of Series B Preferred Stock into shares of Common Stock as provided herein, the holder shall surrender the certificate or certificates therefor, if any, duly endorsed, at the office of the Corporation or any transfer agent for the Common Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates representing the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred Stock to be converted, and the Person or Persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

(i)

In the event the Corporation should at any time after the Initial Issue Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock without payment of any consideration by such holder for the additional shares of Common Stock, then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion shall be increased in proportion to such increase of the aggregate number of shares of Common Stock outstanding.

(ii)

If the number of shares of Common Stock outstanding at any time after the Initial Issue Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share hereunder shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding.

(d) In the event the Corporation shall declare a distribution payable in securities of other Persons, evidences of indebtedness issued by the Corporation or other Persons, assets (excluding cash dividends) or options or rights not referred to in Section 8(c)(i) or 8(c)(ii), then, in each such case for the purpose of this Section 8(d), the holders of Series B Preferred Stock shall be entitled to receive upon conversion a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock into which their Series B Preferred Stock was convertible as of the record date fixed for the determination of the holders of Common Stock entitled to receive such distribution.

(e) If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision or combination provided for elsewhere in this Section 8), provision shall be made so that the holders of Series B Preferred Stock shall thereafter be entitled to receive upon conversion of such Series B Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 8 with respect to the rights of the holders of such Series B Preferred Stock after the recapitalization to the effect that the provisions of this Section 8 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of such Series B Preferred Stock) shall be applicable after that event and be as nearly equivalent as practicable.

(f) No fractional shares of Common Stock shall be issued upon the conversion of any share or shares of the Series B Preferred Stock, and the number of shares of Common Stock to be issued upon conversion shall be rounded down to the nearest whole share. The number of shares issuable upon conversion shall be determined on the basis of the total number of shares of Series B Preferred Stock the holder is at that time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. If the conversion would result in any fractional share of Common Stock, the Corporation shall, in lieu of issuing any such fractional share, pay the holder thereof an amount in cash equal to the fair market value of such fractional share that was rounded down on the date of conversion, as determined in good faith by the Board.

(g) Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 8, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustment, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such Series B Preferred Stock.

(h) In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for,

purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series B Preferred Stock, at least ten days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(i) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding Series B Preferred Stock, in addition to such other remedies as shall be available to the holders of the Series B Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Charter.

(9) Notices . All notices or other communications given to the holders of the Series B Preferred Stock shall be in writing and shall be (a) delivered by registered or certified mail, return receipt requested, postage prepaid, (b) delivered by expedited mail or package delivery service guaranteeing next business day delivery, or (c) delivered personally, by hand (or by facsimile transmission), to the holders of record, addressed to the address or sent to the facsimile number shown in the records of the Corporation. Any notice or other communications given to the holders of the Series B Preferred Stock in accordance with this Section 9 shall be deemed to have been given: (i) five calendar days after the deposit of such notice or communication in the United States Mail, registered or certified, return receipt requested, postage prepaid; (ii) on the first business day after depositing such notice of communication with an expedited mail service or package delivery service guaranteeing delivery no later than the next business day if next business day delivery service has been requested and paid for; or (iii) upon delivery if hand delivered or telecopied.

(10) Restriction on Ownership and Transfer; Excepted Holder Status of Holders of Series B Preferred Stock. The Series B Preferred Stock constitutes Capital Stock and is governed by and issued subject to all the ownership and transfer restrictions of the Charter applicable to Capital Stock generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Article VII of the Charter applicable to Capital Stock. The foregoing sentence shall not be construed to limit the applicability to the Series B Preferred Stock of any other term or provision of the Charter. The shares of Series B Preferred Stock (and the Common Stock or any other series or class of stock which may, from time to time, be issued in connection with the conversion, exchange, dividend, distribution or other event affecting the Series B Preferred Stock) may be Transferred to any Person as long as such Transfer is effected in accordance with the registration provisions of the Securities Act of 1933, as amended, or based on an opinion of counsel of the Investor that is reasonably satisfactory to the Corporation to the effect that such Transfer is exempt therefrom, and does not result in the Corporation losing its status as a REIT, and neither the Corporation nor the Board shall impose any unreasonable restrictions or conditions under Article VII of the Charter or otherwise to any such Transfer or Transferee.

SECOND : The Series B Preferred Stock has been classified and designated by the Board under the authority contained in the Charter. These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.

THIRD : These Articles Supplementary shall be effective at the time the SDAT accepts these Articles Supplementary for record.

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MEDEQUITIES REALTY TRUST, INC.

By:		/s/ William C. Harlan
		William C. Harlan
		President and Chief Operating Officer


ATTEST:

By:		/s/ Jeffery C. Walraven
		Jeffery C. Walraven
		Executive Vice President, Chief Financial Officer, Secretary and Treasurer

Exhibit 3.4

MEDEQUITIES REALTY TRUST, INC.

AMENDED AND RESTATED BYLAWS

ARTICLE I

OFFICES

Section 1. Principal Office.

The principal office of MedEquities Realty Trust, Inc. (the “ Corporation ”) in the State of Maryland shall be located at such place as the Board of Directors of the Corporation (the “ Board of Directors ”) may designate from time to time.

Section 2. Additional Offices.

The Corporation may have additional offices, including a principal executive office, at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Place.

All meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set in accordance with these Bylaws and stated in the notice of the meeting.

Section 2. Annual Meeting.

An annual meeting of stockholders for the election of directors and the transaction of any business as may properly be brought before the meeting and within the powers of the Corporation shall be held on the date and at the time and place set by the Board of Directors.

Section 3. Special Meetings.

(a) General . Each of the chairman of the board, chief executive officer, president and Board of Directors may call a special meeting of stockholders, and the person or group who has called a special meeting shall, except as provided in Section 3(b)(5) of this Article II, set the date, time and place of such special meeting. Subject to Section 3(b) of this Article II, a special meeting of stockholders shall also be called by the secretary to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting.

(b) Stockholder Requested Special Meetings .

(1) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the “ Record Date Request Notice ”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the “ Request Record Date ”). To be in proper form, such Record Date Request Notice shall set forth:

(i) as to the purpose of the special meeting and to any business that the requesting stockholder proposes to bring before the special meeting, (A) a reasonably detailed description of such purpose and the business to be conducted, the stockholder’s reasons for proposing such business at the special meeting, and any material interest in such business of such stockholder or any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration) and (C) a reasonably detailed description of all agreements, arrangements and understandings (I) between or among the stockholder and/or any of the Stockholder Associated Persons or (II) between or among the stockholder and/or any of the Stockholder Associated Persons, on the one hand, and any other person or entity (including their names), on the other hand, in connection with the request for the special meeting or the business proposed to be conducted at the special meeting;

(ii) as to each requesting stockholder and Stockholder Associated Person, (A) the name and address of such stockholder or Stockholder Associated Person, as they appear on the Corporation’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person, (B) the class, series and number of all shares of stock or other securities of the Corporation or any subsidiary thereof (collectively, the “ Company Securities ”), if any, which are owned (beneficially or of record) by such stockholder or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person; provided, that, for purposes of the foregoing and wherever else used in this Article II, references to “beneficial” ownership or other correlative terms shall be deemed to have the meaning given thereto under Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), except that such person or entity shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such person or entity has a right to acquire beneficial ownership at any time in the future;

(iii) as to each requesting stockholder or Stockholder Associated Person, any Disclosable Interests (as defined below) or Other Disclosable Interests (as defined below);

(iv) all information relating to each requesting stockholder or Stockholder Associated Person and each matter of business proposed to be acted on at the special

meeting that must be disclosed in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to, and in accordance with, Regulation 14A (or any successor provision) under the Exchange Act and the rules and regulations promulgated thereunder; and

(v) the signature and date of signature of each requesting stockholder (or of their agents, duly authorized in a writing accompanying the Record Date Request Notice).

In addition, each stockholder submitting a Record Date Request Notice and each Stockholder Associated Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to fix a Request Record Date.

(2) Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten (10) days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten (10) days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth (10 ^th ) day after the first date on which the Record Date Request Notice is received by the secretary. If the Board of Directors shall determine that any request to fix a record date or demand to call and hold a special meeting was not properly made in accordance with this Article II, or shall determine that the stockholder or stockholders requesting that the Board of Directors fix such record date or submitting a demand to call the special meeting have not otherwise complied with this Article II, then the Board of Directors shall not be required to fix a Request Record Date and the secretary shall not be required to call a special meeting of stockholders.

(3) In order for any stockholder to request a special meeting to act on any matter described in a Record Date Request Notice that may properly be considered at a meeting of stockholders, one or more written requests for a special meeting (collectively, the “ Special Meeting Request ”) signed and dated by stockholders of record (or by their agents duly authorized in a writing accompanying the Special Meeting Request) as of the applicable Request Record Date entitled to cast not less than a majority (the “ Special Meeting Percentage ”) of all of the votes entitled to be cast on such matter at such meeting shall be delivered to the secretary. No business may be considered at a special meeting called by the secretary in accordance with Section 3(b) of this Article II (a “ Stockholder-Requested Special Meeting ”) except as described in the applicable Record Date Request Notice or at the direction of the Board of Directors. The Special Meeting Request shall be sent to the secretary by registered mail, return receipt requested, and be received by the secretary within sixty (60) days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its Special Meeting Request at any time by written revocation delivered to the secretary.

Each stockholder providing a Special Meeting Request (other than a stockholder that provides a Special Meeting Request in response to a solicitation made pursuant to a solicitation statement filed on Schedule 14A pursuant to, and in accordance with, Regulation 14A under the

Exchange Act) shall provide the information about such stockholder and any Stockholder Associated Person required to be provided in a Record Date Request Notice pursuant to Section 3(b)(1) of this Article II (or, if applicable, shall update any information provided by such stockholder in a Record Date Request Notice), so that such information with respect to the stockholder and each Stockholder Associated Person is true and correct as of the record date for the Stockholder-Requested Special Meeting (the “ Meeting Record Date ”) and as of the date that is ten (10) Business Days (as defined below) prior to the date of the Stockholder-Requested Special Meeting and the date(s) of any adjournment or postponement thereof. Any such update and supplement shall be sent to the secretary by courier or registered mail, return receipt requested, and shall be received by the secretary, in the case of information required to be provided as of the Meeting Record Date, not later than five (5) Business Days after the Meeting Record Date and, in the case of information required to be provided as of the date that is ten (10) Business Days prior to the date of such Stockholder-Requested Special Meeting and the date(s) of any adjournment or postponement thereof, not later than eight (8) Business Days prior to the date of the Stockholder-Requested Special Meeting or, if practicable, the date(s) of any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the Stockholder-Requested Special Meeting has been adjourned or postponed). In addition, each stockholder providing a Special Meeting Request and each Stockholder Associated Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to call a Stockholder-Requested Special Meeting.

(4) The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the Corporation’s proxy materials). The secretary shall not be required to call a Stockholder- Requested Special Meeting and such meeting shall not be held unless, in addition to the Special Meeting Request required by Section 3(b)(3) of this Article II, the secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.

(5) A Stockholder-Requested Meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder-Requested Meeting shall be not more than ninety (90) days after the Meeting Record Date; and provided further that if the Board of Directors fails to designate, within ten (10) days after the date that a valid Special Meeting Request is actually received by the secretary (the “ Delivery Date ”), a date and time for a Stockholder-Requested Meeting, then such meeting shall be held at 2:00 p.m., Eastern Time, on the ninetieth (90 ^th ) day after the Meeting Record Date, or, if such ninetieth (90 ^th ) day is not a Business Day, on the first preceding Business Day; and provided further that in the event that the Board of Directors fails to designate a place for a Stockholder-Requested Meeting within ten (10) days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for any Stockholder-Requested Meeting, the chairman of the board, chief executive officer, president or Board of Directors may consider such factors as he, she or it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or other special meeting. In the case of any Stockholder-Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within thirty (30) days after the

Delivery Date, then the close of business on the thirtieth (30 ^th ) day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder- Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of Section 3(b)(4) of this Article II.

(6) If written revocations of the Special Meeting Request have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on the matter to the secretary: (i) if the notice of meeting has not already been delivered, the secretary shall refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (ii) if the notice of meeting has been delivered and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the Corporation’s intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (A) the secretary may revoke the notice of the meeting at any time before ten (10) days before the commencement of the meeting or (B) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on the matter. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.

(7) The chairman of the board, chief executive officer, president or Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agents of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported Special Meeting Request shall be deemed to have been received by the secretary until the earlier of (i) five (5) Business Days after actual receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five (5) Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(8) For purposes of this Article II, “ Stockholder Associated Person ” of any stockholder means (i) the beneficial owner or beneficial owners, if different, of shares of stock of the Corporation at whose request the notice is given pursuant to this Article II, (ii) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act) of such stockholder or, if applicable, such beneficial owner and (iii) any other person with whom such stockholder or, if applicable, such beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined below).

(9) For purposes of this Article II, a person shall be deemed to be “ Acting in Concert ” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation in parallel with, such other person where (i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (ii) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Regulation 14A under the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

(10) For purposes of these Bylaws, “ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in New York City are authorized or obligated by law or executive order to close.

Section 4. Notice.

Not less than ten (10) nor more than ninety (90) days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting notice in writing or by electronic transmission stating the date, time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, by mail, by presenting it to such stockholder personally, by leaving it at the stockholder’s residence or usual place of business or by any other means permitted by applicable law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The Corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless a stockholder at such address objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting.

Subject to Section 11(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice of such special meeting. The Corporation may postpone or cancel a meeting of

stockholders by making a Public Announcement (as defined in Section 11(c)(3) of this Article II) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten (10) days prior to such date and otherwise in the manner set forth in this section.

Section 5. Organization and Conduct.

Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment or appointed individual, by the chairman of the Board of Directors or, in the case of a vacancy in the office or absence of the chairman of the Board of Directors, by one of the following officers present at the meeting in the following order: the vice chairman of the Board of Directors, if there is one, the chief executive officer, the president, the vice presidents in their order of rank and seniority, the secretary, or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy at such meeting. The secretary, or, in the secretary’s absence, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, an individual appointed by the Board of Directors or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary of the meeting. In the event that the secretary presides at a meeting of stockholders, an assistant secretary, or, in the absence of all assistant secretaries, an individual appointed by the Board of Directors or the chairman of the meeting, shall record the minutes of the meeting.

The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such other actions as, in the discretion of the chairman and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation: (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) determining when and for how long the polls should be opened and when the polls should be closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding a meeting or recessing or adjourning the meeting to a later date and time and at a place announced at the meeting; and (i) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 6. Quorum.

At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall

constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation (the “ Charter ”) for the vote necessary for the approval of any matter. If, however, such quorum is not established at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than one hundred twenty (120) days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. The stockholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum has been established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough stockholders to leave fewer than would be required to establish a quorum.

Section 7. Voting.

A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast in favor of a matter (other than the election of directors) at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any such matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Charter. Unless otherwise provided by statute or by the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Unless otherwise determined by the chairman of the meeting, voting on any question or in any election may be viva voce rather than by ballot.

Section 8. Proxies.

A holder of record of shares of stock of the Corporation may cast votes in person or by proxy executed or authorized by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the meeting. No proxy shall be valid more than eleven (11) months after its date, unless otherwise provided in the proxy.

Section 9. Voting of Stock by Certain Holders.

Stock of the Corporation registered in the name of a corporation, partnership, limited liability company, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, general partner, trustee or managing member thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or fiduciary may vote stock registered in the name of such person in the capacity of such director or fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt by the Corporation of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.

Section 10. Inspectors.

The Board of Directors or the chairman of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting and any successor to the inspector. Except as otherwise provided by the chairman of the meeting, the inspectors, if any, shall (i) determine the number of shares of stock represented at the meeting, in person or by proxy, and the validity and effect of proxies, (ii) receive and tabulate all votes, ballots or consents, (iii) report such tabulation to the chairman of the meeting, (iv) hear and determine all challenges and questions arising in connection with the validity of any proxies of ballots, (v) perform such tasks as may be required by applicable law and (vi) do such acts as are proper to fairly conduct the election or vote. Each such report shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 11. Advance Notice of Nominees for Director and Other Stockholder Proposals.

(a) Annual Meetings of Stockholders .

(1) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who (A) was a stockholder of record both at the time of giving of notice by the stockholder as provided for in this Section 11(a) of this Article II and at the time of the annual meeting, (B) is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and (C) has complied with this Section 11(a) of this Article II. Except for proposals properly made pursuant to, and in accordance with, Rule 14a-8 under the Exchange Act, and included in the notice of meeting given by or at the direction of the Board of Directors, the foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders.

(2) For any nomination or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 11(a)(1)(iii) of this Article II, the stockholder must have given timely notice (as defined below) thereof in writing and in proper form to the secretary, provided any updates or supplements to such notice at the times and in the forms required by this Section 11 of this Article II and any such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information required under this Section 11 of this Article II and shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the one hundred fiftieth (150 ^th ) day nor later than 5:00 p.m., Eastern Time, on the one hundred twentieth (120 ^th ) day prior to the first anniversary of the date of the proxy statement (as defined in Section 11(c)(3) of this Article II) for the preceding year’s annual meeting; provided, however, that in connection with the Corporation’s first annual meeting or in the event that the date of the annual meeting is advanced or delayed by more than thirty (30) days from the first anniversary of the date of the preceding year’s annual meeting, in order for notice by the stockholder to be timely, such notice must be so delivered not earlier than the one hundred fiftieth (150 ^th ) day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the one hundred twentieth (120 ^th ) day prior to the date of such annual meeting, as originally convened, or the tenth (10 ^th ) day following the day on which Public Announcement of the date of such meeting is first made. The Public Announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

(3) To be in proper form, such stockholder’s notice to the secretary shall set forth:

(i) as to each individual whom the stockholder proposes to nominate for election or reelection as a director (each, a “ Proposed Nominee ”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to, and in accordance with, Regulation 14A (or any successor provision) under the Exchange Act (including the Proposed Nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);

(ii) as to any other business that the stockholder proposes to bring before the meeting, (A) a reasonably detailed description of such business, the stockholder’s reasons for proposing such business at the meeting and any material interest in such business of such stockholder or any Stockholder Associated Person, individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration) and (C) a reasonably detailed description of all

agreements, arrangements and understandings (I) between or among the stockholder and/or any of the Stockholder Associated Persons or (II) between or among the stockholder and/or any of the Stockholder Associated Persons, on the one hand, and any other person or entity (including their names), on the other hand, in connection with the proposal of such business by such stockholder;

(iii) as to the stockholder giving the notice, any Proposed Nominee and any Stockholder Associated Person,

(A) the class, series and number of all shares of Company Securities, if any, which are owned (beneficially or of record) by such stockholder, Proposed Nominee or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person,

(B) the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such stockholder, Proposed Nominee or Stockholder Associated Person,

(C) (I) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such stockholder, any Proposed Nominee or any Stockholder Associated Person, the purpose or effect of which is to give such stockholder, Proposed Nominee or Stockholder Associated Person economic risk similar to ownership of shares or units of any Company Securities, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares or units of any Company Securities, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares or units of any Company Securities (“ Synthetic Equity Interests ”), which Synthetic Equity Interests shall be disclosed without regard to whether (x) the derivative, swap or other transactions convey any voting rights in such shares or units to such stockholder, Proposed Nominee or Stockholder Associated Person, (y) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or units or (z) such stockholder, Proposed Nominee or Stockholder Associated Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (II) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Regulation 14A under the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such stockholder, Proposed Nominee or Stockholder Associated Person has or shares a right to vote any shares or units of any Company Securities,

(III) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such stockholder, Proposed Nominee or Stockholder Associated Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares or units of any Company Securities held by, manage the risk of price changes for, or increase or decrease the voting power of, such stockholder, Proposed Nominee or Stockholder Associated Person with respect to the shares or units of any Company Securities, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares or units of any Company Securities (“ Short Interests ”), (IV) any rights to dividends on the shares or units of any Company Securities owned beneficially by such stockholder, Proposed Nominee or Stockholder Associated Person that are separated or separable from the underlying Company Securities, (V) any performance-related fees (other than an asset based fee) that such stockholder, Proposed Nominee or any Stockholder Associated Person is entitled to based on any increase or decrease in the price or value of shares or units of any Company Securities, or any Synthetic Equity Interests or Short Interests, if any, (VI) (x) if such stockholder or any Stockholder Associated Person with an interest or ownership, or that has taken an action referred to in Section 11(a)(3)(ii) or(iii)(other than this Section 11(a)(3)(C)(VI)) is not a natural person, the identity of the natural person or persons associated with such stockholder or Stockholder Associated Person responsible for the formulation of and decision to propose the business to be brought before the meeting or nominate any such Proposed Nominee (such person or persons, the “ Responsible Person ”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such stockholder or Stockholder Associated Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared generally by any other record or beneficial holder of the shares or units of any Company Securities and that reasonably could have influenced the decision of such stockholder or Stockholder Associated Person to propose such business to be brought before the meeting or nominate any such Proposed Nominee, and (y) if such stockholder or any such Stockholder Associated Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares or units of any Company Securities and that reasonably could have influenced the decision of such stockholder or Stockholder Associated Person to propose such business to be brought before the meeting or nominate any such Proposed Nominee, (VII) any significant equity interests or any Synthetic Equity Interests or Short Interests in any principal competitor of the Corporation held by such stockholder, any Proposed Nominee and any

Stockholder Associated Person, (VIII) any direct or indirect interest of such stockholder, any Proposed Nominee and any Stockholder Associated Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (IX) any pending or threatened litigation in which such stockholder, any Proposed Nominee or any Stockholder Associated Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (X) any material transaction occurring during the prior twelve months between such stockholder, Proposed Nominee and any Stockholder Associated Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (XI) a summary of any material discussions regarding the business proposed to be brought before the meeting or the nomination or identity of the Proposed Nominee (x) between or among any stockholder, Proposed Nominee and any Stockholder Associated Person or (y) between or among any stockholder, Proposed Nominee and any Stockholder Associated Person and any other record or beneficial holder of the shares or units of any Company Securities (including their names) and (XII) any other information relating to such stockholder, Proposed Nominee and any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such stockholder and any Stockholder Associated Person in support of the business proposed to be brought before the meeting or the election of any Proposed Nominee pursuant to, and in accordance with, Regulation 14A under the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (I) through (XII) are referred to as “ Disclosable Interests ”); provided, however, that the Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner,

(D) Without limiting the foregoing, any other substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such stockholder, Proposed Nominee or Stockholder Associated Person, in the Corporation or any subsidiary thereof, other than an interest arising from the ownership of Company Securities where such stockholder, Proposed Nominee or Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series (the disclosures to be made pursuant this Sub-Section (D) are referred to as “ Other Disclosable Interests ”); provided, however, that the Other

Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner, and

(E) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the stockholder and/or any Stockholder Associated Person, on the one hand, and each Proposed Nominee, his or her respective affiliates and associates and any other persons with whom such Proposed Nominee (or any of his or her respective affiliates and associates) is Acting in Concert, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such stockholder and any Stockholder Associated Person were the “registrant” for purposes of such rule and the Proposed Nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to this paragraph are referred to as “ Nominee Information ”);

(iv) as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in Sections 11(a)(3)(ii) or (iii) of this Article II and any Proposed Nominee,

(A) the name and address of such stockholder, as they appear on the Corporation’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person and any Proposed Nominee, and

(B) the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person; and

(v) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director or the proposal of other business on the date of such stockholder’s notice.

(4) Such stockholder’s notice shall, with respect to any Proposed Nominee, be accompanied by (i) a certificate executed by the Proposed Nominee certifying that such Proposed Nominee (A) will serve as a director of the Corporation if elected, (B) is not and will not become a party to (I) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such Proposed Nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “ Voting Commitment ”) that has not been disclosed to the Corporation or (II) any Voting Commitment

that could limit or interfere with such Proposed Nominee’s ability to comply, if elected as a director of the Corporation, with such Proposed Nominee’s duties under applicable law, (C) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation and (D) would be in compliance, if elected as a director of the Corporation, and will comply with applicable publicly disclosed corporate governance, conflict of interest, confidentiality, stock ownership and trading policies and guidelines of the Corporation; and (ii) an attached completed Proposed Nominee questionnaire (which questionnaire shall be provided by the Corporation, upon request, to the stockholder providing the notice and shall include all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to, and in accordance with, Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange or over-the-counter market on which the Corporation’s stock is listed or admitted to trading).

(5) Notwithstanding anything in this Section 11(a) of this Article II to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased, and there is no Public Announcement of such action at least one hundred thirty (130) days prior to the first anniversary of the date of the proxy statement (as defined in Section 11(c)(3) of this Article II) for the preceding year’s annual meeting, a stockholder’s notice required by this Section 11(a) of this Article II shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Corporation not later than 5:00 p.m., Eastern Time, on the tenth (10 ^th ) day following the day on which such Public Announcement is first made by the Corporation.

(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors, or (ii) provided that the special meeting has been called in accordance with Section 3(a) of this Article II for the purpose of electing directors, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 11 of this Article II and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the notice procedures set forth in this Section 11 of this Article II. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more individuals to the Board of Directors, any stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation’s notice of meeting, if the stockholder’s notice, containing the information required by Section 11(a)(3) of this Article II, shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the one hundred twentieth (120 ^th ) day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the ninetieth (90 ^th ) day prior to such

special meeting or the tenth (10 ^th ) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The Public Announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

(1) If information submitted pursuant to this Section 11 of this Article II by any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 11 of this Article II. Any such stockholder shall notify the Corporation of any inaccuracy or change (within two (2) Business Days of becoming aware of such inaccuracy or change) in any such information. Upon written request by the secretary or the Board of Directors, any such stockholder shall provide, within five (5) Business Days of delivery of such request (or such other period as may be specified in such request), (A) written verification, satisfactory, in the discretion of the Board of Directors or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 11 of this Article II, and (B) a written update of any information (including, if requested, by the Corporation, written confirmation by such stockholder that it continues to intend to bring such nomination or other business proposal before the meeting) submitted by the stockholder pursuant to this Section 11 of this Article II as of an earlier date. If a stockholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have been provided in accordance with this Section 11 of this Article II.

(2) Only such individuals who are nominated in accordance with this Section 11 of this Article II shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 11 of this Article II. The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 11 of this Article II.

(3) For purposes of this Section 11, (i) “the date of the proxy statement” shall have the same meaning as “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the Securities and Exchange Commission (“ SEC ”) from time to time, and (ii) “ Public Announcement ” shall mean disclosure (A) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service or (B) in a document publicly filed by the Corporation with the SEC pursuant to the Exchange Act.

(4) Notwithstanding the foregoing provisions of this Section 11 of this Article II, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 11 of this Article II. Nothing in this Section 11 of this Article II shall be deemed to affect

any right of a stockholder to request inclusion of a proposal in, or the right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to, and in accordance with, Rule 14a-8 (or any successor provision) under the Exchange Act. Nothing in this Section 11 of this Article II shall require disclosure of revocable proxies received by the stockholder or Stockholder Associated Person pursuant to a solicitation of proxies after the filing of an effective Schedule 14A by such stockholder or Stockholder Associated Person pursuant to, and in accordance with, Regulation 14A under the Exchange Act.

Section 12. Control Share Acquisition Act.

Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) (the “ MGCL ”) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

Section 13. Telephone Meetings.

The Board of Directors or chairman of the meeting may permit one or more stockholders to participate in a meeting of stockholders by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at the meeting.

Section 14. Stockholders’ Consent in Lieu of Meeting.

Subject to Section 5.10 of the Charter, Article XVII hereof and the notice provisions of Section 4 of this Article II, any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceeds of the stockholders.

ARTICLE III

DIRECTORS

Section 1. General Powers.

The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

Section 2. Number, Tenure and Resignation.

At any regular meeting of the Board of Directors or at any special meeting of the Board of Directors called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the MGCL nor more than fifteen (15), and further provided that the tenure of office of a director shall not be affected by any decrease in the

number of directors. Directors shall be elected at the annual meeting of stockholders, and each director shall be elected to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Any director of the Corporation may resign at any time by delivering his or her resignation in writing to the Board of Directors, the chairman of the Board of Directors or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.

Section 3. Annual and Regular Meetings.

An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, with no notice other than this Bylaw being necessary, or at such other date, time and place as may be determined by the Board of Directors and specified in a notice given as hereinafter provided for special meetings of the Board of Directors. The Board of Directors may provide, by resolution, the date, time and place for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 4. Special Meetings.

Special meetings of the Board of Directors may be called by or at the request of the chairman of the Board of Directors, the chief executive officer, the president or a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the date, time and place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

Section 5. Notice.

Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, courier or United States mail to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least twenty-four (24) hours prior to the meeting. Notice by United States mail shall be given at least three (3) days prior to the meeting. Notice by courier shall be given at least two (2) days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 6. Quorum.

A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors is present at such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the Charter or these Bylaws, the vote of a majority or other percentage of a particular group of directors is required for action, a quorum must also include a majority or such other percentage of such group.

The directors present at a meeting which has been duly called and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough directors to leave fewer than required to establish a quorum.

Section 7. Voting.

The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws. If enough directors have withdrawn from a meeting to leave fewer than required to establish a quorum, but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws.

Section 8. Organization.

At each meeting of the Board of Directors, the chairman of the Board of Directors shall act as chairman of the meeting. In the absence of the chairman of the Board of Directors, the chief executive officer, if a director, or, in the absence of the chief executive officer, the president, if a director, or, in the absence of the president, a director chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant secretary of the Corporation, or, in the absence of the secretary and all assistant secretaries, an individual appointed by the chairman of the meeting, shall act as secretary of the meeting.

Section 9. Telephone Meetings.

Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 10. Consent by Directors Without a Meeting.

Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director and is filed with the minutes of proceedings of the Board of Directors.

Section 11. Vacancies.

If for any reason any or all of the directors cease to be directors, such event shall not terminate the existence of the Corporation or affect these Bylaws or the powers of the remaining directors hereunder. Except as may be provided by the Board of Directors in setting the terms of any class or series of preferred stock, and subject to the right of the stockholders to fill any vacancy that results from the removal of a director at a Special Election Meeting held in accordance with Article XVII hereof, any vacancy (including a vacancy created by an increase in the number of directors) on the Board of Directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum. Any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies.

Section 12. Compensation.

Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they perform or engage in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 13. Reliance.

Each director and officer of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the Corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the director or officer reasonably believes to be within the person’s professional or expert competence, or, with respect to a director, by a committee of the Board of Directors on which the director does not serve, as to a matter within its designated authority, if the director reasonably believes the committee to merit confidence.

Section 14. Certain Rights of Directors and Officers.

A director who is not also an officer of the Corporation shall have no responsibility to devote his or her full time to the affairs of the Corporation. Any director or officer, in his or her personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Corporation.

Section 15. Ratification.

The Board of Directors or the stockholders may ratify and make binding on the Corporation any action or inaction by the Corporation or its officers to the extent that the Board of Directors or the stockholders could have originally authorized the matter. Moreover, any action or inaction questioned in any stockholders’ derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Directors or by the stockholders, and if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

Section 16. Emergency Provisions.

Notwithstanding any other provision in the Charter or these Bylaws, this Section 16 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors under Article III of these Bylaws cannot readily be obtained (an “ Emergency ”). During any Emergency, unless otherwise provided by the Board of Directors, (i) a meeting of the Board of Directors or a committee thereof may be called by any director or officer by any means feasible under the circumstances; (ii) notice of any meeting of the Board of Directors during such an Emergency may be given less than twenty-four (24) hours prior to the meeting to as many directors and by such means as may be feasible at the time, including publication, television or radio, and (iii) the number of directors necessary to constitute a quorum shall be one-third (1/3) of the entire Board of Directors.

ARTICLE IV

COMMITTEES

Section 1. Number, Tenure and Qualifications.

The Board of Directors may appoint from among its members an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors. The exact composition of each committee, including the total number of directors and the number of independent directors on each such committee, shall at all times comply with any applicable listing requirements and rules and regulations of the New York Stock Exchange or any other national securities exchange on which the Corporation’s common stock is then listed, as such rules and regulations may be modified or amended from time to time, and any applicable rules and regulations of the SEC, as such rules and regulations may be modified or amended from time to time.

Section 2. Powers.

The Board of Directors may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Board of Directors, except as prohibited by law.

Section 3. Meetings.

Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two (2) members of any committee (if there are at least two members of the committee) may fix the time and place of its meeting unless the Board of Directors shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member.

Section 4. Telephone Meetings.

Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 5. Consent by Committees Without a Meeting.

Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.

Section 6. Removal and Vacancies.

Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership or size of any committee (including the removal of any member of such committee), to fill any vacancy, to designate an alternate member to replace any absent or disqualified member or to dissolve any such committee.

ARTICLE V

OFFICERS

Section 1. General Provisions.

The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chairman of the Board of Directors, a vice chairman of the Board of Directors, a chief executive officer, a chief operating officer, a chief financial officer, one (1) or more assistant secretaries and one (1) or more assistant treasurers. In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors, except that the chief executive officer or president may from time to time appoint one (1) or more vice presidents, assistant secretaries, and assistant treasurers or other officers. Each officer shall serve until his or her successor is elected and qualifies or until his or her death, or

his or her resignation or removal in the manner hereinafter provided. Any two (2) or more offices except president and vice president may be held by the same person. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 2. Removal and Resignation.

Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by delivering his or her resignation in writing to the Board of Directors, the chairman of the Board of Directors, the chief executive officer, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 3. Vacancies.

A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 4. Chief Executive Officer.

The Board of Directors may designate a chief executive officer. In the absence of such designation, the chairman of the Board of Directors shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed, and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed the Board of Directors from time to time.

Section 5. Chief Operating Officer.

The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as prescribed by the Board of Directors or the chief executive officer.

Section 6. Chief Financial Officer.

The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties prescribed by the Board of Directors or the chief executive officer.

Section 7. Chairman of the Board of Directors.

The Board of Directors may designate from among its members a chairman of the Board of Directors. The Board of Directors may designate the chairman of the Board of Directors as an executive or non-executive chairman. The chairman of the Board of Directors shall preside over the meetings of the Board of Directors. The chairman of the Board of Directors shall perform such other duties as may be assigned to him or her by these Bylaws or the Board of Directors.

Section 8. President.

In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed, and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time.

Section 9. Vice Presidents.

In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president, and shall perform such other duties as from time to time may be assigned to such vice president by the Board of Directors or chief executive officer. The Board of Directors may designate one or more vice presidents as executive vice president, senior vice president or as vice president for particular areas of responsibility.

Section 10. Secretary.

The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors.

Section 11. Treasurer.

The treasurer shall (a) have the custody of the funds and securities of the Corporation, (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, (c) deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and (d) in

general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.

The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.

Section 12. Assistant Secretaries; Assistant Treasurers.

The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the chief executive officer, the president or the Board of Directors.

Section 13. Compensation.

The compensation of the officers shall be fixed from time to time by or under the authority of the Board of Directors. No officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director.

ARTICLE VI

CONTRACTS, CHECKS AND DEPOSITS

Section 1. Contracts.

The Board of Directors or a committee of the Board of Directors acting within the scope of its delegated authority may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when duly authorized or ratified by action of the Board of Directors or such other committee and executed by an authorized person.

Section 2. Checks and Drafts.

All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 3. Deposits.

All funds of the Corporation not otherwise employed shall be deposited or invested from time to time to the credit of the Corporation as the Board of Directors, the chief executive officer, the president, the chief financial officer, or any other officer designated by the Board of Directors may determine.

ARTICLE VII

STOCK

Section 1. Certificates.

Except as may be otherwise provided by the Board of Directors, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. In the event that the Corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the Corporation in the manner required by the MGCL. In the event that the Corporation issues shares of stock without certificates, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no differences in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.

Section 2. Transfers.

All transfers of shares of stock shall be made on the books of the Corporation and the books of the transfer agent of the Corporation, if applicable, by the holder of the shares, in person or by his or her attorney, in such manner as the Board of Directors or any officer of the Corporation may prescribe and, if such shares are certificated, upon surrender to the Corporation or, if authorized by the Corporation, the transfer agent of the Corporation of certificates duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation, or, if authorized by the Corporation, the transfer agent of the Corporation, shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on its books. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Directors that such shares shall no longer be represented by certificates. Upon the transfer of any uncertificated shares, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates.

The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland.

Notwithstanding the foregoing, transfers of shares of any class or series of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 3. Replacement Certificate.

Any officer of the Corporation may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed, stolen or mutilated upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated; provided, however, if such shares have ceased to be certificated, no new certificate shall be issued unless requested in

writing by such stockholder and the Board of Directors has determined that such certificates may be issued. Unless otherwise determined by an officer of the Corporation, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to give the Corporation a bond in such sums as it may direct as indemnity against any claim that may be made against the Corporation.

Section 4. Fixing of Record Date.

Subject to the provisions of Article II, Section 3, the Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of stockholders, not less than ten (10) days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.

When a record date for the determination of stockholders entitled to notice of and to vote at any meeting of stockholders has been set as provided in this section, such record date shall continue to apply to the meeting if adjourned or postponed, except if the meeting is adjourned or postponed to a date more than one hundred twenty (120) days after the record date originally fixed for the meeting, in which case a new record date for such meeting may be determined as set forth herein.

Section 5. Stock Ledger.

The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 6. Fractional Stock; Issuance of Units.

The Board of Directors may authorize the Corporation to issue fractional stock or authorize the issuance of scrip, all on such terms and under such conditions as it may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1. Authorization.

Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the Charter.

Section 2. Contingencies.

Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine, and the Board of Directors may modify or abolish any such reserve.

ARTICLE X

INVESTMENT POLICIES

Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 1. Seal.

The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation, and the words “Incorporated Maryland.” The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 2. Affixing Seal.

Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

INDEMNIFICATION AND ADVANCE OF EXPENSES

To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate

entitlement to indemnification, shall pay or reimburse all reasonable costs, fees and expenses (including attorneys’ fees, costs and expenses) in advance of final disposition of any Proceeding (as defined below) to (a) any individual who is a present or former director or officer of the Corporation and who was or is made or threatened to be made a party to any pending or contemplated action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”) by reason of his or her service in that capacity or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who was or is made or threatened to be made a party to any Proceeding by reason of his or her service in that capacity. The rights to indemnification and to be paid or reimbursed expenses in advance of a final disposition of any Proceeding provided by the Charter and these Bylaws shall vest immediately upon election of a director or officer. The Corporation may, with the approval of its Board of Directors, provide such indemnification and payment or reimbursement of expenses in advance to (i) an individual who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and (ii) any employee or agent of the Corporation or a predecessor of the Corporation. The indemnification and payment or reimbursement of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise.

Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Charter or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph of this Article XII with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice of a meeting is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice of such meeting, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened.

ARTICLE XIV

EXCLUSIVE FORUM FOR CERTAIN LITIGATION

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of any duty owed by the Corporation or

by any director or officer or other employee of the Corporation to the Corporation or to the stockholders of the Corporation, (c) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the Maryland General Corporation Law or the Charter or Bylaws of the Corporation, or (d) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation that is governed by the internal affairs doctrine shall be the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division.

ARTICLE XV

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws; provided, however, that the affirmative vote of at least two-thirds of the votes entitled to be cast at a meeting of the holders of the outstanding Registrable Shares or the written or electronic consent of the holders of at least two-thirds of the outstanding Registrable Shares shall be required in order to amend or alter Article XVII hereof.

ARTICLE XVI

SEVERABILITY

If any provision of these Bylaws shall be held invalid or unenforceable in any respect, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable any other provision of the Bylaws in any jurisdiction.

ARTICLE XVII

SPECIAL ELECTION MEETING

Section 1. Special Meeting Trigger.

Subject to the last sentence of this Section 1, if either: (i) a Registration Statement on Form S-11 or such other form under the Securities Act of 1933, as amended, then available to the Corporation relating to Registrable Shares (as such term is defined in that certain Registration Rights Agreement, dated as of July 31, between the Corporation and FBR Capital Markets & Co. (the “ Registration Rights Agreement ”)) (the “ Shelf Registration Statement ”) has not been declared effective by the SEC, or (ii) the Corporation common stock has not been listed for trading on a national securities exchange, prior to the date that is one hundred eighty (180) days after the initial filing of the Shelf Registration Statement, or, if the Corporation completes its initial public offering pursuant to an IPO Registration Statement (as such term is defined in the Registration Rights Agreement), on a date that is on or before sixty (60) days after the completion of such initial public offering (each, a “ Trigger Date ”), then a special meeting of stockholders shall be called in accordance with the provisions hereof (the “ Special Election Meeting ”); provided that the requirement to hold a Special Election Meeting may be waived or

deferred upon the Corporation’s receipt of the consent, at a duly called meeting or by written or electronic consent, of the holders of at least two-thirds of the outstanding Registrable Shares (other than any Registrable Shares held by the Corporation’s directors and “executive officers” (as that term is defined in Rule 3b-7 under the Exchange Act)). The Special Election Meeting shall occur as soon as possible following the Trigger Date but in no event more than thirty (30) days after the Trigger Date.

If the Corporation has filed an IPO Registration Statement (as such term is defined in the Registration Rights Agreement) prior to the effective date of the Shelf Registration Statement and has used or is using commercially reasonable efforts to complete such initial public offering, the Corporation shall have the right to defer the effectiveness of the Shelf Registration Statement until up to sixty (60) days after the date that is one hundred eighty (180) days after the initial filing of the Shelf Registration Statement.

Section 2. Purposes of Meeting.

The Special Election Meeting shall be called solely for the purposes of: (a) considering and voting upon proposals to remove each then-serving director of the Corporation; and (b) electing such number of directors as there are then vacancies on the Board of Directors, including any vacancies created pursuant to this Article XVII. The removal of any director pursuant to this Article XVII shall be effective immediately upon the receipt of the final report by the officer presiding over the Special Election Meeting of the result of the vote on the proposal to remove any such director.

Section 3. Nominations.

Nominations of individuals for election to the Board of Directors at the Special Election Meeting may only be made (a) by or at the direction of the Board of Directors or (b) upon receipt by the Corporation of written notice of holders of Registrable Shares entitled to cast, or direct the casting of, not less than 20% of all the votes entitled to be cast at the Special Election Meeting (excluding the votes entitled to be cast by the directors or executive officers of the Corporation) and containing the information specified by Section 4 of this Article XVII and any other information required by these Bylaws in order to nominate an individual for election as a director of the Corporation. Each individual whose nomination is made in accordance with this Section 3 is hereinafter referred to as a “ Special Election Meeting Nominee .”

Section 4. Procedures for Stockholder Nominations.

For nominations of individuals for election to the Board of Directors to be properly brought before the Special Election Meeting pursuant to Section 3 of this Article XVII, the holders of Registrable Shares must have given notice thereof in writing to the Secretary not later than 5:00 p.m., Eastern Time, on the tenth (10 ^th ) calendar day after the Trigger Date. Such notice shall include each such proposed Special Election Meeting Nominee’s written consent to serve as a director, if elected, and shall specify:

(a) as to each proposed Special Election Meeting Nominee, the name, age, business address and residence address of such proposed Special Election Meeting Nominee and all other information relating to such proposed Special Election Meeting Nominee that would be required, pursuant to Regulation 14A promulgated under the Exchange Act (or any successor provision), to be disclosed in a contested solicitation of proxies with respect to the election of such individual as a director; and

(b) as to each Holder giving the notice, the class, series and number of all shares of common stock of the Corporation that are owned by such Holder, beneficially or of record.

Section 5. Notice.

Not less than fifteen (15) nor more than twenty-five (25) days before the Special Election Meeting, the Secretary shall give to each stockholder entitled to vote at, or to receive notice of, such Special Election Meeting at such stockholder’s address as it appears in the records of the Corporation, notice in writing setting forth (i) the time and place of the Special Election Meeting, (ii) the purposes for which the Special Election Meeting has been called and (iii) the name of each Special Election Meeting Nominee.

Section 6. Conditions for Removal of Article XVII.

Notwithstanding the restrictions set forth in Article XV hereof, if (i) a Special Election Meeting has been called and has taken place in accordance with the provisions of this Article XVII or (ii) (x) the Shelf Registration Statement has been declared effective and (y) the common stock of the Corporation has been listed for trading on a national securities exchange, then this Article XVII shall have no further force or effect and shall be removed from these Bylaws without further action by the Board of Directors or the assent or vote of the stockholders of the Corporation.

Exhibit 10.1

FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

Dated as of July 31, 2014

TABLE OF CONTENTS


		Page

ARTICLE I DEFINED TERMS			1

ARTICLE II ORGANIZATIONAL MATTERS			14

Section 2.1	Organization		14
Section 2.2	Name		15
Section 2.3	Registered Office and Agent; Principal Office		15
Section 2.4	Term		15
Section 2.5	Partnership Interests as Securities		15
Section 2.6	Certificates Describing Partnership Units		15

ARTICLE III PURPOSE			16

Section 3.1	Purpose and Business		16
Section 3.2	Powers		16

ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS			17

Section 4.1	Capital Contributions of the Partners		17
Section 4.2	Issuances of Partnership Interests		17
Section 4.3	No Preemptive Rights		18
Section 4.4	Other Contribution Provisions		19
Section 4.5	No Interest on Capital		19
Section 4.6	LTIP Units		19
Section 4.7	Conversion of LTIP Units		22

ARTICLE V DISTRIBUTIONS			25

Section 5.1	Requirement and Characterization of Distributions		25
Section 5.2	Amounts Withheld		27
Section 5.3	Distributions Upon Liquidation		27
Section 5.4	Revisions to Reflect Issuance of Partnership Interests		27

ARTICLE VI ALLOCATIONS			28

Section 6.1	Allocations for Capital Account Purposes		28
Section 6.2	Revisions to Allocations to Reflect Issuance of Partnership Interests or Certain DRO Obligations		31

ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS			31

Section 7.1	Management		31
Section 7.2	Certificate of Limited Partnership		35
Section 7.3	Title to Partnership Assets		35
Section 7.4	Reimbursement of the General Partner and the Parent		35
Section 7.5	Outside Activities of the General Partner; Relationship of Shares to Partnership Units; Funding Debt		38
Section 7.6	Transactions with Affiliates		40
Section 7.7	Indemnification		41

TABLE OF CONTENTS

(continued)


		Page

Section 7.8	Liability of the General Partner		43
Section 7.9	Other Matters Concerning the General Partner		44
Section 7.10	Reliance by Third Parties		45
Section 7.11	Restrictions on General Partner’s Authority		45
Section 7.12	Loans by Third Parties		45

ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS			46

Section 8.1	Limitation of Liability		46
Section 8.2	Management of Business		46
Section 8.3	Outside Activities of Limited Partners		46
Section 8.4	Return of Capital		46
Section 8.5	Rights of Limited Partners Relating to the Partnership		47
Section 8.6	Redemption Right		48

ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS			51

Section 9.1	Records and Accounting		51
Section 9.2	Fiscal Year		52
Section 9.3	Reports		52

ARTICLE X TAX MATTERS			52

Section 10.1	Preparation of Tax Returns		52
Section 10.2	Tax Elections		52
Section 10.3	Tax Matters Partner		53
Section 10.4	Organizational Expenses		54
Section 10.5	Withholding		54

ARTICLE XI TRANSFERS AND WITHDRAWALS			55

Section 11.1	Transfer		55
Section 11.2	Transfers of Partnership Interests of General Partner		56
Section 11.3	Limited Partners’ Rights to Transfer		57
Section 11.4	Substituted Limited Partners		58
Section 11.5	Assignees		59
Section 11.6	General Provisions		59

ARTICLE XII ADMISSION OF PARTNERS			61

Section 12.1	Admission of a Successor General Partner		61
Section 12.2	Admission of Additional Limited Partners		61
Section 12.3	Amendment of Agreement and Certificate of Limited Partnership		62
Section 12.4	Limit on Number of Partners		62

ARTICLE XIII DISSOLUTION AND LIQUIDATION			62

Section 13.1	Dissolution		62
Section 13.2	Winding Up		63
Section 13.3	Compliance with Timing Requirements of Regulations; Restoration of Deficit Capital Accounts		64

TABLE OF CONTENTS

(continued)


		Page

Section 13.4	Rights of Limited Partners		66
Section 13.5	Notice of Dissolution		66
Section 13.6	Cancellation of Certificate of Limited Partnership		66
Section 13.7	Reasonable Time for Winding Up		66
Section 13.8	Waiver of Partition		67
Section 13.9	Liability of Liquidator		67

ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS			67

Section 14.1	Amendments		67
Section 14.2	Meetings of the Partners		69

ARTICLE XV GENERAL PROVISIONS			70

Section 15.1	Addresses and Notice		70
Section 15.2	Titles and Captions		70
Section 15.3	Pronouns and Plurals		70
Section 15.4	Further Action		70
Section 15.5	Binding Effect		70
Section 15.6	Creditors		71
Section 15.7	Waiver		71
Section 15.8	Counterparts		71
Section 15.9	Applicable Law		71
Section 15.10	Invalidity of Provisions		71
Section 15.11	Power of Attorney		71
Section 15.12	Entire Agreement		72
Section 15.13	No Rights as Stockholders		73
Section 15.14	Limitation to Preserve REIT Status		73


List of Exhibits:

Exhibit A	—	Partner Registry

Exhibit B	—	Capital Account Maintenance

Exhibit C	—	Special Allocation Rules

Exhibit D	—	Notice of Redemption

Exhibit E	—	Form of DRO Registry

Exhibit F	—	Notice of Election by Partner to Convert LTIP Units into Class A Units

Exhibit G	—	Notice of Election by Partnership to Force Conversion of LTIP Units into Class A Units

iii

FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of July 31, 2014, (the “ Agreement ”) is entered into by and among MedEquities OP GP, LLC, a Delaware limited liability company, as the General Partner, and the Persons whose names are set forth on the Partner Registry (as hereinafter defined) as Limited Partners, together with any other Persons who become Partners in MedEquities Realty Operating Partnership, LP (the “ Partnership ”) as provided herein.

WHEREAS, on April 23, 2014, the General Partner formed the Partnership as a limited partnership pursuant to Delaware law by the filing of the Certificate of Limited Partnership with the Delaware Secretary of State;

WHEREAS, the General Partner and MedEquities Realty Trust, Inc. (the “ Organizational Limited Partner ”) entered into that certain Agreement of Limited Partnership of the Partnership dated as of April 23, 2014 (the “ Original Agreement ”);

WHEREAS, the Partners of the Partnership now wish to amend and restate the partnership agreement as set forth herein, which shall amend, restate and supersede the Original Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to amend and restate the Original Agreement in its entirety and agree to continue the Partnership as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, as amended from time to time, as follows:

ARTICLE I

DEFINED TERMS

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“ Act ” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute.

“ Additional Limited Partner ” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 and who is shown as a Limited Partner on the Partner Registry.

“ Adjusted Capital Account ” means the Capital Account maintained for each Partner as of the end of each Fiscal Year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

“ Adjusted Capital Account Deficit ” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Fiscal Year.

“ Adjusted Property ” means any property the Carrying Value of which has been adjusted pursuant to Exhibit B .

“ Adjustment Event ” has the meaning set forth in Section 4.6.A(i) .

“ Affiliate ” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests or (iv) any officer, director, general partner or trustee of such Person or any Person referred to in clauses (i), (ii), and (iii) above. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“ Aggregate DRO Amount ” means the aggregate balances of the DRO Amounts, if any, of all DRO Partners, if any, as determined on the date in question.

“ Agreed Value ” means (i) in the case of any Contributed Property, the Section 704(c) Value of such property as of the time of its contribution to the Partnership, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed as determined under Section 752 of the Code and the Regulations thereunder; and (ii) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution.

“ Agreement ” means this Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.

“ Assignee ” means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 .

“ Available Cash ” means, with respect to any period for which such calculation is being made:

(a) all cash revenues and funds received by the Partnership from whatever source (excluding the proceeds of any Capital Contribution, unless otherwise determined by the General Partner in its sole and absolute discretion) plus the amount of any reduction (including, without limitation, a reduction resulting because the General Partner determines such amounts are no longer necessary) in reserves of the Partnership, which reserves are referred to in clause (b)(iv) below;

(b) less the sum of the following (except to the extent made with the proceeds of any Capital Contribution):

(i) all interest, principal and other debt-related payments made during such period by the Partnership,

(ii) all cash expenditures (including capital expenditures) made by the Partnership during such period,

(iii) investments in any entity (including loans made thereto) to the extent that such investments are permitted under this Agreement and are not otherwise described in clauses (b)(i) or (ii), and

(iv) the amount of any increase in reserves established during such period which the General Partner determines is necessary or appropriate in its sole and absolute discretion (including any reserves that may be necessary or appropriate to account for distributions required with respect to Partnership Interests having a preference over other classes of Partnership Interests);

Notwithstanding the foregoing, after commencement of the dissolution and liquidation of the Partnership, Available Cash shall not include any cash received or reductions in reserves and shall not take into account any disbursements made or reserves established.

“ Book-Tax Disparities ” means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for U.S. federal income tax purposes as of such date. A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Exhibit B and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained strictly in accordance with U.S. federal income tax accounting principles.

“ Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York, NY are authorized or required by law to close.

“ Capital Account ” means the Capital Account maintained for a Partner pursuant to Exhibit B . The initial Capital Account balance for each Partner who is a Partner on the date hereof shall be the amount set forth opposite such Partner’s name on the Partner Registry.

“ Capital Account Limitation ” has the meaning set forth in Section 4.7.B .

“ Capital Contribution ” means, with respect to any Partner, any cash and the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership.

“ Carrying Value ” means (i) with respect to a Contributed Property or Adjusted Property, the Section 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Partners’ Capital Accounts and (ii) with respect to any other Partnership property, the adjusted basis of such property for U.S. federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B , and to reflect changes, additions (including capital improvements thereto) or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.

“ Cash Amount ” means an amount of cash equal to the Value on the Valuation Date of the Shares Amount.

“ Certificate of Limited Partnership ” means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Delaware Secretary of State, as amended from time to time in accordance with the terms hereof and the Act.

“ Charter ” means the charter of the Parent, within the meaning of Section 1-101(f) of the Maryland General Corporation Law.

“ Class A ” has the meaning set forth in Section 5.1.C .

“ Class A Share ” has the meaning set forth in Section 5.1.C .

“ Class A Unit ” means any Partnership Unit that is not specifically designated by the General Partner as being of another specified class of Partnership Units.

“ Class A Unit Distribution ” has the meaning set forth in Section 4.6.A .

“ Class A Unit Economic Balance ” has the meaning set forth in Section 6.1.E .

“ Class A Unit Transaction ” has the meaning set forth in Section 4.7.F .

“ Class B ” has the meaning set forth in Section 5.1.C .

“ Class B Share ” has the meaning set forth in Section 5.1.C .

“ Class B Unit ” means a Partnership Unit that is specifically designated by the General Partner as being a Class B Unit.

“ Code ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable 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.

“ Consent ” means the consent or approval of a proposed action by a Partner given in accordance with Article XIV .

“ Consent of the Outside Limited Partners ” means the Consent of Limited Partners (excluding for this purpose (i) any Limited Partner Interests held by the General Partner or the Parent, (ii) any Person of which the General Partner or the Parent directly or indirectly owns or controls more than fifty percent (50%) of the voting interests and (iii) any Person directly or indirectly owning or controlling more than fifty percent (50%) of the outstanding voting interests of the General Partner or the Parent) holding Partnership Interests representing more than fifty percent (50%) of the Percentage Interest of the Class A Units of all Limited Partners which are not excluded pursuant to (i), (ii) and (iii) above.

“ Constituent Person ” has the meaning set forth in Section 4.7.F .

“ Contributed Property ” means each property or other asset contributed to the Partnership, in such form as may be permitted by the Act, but excluding cash contributed or deemed contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B , such property shall no longer constitute a Contributed Property for purposes of Exhibit B , but shall be deemed an Adjusted Property for such purposes.

“ Conversion Date ” has the meaning set forth in Section 4.7.B .

“ Conversion Factor ” means 1.0; provided, however, that, if the Parent (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares and does not make a corresponding distribution on Class A Units in Class A Units, (ii) subdivides its outstanding Shares, or (iii) combines its outstanding Shares into a smaller number of Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination; and provided further that in the event that an entity other than an Affiliate of the Parent shall become General Partner pursuant to any merger, consolidation or combination of the General Partner or the Parent with or into another entity (the “ Successor Entity ”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination. Any adjustment to the Conversion Factor shall become effective

immediately after the effective date of the event retroactive to the record date, if any, for the event giving rise thereto, it being intended that (x) adjustments to the Conversion Factor are to be made to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Partnership Units and (y) if a Specified Redemption Date shall fall between the record date and the effective date of any event of the type described above, that the Conversion Factor applicable to such redemption shall be adjusted to take into account such event.

“ Conversion Notice ” has the meaning set forth in Section 4.7.B .

“ Conversion Right ” has the meaning set forth in Section 4.7.A .

“ Convertible Funding Debt ” has the meaning set forth in Section 7.5.F .

“ Debt ” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) obligations of such Person incurred in connection with entering into a lease which, in accordance with generally accepted accounting principles, should be capitalized.

“ Depreciation ” means, for each Fiscal Year, an amount equal to the U.S. federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for U.S. federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.

“ Distribution Period ” has the meaning set forth in Section 5.1.C .

“ DRO Amount ” means the amount specified in the DRO Registry with respect to any DRO Partner, as such DRO Registry may be amended from time to time.

“ DRO Partner ” means a Partner who has agreed in writing to be a DRO Partner and has agreed and is obligated to make certain contributions, not in excess of such DRO Partner’s DRO Amount, to the Partnership with respect to any deficit balance in such Partner’s Capital Account upon the occurrence of certain events. A DRO Partner who is obligated to make any such contribution only upon liquidation of the Partnership shall be designated in the DRO Registry as a Part I DRO Partner and a DRO Partner who is obligated to make any such contribution to the Partnership either upon liquidation of the Partnership or upon liquidation of such DRO Partner’s Partnership Interest shall be designated in the DRO Registry as a Part II DRO Partner.

“ DRO Registry ” means the DRO Registry maintained by the General Partner in the books and records of the Partnership containing substantially the same information as would be necessary to complete the Form of DRO Registry attached hereto as Exhibit E .

“ Economic Capital Account Balances ” has the meaning set forth in Section 6.1.E .

“ Effective Date ” means , 2014, the date of the closing of the private placement offering of the Parent’s shares of common stock, $0.01 par value per share.

“ Equity Incentive Plan ” means any equity incentive or compensation plan hereafter adopted by the Partnership or the Parent, including, without limitation, the MedEquities Realty Trust, Inc. 2014 Equity Incentive Plan.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Fiscal Year ” means the fiscal year of the Partnership, which shall be the calendar year as provided in Section 9.2 .

“ Forced Conversion ” has the meaning set forth in Section 4.7.C .

“ Forced Conversion Notice ” has the meaning set forth in Section 4.7.C .

“ Funding Debt ” means any Debt incurred for the purpose of providing funds to the Partnership by or on behalf of the Parent or any wholly owned subsidiary of the Parent.

“ General Partner ” means MedEquities OP GP, LLC, a Delaware limited liability company, or its successor or permitted assignee, as general partner of the Partnership.

“ General Partner Interest ” means the Partnership Interest held by the General Partner, which Partnership Interest is an interest as a general partner under the Act. The General Partner will not be required to make a Capital Contribution to the Partnership in exchange for the General Partner Interest. A General Partner Interest may be expressed as a number of Partnership Units.

“ General Partner Payment ” has the meaning set forth in Section 15.14 .

“ IRS ” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

“ Immediate Family ” means, with respect to any natural Person, such natural Person’s spouse, parents, descendants, nephews, nieces, brothers, and sisters.

“ Incapacity ” or “ Incapacitated ” means, (i) as to any individual who is a Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner

incompetent to manage his or her Person or estate, (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter, (iii) as to any partnership or limited liability company which is a Partner, the dissolution and commencement of winding up of the partnership or limited liability company, (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership, (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee) or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days of such appointment or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay.

“ Indemnitee ” means (i) any Person made a party to a proceeding by reason of its status as (A) the General Partner, (B) a Limited Partner or (C) a director or officer of the Partnership, the General Partner or the Parent and (ii) such other Persons (including Affiliates of the General Partner, the Parent, a Limited Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.

“ Limited Partner ” means any Person named as a Limited Partner in the Partner Registry or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.

“ Limited Partner Interest ” means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of Partnership Units.

“ Liquidating Event ” has the meaning set forth in Section 13.1 .

“ Liquidating Gains ” has the meaning set forth in Section 6.1.E .

“ Liquidator ” has the meaning set forth in Section 13.2.A .

“ LTIP Units ” means a Partnership Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Section 4.6 and elsewhere in this Agreement in respect of holders of LTIP Units. The allocation of LTIP Units among the Partners shall be set forth in the Partner Registry, as it may be amended or restated from time to time.

“ LTIP Unitholder ” means a Partner that holds LTIP Units.

“ LV Safe Harbor ” “ LV Safe Harbor Election ” and “ LV Safe Harbor Interest ” each has the meaning set forth in Section 10.2.B .

“ Net Income ” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain for such taxable period over the Partnership’s items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Exhibit B . If an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the special allocation rules in Exhibit C , Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item.

“ Net Loss ” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction for such taxable period over the Partnership’s items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Exhibit B . If an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Exhibit C , Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without regard to such item.

“ New Securities ” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase Shares, excluding grants under any Equity Incentive Plan, or (ii) any Debt issued by the Parent that provides any of the rights described in clause (i).

“ Nonrecourse Built-in Gain ” means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.

“ Nonrecourse Deductions ” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

“ Nonrecourse Liability ” has the meaning set forth in Regulations Section 1.752-1(a)(2).

“ Notice of Redemption ” means a Notice of Redemption substantially in the form of Exhibit D .

“ Operating Entity ” has the meaning set forth in Section 7.4.F .

“ Organizational Limited Partner ” has the meaning set forth in the recitals hereto.

“ Original Agreement ” has the meaning set forth in the recitals hereto.

“ Partner ” means the General Partner or a Limited Partner, and “ Partners ” means the General Partner and the Limited Partners.

“ Partner Minimum Gain ” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

“ Partner Nonrecourse Debt ” has the meaning set forth in Regulations Section 1.704-2(b)(4).

“ Partner Nonrecourse Deductions ” has the meaning set forth in Regulations Section 1.704-2(i), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

“ Partner Registry ” means the Partner Registry maintained by the General Partner in the books and records of the Partnership, which contains substantially the same information as would be necessary to complete the form of the Partner Registry attached hereto as Exhibit A .

“ Partnership ” has the meaning set forth in the recitals hereto.

“ Partnership Interest ” means a Limited Partner Interest, a General Partner Interest or LTIP Units, and includes any and all benefits to which the holder of such a partnership interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Partnership Interest may be expressed as a number of Partnership Units.

“ Partnership Minimum Gain ” has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

“ Partnership Record Date ” means the record date established by the General Partner either (i) for the distribution of Available Cash pursuant to Section 5.1 , which record date shall be the same as the record date established by the Parent for a distribution to its stockholders of some or all of its portion of such distribution, or (ii) if applicable, for determining the Partners entitled to vote on or Consent to any proposed action for which the Consent or approval of the Partners is sought pursuant to Section 14.2 .

“ Partnership Unit ” means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2 , and includes Class A Units, Class B Units,

LTIP Units and any other classes or series of Partnership Units established after the date hereof. The number of Partnership Units outstanding and the Percentage Interests in the Partnership represented by such Partnership Units are set forth in the Partner Registry.

“ Percentage Interest ” means, as to a Partner holding a class of Partnership Interests, its interest in such class, determined by dividing the Partnership Units of such class owned by such Partner by the total number of Partnership Units of such class then outstanding. For purposes of determining the Percentage Interest of the Class A Units at any time when there are Class B Units outstanding, all Class B Units shall be treated as Class A Units.

“ Person ” means a natural person, partnership (whether general or limited), trust, estate, association, corporation, limited liability company, unincorporated organization, custodian, nominee or any other individual or entity in its own or any representative capacity.

“ Publicly Traded ” means listed or admitted to trading on the New York Stock Exchange, the NYSE MKT LLC, the NASDAQ Stock Market or any successor to any of the foregoing.

“ Qualified Assets ” means any of the following assets: (i) interests, rights, options, warrants or convertible or exchangeable securities of the Partnership; (ii) Debt issued by the Partnership or any Subsidiary thereof in connection with the incurrence of Funding Debt; (iii) equity interests in Qualified REIT Subsidiaries and limited liability companies (or other entities disregarded from their sole owner for U.S. federal income tax purposes, including wholly owned grantor trusts) whose assets consist solely of Qualified Assets; (iv) up to a one percent (1%) equity interest in any partnership or limited liability company at least ninety-nine percent (99%) of the equity of which is owned, directly or indirectly, by the Partnership; (v) cash held for payment of administrative expenses or pending distribution to security holders of the Parent or any wholly owned Subsidiary thereof or pending contribution to the Partnership; and (vi) other tangible and intangible assets that, taken as a whole, are de minimis in relation to the net assets of the Partnership and its Subsidiaries.

“ Qualified REIT Subsidiaries ” means any Subsidiary of the Parent that is a “qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.

“ Recapture Income ” means any gain recognized by the Partnership (computed without regard to any adjustment pursuant to Section 754 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized either as ordinary income or as “unrecaptured Section 1250 gain” (as defined in Section 1(h)(6) of the Code) because it represents the recapture of depreciation deductions previously taken with respect to such property or asset.

“ Recourse Liabilities ” means the amount of liabilities owed by the Partnership (other than Nonrecourse Liabilities and liabilities to which Partner Nonrecourse Deductions are attributable in accordance with Section 1.704-(2)(i) of the Regulations).

“ Redeeming Partner ” has the meaning set forth in Section 8.6.A .

“ Redemption Amount ” means either the Cash Amount or the Shares Amount, as determined by the General Partner, in its sole and absolute discretion. A Redeeming Partner shall have no right, without the General Partner’s consent, in its sole and absolute discretion, to receive the Redemption Amount in the form of the Shares Amount.

“ Redemption Right ” has the meaning set forth in Section 8.6.A .

“ Regulations ” means the Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“ REIT ” means an entity that qualifies as a real estate investment trust under the Code.

“ REIT Requirements ” has the meaning set forth in Section 5.1.A .

“ Residual Gain ” or “ Residual Loss ” means any item of gain or loss, as the case may be, of the Partnership recognized for U.S. federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax Disparities.

“ Safe Harbor ” has the meaning set forth in Section 11.6.F .

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Section 704(c) Value ” of any Contributed Property or Adjusted Property means the fair market value of such property at the time of contribution or adjustment, as the case may be, as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, subject to Exhibit B , the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the Section 704(c) Value of Contributed Properties or Adjusted Properties in a single or integrated transaction among each separate property on a basis proportional to its fair market values.

“ Share ” means a share of common stock (or other comparable equity interest) of the Parent (or the Successor Entity, as the case may be). Shares may be issued in one or more classes or series in accordance with the terms of the Charter. Shares issued in lieu of the Cash Amount by the Partnership or the Parent may be either registered or unregistered Shares at the option of the Parent. If there is more than one class or series of Shares, the term “Shares” shall, as the context requires, be deemed to refer to the class or series of Shares that corresponds to the class or series of Partnership Interests for which the reference to Shares is made. When used with reference to Class A Units, the term “Shares” refers to shares of common stock (or other comparable equity interest) of the Parent.

“ Shares Amount ” means a number of Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner times the Conversion Factor; provided, however, that, if the Parent issues to holders of Shares securities, rights, options, warrants or convertible or exchangeable securities entitling such holders to subscribe for or

purchase Shares or any other securities or property (collectively, the “rights”), then the Shares Amount shall also include such rights that a holder of that number of Shares would be entitled to receive unless the Partnership issues corresponding rights to holders of Partnership Units.

“ Specified Redemption Date ” means the tenth Business Day after the Valuation Date or such shorter period as the General Partner, in its sole and absolute discretion, may determine; provided, however, that, if the Shares are not Publicly Traded, the Specified Redemption Date means the thirtieth Business Day after receipt by the General Partner of a Notice of Redemption.

“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, trust, partnership or joint venture, or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

“ Substituted Limited Partner ” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 and who is shown as a Limited Partner in the Partner Registry.

“ Successor Entity ” has the meaning set forth in the definition of “Conversion Factor” herein.

“ Termination Transaction ” has the meaning set forth in Section 11.2.B .

“ Unrealized Gain ” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Exhibit B ) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B ) as of such date.

“ Unrealized Loss ” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B ) as of such date, over (ii) the fair market value of such property (as determined under Exhibit B ) as of such date.

“ Unvested LTIP Units ” has the meaning set forth in Section 4.6.C .

“ Valuation Date ” means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter.

“ Value ” means, with respect to one Share of a class of outstanding Shares of the Parent that are Publicly Traded, the average of the daily market price for the ten consecutive trading days immediately preceding the date with respect to which value must be determined. The market price for each such trading day shall be the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day. If the outstanding Shares of the Parent are Publicly Traded and the Shares Amount includes, in addition to the Shares, rights or interests that a holder of Shares has received or would be entitled to receive, then the Value of such rights shall be determined by the Parent acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. If the Shares of the Parent are not Publicly Traded, the Value

of the Shares Amount per Partnership Unit tendered for redemption (which will be the Cash Amount per Partnership Unit offered for redemption payable pursuant to Section 8.6.A ) means the amount that a holder of one Partnership Unit would receive if each of the assets of the Partnership were to be sold for its fair market value on the Specified Redemption Date, the Partnership were to pay all of its outstanding liabilities, and the remaining proceeds were to be distributed to the Partners in accordance with the terms of this Agreement. Such Value shall be determined by the General Partner, acting in good faith and based upon a commercially reasonable estimate of the amount that would be realized by the Partnership if each asset of the Partnership (and each asset of each partnership, limited liability company, trust, joint venture or other entity in which the Partnership owns a direct or indirect interest) were sold to an unrelated purchaser in an arm’s-length transaction where neither the purchaser nor the seller were under economic compulsion to enter into the transaction (without regard to any discount in value as a result of the Partnership’s minority interest in any property or any illiquidity of the Partnership’s interest in any property).

“ Vested LTIP Units ” has the meaning set forth in Section 4.6.C .

“ Vesting Agreement ” means each or any, as the context implies, agreement or instrument entered into by a holder of LTIP Units upon acceptance of an award of LTIP Units under an Equity Incentive Plan.

ARTICLE II

ORGANIZATIONAL MATTERS

Section 2.1 Organization

A. Organization, Status and Rights . The Partnership is a limited partnership organized pursuant to the provisions of the Act and upon the terms and conditions set forth in the Original Agreement. The Partners hereby confirm and agree to their status as partners of the Partnership and to continue the business of the Partnership on the terms set forth in this Agreement. Upon the Effective Date, the Organizational Limited Partner shall withdraw from the Partnership and relinquish any and all rights or interest he may have in the Partnership, and the Partnership shall continue without dissolution. Except as expressly provided herein, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.

B. Qualification of Partnership . The Partners (i) agree that if the laws of any jurisdiction in which the Partnership transacts business so require, the appropriate officers or other authorized representatives of the Partnership shall file, or shall cause to be filed, with the appropriate office in that jurisdiction, any documents necessary for the Partnership to qualify to transact business under such laws; and (ii) agree and obligate themselves to execute, acknowledge and cause to be filed for record, in the place or places and manner prescribed by law, any amendments to the Certificate of Limited Partnership as may be required, either by the Act, by the laws of any jurisdiction in which the Partnership transacts business, or by this Agreement, to reflect changes in the information contained therein or otherwise to comply with the requirements of law for the continuation, preservation and operation of the Partnership as a limited partnership under the Act.

C. Representations . Each Partner represents and warrants that such Partner is duly authorized to execute, deliver and perform its obligations under this Agreement and that the Person, if any, executing this Agreement on behalf of such Partner is duly authorized to do so and that this Agreement is binding on and enforceable against such Partner in accordance with its terms.

Section 2.2 Name

The name of the Partnership is MedEquities Realty Operating Partnership, LP. The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of any of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “LP,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

Section 2.3 Registered Office and Agent; Principal Office

The address of the registered office of the Partnership in the State of Delaware is located at 615 South Dupont Highway, City of Dover, County of Kent, Delaware 19901 and the registered agent for service of process on the Partnership in the State of Delaware at such registered office is National Corporate Research, Ltd. The principal office of the Partnership is 201 Seaboard Lane, Suite 100, Franklin, Tennessee 37067, or shall be such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.

Section 2.4 Term

The term of the Partnership commenced on April 23, 2014, and shall continue until dissolved pursuant to the provisions of Article XIII or as otherwise provided by law.

Section 2.5 Partnership Interests as Securities

All Partnership Interests shall be securities within the meaning of, and governed by, (i) Article 8 of the Delaware Uniform Commercial Code and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction.

Section 2.6 Certificates Describing Partnership Units

The General Partner shall have the authority to issue certificates evidencing the Limited Partnership Interests in accordance with Section 17-702(b) of the Act. Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:

THIS CERTIFICATE IS NOT NEGOTIABLE. THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND TRANSFERABLE ONLY IN ACCORDANCE WITH (A) THE PROVISIONS OF THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP, AS AMENDED, SUPPLEMENTED OR RESTATED FROM TIME TO TIME AND (B) ANY APPLICABLE FEDERAL OR STATE SECURITIES OR BLUE SKY LAWS.

ARTICLE III

PURPOSE

Section 3.1 Purpose and Business

The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act; (ii) to enter into any corporation, partnership, joint venture, trust, limited liability company or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged, directly or indirectly, in any of the foregoing; and (iii) to do anything necessary or incidental to the foregoing; provided, however, that any business shall be limited to and conducted in such a manner as to permit the Parent at all times to be classified as a REIT, unless the Parent, in its sole and absolute discretion has chosen to cease to qualify as a REIT or has chosen not to attempt to qualify as a REIT for any reason or reasons whether or not related to the business conducted by the Partnership. In connection with the foregoing, and without limiting the Parent’s right, in its sole and absolute discretion, to cease qualifying as a REIT, the Partners acknowledge that the status of the Parent as a REIT inures to the benefit of all the Partners and not solely to the General Partner, the Parent or their Affiliates.

Section 3.2 Powers

The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, that the Partnership shall not take, or shall refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the Parent to qualify or continue to qualify as a REIT (unless the Parent has decided to terminate or revoke its election to be taxed as a REIT), (ii) could subject the Parent to any taxes under Sections 857 or 4981 of the Code, or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner, the Parent or their securities, unless such action (or inaction) shall have been specifically consented to by the General Partner in writing.

ARTICLE IV

CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS

Section 4.1 Capital Contributions of the Partners

A. Capital Contributions . Prior to or concurrently with the execution of this Agreement, the Partners have made the Capital Contributions as set forth in the Partner Registry. On the date hereof, the Partners own Partnership Units in the amounts set forth in the Partner Registry and have Percentage Interests in the Partnership as set forth in the Partner Registry. On the Effective Date, certain Partners will make Capital Contributions to the Partnership, and the General Partner will update the Partner Registry to reflect the Capital Contributions made by each Partner, the Partnership Units assigned to each Partner and the Percentage Interest in the Partnership represented by such Partnership Units. The number of Partnership Units and Percentage Interest shall be adjusted in the Partner Registry from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partner’s Percentage Interest occurring after the Effective Date and in accordance with the terms of this Agreement.

B. General Partnership Interest . Except for any Partnership Units designated as Limited Partner Interests by the General Partner, the Partnership Units held by the General Partner shall be the General Partner Interest of the General Partner.

C. Except as provided in Sections 7.5 , 10.5 , and 13.3 , the Partners shall have no obligation to make any additional Capital Contributions or provide any additional funding to the Partnership (whether in the form of loans, repayments of loans or otherwise). Except as otherwise set forth in Section 13.3 , no Partner shall have any obligation to restore any deficit that may exist in its Capital Account, either upon a liquidation of the Partnership or otherwise.

Section 4.2 Issuances of Partnership Interests

A. General . The General Partner is hereby authorized to cause the Partnership from time to time to issue to Partners (including the General Partner, the Parent and their Affiliates) or other Persons (including, without limitation, in connection with the contribution of property to the Partnership or any of its Subsidiaries) Partnership Units or other Partnership Interests in one or more classes, or in one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to one or more other classes of Partnership Interests, all as shall be determined, subject to applicable Delaware law, by the General Partner in its sole and absolute discretion, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests, (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions, (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership, (iv) the rights, if any, of each such class to vote on matters that require the vote or Consent of the Limited Partners, and (v) the consideration, if any, to be received by the Partnership; provided, however, that no such Partnership Units or other

Partnership Interests shall be issued to the General Partner or the Parent unless (a) the Partnership Interests are issued in connection with the grant, award or issuance of Shares or other equity interests in the Parent (including a transaction described in Section 7.4.F ) having designations, preferences and other rights such that the economic interests attributable to such Shares or other equity interests are substantially similar to the designations, preferences and other rights (except voting rights) of the Partnership Interests issued to the General Partner or the Parent in accordance with this Section 4.2.A , and the General Partner or the Parent contributes to the Partnership the proceeds (if any) from the issuance of Shares or equity received by the General Partner or the Parent as required pursuant to Section 7.5.D , (b) the General Partner or the Parent makes an additional Capital Contribution to the Partnership, or (c) the additional Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class. If the Partnership issues Partnership Interests pursuant to this Section 4.2.A , the General Partner shall make such revisions to this Agreement (including but not limited to the revisions described in Section 5.4 , Section 6.2 and Section 8.6 ) as it deems necessary to reflect the issuance of such Partnership Interests. The designation of any newly issued class or series of Partnership Interests may provide a formula for treating such Partnership Interests solely for purposes of voting on or consenting to any matter that requires the vote or Consent of the Limited Partners as set forth in one or more of Sections 7.1 , 7.5.A , 7.11 , 13.1(i) , 13.1(vi) , 14.1.A , 14.1.C , 14.2.A , and 14.2.B of this Agreement as the equivalent of a specified number (including any fraction thereof) of Class A Units. Nothing in this Agreement shall prohibit the General Partner from issuing Partnership Units for less than fair market value if the General Partner concludes in good faith that such issuance is in the best interests of the Partnership.

B. Classes of Partnership Units . On the Effective Date, the Partnership shall have three authorized classes of Partnership Units, entitled “Class A Units,” “Class B Units” and “LTIP Units,” and, thereafter, such additional classes of Partnership Units as may be created by the General Partner pursuant to Section 4.2.A and this Section 4.2.B . Class A Units, Class B Units or a class of Partnership Interests created pursuant to Section 4.2.A or this Section 4.2.B , at the election of the General Partner, in its sole and absolute discretion, may be issued to newly admitted Partners in exchange for the contribution by such Partners of cash, real estate partnership interests, stock, notes or other assets or consideration; provided, however, that any Partnership Unit that is not specifically designated by the General Partner as being of a particular class shall be deemed to be a Class A Unit. Each Class B Unit shall be converted automatically into a Class A Unit on the day immediately following the Partnership Record Date for the Distribution Period in which such Class B Unit was issued, without the requirement for any action by the General Partner, the Partnership or the Partner holding the Class B Unit. The issuance and terms of any LTIP Units shall be in accordance with Section 4.6 .

Section 4.3 No Preemptive Rights

Except to the extent expressly granted by the Partnership pursuant to another agreement, no Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions or loans to the Partnership or (ii) issuance or sale of any Partnership Units or other Partnership Interests.

Section 4.4 Other Contribution Provisions

A. General . If any Partner is admitted to the Partnership and is given a Capital Account in exchange for services rendered to the Partnership, such transaction shall be treated by the Partnership and the affected Partner (and set forth in the Partner Registry) as if the Partnership had compensated such Partner in cash, and the Partner had made a Capital Contribution of such cash to the capital of the Partnership.

B. Mergers . To the extent the Partnership acquires any property (or an indirect interest therein) by the merger of any other Person into the Partnership or with or into a Subsidiary of the Partnership, Persons who receive Partnership Interests in exchange for their interest in the Person merging into the Partnership or with or into a Subsidiary of the Partnership shall be deemed to have been admitted as Additional Limited Partners pursuant to Section 12.2 and shall be deemed to have made Capital Contributions as provided in the applicable merger agreement (or if not so provided, as determined by the General Partner in its sole and absolute discretion) and as set forth in the Partner Registry.

Section 4.5 No Interest on Capital

No Partner shall be entitled to interest on its Capital Contributions or its Capital Account.

Section 4.6 LTIP Units

A. Issuance of LTIP Units . The General Partner may from time to time, for such consideration as the General Partner may determine to be appropriate, issue LTIP Units to Persons who provide services to the Partnership or the Parent and admit such Persons as Limited Partners. Subject to the following provisions of this Section 4.6 and the special provisions of Sections 4.7 and 6.1.E , LTIP Units shall be treated as Class A Units, with all of the rights, privileges and obligations attendant thereto (or, if so designated by the General Partner in connection with the issuance thereof, as Class B Units for the quarter in which such LTIP Units are issued). For purposes of computing the Partners’ Percentage Interests, holders of LTIP Units shall be treated as Class A Unit holders and LTIP Units shall be treated as Class A Units. In particular, the Partnership shall maintain at all times a one-to-one correspondence between LTIP Units and Class A Units for conversion, distribution and other purposes, including, without limitation, complying with the following procedures:

(i) If an Adjustment Event (as defined below) occurs, then the General Partner shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between Class A Units and LTIP Units. The following shall be “Adjustment Events”: (A) the Partnership makes a distribution on all outstanding Class A Units in Partnership Units, (B) the Partnership subdivides the outstanding Class A Units into a greater number of units or combines the outstanding Class A Units into a smaller number of units, or (C) the Partnership issues any Partnership Units in exchange for its outstanding Class A Units by way of a reclassification or recapitalization of its Class A Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not

be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business Class A Unit Transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan or (z) the issuance of any Partnership Units to the General Partner or the Parent in respect of a capital contribution to the Partnership. If the Partnership takes an action affecting the Class A Units other than actions specifically described above as “Adjustment Events” and in the opinion of the General Partner such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any Equity Incentive Plan, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units, as herein provided, the Partnership shall promptly file in the books and records of the Partnership an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after filing of such certificate, the Partnership shall mail a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; and

(ii) The LTIP Unitholders shall, when, as and if authorized and declared by the General Partner out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Class A Unit (the “ Class A Unit Distribution ”), paid to holders of Class A Units on such Partnership Record Date established by the General Partner with respect to such distribution. So long as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Class A Units or Class B Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units.

B. Priority . Subject to the provisions of this Section 4.6 and the special provisions of Sections 4.7 and 5.1.E , the LTIP Units shall rank pari passu with the Class A Units and Class B Units as to the payment of regular and special periodic or other distributions and distribution of assets upon liquidation, dissolution or winding up. As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Partnership Units which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Class A Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units. Subject to the terms of any Vesting Agreement, an LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the same extent, and subject to the same restrictions as holders of Class A Units are entitled to transfer their Class A Units pursuant to Article XI .

C. Special Provisions . LTIP Units shall be subject to the following special provisions:

(i) Vesting Agreements . LTIP Units may, in the sole discretion of the General Partner, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Equity

Incentive Plan, if applicable. LTIP Units that have vested under the terms of a Vesting Agreement are referred to as “ Vested LTIP Units ;” all other LTIP Units shall be treated as “ Unvested LTIP Units .”

(ii) Forfeiture . Unless otherwise specified in the Vesting Agreement, upon the occurrence of any event specified in a Vesting Agreement as resulting in either the right of the Partnership or the General Partner to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Partnership or the General Partner exercises such right to repurchase or forfeiture in accordance with the applicable Vesting Agreement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the Vesting Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Partnership Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the LTIP Unitholder that is attributable to all of his or her LTIP Units shall be reduced by the amount, if any, by which it exceeds the target balance contemplated by Section 6.1.E , calculated with respect to the LTIP Unitholder’s remaining LTIP Units, if any.

(iii) Allocations . LTIP Unitholders shall be entitled to certain special allocations of gain under Section 6.1.E .

(iv) Redemption . The Redemption Right provided to the holders of Class A Units under Section 8.6 shall not apply with respect to LTIP Units unless and until they are converted to Class A Units as provided in clause (v) below and Section 4.7 .

(v) Conversion to Class A Units . Vested LTIP Units are eligible to be converted into Class A Units in accordance with Section 4.7 .

D. Voting . LTIP Unitholders shall (a) have the same voting rights as the Limited Partners, with the LTIP Units voting as a single class with the Class A Units and having one vote per LTIP Unit; and (b) have the additional voting rights that are expressly set forth below. So long as any LTIP Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of a majority of the LTIP Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units so as to materially and adversely affect any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of all of Class A Units (including the Class A Units held by the General Partner or the Parent); but subject, in any event, to the following provisions:

(i) With respect to any Class A Unit Transaction (as defined in Section 4.7.F ), so long as the LTIP Units are treated in accordance with Section 4.7.F , the consummation of such Class A Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and

(ii) Any creation or issuance of any Partnership Units or of any class or series of Partnership Interest in accordance with the terms of this Agreement, including, without limitation, additional Class A Units or LTIP Units, whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding LTIP Units shall have been converted into Class A Units.

Section 4.7 Conversion of LTIP Units .

A. Conversion Right . An LTIP Unitholder shall have the right (the “ Conversion Right ”), at his or her option, at any time to convert all or a portion of his or her Vested LTIP Units into Class A Units; provided, however, that a holder may not exercise the Conversion Right for less than one thousand (1,000) Vested LTIP Units or, if such holder holds less than one thousand Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into Class A Units until they become Vested LTIP Units; provided, however, that when an LTIP Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Partnership a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Partnership subject to such condition. The General Partner shall have the right at any time to cause a conversion of Vested LTIP Units into Class A Units. In all cases, the conversion of any LTIP Units into Class A Units shall be subject to the conditions and procedures set forth in this Section 4.7 .

B. Exercise by an LTIP Unitholder . A holder of Vested LTIP Units may convert such LTIP Units into an equal number of fully paid and non-assessable Class A Units, giving effect to all adjustments (if any) made pursuant to Section 4.6 . Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Limited Partner, to the extent attributable to its ownership of LTIP Units, divided by (y) the Class A Unit Economic Balance, in each case as determined as of the effective date of conversion (the “ Capital Account Limitation ”). In order to exercise his or her Conversion Right, an LTIP Unitholder shall deliver a notice (a “ Conversion Notice ”) in the form attached as Exhibit F to this Agreement to the Partnership (with a copy to the General Partner) not less than ten nor more than 60 days prior to a date (the “ Conversion Date ”) specified in such Conversion Notice; provided, however, that if the General Partner has not given to the LTIP Unitholders notice of a proposed or upcoming Class A Unit Transaction (as defined in Section 4.7.F ) at least 30 days prior to the effective date of such Class A Unit Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth day after such notice from the General Partner of a Class A Unit Transaction or (y) the third business day immediately preceding the effective date of such Class A Unit Transaction. A Conversion Notice shall be provided in the manner provided in Section 15.1 . Each LTIP Unitholder covenants and agrees with the Partnership that

all Vested LTIP Units to be converted pursuant to this Section 4.7.B shall be free and clear of all liens and encumbrances. Notwithstanding anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 8.6 relating to those Class A Units that will be issued to such holder upon conversion of such LTIP Units into Class A Units in advance of the Conversion Date; provided, however, that the redemption of such Class A Units by the Partnership shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if he or she so wishes, the Class A Units into which his or her Vested LTIP Units will be converted can be redeemed by the Partnership simultaneously with such conversion, with the further consequence that, if the General Partner elects to cause the Parent to assume and perform the Partnership’s redemption obligation with respect to such Class A Units under Section 8.6 by delivering to such holder Shares rather than cash, then such holder can have such Shares issued to him or her simultaneously with the conversion of his or her Vested LTIP Units into Class A Units. The General Partner and LTIP Unitholder shall reasonably cooperate with each other to coordinate the timing of the events described in the foregoing sentence.

C. Forced Conversion . The Partnership, at any time at the election of the General Partner, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be converted (a “ Forced Conversion ”) into an equal number of Class A Units, giving effect to all adjustments (if any) made pursuant to Section 4.6 ; provided, however, that the Partnership may not cause Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to Section 4.7.B . In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice (a “ Forced Conversion Notice ”) in the form attached as Exhibit G to this Agreement to the applicable LTIP Unitholder not less than ten nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 15.1 .

D. Completion of Conversion . A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of Class A Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Partnership shall deliver to such LTIP Unitholder, upon his or her written request, a certificate of the General Partner certifying the number of Class A Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The Assignee of any Limited Partner pursuant to Article XI may exercise the rights of such Limited Partner pursuant to this Section 4.7 and such Limited Partner shall be bound by the exercise of such rights by the Assignee.

E. Impact of Conversions for Purposes of Section 6.1.E . For purposes of making future allocations under Section 6.1.E and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Class A Unit Economic Balance.

F. Class A Unit Transactions . If the Partnership, the General Partner or the Parent shall be a party to any Class A Unit Transaction, as defined below (including without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all Class A Units or other business combination or reorganization, or sale of all or substantially all of the Partnership’s assets, but excluding any Class A Unit Transaction which constitutes an Adjustment Event) in each case as a result of which Class A Units shall be exchanged for or converted into the right, or the holders of such Class A Units shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (each of the foregoing being referred to herein as a “ Class A Unit Transaction ”), then the General Partner shall, immediately prior to the Class A Unit Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Class A Unit Transaction or that would occur in connection with the Class A Unit Transaction if the assets of the Partnership were sold at the Class A Unit Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the Class A Unit Transaction (in which case the Conversion Date shall be the effective date of the Class A Unit Transaction). In anticipation of such Forced Conversion and the consummation of the Class A Unit Transaction, the Partnership shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such Class A Unit Transaction in consideration for the Class A Units into which his or her LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Class A Unit Transaction by a holder of the same number of Class A Units, assuming such holder of Class A Units is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a “ Constituent Person ”), or an affiliate of a Constituent Person. In the event that holders of Class A Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Class A Unit Transaction, prior to such Class A Unit Transaction the General Partner shall give prompt written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Class A Units in connection with such Class A Unit Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held him or her (or by any of his or her transferees) the same kind and amount of consideration that a holder of a Class A Unit would receive if such Class A Unit holder failed to make such an election. Subject to the rights of the Partnership and the General Partner under any Vesting Agreement and any Equity Incentive Plan, the Partnership shall use commercially reasonable effort to cause the terms of any Class A Unit Transaction to be consistent with the provisions of this Section 4.7.F and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into Class A Units in connection with the Class A Unit Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such Class A Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Class A Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.

ARTICLE V

DISTRIBUTIONS

Section 5.1 Requirement and Characterization of Distributions

A. General . The General Partner may cause the Partnership to distribute at least quarterly all, or such portion as the General Partner may in its sole and absolute discretion determine, of the Available Cash of the Partnership with respect to such quarter or shorter period to the Partners in accordance with the terms established for the class or classes of Partnership Interests held by such Partners who are Partners on the respective Partnership Record Date with respect to such quarter or shorter period as provided in Sections 5.1.B , 5.1.C and 5.1.D and in accordance with the respective terms established for each class of Partnership Interest. Notwithstanding anything to the contrary contained herein, in no event may a Partner receive a distribution of Available Cash with respect to a Partnership Unit for a quarter or shorter period if such Partner is entitled to receive a distribution with respect to a Share for which such Partnership Unit has been redeemed or exchanged. Unless otherwise expressly provided for herein, or in the terms established for a new class or series of Partnership Interests created in accordance with Article IV hereof, no Partnership Interest shall be entitled to a distribution in preference to any other Partnership Interest. The General Partner shall make such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the qualification of the Parent as a REIT, to distribute Available Cash (a) to Limited Partners so as to preclude any such distribution or portion thereof from being treated as part of a sale of property to the Partnership by a Limited Partner under Section 707 of the Code or the Regulations thereunder; provided, however, that none of the General Partner, the Parent, and the Partnership shall have liability to a Limited Partner under any circumstances as a result of any distribution to a Limited Partner being so treated, and (b) to the Parent in an amount sufficient to enable the Parent to make distributions to its stockholders that will enable the Parent to (1) satisfy the requirements for qualification as a REIT under the Code and the Regulations (the “ REIT Requirements ”), and (2) avoid any U.S. federal income or excise tax liability.

B. Method . (i) Each holder of Partnership Interests that is entitled to any preference in distribution shall be entitled to a distribution in accordance with the rights of any such class of Partnership Interests (and, within such class, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date); and

(ii) To the extent there is Available Cash remaining after the payment of any preference in distribution in accordance with the foregoing clause (i), with respect to Partnership Interests that are not entitled to any preference in distribution or with respect to which distributions are not limited to any preference in distribution, such Available Cash shall be distributed pro rata to each such class in accordance with the terms of such class (and, within each such class, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date).

C. Distributions When Class B Units Are Outstanding . If for any quarter or shorter period with respect to which a distribution is to be made (a “ Distribution Period ”) Class B Units are outstanding on the Partnership Record Date for such Distribution Period, the General Partner shall allocate the Available Cash with respect to such Distribution Period available for distribution with respect to the Class A Units and Class B Units collectively between the Partners who are holders of Class A Units (“ Class A ”) and the Partners who are holders of Class B Units (“ Class B ”) as follows:

(1) Class A shall receive that portion of the Available Cash (the “ Class A Share ”) determined by multiplying the amount of Available Cash by the following fraction:


		A × Y
		(A × Y) + (B × X)

(2) Class B shall receive that portion of the Available Cash (the “ Class B Share ”) determined by multiplying the amount of Available Cash by the following fraction:


		B × X
		(A × Y) + (B × X)

(3) For purposes of the foregoing formulas, (i) “A” equals the number of Class A Units outstanding on the Partnership Record Date for such Distribution Period; (ii) “B” equals the number of Class B Units outstanding on the Partnership Record Date for such Distribution Period; (iii) “Y” equals the number of days in the Distribution Period; and (iv) “X” equals the number of days in the Distribution Period for which the Class B Units were issued and outstanding.

The Class A Share shall be distributed pro rata among Partners holding Class A Units on the Partnership Record Date for the Distribution Period in accordance with the number of Class A Units held by each Partner on such Partnership Record Date; provided, however, that in no event may a Partner receive a distribution of Available Cash with respect to a Class A Unit if a Partner is entitled to receive a distribution with respect to a Share for which such Class A Unit has been redeemed or exchanged. If Class B Units were issued on the same date, the Class B Share shall be distributed pro rata among the Partners holding Class B Units on the Partnership Record Date for the Distribution Period in accordance with the number of Class B Units held by each Partner on such Partnership Record Date. In no event shall any Class B Units be entitled to receive any distribution of Available Cash for any Distribution Period ending prior to the date on which such Class B Units are issued.

D. Distributions When Class B Units Have Been Issued on Different Dates . If Class B Units which have been issued on different dates are outstanding on the Partnership Record Date for any Distribution Period, then the Class B Units issued on each particular date shall be treated as a separate series of Partnership Units for purposes of making the allocation of Available Cash for such Distribution Period among the holders of Partnership Units (and the formula for making such allocation, and the definitions of variables used therein, shall be modified accordingly). Thus, for example, if two series of Class B Units are outstanding on the Partnership Record Date for any Distribution Period, the allocation formula for each series, “Series B1” and “Series B2” would be as follows:

(1) Series B1 shall receive that portion of the Available Cash determined by multiplying the amount of Available Cash by the following fraction:


		B1 × X1
		(A × Y) + (B1 × X1) + (B2 × X2)

(2) Series B2 shall receive that portion of the Available Cash determined by multiplying the amount of Available Cash by the following fraction:


		B2 × X2
		(A × Y) + (B1 × X1) + (B2 × X2)

(3) For purposes of the foregoing formulas the definitions set forth in Section 5.1.C(3) remain the same except that (i) “B1” equals the number of Partnership Units in Series B1 outstanding on the Partnership Record Date for such Distribution Period; (ii) “B2” equals the number of Partnership Units in Series B2 outstanding on the Partnership Record Date for such Distribution Period; (iii) “X1” equals the number of days in the Distribution Period for which the Partnership Units in Series B1 were issued and outstanding; and (iv) “X2” equals the number of days in the Distribution Period for which the Partnership Units in Series B2 were issued and outstanding.

E. Distributions With Respect to LTIP Units . In accordance with Section 4.6.A , LTIP Unitholders shall be entitled to receive distributions in an amount per LTIP Unit equal to the Class A Unit Distribution.

Section 5.2 Amounts Withheld

All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 with respect to any allocation, payment or distribution to the General Partner, the Limited Partners or Assignees shall be treated as amounts distributed to the General Partner, Limited Partners or Assignees, as the case may be, pursuant to Section 5.1 for all purposes under this Agreement.

Section 5.3 Distributions Upon Liquidation

Proceeds from a Liquidating Event shall be distributed to the Partners in accordance with Section 13.2 .

Section 5.4 Revisions to Reflect Issuance of Partnership Interests

If the Partnership issues Partnership Interests pursuant to Article IV , the General Partner shall make such revisions to this Article V and the Partner Registry in the books and records of the Partnership as it deems necessary to reflect the issuance of such additional Partnership Interests without the consent or approval of any other Partner.

ARTICLE VI

ALLOCATIONS

Section 6.1 Allocations for Capital Account Purposes

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Exhibit B ) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

A. Net Income . After giving effect to the special allocations set forth in Section 1 of Exhibit C , Net Income shall be allocated:

(1) first, to the General Partner until the cumulative Net Income allocated under this clause (1) equals the cumulative Net Losses allocated to the General Partner under Section 6.1.B(6) ;

(2) second, to each DRO Partner until the cumulative Net Income allocated such DRO Partner under this clause (2) equals the cumulative Net Losses allocated such DRO Partner under Section 6.1.B(5) (and among the DRO Partners, pro rata in proportion to their respective percentages of the cumulative Net Losses allocated to all DRO Partners pursuant to Section 6.1.B(5) );

(3) third, to the General Partner until the cumulative Net Income allocated under this clause (3) equals the cumulative Net Losses allocated the General Partner under Section 6.1.B(4) ;

(4) fourth, to the holders of any Partnership Interests that are entitled to any preference upon liquidation until the cumulative Net Income allocated under this clause (4) equals the cumulative Net Losses allocated to such Partners under Section 6.1.B(3) ;

(5) fifth, to the holders of any Partnership Interests that are entitled to any preference in distribution in accordance with the rights of any such class of Partnership Interests until each such Partnership Interest has been allocated, on a cumulative basis pursuant to this clause (5), Net Income equal to the amount of distributions payable that are attributable to the preference of such class of Partnership Interests whether or not paid (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); and

(6) finally, with respect to Partnership Interests that are not entitled to any preference in distribution or with respect to which distributions are not limited to any preference in distribution, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made).

B. Net Losses . After giving effect to the special allocations set forth in Section 1 of Exhibit C , Net Losses shall be allocated:

(1) first, to the holders of Partnership Interests, in proportion to, and to the extent that, their share of the Net Income previously allocated pursuant to Section 6.1.A(6) exceeds, on a cumulative basis, the sum of (a) distributions with respect to such Partnership Interests pursuant to clause (ii) of Section 5.1.B and (b) Net Losses allocated under this clause (1);

(2) second, with respect to classes of Partnership Interests that are not entitled to any preference in distribution upon liquidation, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); provided, however, that Net Losses shall not be allocated to any Partner pursuant to this Section 6.1.B(2) to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) (determined in each case (i) by not including in the Partners’ Adjusted Capital Accounts any amount that a Partner is obligated to contribute to the Partnership with respect to any deficit in its Capital Account pursuant to Section 13.3 and (ii) in the case of a Partner who also holds classes of Partnership Interests that are entitled to any preferences in distribution upon liquidation, by subtracting from such Partners’ Adjusted Capital Account the amount of such preferred distribution to be made upon liquidation) at the end of such taxable year (or portion thereof);

(3) third, with respect to classes of Partnership Interests that are entitled to any preference in distribution upon liquidation, in reverse order of the priorities of each such class (and within each such class, pro rata in proportion to their respective Percentage Interests as of the last day of the period for which such allocation is being made); provided, however, that Net Losses shall not be allocated to any Partner pursuant to this Section 6.1.B(3) to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) (determined in each case by not including in the Partners’ Adjusted Capital Accounts any amount that a Partner is obligated to contribute to the Partnership with respect to any deficit in its Capital Account pursuant to Section 13.3 ) at the end of such taxable year (or portion thereof);

(4) fourth, to the General Partner in an amount equal to the excess of (a) the amount of the Partnership’s Recourse Liabilities over (b) the Aggregate DRO Amount;

(5) fifth, to and among the DRO Partners, in proportion to their respective DRO Amounts, until such time as the DRO Partners as a group have been allocated cumulative Net Losses pursuant to this clause (5) equal to the Aggregate DRO Amount; and

(6) thereafter, to the General Partner.

C. Allocation of Nonrecourse Debt . For purposes of Regulation Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated by the General Partner by taking into account facts and circumstances relating to each Partner’s respective interest in the profits of the Partnership. For this purpose, the General Partner shall have the sole and absolute discretion in any Fiscal Year to allocate such excess Nonrecourse Liabilities among the Partners in any manner permitted under Code Section 752 and the Regulations thereunder.

D. Recapture Income . Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible after taking into account other required allocations of gain pursuant to Exhibit C , be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.

E. Special Allocations Regarding LTIP Units . Notwithstanding the provisions of Section 6.1.A , Liquidating Gains shall first be allocated to the LTIP Unitholders until their Economic Capital Account Balances, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Class A Unit Economic Balance, multiplied by (ii) the number of their LTIP Units. For this purpose, “ Liquidating Gains ” means net gains that are or would be realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain realized in connection with an adjustment to the value of Partnership assets under Section 704(b) of the Code made pursuant to Section 1.D of Exhibit B of the Partnership Agreement. The “ Economic Capital Account Balances ” of the LTIP Unitholders will be equal to their Capital Account balances to the extent attributable to their ownership of LTIP Units. Similarly, the “ Class A Unit Economic Balance ” shall mean (i) the Capital Account balance of the Parent, plus the amount of the Parent’s share of any Partner Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the Parent’s ownership of Class A Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 6.1.E , but prior to the realization of any Liquidating Gains, divided by (ii) the number of the Parent’s Class A Units. Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 6.1.E . The parties agree that the intent of this Section 6.1.E is to make the Capital Account balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with the Parent’s Class A Units (on a per-Unit basis), provided that Liquidating Gains are of a sufficient magnitude to do so upon a sale of all or substantially all of the assets of the Partnership, or upon an adjustment to the Partners’ Capital Accounts pursuant to Section 1.D of Exhibit B . To the extent the LTIP Unitholders receive a distribution in excess of their Capital Accounts, such distribution will be a guaranteed payment under Section 707(c) of the Code.

F. Special Allocations in Connection with a Liquidity Event . The Partners intend that the allocation of Net Profits, Net Losses and other items of income, gain, loss, deduction and credit required to be allocated to the Capital Accounts of the Partners pursuant to this Agreement will result in final Capital Account balances that will permit the amount each Partner is entitled to receive upon “liquidation” of the Partnership (within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations) to equal the amount such Partner would have received if such amount was distributable solely pursuant to the priorities set forth in Article V and Section 13.2.A(1) - (4) (and, for the avoidance of doubt, taking into account any applicable DRO Amounts). Accordingly, notwithstanding the provisions of Section 6.1.A , in the taxable year of the event precipitating a Liquidity Event and thereafter, appropriate adjustments to allocations of Net Profits and Net Losses to the Partners shall be made to achieve such result.

Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests or Certain DRO Obligations

A. Issuances of Partnership Interests . If the Partnership issues Partnership Interests pursuant to Article IV , the General Partner shall make such revisions to this Article VI and the Partner Registry in the books and records of the Partnership as it deems necessary to reflect the terms of the issuance of such Partnership Interests, including making preferential allocations to classes of Partnership Interests that are entitled thereto. Such revisions shall not require the consent or approval of any other Partner.

B. Certain DRO Obligations . If a DRO Partner has agreed and is obligated to restore the deficit balance in such Partner’s Capital Account upon the occurrence of certain events, and such obligation is inconsistent with the allocation of Net Losses that otherwise would apply to such Partner as a DRO Partner pursuant to this Article VI (for example, because the DRO Partner has agreed to bear Net Losses in a manner pari passu with the General Partner), the General Partner shall make such revisions to this Article VI as it deems necessary to reflect the terms of such obligation, including with respect to the order of allocation of Net Losses with respect to such Partner. Such revisions shall not require the consent or approval of any other Partner.

ARTICLE VII

MANAGEMENT AND OPERATIONS OF BUSINESS

Section 7.1 Management

A. Powers of General Partner . Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.11 , shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1 , including, without limitation:

(1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as are required under Section 5.1.A or will permit the Parent (so long as the Parent qualifies as a REIT) to avoid the payment of any U.S. federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its stockholders sufficient to permit the Parent to maintain its REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities including, without limitation, the assumption or guarantee of the debt of the Parent, its Subsidiaries or the Partnership’s Subsidiaries, the issuance of evidences of

indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets) and the incurring of any obligations the General Partner deems necessary for the conduct of the activities of the Partnership;

(2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;

(3) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership (including acquisition of any new assets, the exercise or grant of any conversion, option, privilege or subscription right or other right available in connection with any assets at any time held by the Partnership) or the merger or other combination of the Partnership or any Subsidiary of the Partnership with or into another entity on such terms as the General Partner deems proper;

(4) the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct of the operations of the Parent, the General Partner, the Partnership or any of the Partnership’s Subsidiaries, the lending of funds to other Persons (including, without limitation, the Parent, the General Partner and their Subsidiaries and the Partnership’s Subsidiaries) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which the Partnership has an equity investment and the making of capital contributions to its Subsidiaries;

(5) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;

(6) the negotiation, execution, and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;

(7) the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership;

(8) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;

(9) the holding, managing, investing and reinvesting of cash and other assets of the Partnership;

(10) the collection and receipt of revenues and income of the Partnership;

(11) the selection, designation of powers, authority and duties and the dismissal of employees of the Partnership (including, without limitation, employees having titles such as “president,” “vice president,” “secretary” and “treasurer”) and agents, outside attorneys, accountants, consultants and contractors of the Partnership and the determination of their compensation and other terms of employment or hiring;

(12) the maintenance of such insurance for the benefit of the Partnership and the Partners (including, without limitation, the Parent and the General Partner) as it deems necessary or appropriate;

(13) the formation of, or acquisition of an interest (including non-voting interests in entities controlled by Affiliates of the Partnership or third parties) in, and the contribution of property to, any further limited or general partnerships, joint ventures, limited liability companies or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of funds or property to, or making of loans to, its Subsidiaries and any other Person in which it has an equity investment from time to time, or the incurrence of indebtedness on behalf of such Persons or the guarantee of the obligations of such Persons); provided, however, that as long as the Parent has determined to qualify or continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the Parent to fail to qualify as a REIT;

(14) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution or abandonment of any claim, cause of action, liability, debt or damages due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

(15) the determination of the fair market value of any Partnership property distributed in kind, using such reasonable method of valuation as the General Partner may adopt;

(16) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any assets or investment held by the Partnership;

(17) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, individually or jointly with any such Subsidiary or other Person;

(18) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have any interest pursuant to contractual or other arrangements with such Person;

(19) the making, executing and delivering of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts,

guarantees, warranties, indemnities, waivers, releases or other legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;

(20) the distribution of cash to acquire Partnership Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.6 ;

(21) the determination regarding whether a payment to a Partner who exercises its Redemption Right under Section 8.6 that is assumed by the Parent will be paid in the form of the Cash Amount or the Shares Amount, except as such determination may be limited by Section 8.6 .

(22) the acquisition of Partnership Interests in exchange for cash, debt instruments and other property;

(23) the maintenance of the Partner Registry in the books and records of the Partnership to reflect the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of Partnership Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise; and

(24) the registration of any class of securities of the Partnership under the Securities Act or the Exchange Act, and the listing of any debt securities of the Partnership on any exchange.

B. No Approval by Limited Partners . Except as provided in Section 7.11 , each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement, the Act or any applicable law, rule or regulation, to the full extent permitted under the Act or other applicable law. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall be in the sole and absolute discretion of the General Partner without consideration of any other obligation or duty, fiduciary or otherwise, of the Partnership or the Limited Partners and shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity. The Limited Partners acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the stockholders of the Parent.

C. Insurance . At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership and its Subsidiaries, (ii) liability insurance for the Indemnitees hereunder, and (iii) such other insurance as the General Partner, in its sole and absolute discretion, determines to be necessary.

D. Working Capital and Other Reserves . At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time, including upon liquidation of the Partnership under Article XIII .

Section 7.2 Certificate of Limited Partnership

To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4) , the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and any other state, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property.

Section 7.3 Title to Partnership Assets

Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, in its sole and absolute discretion, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

Section 7.4 Reimbursement of the General Partner and the Parent

A. No Compensation . Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles V and VI regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not receive payments from the Partnership or otherwise be compensated for its services as the general partner of the Partnership.

B. Responsibility for Partnership and General Partner and Parent Expenses . The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s organization, the ownership of its assets and its operations. The Partnership shall also be responsible for the administrative and operating costs and expenses incurred by the General Partner and the Parent, including, but not limited to, all expenses relating to the General Partner’s and the Parent’s (i) continued existence and subsidiary operations, (ii) offerings and registration

of securities, (iii) preparation and filing of any periodic or other reports and communications required under federal, state or local laws and regulations, (iv) compliance with laws, rules and regulations promulgated by any regulatory body, and (v) operating or administrative costs incurred in the ordinary course of business on behalf of the Partnership; provided, however, that such costs and expenses shall not include any administrative or operating costs of the General Partner or the Parent attributable to assets owned by the General Partner or the Parent directly and not through the Partnership or its subsidiaries. The General Partner and the Parent, at the General Partner’s sole and absolute discretion, shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses the Parent or the General Partner incurs relating to or resulting from the ownership and operation of, or for the benefit of, the Partnership (including, without limitation, expenses related to the operations of the General Partner and the Parent and to the management and administration of any Subsidiaries of the General Partner, the Parent or the Partnership or Affiliates of the Partnership, such as auditing expenses and filing fees); provided, however, that (i) the amount of any such reimbursement shall be reduced by (x) any interest earned by the General Partner or the Parent with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership as permitted in Section 7.5.A (which interest is considered to belong to the Partnership and shall be paid over to the Partnership to the extent not applied to reimburse the General Partner or the Parent for expenses hereunder); and (y) any amount derived by the General Partner from any investments permitted in Section 7.5.A ; (ii) the Partnership shall not be responsible for any taxes that the General Partner or the Parent would not have been required to pay if the Parent qualified as a REIT for U.S. federal income tax purposes or any taxes imposed on the General Partner or the Parent by reason of the Parent’s failure to distribute to its stockholders an amount equal to its taxable income; (iii) the Partnership shall not be responsible for expenses or liabilities incurred by the General Partner in connection with any business or assets of the General Partner other than its ownership of Partnership Interests or operation of the business of the Partnership or ownership of interests in Qualified Assets to the extent permitted in Section 7.5.A ; and (iv) the Partnership shall not be responsible for any expenses or liabilities of the General Partner that are excluded from the scope of the indemnification provisions of Section 7.7.A by reason of the provisions of clause (i), (ii) or (iii) thereof. The General Partner shall determine in good faith the amount of expenses incurred by it or the Parent related to the ownership of Partnership Interests or operation of, or for the benefit of, the Partnership. If certain expenses are incurred that are related both to the ownership of Partnership Interests or operation of, or for the benefit of, the Partnership and to the ownership of other assets (other than Qualified Assets as permitted under Section 7.5.A ) or the operation of other businesses, such expenses will be allocated to the Partnership and such other entities (including the General Partner and the Parent) owning such other assets or businesses in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. Such reimbursements shall be in addition to any reimbursement to the General Partner and the Parent pursuant to Section 10.3.C and as a result of indemnification pursuant to Section 7.7 . All payments and reimbursements hereunder shall be characterized for U.S. federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner or the Parent.

C. Partnership Interest Issuance Expenses . The General Partner and the Parent shall also be reimbursed for all expenses they incur relating to any issuance of Partnership Interests, Shares, Debt of the Partnership, Funding Debt of the General Partner or the Parent or rights,

options, warrants or convertible or exchangeable securities pursuant to Article IV (including, without limitation, all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of which expenses are considered by the Partners to constitute expenses of, and for the benefit of, the Partnership.

D. Purchases of Shares by the Parent . If the Parent exercises its rights under the Charter to purchase Shares or otherwise elects or is required to purchase from its stockholders Shares in connection with a share repurchase or similar program or otherwise, or for the purpose of delivering such Shares to satisfy an obligation under any dividend reinvestment or equity purchase program adopted by the Parent, any employee equity purchase plan adopted by the Parent or any similar obligation or arrangement undertaken by the Parent in the future, the purchase price paid by the Parent for those Shares and any other expenses incurred by the Parent in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursable to the Parent, subject to the conditions that: (i) if those Shares subsequently are to be sold by the Parent, the Parent shall pay to the Partnership any proceeds received by the Parent for those Shares (provided, however, that a transfer of Shares for Partnership Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such Shares are required to be cancelled pursuant to applicable law or are not retransferred by the Parent within thirty (30) days after the purchase thereof, the General Partner shall cause the Partnership to cancel a number of Partnership Units (rounded to the nearest whole Partnership Unit) held by the Parent equal to the product attained by multiplying the number of those Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor.

E. Reimbursement not a Distribution . Except as set forth in the succeeding sentence, if and to the extent any reimbursement made pursuant to this Section 7.4 is determined for U.S. federal income tax purposes not to constitute a payment of expenses of the Partnership, the amount so determined shall constitute a guaranteed payment with respect to capital within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners and shall not be treated as a distribution for purposes of computing the Partners’ Capital Accounts. Amounts deemed paid by the Partnership to the General Partner in connection with redemption of Partnership Units pursuant to clause (ii) of subparagraph (D) above shall be treated as a distribution for purposes of computing the Partner’s Capital Accounts.

F. Funding for Certain Capital Transactions . In the event that the Parent shall undertake to acquire (whether by merger, consolidation, purchase or otherwise) the assets or equity interests of another Person and such acquisition shall require the payment of cash by the Parent (whether to such Person or to any other selling party or parties in such transaction or to one or more creditors, if any, of such Person or such selling party or parties), (i) the Partnership shall advance to the Parent the cash required to consummate such acquisition if, and to the extent that, such cash is not to be obtained by the Parent through an issuance of Shares described in Section 4.2 or pursuant to a transaction described in Section 7.5.B , (ii) the Parent shall, upon consummation of such acquisition, transfer to the Partnership (or cause to be transferred to the Partnership), in full and complete satisfaction of such advance and as required by Section 7.5 , the assets or equity interests of such Person acquired by the Parent in such acquisition (or equity interests in Persons owning all of such assets or equity interests), and (iii) pursuant to and in accordance with Section 4.2 and Section 7.5.B , the Partnership shall issue to the Parent, Partnership Interests and/or rights, options, warrants or convertible or exchangeable securities of

the Partnership having designations, preferences and other rights that are substantially the same as those of any additional Shares, other equity securities, New Securities and/or Convertible Funding Debt, as the case may be, issued by the Parent in connection with such acquisition (whether issued directly to participants in the acquisition transaction or to third parties in order to obtain cash to complete the acquisition). In addition to, and without limiting, the foregoing, in the event that the Parent engages in a transaction in which (x) the Parent (or a wholly owned direct or indirect Subsidiary of the Parent) merges with another entity (referred to as the “ Parent Entity ”) that is organized in the “UPREIT format” (i.e., where the Parent Entity holds substantially all of its assets and conducts substantially all of its operations through a partnership, limited liability company or other entity (referred to as an “ Operating Entity ”)) and the Parent survives such merger, (y) such Operating Entity merges with or is otherwise acquired by the Partnership in exchange in whole or in part for Partnership Interests, and (z) the Parent is required or elects to pay part of the consideration in connection with such merger involving the Parent Entity in the form of cash and part of the consideration in the form of Shares, the Partnership shall distribute to the Parent with respect to its existing Partnership Interest an amount of cash sufficient to complete such transaction and the General Partner shall cause the Partnership to cancel a number of Partnership Units (rounded to the nearest whole number) held by the Parent equal to the product attained by multiplying the number of additional Shares of the Parent that the Parent would have issued to the Parent Entity or the owners of the Parent Entity in such transaction if the entire consideration therefor were to have been paid in Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor.

Section 7.5 Outside Activities of the General Partner; Relationship of Shares to Partnership Units; Funding Debt

A. General . Without the Consent of the Outside Limited Partners, the General Partner shall not, directly or indirectly, enter into or conduct any business other than in connection with the ownership, acquisition and disposition of Partnership Interests and the management of the business of the Partnership and such activities as are incidental thereto. Without the Consent of the Outside Limited Partners, the assets of the General Partner shall be limited to Partnership Interests and permitted debt obligations of the Partnership (as contemplated by Section 7.5.F ); provided, however, that the General Partner shall be permitted to hold such bank accounts or similar instruments or accounts in its name as it deems necessary to carry out its responsibilities and purposes as contemplated under this Agreement and its organizational documents (provided that accounts held on behalf of the Partnership to permit the General Partner to carry out its responsibilities under this Agreement shall be considered to belong to the Partnership and the interest earned thereon shall, subject to Section 7.4.B , be applied for the benefit of the Partnership); and, provided further that, the General Partner shall be permitted to acquire Qualified Assets.

B. Repurchase of Shares and Other Securities . If the Parent exercises its rights under the Charter to purchase Shares or otherwise elects to purchase from the holders thereof Shares, other equity securities of the Parent, New Securities or Convertible Funding Debt, then the General Partner shall cause the Partnership to purchase from the Parent (i) in the case of a purchase of Shares, that number of Partnership Units of the appropriate class equal to the product obtained by multiplying the number of Shares purchased by the Parent times a fraction, the numerator of which is one and the denominator of which is the Conversion Factor, or (ii) in the case of the purchase of any other securities on the same terms and for the same aggregate price that the Parent purchased such securities.

C. Forfeiture of Shares . If the Partnership or the Parent acquires Shares as a result of the forfeiture of such Shares under a restricted or similar share, share bonus or similar share plan, then the General Partner shall cause the Partnership to cancel, without payment of any consideration to the Parent, that number of Partnership Units of the appropriate class equal to the number of Shares so acquired, and, if the Partnership acquired such Shares, it shall transfer such Shares to the Parent for cancellation.

D. Issuances of Shares and Other Securities . The Parent shall not grant, award or issue any additional Shares (other than Shares issued pursuant to Section 8.6 or pursuant to a dividend or distribution (including any stock split) of Shares to all of its stockholders that results in an adjustment to the Conversion Factor pursuant to clause (i), (ii) or (iii) of the definition thereof), other equity securities of the Parent, New Securities or Convertible Funding Debt unless (i) the General Partner shall cause, pursuant to Section 4.2.A , the Partnership to issue to the Parent, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially the same as those of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, and (ii) in exchange therefor, the Parent transfers or otherwise causes to be transferred to the Partnership, as an additional Capital Contribution, the proceeds (if any) from the grant, award, or issuance of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, or from the exercise of rights contained in such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be (or, in the case of an acquisition described in Section 7.4.F in which all or a portion of the cash required to consummate such acquisition is to be obtained by the Parent through an issuance of Shares described in Section 4.2 , the Parent complies with such Section 7.4.F ). Without limiting the foregoing, the Parent is expressly authorized to issue additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, for less than fair market value, and the General Partner is expressly authorized, pursuant to Section 4.2.A , to cause the Partnership to issue to the Parent corresponding Partnership Interests, (for example, and not by way of limitation, the issuance of Shares and corresponding Partnership Units pursuant to a stock purchase plan providing for purchases of Shares, either by employees or stockholders, at a discount from fair market value or pursuant to employee stock options that have an exercise price that is less than the fair market value of the Shares, either at the time of issuance or at the time of exercise) as long as (a) the General Partner concludes in good faith that such issuance is in the interests of the General Partner, the Parent and the Partnership and (b) the Parent transfers all proceeds from any such issuance or exercise to the Partnership as an additional Capital Contribution.

E. Equity Incentive Plan . If at any time or from time to time, the Parent sells or otherwise issues Shares pursuant to any Equity Incentive Plan, the Parent shall transfer or cause to be transferred the proceeds of the sale of such Shares, if any, to the Partnership as an additional Capital Contribution in exchange for an amount of additional Partnership Units equal to the number of Shares so sold divided by the Conversion Factor.

F. Funding Debt . The General Partner or the Parent or any wholly owned Subsidiary of either of them may incur a Funding Debt from a financial institution or other lender, including, without limitation, a Funding Debt that is convertible into Shares or otherwise constitutes a class of New Securities (“ Convertible Funding Debt ”), subject to the condition that the General Partner, the Parent or such Subsidiary, as the case may be, lend to the Partnership the net proceeds of such Funding Debt; provided, however, that Convertible Funding Debt shall be issued in accordance with the provisions of Section 7.5.D above; and, provided further that the General Partner, the Parent or such Subsidiary shall not be obligated to lend the net proceeds of any Funding Debt to the Partnership in a manner that would be inconsistent with the Parent’s ability to qualify or remain qualified as a REIT. If the General Partner, the Parent or such Subsidiary enters into any Funding Debt, the loan to the Partnership shall be on comparable terms and conditions, including interest rate, repayment schedule, costs and expenses and other financial terms, as are applicable with respect to or incurred in connection with such Funding Debt.

G. Capital Contributions of the Parent . The Capital Contributions by the Parent pursuant to Sections 7.5.D and 7.5.E will be deemed to equal the cash contributed by the General Partner plus (a) in the case of cash contributions funded by an offering of any equity interests in or other securities of the Parent, the offering costs attributable to the cash contributed to the Partnership to the extent not reimbursed pursuant to Section 7.4.C and (b) in the case of Partnership Units issued pursuant to Section 7.5.E , an amount equal to the difference between the Value of the Shares sold pursuant to any Equity Incentive Plan and the net proceeds of such sale.

H. Tax Loans . The General Partner or the Parent may in its sole and absolute discretion, cause the Partnership to make an interest free loan to the General Partner or the Parent, as applicable, provided that the proceeds of such loans are used to satisfy any tax liabilities of the General Partner or the Parent, as applicable.

Section 7.6 Transactions with Affiliates

A. Transactions with Certain Affiliates . Except as expressly permitted by this Agreement, with respect to any transaction with an Affiliate not negotiated on an arm’s-length basis, the Partnership shall not, directly or indirectly, sell, transfer or convey any property to, or purchase any property from, or borrow funds from, or lend funds to, any Partner or any Affiliate of the Partnership that is not also a Subsidiary of the Partnership, except pursuant to transactions that are determined in good faith by the General Partner to be on terms that are fair and reasonable and no less favorable to the Partnership than would be obtained from an unaffiliated third party.

B. Joint Ventures . The Partnership may transfer assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner, in its sole and absolute discretion, believes to be advisable.

C. Services Agreement . The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, any management, shared-services, development or advisory agreement with a property and/or asset manager (including an Affiliate of the Partnership, the Parent or the General Partner) for the provision of property management, asset management, leasing, development and/or similar services with respect to the Partnership properties and any agreement for the provision of services of accountants, legal counsel, appraisers, insurers, brokers, transfer agents, registrars, developers, financial advisors and other professional and administrative services with an Affiliate of any of the Partnership, the Parent or the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

D. Conflict Avoidance . The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a non-competition arrangement and other conflict avoidance agreements with various Affiliates of the Partnership, the Parent and General Partner on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

E. Benefit Plans Sponsored by the Partnership . The General Partner in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Parent, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them.

Section 7.7 Indemnification

A. General . The Partnership shall indemnify each Indemnitee to the fullest extent provided by the Act from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys fees and other legal fees and expenses), judgments, fines, settlements and other amounts, arising from or in connection with any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, incurred by the Indemnitee and relating to the Partnership or the General Partner or the Parent or the operation of, or the ownership of property by, the Indemnitee, Partnership or the General Partner or the Parent as set forth in this Agreement in which any such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established by a final determination of a court of competent jurisdiction that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guarantee, contractual obligation for any indebtedness or other obligation or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the

requisite standard of conduct set forth in this Section 7.7.A . The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and any insurance proceeds from the liability policy covering the General Partner and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the Partnership to fund its obligations under this Section 7.7 .

B. Reimbursement of Expenses . Reasonable expenses expected to be incurred by an Indemnitee shall be paid or reimbursed by the Partnership in advance of the final disposition of any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative made or threatened against an Indemnitee upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in Section 7.7.A has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

C. No Limitation of Rights . The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitee is indemnified.

D. Insurance . The Partnership may purchase and maintain insurance on behalf of the Indemnitees and such other Persons as the General Partner shall determine against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Indemnitee or Person against such liability under the provisions of this Agreement.

E. No Personal Liability for Partners . In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

F. Interested Transactions . An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

G. Benefit . The provisions of this Section 7.7 are for the benefit of the Indemnitees, their employees, officers, directors, trustees, heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 , or any provision hereof, shall be prospective only and shall not in any way affect the limitation on the Partnership’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or related to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

H. Indemnification Payments Not Distributions . If and to the extent any payments to the General Partner pursuant to this Section 7.7 constitute gross income to the General Partner (as opposed to the repayment of advances made on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.

I. Exception to Indemnification . Notwithstanding anything to the contrary in this Agreement, the General Partner shall not be entitled to indemnification hereunder for any loss, claim, damage, liability or expense for which the General Partner is obligated to indemnify the Partnership under any other agreement between the General Partner and the Partnership.

Section 7.8 Liability of the General Partner

A. General . Notwithstanding anything to the contrary set forth in this Agreement, the General Partner (which for the purposes of this Section 7.8 shall include the directors and officers of the General Partner and the Parent) shall not be liable for monetary or other damages to the Partnership, any Partners or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission unless the General Partner acted in bad faith and the act or omission was material to the matter giving rise to the loss, liability or benefit not derived.

B. Obligation to Consider Interests of Parent . The Limited Partners expressly acknowledge that the General Partner, in considering whether to dispose of any of the Partnership assets, shall take into account the tax consequences to the Parent of any such disposition and shall have no liability whatsoever to the Partnership or any Limited Partner for decisions that are based upon or influenced by such tax consequences.

C. No Obligation to Consider Separate Interests of Limited Partners . The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, the Limited Partners and the Parent’s stockholders, and that, except as set forth herein, the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or Assignees) in deciding whether to cause the Partnership to take (or decline to take) any actions, and that the General Partner shall not be liable for monetary or other damages for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with any decisions or actions made or taken or declined to be made or taken, provided that the General Partner has acted pursuant to its authority under this Agreement. Any decisions or actions not taken by the General Partner in accordance with the terms of this Agreement shall not constitute a breach of any duty owed to the Partnership or the Limited Partners by law or equity, fiduciary or otherwise. In the event of a conflict between the interests of the Limited Partners and the stockholders of the Parent, the General Partner shall act in the interests of the Parent’s stockholders, and neither the Parent nor the General Partner shall be liable for monetary or other losses sustained, liabilities incurred or benefits not derived by the Limited Partners in connection therewith.

D. Actions of Agents . Subject to its obligations and duties as General Partner set forth in Section 7.1.A , the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.

E. Effect of Amendment . Notwithstanding any other provision contained herein, any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

F. Limitations of Fiduciary Duty . Sections 7.1.B , Section 7.7.E and this Section 7.8 and any other Section of this Agreement limiting the liability of the General Partner and/or the directors and officers of the Parent shall constitute an express limitation of any duties, fiduciary or otherwise, that they would owe the Partnership or the Limited Partners if such duty would be imposed by any law, in equity or otherwise.

Section 7.9 Other Matters Concerning the General Partner

A. Reliance on Documents . The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.

B. Reliance on Advisors . The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

C. Action Through Agents . The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty that is permitted or required to be done by the General Partner hereunder.

D. Actions to Maintain REIT Status or Avoid Taxation of the Parent . Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership undertaken in the good faith belief that such action or omission is

necessary or advisable in order (i) to protect the ability of the Parent to qualify as a REIT or (ii) to allow the Parent to avoid incurring any liability for taxes under Sections 857 or 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

Section 7.10 Reliance by Third Parties

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership, to enter into any contracts on behalf of the Partnership and to take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing, in each case except to the extent that such action imposes, or purports to impose, liability on the Limited Partner. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

Section 7.11 Restrictions on General Partner’s Authority

The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of (i) all Partners adversely affected or (ii) such lower percentage of the Partnership Interests held by Limited Partners as may be specifically provided for under a provision of this Agreement or the Act. The preceding sentence shall not apply to any limitation or prohibition in this Agreement that expressly authorizes the General Partner to take action (either in its discretion or in specified circumstances) so long as the General Partner acts within the scope of such authority.

Section 7.12 Loans by Third Parties

The Partnership may incur Debt, or enter into similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any acquisition of property and any borrowings from, or guarantees of Debt of the General Partner or any of its Affiliates) with any Person upon such terms as the General Partner determines appropriate.

ARTICLE VIII

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Section 8.1 Limitation of Liability

The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.5 , or under the Act.

Section 8.2 Management of Business

No Limited Partner or Assignee (other than the General Partner, the Parent, any of their Affiliates, or any officer, director, employee, partner, agent or trustee of the General Partner, the Parent, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control (within the meaning of the Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, the Parent, any of their Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Parent, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.

Section 8.3 Outside Activities of Limited Partners

Subject to Section 7.5 , and subject to any agreements entered into pursuant to Section 7.6.B and to any other agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership, the Parent or a Subsidiary, any Limited Partner (other than the Parent) and any officer, director, employee, agent, trustee, Affiliate or stockholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct or indirect competition with the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. None of the Limited Partners (other than the Parent) or any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than the General Partner or the Parent to the extent expressly provided herein), and no Person (other than the General Partner and the Parent) shall have any obligation pursuant to this Agreement to offer any interest in any such business venture to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.

Section 8.4 Return of Capital

Except pursuant to the right of redemption set forth in Section 8.6 , no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. No Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions (except as permitted by Section 4.2.A )

or, except to the extent provided by Exhibit C or as permitted by Sections 4.2.A , 5.1.B(i) , 6.1.A and 6.1.B , or otherwise expressly provided in this Agreement, as to profits, losses, distributions or credits.

Section 8.5 Rights of Limited Partners Relating to the Partnership

A. General . In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.D , each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s own expense:

(1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by either the Parent or the Partnership, if any, pursuant to the Exchange Act;

(2) to obtain a copy of the Partnership’s U.S. federal, state and local income tax returns for each Fiscal Year;

(3) to obtain a current list of the name and last known business, residence or mailing address of each Partner;

(4) to obtain a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed;

(5) to obtain true and full information regarding the amount of cash and a description and statement of the Agreed Value of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each Partner became a Partner; and

(6) other information regarding the affairs of the Partnership as is just and reasonable.

B. Notice of Conversion Factor . The Partnership shall notify each Limited Partner upon request (i) of the then current Conversion Factor and (ii) of any changes to the Conversion Factor.

C. Notice of Extraordinary Transaction of the Parent . The Parent shall not make any extraordinary distributions of cash or property to its stockholders or effect a merger (including, without limitation, a triangular merger), consolidation or other combination with or into another Person, a sale of all or substantially all of its assets or any other similar extraordinary transaction without providing written notice to the Limited Partners of its intention to make such distribution or effect such merger, consolidation, combination, sale or other extraordinary transaction at least twenty (20) Business Days prior to the record date to determine stockholders eligible to receive such distribution or to vote upon the approval of such merger, sale or other extraordinary transaction (or, if no such record date is applicable, at least twenty (20) Business Days before

consummation of such merger, sale or other extraordinary transaction), which notice shall describe in reasonable detail the action to be taken; provided, however, that the General Partner, in its sole and absolute discretion, may shorten the required notice period of not less than twenty (20) Business Days prior to the record date to determine the stockholders eligible to vote upon a merger transaction (but not any of the other transactions covered by this Section 8.5.C. ) to a period of not less than ten (10) calendar days (thereby continuing to afford the holders of Partnership Units the opportunity to redeem Partnership Units under Section 8.6 on or prior to the record date for the stockholder vote on the merger transaction) so long as (i) (A) the Parent will be the surviving entity in such merger transaction, (B) immediately following the merger transaction, Persons who held voting securities of the Parent immediately prior to such merger transaction will hold, solely by reason of the ownership of voting securities of the Parent immediately prior to the merger transaction, voting securities of the Parent representing not less than fifty-one percent (51%) of the total combined voting power of all outstanding voting securities of the Parent after such merger, and (C) in the event that in connection with such merger transaction the Partnership will merge with another entity, the Partnership will be the surviving entity in such merger, or (ii) the Parent otherwise determines that it is in the best interests of the Parent to shorten such required notice period to a period of not less ten (10) calendar days. This provision for such notice shall not be deemed (i) to permit any transaction that otherwise is prohibited by this Agreement or requires a Consent of the Partners or (ii) to require a Consent on the part of any one or more of the Limited Partners to a transaction that does not otherwise require Consent under this Agreement. Each Limited Partner agrees, as a condition to the receipt of the notice pursuant hereto, to keep confidential the information set forth therein until such time as the Parent has made public disclosure thereof and to use such information during such period of confidentiality solely for purposes of determining whether to exercise the Redemption Right; provided, however, that a Limited Partner may disclose such information to its attorney, accountant and/or financial advisor for purposes of obtaining advice with respect to such exercise so long as such attorney, accountant and/or financial advisor agrees to receive and hold such information subject to this confidentiality requirement.

D. Confidentiality . Notwithstanding any other provision of this Section 8.5 , the General Partner and the Parent may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business or (ii) the Partnership or the Parent is required by law or by agreements with unaffiliated third parties to keep confidential, provided, however, that this Section 8.5.D shall not affect the notice requirements set forth in Section 8.5.C above.

Section 8.6 Redemption Right

A. General . (i) Subject to Section 8.6.C and Section 11.6.E , at any time on or after one (1) year following the date of the initial issuance thereof (which, in the event of the transfer of a Class A Unit or Class B Unit, shall be deemed to be the date that the Class A Unit or such Class B Unit, as the case may be, was issued to the original recipient thereof for purposes of this Section 8.6 ), the holder of a Class A Unit (if other than the Parent or any Subsidiary of the Parent), including any LTIP Units that are converted into Class A Units, shall have the right (the

“ Redemption Right ”) to require the Partnership to redeem such Class A Unit, with such redemption to occur on the Specified Redemption Date and at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership. Any such Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the holder of the Partnership Units who is exercising the Redemption Right (the “ Redeeming Partner ”). A Limited Partner may exercise the Redemption Right from time to time, without limitation as to frequency, with respect to part or all of the Partnership Units that it owns, as selected by the Limited Partner, provided, however, that a Limited Partner may not exercise the Redemption Right for fewer than one thousand (1,000) Partnership Units of a particular class unless such Redeeming Partner then holds fewer than one thousand (1,000) Partnership Units in that class, in which event the Redeeming Partner must exercise the Redemption Right for all of the Partnership Units held by such Redeeming Partner in that class, and provided further that, with respect to a Limited Partner which is an entity, such Limited Partner may exercise the Redemption Right for fewer than one thousand (1,000) Partnership Units without regard to whether or not such Limited Partner is exercising the Redemption Right for all of the Partnership Units held by such Limited Partner as long as such Limited Partner is exercising the Redemption Right on behalf of one or more of its equity owners in respect of one hundred percent (100%) of such equity owners’ interests in such Limited Partner. For purposes hereof, a Class A Unit issued upon conversion of a Class B Unit shall be deemed to have been issued when the Class B Unit was issued.

(ii) The Redeeming Partner shall have no right with respect to any Partnership Units so redeemed to receive any distributions paid in respect of a Partnership Record Date for distributions in respect of Partnership Units after the Specified Redemption Date with respect to such Partnership Units.

(iii) The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.6 , and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Limited Partner’s Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner.

(iv) If the Parent provides notice to the Limited Partners, pursuant to Section 8.5.C , the Redemption Right shall be exercisable, without regard to whether the Partnership Units have been outstanding for any specified period, during the period commencing on the date on which the Parent provides such notice and ending on the record date to determine stockholders eligible to receive such distribution or to vote upon the approval of such merger, sale or other extraordinary transaction (or, if no such record date is applicable, at least twenty (20) Business Days before the consummation of such merger, sale or other extraordinary transaction). If this subparagraph (iv) applies, the Specified Redemption Date is the date on which the Partnership and the General Partner receive notice of exercise of the Redemption Right, rather than ten (10) Business Days after receipt of the Notice of Redemption.

B. Parent Assumption of Redemption Right . (i) If a Limited Partner has delivered a Notice of Redemption, the General Partner may, in its sole and absolute discretion (subject to the limitations on ownership and transfer of Shares set forth in the Charter), elect to cause the Parent

to assume directly and satisfy a Redemption Right. If such election is made by the General Partner, the Partnership shall determine whether the Parent shall pay the Redemption Amount in the form of the Cash Amount or the Shares Amount. The Partnership’s decision regarding whether such payment shall be made in the form of the Cash Amount or the Shares Amount shall be made by the General Partner, in its capacity as the general partner of the Partnership and in its sole and absolute discretion. Upon such payment by the Parent, the Parent shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. Unless the General Partner, in its sole and absolute discretion, shall exercise its right to cause the Parent to assume directly and satisfy the Redemption Right, the Parent shall not have any obligation to the Redeeming Partner or to the Partnership with respect to the Redeeming Partner’s exercise of the Redemption Right. If the General Partner shall exercise its right to cause the Parent to assume directly and satisfy the Redemption Right in the manner described in the first sentence of this Section 8.6.B and the Parent shall fully perform its obligations in connection therewith, the Partnership shall have no right or obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner’s exercise of the Redemption Right, and each of the Redeeming Partner, the Partnership and the Parent shall, for U.S. federal income tax purposes, treat the transaction between the Parent and the Redeeming Partner as a sale of the Redeeming Partner’s Partnership Units to the Parent. Nothing contained in this Section 8.6.B shall imply any right of the General Partner to require any Limited Partner to exercise the Redemption Right afforded to such Limited Partner pursuant to Section 8.6.A .

(ii) If the General Partner determines that the Parent shall pay the Redeeming Partner the Redemption Amount in the form of Shares, the total number of Shares to be paid to the Redeeming Partner in exchange for the Redeeming Partner’s Partnership Units shall be the applicable Shares Amount. If this amount is not a whole number of Shares, the Redeeming Partner shall be paid (i) that number of Shares which equals the nearest whole number less than such amount plus (ii) an amount of cash which the General Partner determines, in its reasonable discretion, to represent the fair value of the remaining fractional Share which would otherwise be payable to the Redeeming Partner.

(iii) Each Redeeming Partner agrees to execute such documents or provide such information or materials as the Parent may reasonably require in connection with the issuance of Shares upon exercise of the Redemption Right.

C. Exceptions to Exercise of Redemption Right . Notwithstanding the provisions of Sections 8.6.A and 8.6.B , a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as) the delivery of Shares to such Partner on the Specified Redemption Date would (i) be prohibited under the restrictions on the ownership or transfer of Shares in the Charter, (ii) be prohibited under applicable federal or state securities laws or regulations (in each case regardless of whether the Parent would in fact assume and satisfy the Redemption Right), (iii) without limiting the foregoing, result in the Shares being owned by fewer than 100 persons (determined without reference to rules of attribution), (iv) without limiting the foregoing, result in the Parent being “closely held” within the meaning of Section 856(h) of the Code or cause the Parent to own, actually or constructively, ten percent (10%) or more of the ownership interests in a tenant of the Parent, the Partnership or a Subsidiary of the Partnership’s real property within the meaning of Section 856(d)(2)(B) of the

Code, and (v) without limiting the foregoing, cause the acquisition of the Shares by the Redeeming Partner to be “integrated” with any other distribution of Shares for purposes of complying with the registration provision of the Securities Act, as amended. Notwithstanding the foregoing, the Parent may, in its sole and absolute discretion, waive such prohibition set forth in this Section 8.6.C .

D. No Liens on Partnership Units Delivered for Redemption . Each Limited Partner covenants and agrees that all Partnership Units delivered for redemption shall be delivered to the Partnership or the Parent, as the case may be, free and clear of all liens; and, notwithstanding anything contained herein to the contrary, neither the Parent nor the Partnership shall be under any obligation to acquire Partnership Units which are or may be subject to any liens. Each Limited Partner further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Partnership Units to the Partnership or the Parent, such Limited Partner shall assume and pay such transfer tax.

E. Additional Partnership Interests; Modification of Holding Period . If the Partnership issues Partnership Interests to any Additional Limited Partner pursuant to Article IV , the General Partner shall make such revisions to this Section 8.6 as it determines are necessary to reflect the issuance of such Partnership Interests (including setting forth any restrictions on the exercise of the Redemption Right with respect to such Partnership Interests which differ from those set forth in this Agreement), provided, however, that no such revisions shall materially adversely affect the rights of any other Limited Partner to exercise its Redemption Right without that Limited Partner’s prior written consent. In addition, the General Partner may, with respect to any holder or holders of Partnership Units, at any time and from time to time, as it shall determine in its sole and absolute discretion, (i) reduce or waive the length of the period prior to which such holder or holders may not exercise the Redemption Right or (ii) reduce or waive the length of the period between the exercise of the Redemption Right and the Specified Redemption Date.

ARTICLE IX

BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1 Records and Accounting

The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3 . Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided, however, that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles.

Section 9.2 Fiscal Year

The fiscal year of the Partnership shall be the calendar year.

Section 9.3 Reports

A. Annual Reports . As soon as practicable, but in no event later than the date on which the Parent mails its annual report to its stockholders, the General Partner shall cause to be mailed to each Limited Partner an annual report, as of the close of the most recently ended Fiscal Year, containing financial statements of the Partnership, or of the Parent if such statements are prepared on a consolidated basis with the Partnership, for such Fiscal Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the Parent.

B. Quarterly Reports . If and to the extent that the Parent mails quarterly reports to its stockholders, as soon as practicable, but in no event later than the date on which such reports are mailed, the General Partner shall cause to be mailed to each Limited Partner a report containing unaudited financial statements, as of the last day of such fiscal quarter, of the Partnership, or of the Parent if such statements are prepared on a consolidated basis with the Partnership, and such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate.

C. The General Partner shall have satisfied its obligations under Section 9.3.A and Section 9.3.B by posting or making available the reports required by this Section 9.3 on the website maintained from time to time by the Partnership or the Parent, provided that such reports are able to be printed or downloaded from such website.

ARTICLE X

TAX MATTERS

Section 10.1 Preparation of Tax Returns

The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for U.S. federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Limited Partners for U.S. federal and state income tax reporting purposes.

Section 10.2 Tax Elections

A. Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code (including the election under Section 754 of the Code). The General Partner shall have the right to seek to revoke any such election upon the General Partner’s determination in its sole and absolute discretion that such revocation is in the best interests of the Partners.

B. Without limiting the foregoing, the Partners, intending to be legally bound, hereby authorize the General Partner, on behalf of the Partnership, to make an election (the “ LV Safe Harbor Election ”) to have the “liquidation value” safe harbor provided in Proposed Treasury Regulation § 1.83-3(l) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the “ LV Safe Harbor ”), apply to any interest in the Partnership transferred to a service provider while the LV Safe Harbor Election remains effective, to the extent such interest meets the LV Safe Harbor requirements (collectively, such interests are referred to as “ LV Safe Harbor Interests ”). The tax matters partner is authorized and directed to execute and file the LV Safe Harbor Election on behalf of the Partnership and the Partners. The Partnership and the Partners (including any person to whom an interest in the Partnership is transferred in connection with the performance of services) hereby agree to comply with all requirements of the LV Safe Harbor (including forfeiture allocations) with respect to all LV Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of LV Safe Harbor Interests consistent with such final LV Safe Harbor guidance. The Partnership is also authorized to take such actions as are necessary to achieve, under the LV Safe Harbor, the effect that the election and compliance with all requirements of the LV Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation § 1.83-3, including amending this Agreement.

Section 10.3 Tax Matters Partner

A. General . The General Partner shall be the “tax matters partner” of the Partnership for U.S. federal income tax purposes. Pursuant to Section 6223(c)(3) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address, taxpayer identification number and profit interest of each of the Limited Partners and any Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners.

B. Powers . The tax matters partner is authorized, but not required:

(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a “notice partner” (as defined in Section 6231(a)(8) of the Code) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code);

(2) if a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “ final adjustment ”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;

(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;

(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

(5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item;

(6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding, to the extent permitted by applicable law or regulations; and

(7) to take any other action required by the Code and Regulations in connection with its role as tax matters partner.

The taking of any action and the incurring of any expense by the tax matters partner in connection with any such audit or proceeding referred to in clause (6) above, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the tax matters partner in its capacity as such.

C. Reimbursement . The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm and/or law firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.

Section 10.4 Organizational Expenses

The Partnership shall elect to deduct expenses as provided in Section 709 of the Code.

Section 10.5 Withholding

Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of U.S. federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable, allocable or otherwise transferred to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445, 1446 or 1471-1474, inclusive, of the Code and the Regulations thereunder. Any amount paid on behalf of or with respect to a Limited Partner (other than amounts actually withheld from payments to a Limited Partner) shall

constitute a loan by the Partnership, to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed or otherwise paid to such Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner’s Partnership Interest to secure such Limited Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5 . If a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner (including, without limitation, the right to receive distributions). Any amounts payable by a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, plus four (4) percentage points (but not higher than the maximum rate that may be charged under law) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request to perfect or enforce the security interest created hereunder.

ARTICLE XI

TRANSFERS AND WITHDRAWALS

Section 11.1 Transfer

A. Definition . The term “transfer,” when used in this Article XI with respect to a Partnership Interest or a Partnership Unit, shall be deemed to refer to a transaction by which the General Partner purports to assign all or any part of its General Partner Interest to another Person or by which a Limited Partner purports to assign all or any part of its Limited Partner Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term “transfer” when used in this Article XI does not include any redemption or repurchase of Partnership Units by the Partnership from a Partner or acquisition of Partnership Units from a Limited Partner by the Parent pursuant to Section 8.6 or otherwise. No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.

B. General . No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI . Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void.

Section 11.2 Transfers of Partnership Interests of General Partner

A. General . Other than to an Affiliate of the Parent, the General Partner may not transfer any of its Partnership Interests except in connection with (i) a transaction permitted under Section 11.2.B , (ii) a Transfer to any wholly owned Subsidiary of the General Partner or the owner of all of the ownership interests of the General Partner, or (iii) as otherwise expressly permitted under this Agreement, nor shall the General Partner withdraw as General Partner except in connection with a transaction permitted under Section 11.2.B or any Transfer, merger, consolidation, or other combination permitted under clause (ii) of this Section 11.2.A .

B. Termination Transactions . Neither the General Partner nor the Parent shall engage in any merger (including, without limitation, a triangular merger), consolidation or other combination with or into another Person (other than any transaction permitted by Section 11.2.A ), any sale of all or substantially all of its assets or any reclassification, recapitalization or change of outstanding Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination as described in the definition of “ Conversion Factor ”) (a “ Termination Transaction ”), unless:

(i) the Consent of the Outside Limited Partners is obtained;

(ii) following such Termination Transaction, substantially all of the assets directly or indirectly owned by the surviving entity are owned directly or indirectly by the Partnership or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with the Partnership; or

(iii) in connection with such Termination Transaction all Partners either will receive, or will have the right to receive, for each Partnership Unit an amount of cash, securities, or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid to a holder of Shares, if any, corresponding to such Unit in consideration of one such Share at any time during the period from and after the date on which the Termination Transaction is consummated; provided, however, that, if in connection with the Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of the percentage required for the approval of mergers under the organizational documents of the Parent, each holder of Partnership Units shall receive, or shall have the right to receive without any right of Consent set forth above in this Section 11.2.B , the greatest amount of cash, securities, or other property which such holder would have received had it exercised the Redemption Right and received Shares in exchange for its Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer.

C. Creation of New General Partner . The General Partner shall not enter into an agreement or other arrangement providing for or facilitating the creation of a General Partner other than the General Partner, unless the successor General Partner executes and delivers a counterpart to this Agreement in which such General Partner agrees to be fully bound by all of the terms and conditions contained herein that are applicable to a General Partner.

Section 11.3 Limited Partners’ Rights to Transfer

A. General . Except to the extent expressly permitted in Sections 11.3.B and 11.3.C or in connection with the exercise of a Redemption Right pursuant to Section 8.6 , a Limited Partner may not transfer all or portion of its Partnership Interest, or any of such Limited Partner’s rights as a Limited Partner, without the prior written consent of the General Partner, which consent may be withheld in the General Partner’s sole and absolute discretion. Any transfer otherwise permitted under Sections 11.3.B and 11.3.C shall be subject to the conditions set forth in Section 11.3.D and 11.3.E , and all permitted transfers shall be subject to Section 11.5 and Section 11.6 .

B. Incapacitated Limited Partner . If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner’s estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partner, for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.

C. Permitted Transfers . A Limited Partner may transfer, with or without the consent of the General Partner, all or a portion of its Partnership Interest (i) in the case of a Limited Partner who is an individual, to a member of his or her Immediate Family, any trust formed for the benefit of himself or herself and/or members of his or her Immediate Family, or any partnership, limited liability company, joint venture, corporation or other business entity comprised only of himself or herself and/or members of his or her Immediate Family and entities the ownership interests in which are owned by or for the benefit of himself or herself and/or members of his or her Immediate Family, (ii) in the case of a Limited Partner which is a trust, to the beneficiaries of such trust, (iii) in the case of a Limited Partner which is a partnership, limited liability company, joint venture, corporation or other business entity to which Units were transferred pursuant to clause (i) above, to its partners, owners or stockholders, as the case may be, who are members of the Immediate Family of or are actually the Person(s) who transferred Partnership Units to it pursuant to clause (i) above, (iv) in the case of a Limited Partner which acquired Partnership Units as of the date hereof and which is a partnership, limited liability company, joint venture, corporation or other business entity, to its partners, owners, stockholders or Affiliates thereof, as the case may be, or the Persons owning the beneficial interests in any of its partners, owners or stockholders or Affiliates thereof (it being understood that this clause (iv) will apply to all of each Person’s Interests whether the Partnership Units relating thereto were acquired on the date hereof or hereafter), (v) in the case of a Limited Partner which is a partnership, limited liability company, joint venture, corporation or other business entity other than any of the foregoing described in clause (iii) or (iv), in accordance with the terms of any agreement between such Limited Partner and the Partnership pursuant to which such Partnership Interest was issued, (vi) pursuant to a gift or other transfer without consideration, (vii) pursuant to applicable laws of descent or distribution, (viii) to another Limited Partner and (ix) pursuant to a grant of security interest or other encumbrance effectuated in a bona fide transaction or as a result of the exercise of remedies related thereto, subject to the provisions of Section 11.3.E hereof. A trust or other entity will be considered formed “for the benefit” of a Partner’s Immediate Family even though some other Person has a remainder interest under or with respect to such trust or other entity.

D. No Transfers Violating Securities Laws . The General Partner may prohibit any transfer of Partnership Units by a Limited Partner unless it receives a written opinion of legal counsel (which opinion and counsel shall be reasonably satisfactory to the Partnership) to such Limited Partner to the effect that such transfer would not require filing of a registration statement under the Securities Act or would not otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Unit or, at the option of the Partnership, an opinion of legal counsel to the Partnership to the same effect.

E. No Transfers to Holders of Nonrecourse Liabilities . No pledge or transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan otherwise constitutes a Nonrecourse Liability unless (i) the General Partner is provided prior written notice thereof and (ii) the lender enters into an arrangement with the Partnership and the General Partner to exchange or redeem for the Redemption Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

Section 11.4 Substituted Limited Partners

A. Consent of General Partner . No Limited Partner shall have the right to substitute a transferee as a Limited Partner in its place. The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership, the General Partner or any Partner. The General Partner hereby grants its consent to the admission as a Substituted Limited Partner to any bona fide financial institution that loans money or otherwise extends credit to a holder of Partnership Units and thereafter becomes the owner of such Partnership Units pursuant to the exercise by such financial institution of its rights under a pledge of such Partnership Units granted in connection with such loan or extension of credit.

B. Rights of Substituted Partner . A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article XI shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be conditioned upon the transferee executing and delivering to the Partnership an acceptance of all the terms and conditions of this Agreement (including, without limitation, the provisions of Section 15.11 ) and such other documents or instruments as may be required to effect the admission.

C. Partner Registry . Upon the admission of a Substituted Limited Partner, the General Partner shall update the Partner Registry in the books and records of the Partnership as it deems necessary to reflect such admission in the Partner Registry.

Section 11.5 Assignees

If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4 , such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses, gain, loss and Recapture Income attributable to the Partnership Units assigned to such transferee, and shall have the rights granted to the Limited Partners under Section 8.6 , but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Units in any matter presented to the Limited Partners for a vote (such Partnership Units being deemed to have been voted on such matter in the same proportion as all other Partnership Units held by Limited Partners are voted). If any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article XI to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units.

Section 11.6 General Provisions

A. Withdrawal of Limited Partner . No Limited Partner may withdraw from the Partnership other than as a result of a permitted transfer of all of such Limited Partner’s Partnership Units in accordance with this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6 .

B. Termination of Status as Limited Partner . Any Limited Partner who shall transfer all of its Partnership Units in a transfer permitted pursuant to this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6 shall cease to be a Limited Partner.

C. Timing of Transfers . Transfers pursuant to this Article XI may only be made upon three (3) Business Days prior notice to the General Partner, unless the General Partner otherwise agrees.

D. Allocations . If any Partnership Interest is transferred during any quarterly segment of the Partnership’s fiscal year in compliance with the provisions of this Article XI or redeemed or transferred pursuant to Section 8.6 , Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the fiscal year in accordance with Section 706(d) of the Code and corresponding Regulations, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly, or a monthly proration period, in which event Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be prorated based upon the applicable method selected by the

General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which the transfer or redemption occurs shall be allocated to the Person who is a Partner as of midnight on the last day of said month. All distributions of Available Cash attributable to any Partnership Unit with respect to which the Partnership Record Date is before the date of such transfer, assignment or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and, in the case of a transfer or assignment other than a redemption, all distributions of Available Cash thereafter attributable to such Partnership Unit shall be made to the transferee Partner.

E. Additional Restrictions . Notwithstanding anything to the contrary herein, and in addition to any other restrictions on transfer herein contained, including, without limitation, the provisions of Article VII and this Article XI , in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to Section 8.6 ) be made without the express consent of the General Partner, in its sole and absolute discretion, (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership there is a significant risk that such transfer would cause a termination of the Partnership for U.S. federal or state income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner, or any Subsidiary of either, or pursuant to a transaction expressly permitted under Section 11.2 ); (v) if in the opinion of counsel to the Partnership, there is a significant risk that such transfer would cause the Partnership to be treated as an association taxable as a corporation for U.S. federal income tax purposes; (vi) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (vii) if such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and the Regulations thereunder or such transfer causes the Partnership to become a “publicly traded partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the Code (provided, however, that, this clause (vii) shall not be the basis for limiting or restricting in any manner the exercise of the Redemption Right under Section 8.6 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a “publicly traded partnership” and, by reason thereof, taxable as a corporation for U.S. federal income tax purposes); (viii) if such transfer subjects the Partnership or the activities of the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended; or (ix) if in the opinion of legal counsel for the Partnership, there is a risk that such transfer would adversely affect the ability of the Parent to qualify or continue to qualify as a REIT or subject the Parent to any additional taxes under Sections 857 or 4981 of the Code.

F. Avoidance of “Publicly Traded Partnership” Status . The General Partner shall monitor the transfers of interests in the Partnership to determine (i) if such interests are being traded on an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and (ii) whether additional transfers of interests would result in the Partnership being unable to qualify for at least one of the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently

published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code) (the “ Safe Harbors ”). The General Partner shall take all steps reasonably necessary or appropriate to prevent any trading of interests or any recognition by the Partnership of transfers made on such markets and, except as otherwise provided herein, to insure that at least one of the Safe Harbors is met; provided, however, that the foregoing shall not authorize the General Partner to limit or restrict in any manner the right of any holder of a Partnership Unit to exercise the Redemption Right in accordance with the terms of Section 8.6 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a “publicly traded partnership” and, by reason thereof, taxable as a corporation.

ARTICLE XII

ADMISSION OF PARTNERS

Section 12.1 Admission of a Successor General Partner

A successor to all of the General Partner’s General Partner Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer. Any such successor shall carry on the business of the Partnership without dissolution. In such case, the admission shall be subject to such successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission.

Section 12.2 Admission of Additional Limited Partners

A. General . No Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent shall be given or withheld in the General Partner’s sole and absolute discretion. A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement or who exercises an option to receive Partnership Units shall be admitted to the Partnership as an Additional Limited Partner only with the consent of the General Partner and only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 15.11 and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person’s admission as an Additional Limited Partner. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.

B. Allocations to Additional Limited Partners . If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Fiscal Year shall be allocated among such Additional Limited Partner and all other Partners

and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or monthly proration method, in which event Net Income, Net Losses, and each item thereof would be prorated based upon the applicable period selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner.

Section 12.3 Amendment of Agreement and Certificate of Limited Partnership

For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment to the Partner Registry) and, if required by law, shall prepare and file an amendment to the Certificate of Limited Partnership and may for this purpose exercise the power of attorney granted pursuant to Section 15.11 .

Section 12.4 Limit on Number of Partners

Unless otherwise permitted by the General Partner in its sole and absolute discretion, no Person shall be admitted to the Partnership as an Additional Limited Partner if the effect of such admission would be to cause the Partnership to have a number of Partners that would cause the Partnership to become a reporting company under the Exchange Act.

ARTICLE XIII

DISSOLUTION AND LIQUIDATION

Section 13.1 Dissolution

The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (“ Liquidating Events ”):

(i) an event of withdrawal of the General Partner (other than an event of bankruptcy) unless within ninety (90) days after the withdrawal, the written Consent of the Outside Limited Partners to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner is obtained;

(ii) an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;

(iii) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;

(iv) ninety (90) days after the sale of all or substantially all of the assets and properties of the Partnership for cash or for marketable securities;

(v) the redemption of all Partnership Units other than those held by the General Partner; or

(vi) a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to or at the time of the entry of such order or judgment, the written Consent of the Outside Limited Partners is obtained to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.

Section 13.2 Winding Up

A. General . Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs. The General Partner (or, if there is no remaining General Partner, any Person elected by a majority in interest of the Limited Partners (the “ Liquidator ”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include equity or other securities of the General Partner or any other entity) shall be applied and distributed in the following order:

(1) First, to the payment and discharge of all of the Partnership’s debts and liabilities to creditors other than the Partners;

(2) Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;

(3) Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the Limited Partners;

(4) Fourth, to the holders of Partnership Interests that are entitled to any preference in distribution upon liquidation in accordance with the rights of any such class or series of Partnership Interests (and, within each such class or series, to each holder thereof pro rata based on its Percentage Interest in such class); and

(5) The balance, if any, to the Partners in accordance with their positive Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods.

The General Partner shall not receive any additional compensation for any services performed pursuant to this Article XIII .

B. Deferred Liquidation . Notwithstanding the provisions of Section 13.2.A which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A , undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

Section 13.3 Compliance with Timing Requirements of Regulations; Restoration of Deficit Capital Accounts

A. Timing of Distributions . If the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made under this Article XIII to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). In the discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article XIII may be: (A) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership (in which case the assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the General Partner, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement); or (B) withheld to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership; provided, however, that such withheld amounts shall be distributed to the General Partner and Limited Partners as soon as practicable.

B. Restoration of Deficit Capital Accounts upon Liquidation of the Partnership . If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever, except as otherwise set forth in this Section 13.3.B , or as otherwise expressly agreed in writing by the affected Partner and the Partnership after the date hereof. Notwithstanding the foregoing, (i) if the General Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions, and allocations for all Partnership years or portions thereof, including the year during which such liquidation occurs), the General Partner shall contribute to the capital of the Partnership the amount necessary to restore such deficit balance to zero in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(3); (ii) if a DRO Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions, and allocations for all Partnership Years or portions thereof, including the year during which such liquidation occurs), such DRO Partner shall be obligated to make a contribution to the Partnership with respect to any such deficit balance in such DRO Partner’s Capital Account upon a liquidation of the Partnership in an amount equal to the lesser of such deficit balance or such DRO Partner’s DRO Amount; and (iii) the first sentence of this Section 13.3.B shall not apply with respect to any other Partner to the extent, but only to such extent, that such Partner previously has agreed in writing, with the consent of the General Partner, to undertake an express obligation to restore all or any portion of a deficit that may exist in its Capital Account upon a liquidation of the Partnership. No Limited Partner shall have any right to become a DRO Partner, to increase its DRO Amount, or otherwise agree to restore any portion of any deficit that may exist in its Capital Account without the express written consent of the General Partner, in its sole and absolute discretion. Any contribution required of a Partner under this Section 13.3.B shall be made on or before the later of (i) the end of the Partnership Year in which the interest is liquidated or (ii) the ninetieth (90th) day following the date of such liquidation. The proceeds of any contribution to the Partnership made by a DRO Partner with respect to a deficit in such DRO Partner’s Capital Account balance shall be treated as a Capital Contribution by such DRO Partner and the proceeds thereof shall be treated as assets of the Partnership to be applied as set forth in Section 13.2.A .

C. Restoration of Deficit Capital Accounts upon a Liquidation of a Partner’s Interest by Transfer . If a DRO Partner’s interest in the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) (other than in connection with a liquidation of the Partnership) which term shall include a redemption by the Partnership of such DRO Partner’s interest upon exercise of the Redemption Right, and such DRO Partner is designated on Exhibit E as a Part II DRO Partner, such DRO Partner shall be required to contribute cash to the Partnership equal to the lesser of (i) the amount required to increase its Capital Account balance as of such date to zero, or (ii) such DRO Partner’s DRO Amount. For this purpose, (i) the DRO Partner’s deficit Capital Account balance shall be determined by taking into account all contributions, distributions, and allocations for the portion of the Fiscal Year ending on the date of the liquidation or redemption, and (ii) solely for purposes of determining such DRO Partner’s Capital Account balance, the General Partner shall redetermine the Carrying Value of the Partnership’s assets on such date based upon the principles set forth in Sections 1.D.(3) and (4) of Exhibit B hereto, and shall take into account the DRO Partner’s allocable share of any

Unrealized Gain or Unrealized Loss resulting from such redetermination in determining the balance of its Capital Account. The amount of any payment required hereunder shall be due and payable within the time period specified in the second to last sentence of Section 13.3.B .

D. Effect of the Death of a DRO Partner . After the death of a DRO Partner who is an individual, the executor of the estate of such DRO Partner may elect to reduce (or eliminate) the DRO Amount of such DRO Partner. Such elections may be made by such executor by delivering to the General Partner within two hundred and seventy (270) days of the death of such Limited Partner, a written notice setting forth the maximum deficit balance in its Capital Account that such executor agrees to restore under this Section 13.3 , if any. If such executor does not make a timely election pursuant to this Section 13.3 (whether or not the balance in the applicable Capital Account is negative at such time), then the DRO Partner’s estate (and the beneficiaries thereof who receive distributions of Partnership Interests therefrom) shall be deemed a DRO Partner with a DRO Amount in the same amount as the deceased DRO Partner. Any DRO Partner which itself is a partnership for U.S. federal income tax purposes may likewise elect, after the date of its partner’s death to reduce (or eliminate) its DRO Amount by delivering a similar notice to the General Partner within the time period specified above, and in the absence of any such notice the DRO Amount of such DRO Partner shall not be reduced to reflect the death of any of its partners.

Section 13.4 Rights of Limited Partners

Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership. Except as otherwise expressly provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions, or allocations.

Section 13.5 Notice of Dissolution

If a Liquidating Event occurs or an event occurs that would, but for provisions of an election or objection by one or more Partners pursuant to Section 13.1 , result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner).

Section 13.6 Cancellation of Certificate of Limited Partnership

Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2 , the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.

Section 13.7 Reasonable Time for Winding Up

A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 , to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect among the Partners during the period of liquidation.

Section 13.8 Waiver of Partition

Each Partner hereby waives any right to partition of the Partnership property.

Section 13.9 Liability of Liquidator

The Liquidator shall be indemnified and held harmless by the Partnership in the same manner and to the same degree as an Indemnitee may be indemnified pursuant to Section 7.7 .

ARTICLE XIV

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

Section 14.1 Amendments

A. General . Amendments to this Agreement may be proposed by the General Partner or by any Limited Partner holding Partnership Interests representing twenty-five percent (25%) or more of the Percentage Interest of the Class A Units. Following such proposal (except an amendment governed by Section 14.1.B ), the General Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall seek the written Consent of the Partners as set forth in this Section 14.1 on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written Consent, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) calendar days, any failure to respond in such time period shall constitute a vote in favor of the recommendation of the General Partner. A proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and, except as provided in Section 14.1.B , 14.1.C or 14.1.D , it receives the Consent of the Partners holding Partnership Interests representing more than fifty percent (50%) of the Percentage Interest of the Class A Units (including Class A Units held by the Parent).

B. Amendments Not Requiring Limited Partner Approval . Notwithstanding Section 14.1.A but subject to Section 14.1.C , the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes:

(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;

(2) to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement (which may be effected through the replacement of the Partner Registry with an amended Partner Registry);

(3) to set forth the designations, rights, powers, duties, and preferences of the holders of any additional Partnership Interests issued pursuant to Article IV ;

(4) to reflect a change that does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions of this Agreement, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;

(5) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal, state or local agency or contained in federal, state or local law;

(6) to modify the method by which Partners’ Capital Accounts, or any debits or credits thereto, are computed, in each case in accordance with Section 1.E of Exhibit B to this Agreement; and

(7) to include provisions in the Agreement that may be referenced in any rulings, regulations, notices, announcements, or other guidance regarding the U.S. federal income tax treatment of compensatory partnership interests issued and made effective after the date hereof or in connection with any elections that the General Partner determines to be necessary or advisable in respect of any such guidance. Any such amendment may include, without limitation, (a) a provision authorizing or directing the General Partner to make any election under such guidance, (b) a covenant by the Partnership that all of the Partners must (I) comply with the such guidance and (II) take all actions (or, as the case may be, not take any action) necessary, including providing the Partnership with any required information, to permit the Partnership to comply with the requirements set forth or referred to in the Regulations for such election or other related guidance from the IRS, and (c) an amendment to the capital account maintenance provisions and the allocation provisions contained in Exhibit B or Exhibit C of this Agreement so that such provisions comply with (I) the provisions of the Code and the Regulations as they apply to the issuance of compensatory partnership interests and (II) the requirements of such guidance and any election made by the General Partner with respect thereto, including, a provision requiring “forfeiture allocations” as appropriate.

The General Partner shall notify the Limited Partners in writing when any action under this Section 14.1.B is taken in the next regular communication to the Limited Partners or within ninety (90) days of the date thereof, whichever is earlier.

C. Amendments Requiring Limited Partner Approval (Excluding the Parent) . Notwithstanding Sections 14.1.A and 14.1.B , without the Consent of the Outside Limited Partners, the General Partner shall not amend Section 4.2.A , Section 7.1.A (second sentence only), Section 7.5 , Section 7.6 , Section 7.8 , Section 7.11 , Section 11.2 , Section 13.1 , the last sentence of Section 11.4.A (provided, however, that no such amendment shall in any event adversely affect the rights of any lender who made a loan or who extended credit and received in connection therewith a pledge of Partnership Units prior to the date such amendment is adopted unless, and only to the extent such lender consents thereto), this Section 14.1.C or Section 14.2 .

D. Other Amendments Requiring Certain Limited Partner Approval . Notwithstanding anything in this Section 14.1 to the contrary, this Agreement shall not be amended with respect to any Partner adversely affected without the Consent of such Partner

adversely affected or to any Assignee who is a bona fide financial institution that loans money or otherwise extends credit to a holder of Partnership Units that is adversely affected, but in either case only if such amendment would (i) convert such Limited Partner’s interest in the Partnership into a general partner’s interest, (ii) modify the limited liability of such Limited Partner, (iii) amend Section 7.11 , (iv) amend Article V or Article VI (except as permitted pursuant to Sections 4.2 , 5.4 , 6.2 and 14.1.B(3) ), (v) amend Section 8.6 or any defined terms set forth in Article I that relate to the Redemption Right (except as permitted in Section 8.6.E ), or (vi) amend Sections 11.3 or 11.5 , or add any additional restrictions to Section 11.6.E or amend Section 14.1.B(4) or this Section 14.1.D .

E. Amendment and Restatement of Partner Registry Not an Amendment . Notwithstanding anything in this Article XIV or elsewhere in this Agreement to the contrary, any amendment and restatement of the Partner Registry by the General Partner to reflect events or changes otherwise authorized or permitted by this Agreement shall not be deemed an amendment of this Agreement and may be done at any time and from time to time, as determined by the General Partner without the Consent of the Limited Partners and without any notice requirement.

Section 14.2 Meetings of the Partners

A. General . Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding Partnership Interests representing twenty-five percent (25%) or more of the Percentage Interest of the Class A Units (including Class A Units held by the Parent). The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting. Partners entitled to vote may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.A . Except as otherwise expressly provided in this Agreement, the Consent of holders of Partnership Interests representing a majority of the Percentage Interests of the Class A Units shall control (including Class A Units held by the Parent).

B. Actions Without a Meeting . Except as otherwise expressly provided by this Agreement, any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by Partners holding Partnership Interests representing more than fifty percent (50%) (or such other percentage as is expressly required by this Agreement) of the Percentage Interest of the Class A Units (including Class A Units held by the Parent). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of Partners. Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the date on which written consents from the Partners holding the required Percentage Interest of the Class A Units have been filed with the General Partner.

C. Proxy . Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or its attorney-in-fact. No proxy shall be valid after the expiration of eleven

(11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership’s receipt of written notice thereof.

D. Conduct of Meeting . Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.

ARTICLE XV

GENERAL PROVISIONS

Section 15.1 Addresses and Notice

Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person, when sent by first class United States mail or by other means of written communication (including, but not limited to, via e-mail) to the Partner or Assignee at the address set forth in the Partner Registry or such other address as the Partners shall notify the General Partner in writing.

Section 15.2 Titles and Captions

All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” “Sections” and “Exhibits” are to Articles, Sections and Exhibits of this Agreement.

Section 15.3 Pronouns and Plurals

Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

Section 15.4 Further Action

The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 15.5 Binding Effect

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 15.6 Creditors

Other than as expressly set forth herein with regard to any Indemnitee, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

Section 15.7 Waiver

No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

Section 15.8 Counterparts

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

Section 15.9 Applicable Law

This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

Section 15.10 Invalidity of Provisions

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

Section 15.11 Power of Attorney

A. General . Each Limited Partner and each Assignee who accepts Partnership Units (or any rights, benefits or privileges associated therewith) is deemed to irrevocably constitute and appoint the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:

(1) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or any Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property, (b) all instruments that the General Partner or any Liquidator deem appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its

terms, (c) all conveyances and other instruments or documents that the General Partner or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation, (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article XI , XII or XIII or the Capital Contribution of any Partner and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and

(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement.

Nothing contained in this Section 15.11 shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article XIV or as may be otherwise expressly provided for in this Agreement.

B. Irrevocable Nature . The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner or any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partner’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.

Section 15.12 Entire Agreement

This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any prior written oral understandings or agreements among them with respect thereto.

Section 15.13 No Rights as Stockholders

Nothing contained in this Agreement shall be construed as conferring upon the holders of the Partnership Units any rights whatsoever as stockholders of the Parent, including, without limitation, any right to receive dividends or other distributions made to stockholders of the Parent, or to vote or to consent or receive notice as stockholders in respect to any meeting of stockholders for the election of directors of the Parent or any other matter.

Section 15.14 Limitation to Preserve REIT Status

To the extent that any amount paid or credited to the Parent or the General Partner or any of their officers, directors, employees or agents pursuant to Sections 7.4 or 7.7 would constitute gross income to the Parent for purposes of Sections 856(c)(2) or 856(c)(3) of the Code (a “ General Partner Payment ”) then, notwithstanding any other provision of this Agreement, the amount of such General Partner Payment for any Fiscal Year shall not exceed the lesser of:

(i) an amount equal to the excess, if any, of (a) 4% of the Parent’s total gross income (within the meaning of Section 856(c)(3) of the Code but not including the amount of any General Partner Payments) for the Fiscal Year which is described in subsections (A) though (H) of Section 856(c)(2) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(2) of the Code) derived by the Parent from sources other than those described in subsections (A) through (H) of Section 856(c)(2) of the Code (but not including the amount of any General Partner Payments); or

(ii) an amount equal to the excess, if any of (a) 24% of the Parent’s total gross income (but not including the amount of any General Partner Payments) for the Fiscal Year which is described in subsections (A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(3) of the Code but not including the amount of any General Partner Payments) derived by the Parent from sources other than those described in subsections (A) through (I) of Section 856(c)(3) of the Code;

provided, however, that General Partner Payments in excess of the amounts set forth in subparagraphs (i) and (ii) above may be made if the Parent, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts would not adversely affect the Parent’s ability to qualify as a REIT. To the extent General Partner Payments may not be made in a given Fiscal Year due to the foregoing limitations, such General Partner Payments shall carry over and be treated as arising in the following year; provided, however, that such amounts shall not carry over for more than five (5) Fiscal Years, and if not paid within such five (5) Fiscal Year period, shall expire; and provided further that (i) as General Partner Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (ii) with respect to carry over amounts for more than one Fiscal Year, such payments shall be applied to the earliest Fiscal Year first.

[Remainder of page intentionally left blank, signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.


GENERAL PARTNER:

MedEquities OP GP, LLC

	By: MedEquities Realty Trust, Inc., its sole member

		By:	/s/ William C. Harlan

			Name:	William C. Harlan
			Title:	President

LIMITED PARTNERS:

By:	MedEquities OP GP, LLC,

	as Attorney-in-Fact for the Limited Partners

	By: MedEquities Realty Trust, Inc., its sole member

		By:	/s/ William C. Harlan

			Name:	William C. Harlan
			Title:	President

EXHIBIT A

FORM OF PARTNER REGISTRY


	CLASS A UNITS
Name And Address Of Partner	Partnership Units	Initial Capital Account	Percentage Interest

GENERAL PARTNER:

MedEquities OP GP, LLC

LIMITED PARTNERS:

MedEquities Realty Trust, Inc.

[NAME]

TOTAL CLASS A UNITS				100.00000	%

EXHIBIT B

CAPITAL ACCOUNT MAINTENANCE

1.	Capital Accounts of the Partners

A. The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed contributions made by such Partner to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 1.B and allocated to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof, and decreased by (x) the amount of cash or Agreed Value of property actually distributed or deemed to be distributed to such Partner pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 1.B and allocated to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof.

B. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners’ Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for U.S. federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:

(1) Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any adjustments to the adjusted bases of the assets of the Partnership pursuant to Sections 734(b) and 743(b) of the Code, provided, however, that the amounts of any adjustments to the adjusted bases of the assets of the Partnership made pursuant to Section 734 of the Code as a result of the distribution of property by the Partnership to a Partner (to the extent that such adjustments have not previously been reflected in the Partners’ Capital Accounts) shall be reflected in the Capital Accounts of the Partners in the manner and subject to the limitations prescribed in Regulations Section l.704-1(b)(2)(iv)(m)(4).

(2) The computation of all items of income, gain, and deduction shall be made without regard to the fact that items described in Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not includible in gross income or are neither currently deductible nor capitalized for U.S. federal income tax purposes.

(3) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership’s Carrying Value with respect to such property as of such date.

(4) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year.

(5) In the event the Carrying Value of any Partnership asset is adjusted pursuant to Section 1.D , the amount of any such adjustment shall be taken into account as gain or loss from the disposition of such asset.

(6) Any items specially allocated under Section 2 of Exhibit C to the Agreement hereof shall not be taken into account.

C. A transferee (including any Assignee) of a Partnership Unit shall succeed to a pro rata portion of the Capital Account of the transferor in accordance with Regulations Section 1.704-1(b)(2)(iv)(l).

D. (1) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of all Partnership assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the times of the adjustments provided in Section 1.D(2) , as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Section 6.1 of the Agreement.

(2) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) immediately prior to the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; (c) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g); (d) immediately prior to the grant of an interest in the Partnership (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership; (e) immediately prior to the issuance by the Partnership of a noncompensatory option to acquire an interest in the Partnership (other than an option for a de minimis interest); and (f) at such other times as are permitted by applicable Regulations and as determined in the discretion of the General Partner; provided, however, that adjustments pursuant to clauses (a), (b), (d), (e) and (f) above shall be made only if the General Partner determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership or to comply with applicable Regulations; provided further, however, that the issuance of any LTIP Unit shall be deemed to require a revaluation pursuant to this Section 1.D.

(3) In accordance with Regulations Section 1.704- l(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the time any such asset is distributed.

(4) In determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit B , the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the General Partner using such reasonable

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method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article XIII of the Agreement, shall be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate fair market value among the assets of the Partnership in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties.

E. The provisions of the Agreement (including this Exhibit B and the other Exhibits to the Agreement) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order to comply with such Regulations, the General Partner may make such modification without regard to Article XIV of the Agreement, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article XIII of the Agreement upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance with Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section l.704-1(b).

2.	No Interest

No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners’ Capital Accounts.

3.	No Withdrawal

No Partner shall be entitled to withdraw any part of its Capital Contribution or Capital Account or to receive any distribution from the Partnership, except as provided in Articles IV , V , VII and XIII of the Agreement.

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EXHIBIT C

SPECIAL ALLOCATION RULES

1.	Special Allocation Rules.

Notwithstanding any other provision of the Agreement or this Exhibit C, the following special allocations shall be made in the following order:

A. Minimum Gain Chargeback . Notwithstanding the provisions of Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such Fiscal Year and without regard to any decrease in Partner Minimum Gain during such Fiscal Year.

B. Partner Minimum Gain Chargeback . Notwithstanding any other provision of Section 6.1 of this Agreement or any other provisions of this Exhibit C (except Section 1.A), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each General Partner and Limited Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith. Solely for purposes of this Section 1.B, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such Fiscal Year, other than allocations pursuant to Section 1.A.

C. Qualified Income Offset . In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 1.A and 1.B with respect to such Fiscal Year, such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Fiscal Year)

shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 1.C is intended to constitute a “qualified income offset” under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

D. Gross Income Allocation . In the event that any Partner has an Adjusted Capital Account Deficit at the end of any Fiscal Year (after taking into account allocations to be made under the preceding paragraphs hereof with respect to such Fiscal Year), each such Partner shall be specially allocated items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Fiscal Year) in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit.

E. Nonrecourse Deductions . Except as may otherwise be expressly provided by the General Partner pursuant to Section 4.2 of the Agreement with respect to other classes of Partnership Units, Nonrecourse Deductions for any Fiscal Year shall be allocated only to the Partners holding Class A Units and Class B Units in accordance with their respective Percentage Interests. If the General Partner determines in its good faith discretion that the Partnership’s Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio for such Fiscal Year to the numerically closest ratio which would satisfy such requirements.

F. Partner Nonrecourse Deductions . Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).

G. Adjustments Pursuant to Code Section 734 and Section 743 . To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations.

2.	Allocations for Tax Purposes

A. Except as otherwise provided in this Section 2, for U.S. federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

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B. In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for U.S. federal income tax purposes among the Partners as follows:

(1) (a) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners consistent with the principles of Section 704(c) of the Code to take into account the variation between the Section 704(c) Value of such property and its adjusted basis at the time of contribution (taking into account Section 2.C of this Exhibit C); and

(b) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

(2) (a) In the case of an Adjusted Property, such items shall

(i) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Exhibit B;

(ii) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 2.B(1) of this Exhibit C; and

(b) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

(3) all other items of income, gain, loss and deduction shall be allocated among the Partners in the same manner as their correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

C. To the extent Regulations promulgated pursuant to Section 704(c) of the Code permit a Partnership to utilize alternative methods to eliminate the disparities between the Carrying Value of property and its adjusted basis, the General Partner shall have the authority to elect the method to be used by the Partnership and such election shall be binding on all Partners.

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EXHIBIT D

NOTICE OF REDEMPTION

The undersigned hereby irrevocably (i) redeems Partnership Units in MedEquities Realty Operating Partnership, LP (the “Partnership”) in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended, and the Redemption Right referred to therein, (ii) surrenders such Partnership Units and all right, title and interest therein and (iii) directs that the Cash Amount or Shares Amount (as determined by the General Partner) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if Shares are to be delivered, such Shares be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has marketable and unencumbered title to such Partnership Units, free and clear of the rights of or interests of any other person or entity, (b) has the full right, power and authority to redeem and surrender such Partnership Units as provided herein and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consult or approve such redemption and surrender. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Amended and Restated Agreement of Limited Partnership of the Partnership.


Dated:						Name of Limited Partner:


						(Signature of Limited Partner)


						(Street Address)


						(City) (State) (Zip Code)

						Signature Guaranteed by:



IF SHARES ARE TO BE ISSUED, ISSUE TO:

Name:



Social Security or tax identifying number:

EXHIBIT E

FORM OF DRO REGISTRY


		DRO AMOUNT
PART I DRO PARTNERS

PART II DRO PARTNERS

EXHIBIT F

NOTICE OF ELECTION BY PARTNER TO CONVERT

LTIP UNITS INTO CLASS A UNITS

The undersigned holder of LTIP Units hereby irrevocably (i) elects to convert LTIP Units in MedEquities Realty Operating Partnership, LP (the “Partnership”) into Class A Units in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended; and (ii) directs that any cash in lieu of Class A Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has title to such LTIP Units, free and clear of the rights or interests of any other person or entity other than the Partnership; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent to or approval of all persons or entities, if any, having the right to consent or approve such conversion. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Amended and Restated Agreement of Limited Partnership of the Partnership.


Dated:						Name of Limited Partner:


						(Signature of Limited Partner)


						(Street Address)


						(City) (State) (Zip Code)

						Signature Guaranteed by:

EXHIBIT G

NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF

LTIP UNITS INTO CLASS A UNITS

MedEquities Realty Operating Partnership, LP (the “Partnership”) hereby irrevocably elects to cause the number of LTIP Units held by the holder of LTIP Units set forth below to be converted into Class A Units in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended (the “Agreement”). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Agreement.

Name of Holder:

Date of this Notice:

Number of LTIP Units to be Converted:

Please Print: Exact Name as Registered with Partnership

Exhibit 10.2

AMENDMENT NO. 1

FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

This Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP (this “ Amendment ”) is made as of January 28, 2015 by MedEquities OP GP, LLC, a Delaware limited liability company (the “ General Partner ”), as sole general partner of MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Partnership ”), pursuant to the authority granted to the General Partner in the First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP, dated as of July 31, 2014 (the “ Partnership Agreement ”), for the purpose of issuing additional Partnership Units in the form of Preferred Partnership Units (as defined below). Capitalized terms used and not defined herein shall have the meanings set forth in the Partnership Agreement.

WHEREAS, MedEquities Realty Trust, Inc., a Maryland corporation (the “ Parent ”), is the sole and managing member of the General Partner;

WHEREAS, the Board of Directors (the “ Board ”) of the Parent adopted resolutions on January 14, 2015 classifying and designating 125 shares of Preferred Stock (as defined in the Articles of Amendment and Restatement of the Parent (the “ Charter ”) as Series A Preferred Stock (as defined below);

WHEREAS, on January 20, 2015, the Company filed Articles Supplementary to the Charter with the State Department of Assessments and Taxation of Maryland, establishing the Series A Preferred Stock, with such preferences, rights, powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption as described in the Series A Articles Supplementary (as defined below);

WHEREAS, on January 28, 2015, the Company issued 125 shares of the Series A Preferred Stock; and

WHEREAS, the General Partner has determined that, in connection with the issuance of the Series A Preferred Stock, it is necessary and desirable to amend the Partnership Agreement to create additional Partnership Units in the form of Series A Preferred Partnership Units (as defined below) having designations, preferences and other rights which are substantially the same as the economic rights of the Series A Preferred Stock.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Partnership Agreement is hereby amended as follows:

1. Article 1 of the Partnership Agreement is hereby amended to add the following definitions:

“ Common Partnership Interest ” shall mean an ownership interest in the Partnership, other than a Preferred Partnership Interest, and includes any and all benefits to which the holder of such an ownership interest may be entitled as provided in this Agreement or the Act, together with all obligations of such person to comply with the terms and provisions of this Agreement and the Act.

“ Common Partnership Unit ” shall mean a fractional, undivided share of the Common Partnership Interests of all Partners issued hereunder.

“ Parent ” means MedEquities Realty Trust, Inc., a Maryland corporation.

“ Preferred Partnership Interest ” shall mean an ownership interest in the Partnership evidenced by a designated series of Preferred Partnership Units, having a preference in payment of distributions or on liquidation as determined by the General Partner for such series of Preferred Partnership Units and as set forth in an amendment to this Agreement, and includes all benefits to which the holder of such an ownership interest may be entitled as provided in this Agreement or the Act, together with all obligations of such Person to comply with the terms and provisions of this Agreement and the Act.

“ Preferred Partnership Unit ” shall mean a fractional, undivided share of Preferred Partnership Interests of all Partners in the specified series issued hereunder.

“ Series A Articles Supplementary ” shall mean the Articles Supplementary Establishing and Fixing the Rights and Preference of a Series of Shares of Preferred Stock, designating the rights and preferences of the 12.5% Series A Redeemable Cumulative Preferred Stock, filed as part of the Parent’s Charter with the State Department of Assessments and Taxation of Maryland on January 28, 2015.

“ Series A Preferred Partnership Interests ” shall mean an ownership interest in the Partnership evidenced by the Series A Preferred Partnership Units, having a preference in payment of distributions or on liquidation as set forth in this Amendment.

“ Series A Preferred Partnership Units ” shall mean the series of Preferred Partnership Units established pursuant to this Amendment, representing a fractional, undivided share of the Series A Preferred Partnership Interests of all Partners issued under the Partnership Agreement.

“ Series A Preferred Stock ” shall mean the 12.5% Series A Redeemable Cumulative Preferred Stock of the Parent, with the preferences, conversion and other rights, voting powers, restrictions, limitations, qualifications and terms and conditions of redemption as described in the Series A Articles Supplementary.

2. In accordance with Section 4.2 of the Partnership Agreement, set forth in Exhibit H hereto are the terms and conditions of the Series A Preferred Partnership Units hereby established and issued to the Parent in consideration of its contribution to the Partnership of the proceeds of the issuance and sale of the Series A Preferred Stock by the Parent. The Partnership Agreement is amended to incorporate such Exhibit H as Exhibit H thereto.

3. Except as modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and confirms.

4. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to conflicts of law.

5. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned has caused this Amendment to be duly executed on its behalf as of the date first set forth above.


MEDEQUITIES OP GP, LLC, as sole general partner of MedEquities Realty Operating Partnership, LP

By:		/s/ William C. Harlan
Name:		William C. Harlan
Title:		President and Chief Operating Officer

Signature Page to Amendment No. 1 to the First Amended and Restated

Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP

EXHIBIT H

DESIGNATION OF TERMS AND CONDITIONS OF SERIES A PREFERRED PARTNERSHIP UNITS

(1) Designation and Number . A series of Preferred Partnership Units, designated as Series A Preferred Partnership Units, is hereby established. The number of Series A Preferred Partnership Units shall be 125.

(2) Ranking . The Series A Preferred Partnership Units will, with respect to rights to receive distributions and to participate in distributions or payments upon liquidation, dissolution or winding up of the Partnership, rank (a) senior to the Common Partnership Units and any other Partnership Units of the Company, now or hereafter issued and outstanding, the terms of which provide that such Partnership Units rank, as to distributions and upon liquidation, dissolution or winding up of the Partnership, junior to such Series A Preferred Partnership Units, (b) on a parity with any other Partnership Units of the Partnership, now or hereafter issued and outstanding, other than Partnership Units referred to in clauses (a) and (c); and (c) junior to all Partnership Units of the Partnership the terms of which specifically provide that such Partnership Units rank senior to the Series A Preferred Partnership Units.

(3) Distributions.

(a) The record holders of the then outstanding Series A Preferred Partnership Units shall be entitled to receive cumulative preferential cash distributions, when and as authorized by the General Partner, out of funds legally available for the payment of distributions, at the rate of 12.5% per annum of the total of (i) the $1,000 liquidation preference (the “ Liquidation Preference ”) plus (ii) all accumulated and unpaid distributions thereon which are in arrears. Such distributions shall accrue on a daily basis and be cumulative from the first date on which any Series A Preferred Partnership Units are issued (the “ Initial Issue Date ”), and shall be payable annually in arrears on June 30 of each year or, if not a business day, the next succeeding business day (each, a “ Distribution Payment Date ”). Any distribution payable on the Series A Preferred Partnership Units for any partial Distribution Period (as defined below) will be computed on the basis of a 360-day year consisting of twelve 30-day months. The term “ Distribution Period ” shall mean, with respect to the first Distribution Period, the period from and including the Initial Issue Date to and including the first Distribution Payment Date, and with respect to each subsequent Distribution Period, the period from but excluding a Distribution Payment Date to and including the next succeeding Distribution Payment Date or other date as of which accumulated distributions are to be calculated. Distributions shall be paid to holders of record of the Series A Preferred Partnership Units of the Partnership at the close of business on the record date, which shall be the 15th day of the calendar month in which the applicable Distribution Payment Date falls or such other date designated by the Company for the payment of distributions that is not more than 30 nor less than 10 days prior to such Distribution Payment Date (each, a “ Distribution Record Date ”). Distributions in respect of any past Distribution Periods that are in arrears may be authorized and paid at any time to holders of record on the Distribution Record Date related to each such Distribution Period. Any distribution payment made on the Series A Preferred Partnership Units shall be credited first against the earliest accumulated but unpaid distribution due which remains payable.

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(b) No distributions on the Series A Preferred Partnership Units shall be authorized by the General Partner or paid or set apart for payment by the General Partner at such time as the terms and provisions of any agreement of the Parent, including any agreement relating to its indebtedness, prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.

(c) Notwithstanding the foregoing, distributions on the Series A Preferred Partnership Units shall accumulate whether or not the terms and provisions set forth in Section 3(b) hereof at any time prohibit the current payment of distributions, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. Distributions will be authorized and paid when due in all events to the fullest extent permitted by law and, if revaluation of the Partnership or its assets would permit payment of distributions which would otherwise be prohibited, then such revaluation shall be done. Unpaid distributions on the Series A Preferred Partnership Units will accumulate as of the Distribution Payment Date on which they first become payable.

(d) Except as provided in Section 3(e), unless full cumulative distributions on the Series A Preferred Partnership Units have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past Distribution Periods and the then current Distribution Period, no distributions (other than in Common Partnership Units or other partnership units ranking junior to the Series A Preferred Partnership Units as to distributions and upon liquidation) shall be authorized or paid or set aside for payment nor shall any other distribution be authorized or made upon the Common Partnership Units, or any other partnership units of the Partnership ranking junior to the Series A Preferred Partnership Units as to distributions or upon liquidation, nor shall any Common Partnership Units, or any other partnership units of the Partnership ranking junior to the Series A Preferred Partnership Units as to distributions or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such units) by the Partnership (except by conversion into or exchange for other partnership units of the Partnership ranking junior to the Series A Preferred Partnership Units as to distributions and upon liquidation). Holders of the Series A Preferred Partnership Units shall not be entitled to any distribution, whether payable in cash, property or units, in excess of full cumulative distributions on the Series A Preferred Partnership Units as provided above. Any distribution payment made on the Series A Preferred Partnership Units shall be first credited against the earliest accumulated but unpaid distribution due with respect to such shares which remains payable.

(e) When distributions are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series A Preferred Partnership Units, all distributions authorized upon the Series A Preferred Partnership Units shall be authorized pro rata.

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(f) Holders of the Series A Preferred Partnership Units shall not be entitled to any distribution, whether payable in cash, property or units in excess of the full cumulative distributions on the Series A Preferred Partnership Units as described above.

(4) Liquidation Preference .

(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the holders of the Series A Preferred Partnership Units shall be entitled to receive out of the assets of the Partnership legally available for distribution a distribution in cash in the amount of the Liquidation Preference plus an amount equal to all distributions accumulated and unpaid thereon to the date of payment, plus, if applicable, the Redemption Premium (as defined Series A Articles Supplementary) then in effect, before any distribution of assets is made to holders of Common Partnership Units or any other class of partnership units of the Partnership that ranks junior to the Series A Preferred Partnership Units as to liquidation rights.

(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the legally available assets of the Partnership are insufficient to pay the amount of the Liquidation Preference plus an amount equal to all distributions accumulated and unpaid on all outstanding Series A Preferred Partnership Units, then the holders of the Series A Preferred Partnership Units shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be entitled.

(c) After payment of the full amount of liquidating distributions to which they are entitled, the holders of the Series A Preferred Partnership Units will have no right or claim to any of the remaining assets of the Partnership.

(5) Redemption . In connection with the redemption by the Parent of any shares of Series A Preferred Stock in accordance with the provisions of the Series A Articles Supplementary, the Partnership shall redeem a Series A Preferred Partnership Unit by making a payment to the Company for such purpose which shall be equal to the redemption price (as set forth in the Series A Articles Supplementary), plus all and any accumulated and unpaid dividends on the Series A Preferred Stock (whether or not declared), to, but not including, the redemption date. From and after the applicable redemption date, the Series A Preferred Partnership Units so redeemed shall no longer be outstanding and all rights hereunder, to distributions or otherwise, with respect to such Series A Preferred Partnership Units shall cease.

(6) Voting Rights . Except as required by applicable law or the Partnership Agreement, the holder of the Series A Preferred Partnership Units, as such, shall have no voting rights.

(7) Conversion . The Series A Preferred Partnership Units are not convertible into or exchangeable for any other property or securities of the Partnership.

(8) Restriction on Ownership . The Series A Preferred Partnership Units shall be owned and held solely by the Parent.

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(9) Allocations. Allocations of the Partnership’s items of income, gain, loss and deduction shall be allocated among holders of Series A Preferred Partnership Units in accordance with Article VI of the Partnership Agreement.

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Exhibit 10.3

AMENDMENT NO. 2

FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

This A MENDMENT N O . 2 TO THE F IRST A MENDED AND R ESTATED A GREEMENT OF L IMITED P ARTNERSHIP OF M ED E QUITIES R EALTY O PERATING P ARTNERSHIP , LP (this “ Amendment ”) is made as of March 10, 2015 by MedEquities OP GP, LLC , a Delaware limited liability company (the “ General Partner ”), as sole general partner of MedEquities Realty Operating Partnership, LP , a Delaware limited partnership (the “ Partnership ”), pursuant to the authority granted to the General Partner in the First Amended and Restated Agreement of Limited Partnership of MedEquities Realty Operating Partnership, LP, dated as of July 31, 2014, as amended by that certain Amendment No. 1 thereto dated as of January 28, 2015 (the “ Partnership Agreement ”), for the purpose of issuing additional Partnership Units in the form of Series B Preferred Partnership Units (as defined below). Capitalized terms used and not defined herein shall have the meanings set forth in the Partnership Agreement.

WHEREAS, MedEquities Realty Trust, Inc., a Maryland corporation (the “ Parent ”), is the sole and managing member of the General Partner; and

WHEREAS, the General Partner has determined that it is necessary and desirable to amend the Partnership Agreement to create additional Partnership Units in the form of Series B Preferred Partnership Units.

NOW, THEREFORE , in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership Agreement is hereby amended as follows:

1. Article I of the Partnership Agreement is hereby amended to add the following definitions:

“ Applicable Distribution Rate ” means (i) 7.875% in the absence of a Distribution Default, a Covenant Default or a REIT Default, (ii) 9.50% for so long as a Distribution Default or a Covenant Default (each in the absence of a REIT Default) has occurred and is continuing, (iii) 12.15% for so long as a REIT Default has occurred and is continuing and (iv) 14.62% for so long as a REIT Default and either a Distribution Default or Covenant Default (or both) has occurred and is continuing. Upon the cure of any Distribution Default, Covenant Default or REIT Default, the Applicable Distribution Rate shall revert back to the rate set forth in clause (i) above.

“ Investment Amount ” shall have the meaning set forth in the Series B Articles Supplementary.

“ Series B Articles Supplementary ” shall mean the Articles Supplementary establishing and fixing the Rights and Preferences of a Series of Preferred Stock, designating the rights and preferences of the 7.875% Series B Redeemable Cumulative Preferred Stock, filed as part of the Parent’s Charter with the State Department of Assessments and Taxation of Maryland on March 10, 2015.

“ Series B Preferred Partnership Interests ” shall mean an ownership interest in the Partnership evidenced by the Series B Preferred Partnership Units, having a preference in payment of distributions or on liquidation as set forth in this Amendment.

“ Series B Preferred Partnership Units ” shall mean the series of Preferred Partnership Units established pursuant to this Amendment, representing a fractional, undivided share of the Series B Preferred Partnership Interests of all Partners issued under the Partnership Agreement.

“ Series B Preferred Stock ” shall mean the 7.875% Series B Redeemable Cumulative Preferred Stock of the Parent with the preferences, conversion and other rights, voting powers, restrictions, limitations, qualifications and terms and conditions of redemption as described in the Series B Articles Supplementary.

“ Tangible Net Worth ” shall have the meaning set forth in the Series B Articles Supplementary.

2. In accordance with Section 4.2 of the Partnership Agreement, set forth in Exhibit I hereto are the terms and conditions of the Series B Preferred Partnership Units, which are hereby established and which are to be issued to Parent in consideration of its contribution to the Partnership of cash in exchange therefor. The Partnership Agreement is hereby amended to incorporate such Exhibit I as Exhibit I thereto.

3. Except as modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and confirms.

4. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles or rules governing conflicts of law.

(Signature page follows.)

IN WITNESS WHEREOF , the undersigned has caused this Amendment to be duly executed on its behalf as of the date first set forth above.


MEDEQUITIES OP GP, LLC, as sole general partner of MedEquities Realty Operating Partnership, LP

By:		/s/ William C. Harlan
Name:		William C. Harlan
Title:		President and Chief Operating Officer

Signature Page to Amendment No. 2 to the First Amended and Restated Agreement of

Limited Partnership of MedEquities Realty Operating Partnership, LP

EXHIBIT I

DESIGNATION OF TERMS AND CONDITIONS OF SERIES B PREFERRED PARTNERSHIP UNITS

(1) Designation and Number . A series of Preferred Partnership Units, designated as Series B Preferred Partnership Units, is hereby established. The number of Series B Preferred Partnership Units shall be 125,000.

(2) Ranking . The Series B Preferred Partnership Units will, with respect to rights to receive distributions and to participate in distributions or payments upon liquidation, dissolution or winding up of the Partnership, rank (a) senior to the Common Partnership Units and any other Partnership Units now or hereafter issued and outstanding, the terms of which provide that such Partnership Units rank, as to distributions and upon liquidation, dissolution or winding up of the Partnership, junior to such Series B Preferred Partnership Units (collectively, with the Common Partnership Units, “ Junior Units ”); (b) on parity with any other Partnership Units hereafter issued and outstanding that are properly approved pursuant to Section 6(h) of the Series B Articles Supplementary, the terms of which specifically provide that such Partnership Units rank, as to distributions and upon liquidation, dissolution or winding up of the Partnership, on a parity with such Series B Preferred Units (“ Parity Units ”); and (c) junior to the Series A Preferred Partnership Units and any other Partnership Units hereafter issued and outstanding that are properly approved pursuant to Section 6(h) of the Series B Articles Supplementary, the terms of which specifically provide that such Partnership Units rank, as to distributions and the distribution of assets upon liquidation, dissolution or winding up of the Partnership, senior to the Series B Preferred Partnership Units (“ Senior Units ”).

(3) Distributions .

(a) The record holders of the then outstanding Series B Preferred Partnership Units shall be entitled to receive cumulative preferential cash distributions, junior to cash distributions required to be made with respect to Senior Units, on parity with cash distributions required to be made with respect to any Parity Units, but prior to and in preference to all cash distributions made with respect to all Junior Units, when and as authorized by the General Partner, out of funds legally available for the payment of distributions, at an annual rate equal to the Applicable Distribution Rate then in effect multiplied by the total of (i) the $1,000 per Series B Preferred Partnership Unit liquidation preference (the “ Liquidation Preference ”) plus (ii) all accumulated and unpaid distributions thereon that are in arrears. Such distributions shall be cumulative from the first date on which Series B Preferred Partnership Units are issued, such issue date to be contemporaneous with the first receipt by the Parent of subscription funds for the Series B Preferred Stock (the “ Initial Issue Date ”), and shall be payable monthly in arrears on the first day of each calendar month or, if not a business day, the next succeeding business day (each, a “ Distribution Payment Date ”). Any distribution payable on the Series B Preferred Partnership Units for any partial Distribution Period (as defined below) will be computed on the basis of a 360-day year consisting of twelve 30-day months. The term “ Distribution Period ” shall mean, with respect to the first Distribution Period, the period from and including the Initial Issue Date to and including the first Distribution Payment Date, and with respect to each subsequent Distribution Period, the period from but excluding a Distribution Payment Date to and including the next succeeding Distribution Payment Date or other date as to which

I-1

accumulated distributions are to be calculated. Distributions shall be paid to holders of record of the Series B Preferred Partnership Units at the close of business on the record date, which shall be the business day nearest the 23 ^rd day of the calendar month that is immediately prior to the month in which the applicable Distribution Payment Date falls or such other date designated by the General Partner for the payment of distributions that is not more than 30 nor less than 10 days prior to such Distribution Payment Date (each, a “ Distribution Record Date ”). Distributions in respect of any past Distribution Periods that are in arrears may be authorized and paid at any time to holders of record on the Distribution Record Date related to each such Distribution Period. Any distribution payment made on the Series B Preferred Partnership Units shall be credited first against the earliest accumulated but unpaid distributions that remain payable. After full cumulative cash distributions, including all amounts in arrears, are paid with respect to the Series B Preferred Partnership Units pursuant to this Section 3(a) with respect to a Distribution Period, no further cash distributions shall be required to be made with respect to the Series B Preferred Partnership Units pursuant to this Section 3(a) with respect to such Distribution Period except as provided in Section 3(j) below.

(b) No distributions on the Series B Preferred Partnership Units shall be authorized by the General Partner or paid or set apart for payment by the General Partner if, at such time, (i) the terms and provisions of any agreement of the Partnership in effect on the date hereof relating to its indebtedness prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder or (ii) such authorization, payment or setting apart is prohibited by applicable law.

(c) Notwithstanding the foregoing, distributions on the Series B Preferred Partnership Units shall accumulate if they are not paid in full for any reason, including, without limitation, whether or not the terms and provisions set forth in Section 3(b) hereof at any time prohibit the current payment of distributions, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. Distributions will be authorized and paid when due in all events to the fullest extent permitted by law, and if revaluation of the Partnership or its assets would permit payment of distributions that would otherwise be prohibited, then such revaluation shall be done. Unpaid distributions on the Series B Preferred Partnership Units will accumulate as of the Distribution Payment Date on which they first become payable.

(d) Except as provided in Section 3(e), unless full cumulative distributions on all the outstanding Series B Preferred Partnership Units have been or contemporaneously are authorized, declared and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past Distribution Periods through the prior Distribution Payment Date, no distributions (other than solely in Common Partnership Units or other Junior Units) shall be authorized, declared or paid or set apart for payment nor shall any other distribution be authorized, declared or made upon any of the Common Partnership Units or any other Junior Units nor shall any Common Partnership Units or any other Junior Units be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such units) by the Partnership (except by conversion into or exchange for other Junior Units or shares of the Parent’s common stock pursuant to Section 8.6 of the Partnership Agreement). Notwithstanding anything to the contrary contained herein and for the avoidance of doubt, distributions to the holders of the Common Partnership Units and

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other Junior Units shall be permitted and shall not be restricted at any time if the Partnership is not in arrears with regard to the payment of any distributions on any outstanding Series B Preferred Partnership Units in respect of any completed Distribution Period through a prior Distribution Payment Date.

(e) When distributions are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series B Preferred Partnership Units, all distributions authorized and paid upon the Series B Preferred Partnership Units shall be authorized and paid pro rata.

(f) Notwithstanding anything to the contrary herein, the General Partner will not be prohibited from declaring and paying distributions on the Series A Preferred Partnership Units or from declaring and paying other distributions in such amounts that are necessary under applicable law for Parent to preserve its status as a REIT.

(g) A “ Distribution Default ” shall have occurred if for any reason or for no reason (including due to the operation of Sections 3(b) and 3(c) above) at any time the cash distribution payments on the Series B Preferred Partnership Units are in arrears for twelve consecutive Distribution Payment Dates. A Distribution Default shall be deemed to continue for so long as such condition exists.

(h) A “ Covenant Default ” shall have occurred if (i) the aggregate Investment Amount is less than $100,000,000 and the Tangible Net Worth of either Parent or the Partnership is less than $100,000,000 or (ii) the Investment Amount is greater than $100,000,000 and the Tangible Net Worth of either Parent or the Partnership is less than $110,000,000. A Covenant Default shall be deemed to continue for so long as either of these conditions exists.

(i) A “ REIT Default ” shall occur upon (i) the failure of Parent to qualify on or before June 30, 2015 for the taxable year ended December 31, 2014 as REIT or (ii) at any time after becoming qualified as a REIT, (A) it is more likely than not that the Parent will not be taxed as a REIT for the current taxable year, or (B) it is determined finally by the Internal Revenue Service (and not reasonably disputed by the Parent pursuant to appropriate legal process) that the Parent fails to qualify as a REIT for any taxable year. A REIT Default shall be deemed to occur retroactively as of the first day of the calendar year in which either of the events described in clauses (i) and (ii) of this definition occurs and shall continue for so long as such failure continues.

(j) If it is determined that a REIT Default has occurred, the Applicable Distribution Rate on account of such REIT Default shall apply (and distributions pursuant to Section 3(a) above shall be deemed to have accumulated at such Applicable Distribution Rate) from the first day of the calendar year during which such REIT Default occurs and shall continue to accumulate at such Applicable Distributions Rate until such REIT Default is cured, with the Applicable Distribution Rate for such period being as set forth in clause (iv) of the Applicable Distribution Rate definition (unless during the period of such REIT Default no Distributions Default or Covenant Default exists, in which case the Applicable Distribution Rate shall be as set forth in clause (iii) of the Applicable Distribution Rate definition) and the Partnership shall promptly and retroactively be obligated to pay to the holders of the Series B Preferred Partnership Units, automatically and without further action by any holder of Series B Preferred Partnership Units, an amount in cash equal to the excess of the amount of the distributions that

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should have been paid for such period over the amount of distributions actually paid in cash for such period, it being understood and agreed that any such amounts not paid as required shall accrue, accumulate and be required to be paid in accordance with the provisions of Section 3, including but not limited to Section 3(a)(ii). The Partnership’s obligations under this Section 3(j) shall survive any redemption, conversion or other occurrence with respect to shares of the Series B Preferred Partnership Units that causes such Series B Preferred Partnership Units to no longer be outstanding, and shall survive the cancellation or other termination of the Partnership’s obligations with respect to the Series B Preferred Partnership Units hereunder.

(4) Liquidation Preference .

(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, following any required distribution with respect to the Series A Preferred Partnership Units required to be made pursuant to the provisions of the Partnership Agreement in existence on the Initial Issue Date (or as amended in compliance with Section 6(h) of the Series B Articles Supplementary) and any other Senior Units properly approved pursuant to Section 6(h) of the Series B Articles Supplementary, but prior to and in preference to any distribution being made to holders of Common Partnership Units and any other Junior Units or other securities of the Partnership that are not authorized and issued in compliance with the provisions of Section 6(h) of the Series B Articles Supplementary, the holders of the Series B Preferred Partnership Units shall be entitled to receive, out of the assets of the Partnership legally available for distribution, on account of each of their Series B Preferred Partnership Units, a distribution in cash in the amount of (i) the Liquidation Preference plus (ii) an amount equal to all distributions accumulated and unpaid thereon to the date of payment plus (iii) the Redemption Distribution (as defined below) then in effect.

(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the legally available assets of the Partnership are insufficient to pay all amounts required to be paid to the holders of the Series B Preferred Partnership Units pursuant to Section 4(a) above, then the holders of the Series B Preferred Partnership Units shall share ratably in any such distribution of assets to be made to them in proportion to the full liquidating distributions to which they would otherwise be entitled.

(c) After payment of the full amount of liquidating distributions to which they are entitled, the holders of the Series B Preferred Partnership Units will have no right or claim to any of the remaining assets of the Partnership.

(5) Redemption .

(a) Right and Obligation of Redemption . In connection with the redemption by the Parent of the Series B Preferred Stock in accordance with the provisions of the Series B Articles Supplementary, the Partnership shall redeem the Series B Preferred Partnership Units by making a payment to the Parent for such purpose, which shall be equal to the Redemption Amount (as set forth in the Series B Articles Supplementary). The foregoing notwithstanding, no Redemption Distribution shall be due with respect to a redemption made in conjunction a Change of Control (as defined in the Series B Articles Supplementary) resulting from the acquisition of the Parent or of the Parent’s or the Partnership’s assets by Carter/Validus Operating Partnership, L.P., a Delaware limited partnership, or any of its affiliates prior to December 31, 2015. From and after the applicable redemption date, the Series B Preferred Partnership Units so redeemed shall no longer be outstanding and all rights hereunder, to distributions or otherwise, with respect to such Series B Preferred Partnership Units shall cease.

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(6) Voting Rights . The holders of the Series B Preferred Partnership Units shall have no voting rights, except as required by applicable law and the Partnership Agreement (including this Exhibit I).

(7) Allocations . The Partnership’s items of income, gain, loss and deduction shall be allocated among holders of Series B Preferred Partnership Units in accordance with Article VI of the Partnership Agreement; it being understood and agreed that in effecting the allocation provisions of Article VI of the Partnership Agreement, (a) the Series B Preferred Partnership Units shall be deemed to constitute Partnership Interests that are entitled to a preference upon liquidation and in distribution, and (b) to the extent that any provision of Article VI of the Partnership Agreement requires preferential allocations to be made both to the Series A Preferred Partnership Units and the Series B Preferred Partnership Units, such allocations shall be made (i) first with respect to the Series A Preferred Partnership Units in preference to allocations made with respect to all other Partnership Interests (including the Series B Preferred Partnership Units) to the full extent required with respect to such Series A Preferred Partnership Units and (ii) then shall be made with respect to the Series B Preferred Partnership Units prior to and in preference to allocations made with respect to all Junior Units.

(8) Conversion . The Series B Preferred Partnership Units are not convertible into or exchangeable for any other property or securities of the Parent or the Partnership, except as provided herein.

(a) In the event that a holder of shares of Series B Preferred Stock exercises its right to convert the shares of Series A Preferred Shares into shares of common stock of the Parent in accordance with the terms of the Series B Articles Supplementary, then, concurrently therewith, an equivalent number of Series B Preferred Partnership Units held by the Parent shall be automatically converted into a number of Common Partnership Units equal to the number of shares of common stock of the Parent issued upon conversion of such shares of Series B Preferred Stock. Any such conversion will be effective at the same time the conversion of the shares of Series B Preferred Stock into shares of common stock of the Parent is effective.

(b) No fractional units will be issued in connection with the conversion of Series B Preferred Units into Common Partnership Units, and the number of Common Partnership Units to be issued upon conversion shall be rounded down to the nearest whole unit. In lieu of fractional Common Partnership Units, the holder shall be entitled to receive an amount in cash equal to the fair market value of such fractional Common Partnership Unit that was rounded down on the date of conversion, as determined in good faith by the General Partner.

(9) Adjustments . All dollar amounts and numbers of units set forth herein shall be proportionately and equitably adjusted for any splits or combinations of units, and for any dividends and distributions of additional securities with respect to outstanding units.

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Exhibit 10.4

MEDEQUITIES REALTY TRUST, INC.

AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS


			Page
1.	PURPOSE			1
2.	DEFINITIONS			1
3.	ADMINISTRATION OF THE PLAN			7
	3.1	Committee.		7
	3.2	Terms of Awards.		8
	3.3	Forfeiture; Recoupment.		9
	3.4	No Repricing.		10
	3.5	Deferral Arrangement.		10
	3.6	No Liability.		10
	3.7	Share Issuance/Book-Entry.		10
4.	SHARES SUBJECT TO THE PLAN			10
	4.1	Number of Shares Available for Awards.		10
	4.2	Adjustments in Authorized Shares.		11
	4.3	Share Usage.		11
5.	EFFECTIVE DATE, DURATION AND AMENDMENTS			11
	5.1	Effective Date.		11
	5.2	Term.		11
	5.3	Amendment and Termination of the Plan.		12
6.	AWARD ELIGIBILITY AND LIMITATIONS			12
	6.1	Service Providers and Other Persons.		12
	6.2	Limitation on Shares Subject to Awards and Cash Awards.		12
	6.3	Stand-Alone, Additional, Tandem and Substitute Awards.		13
7.	AWARD AGREEMENT			13
8.	TERMS AND CONDITIONS OF OPTIONS			13
	8.1	Option Price.		13
	8.2	Vesting.		13
	8.3	Term.		14
	8.4	Termination of Service.		14
	8.5	Limitations on Exercise of Option.		14
	8.6	Method of Exercise.		14
	8.7	Rights of Holders of Options.		14
	8.8	Delivery of Share Certificates.		15
	8.9	Transferability of Options.		15
	8.10	Family Transfers.		15
	8.11	Limitations on Incentive Stock Options.		15
	8.12	Notice of Disqualifying Disposition.		15
9.	TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS			16
	9.1	Right to Payment and Grant Price.		16
	9.2	Other Terms.		16
	9.3	Term.		16
	9.4	Transferability of SARS.		16
	9.5	Family Transfers.		17


10.	TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS			17
	10.1	Grant of Restricted Stock or Stock Units.		17
	10.2	Restrictions.	17
	10.3	Restricted Stock Certificates.		17
	10.4	Rights of Holders of Restricted Stock.		18
	10.5	Rights of Holders of Stock Units.		18
	10.6	Termination of Service.		19
	10.7	Delivery of Shares.		19
11.	TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS			19
12.	FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK			20
	12.1	General Rule.		20
	12.2	Surrender of Shares.		20
	12.3	Cashless Exercise.		20
	12.4	Other Forms of Payment.		20
13.	TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS			20
	13.1	Dividend Equivalent Rights.		20
	13.2	Termination of Service.		21
14.	TERMS AND CONDITIONS OF PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS			21
	14.1	Grant of Performance Awards and Annual Incentive Awards.		21
	14.2	Value of Performance Awards and Annual Incentive Awards.		21
	14.3	Earning of Performance Awards and Annual Incentive Awards.		21
	14.4	Form and Timing of Payment of Performance Awards and Annual Incentive Awards.		22
	14.5	Performance Conditions.		22
	14.6	Performance Awards or Annual Incentive Awards Granted to Designated Covered Employees.		22
	14.7	Status of Awards Under Code Section 162(m).		25
15.	TERMS AND CONDITIONS OF LONG-TERM INCENTIVE UNITS			26
	15.1	Vesting.		26
16.	PARACHUTE LIMITATIONS			26
17.	REQUIREMENTS OF LAW			27
	17.1	General.		27
	17.2	Rule 16b-3.		28
18.	EFFECT OF CHANGES IN CAPITALIZATION			28
	18.1	Changes in Shares.		28
	18.2	Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control.		28
	18.3	Change in Control in which Awards are not Assumed.		29
	18.4	Change in Control in which Awards are Assumed.		30
	18.5	Adjustments.		30
	18.6	No Limitations on Company.		31
19.	GENERAL PROVISIONS			31
	19.1	Disclaimer of Rights.		31
	19.2	Nonexclusivity of the Plan.		31
	19.3	Withholding Taxes.		31
	19.4	Captions.		32


19.5	Other Provisions.	32
19.6	Number and Gender.	32
19.7	Severability.	33
19.8	Governing Law.	33
19.9	Code Section 409A.	33

iii

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

(as amended and restated effective August 13, 2015)

MedEquities Realty Trust, Inc., a Maryland corporation (the “Company”), sets forth herein the terms of its 2014 Equity Incentive Plan (the “Plan”), as follows:

1.	PURPOSE

The Plan is intended to provide (a) incentive to officers, employees, directors, consultants and other eligible persons to stimulate their efforts towards the success of the Company and to operate and manage its business in a manner that will provide for the long term growth and profitability of the Company; and (b) a means of obtaining, rewarding and retaining key personnel. To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units (including deferred stock units), dividend equivalent rights, long-term incentive units, other equity-based awards and cash bonus awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein.

2.	DEFINITIONS

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

2.1 “Affiliate” means, with respect to the Company, any company or other trade or business that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary. For purposes of granting Options or Stock Appreciation Rights, an entity may not be considered an Affiliate of the Company unless the Company holds a “controlling interest” in such entity, where the term “controlling interest” has the same meaning as provided in Treasury Regulation Section 1.414(c)-2(b)(2)(i), provided that the language “at least 50 percent” is used instead of “at least 80 percent” and, provided further, that where granting of Options or Stock Appreciation Rights is based upon a legitimate business criteria, the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).

2.2 “Annual Incentive Award” means an Award, denominated in cash, made subject to attainment of performance goals (as described in Section 14 ) over a Performance Period of up to one (1) year (which shall correspond to the Company’s fiscal year, unless otherwise specified by the Committee).

2.3 “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate, securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national market system, of any jurisdiction applicable to Awards granted to residents therein.

2.4 “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Unit, Dividend Equivalent Right, Performance Award, Annual Incentive Award, LTIP Unit, or Other Equity-Based Award under the Plan.

2.5 “Award Agreement” means the agreement between the Company and a Grantee that evidences and sets out the terms and conditions of an Award.

2.6 “Benefit Arrangement” shall have the meaning set forth in Section 16 .

2.7 “Board” means the Board of Directors of the Company.

2.8 “Cause” means, unless defined otherwise in a Service Provider’s Award Agreement or employment, consulting or services agreement with the Company or an Affiliate (in which case such definition shall control), as determined by the Committee, the Service Provider’s (i) continued failure to substantially perform duties, or gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction or plea of guilty or nolo contendere of a felony; (iii) conviction of any other criminal offense involving an act of dishonesty intended to result in substantial personal enrichment of such Grantee at the expense of the Company or an Affiliate; or (iv) material breach of any Company policy or term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.

2.9 “Change in Control” means:

(i) Any “person” as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding voting securities;

(ii) During any period of twelve consecutive months, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) hereof) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or actual threatened solicitation of proxies or consents by or on behalf of a person other than the Board;

(iii) The consummation of a merger or consolidation of the Company with any other entity or the issuance of voting securities in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary thereof) pursuant to

applicable exchange requirements, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) at least 50.1% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as defined above) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of either of the then outstanding shares of Common Stock or the combined voting power of the Company’s then outstanding voting securities; or

(iv) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction or series of transactions within a period of twelve months ending on the date of the last sale or disposition having a similar effect).

Notwithstanding the foregoing, if an Award constitutes deferred compensation within the meaning of Code Section 409A, no payment, settlement or vesting (if vesting would be deemed a distribution with respect to the Award under Section 409A) shall occur with respect to such Award on account of the Change in Control transaction or event unless the transaction or event also constitutes a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the Company’s assets, as those terms are used in Code Section 409A(a)(2)(c)(v).

2.10 “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

2.11 “Committee” means the Committee constituted under Section 3 to administer the Plan.

2.12 “Common Stock” means the common stock of the Company, par value $0.01 per share.

2.13 “Company” means MedEquities Realty Trust, Inc., a Maryland corporation.

2.14 “Covered Employee” means a Grantee who is a covered employee within the meaning of Code Section 162(m)(3).

2.15 “Determination Date” means the Grant Date or such other date as of which the Fair Market Value of a Share is required to be established for purposes of the Plan.

2.16 “Disability” means the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee’s Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

2.17 “Dividend Equivalent Right” means a right, granted to a Grantee under Section 13 , to receive cash, Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.

2.18 “Effective Date” means July 30, 2014, the date the Plan was approved by the stockholders of the Company.

2.19 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

2.20 “Fair Market Value” means the fair market value of a Share for purposes of the Plan, which shall be determined as of any Determination Date as follows:

(i) If on such Determination Date the Shares are listed on a Stock Exchange, or are publicly traded on another established securities market (a “ Securities Market ”), the Fair Market Value of a Share shall be the closing price of a Share as reported on such Stock Exchange or such Securities Market (provided that, if there is more than one such Stock Exchange or Securities Market, the Committee shall designate the appropriate Stock Exchange or Securities Market for purposes of the Fair Market Value determination). If there is no such reported closing price on such Determination Date, the Fair Market Value of a Share shall be the closing price of a Share on the most recent date prior to such Determination Date on which any sale of Shares shall have been reported on such Stock Exchange or such Securities Market.

(ii) If on such Determination Date the Shares are not listed on a Stock Exchange or publicly traded on a Securities Market, the Fair Market Value of a Share shall be the value of a Share as determined by the Committee in good faith; provided, however, that if such Fair Market Value is used to determine an Option Price or a SAR Exercise Price, the Committee shall use a reasonable application of a reasonable valuation method, in a manner consistent with Code Section 409A.

2.21 “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which any one or more of these persons (or the Grantee) control the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.

2.22 “Good Reason” means, unless defined otherwise in a Service Provider’s Award Agreement or employment, consulting or services agreement with the Company or an Affiliate (in which case such definition shall control), as determined by the Committee (i) the assignment to the Service Provider of substantial duties or responsibilities inconsistent with the Service Provider’s position at the Company, or any other action by the Company which results in a

substantial diminution of the Service Provider’s duties, authorities or responsibilities (other than temporarily while physically or mentally incapacitated or as required by applicable law); (ii) a material reduction in the Service Provider’s aggregate base salary and other compensation (including annual target bonus opportunity and retirement plans, welfare plans and fringe benefits) taken as a whole, excluding any reductions caused by the failure to achieve performance targets (as the same may be in effect from time to time); (iii) the relocation of the Service Provider’s principal place of employment to a location more than 30 miles from the Service Provider’s principal place of employment or the Company’s requiring the Service Provider to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with the Service Provider’s business travel obligations as of immediately prior to the Change in Control or (iv) the Company’s material breach of the terms of any employment agreement with the Service Provider; provided, however, that the Service Provider must provide the Company with a written notice detailing the specific circumstances alleged to constitute “Good Reason” within ninety (90) days after the first occurrence of such circumstances that the Service Provider knows or reasonably should have known to constitute “Good Reason,” such condition must not have been remedied by the Company within thirty (30) days of such written notice, and the termination must occur within ninety (30) days after such failure to remedy the event.

2.23 “Grant Date” means, as determined by the Committee, the latest to occur of (i) the date as of which the Company completes the action constituting the Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 , or (iii) such other date as may be specified by the Committee.

2.24 “Grantee” means a natural person who receives or holds an Award under the Plan.

2.25 “Incentive Stock Option” means an “incentive stock option” within the meaning of Code Section 422, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

2.26 “Long-Term Incentive Unit” or “LTIP Unit” means an Award under Section 15 of an interest in the operating partnership affiliated with the Company.

2.27 “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.

2.28 “Option” means an option to purchase one or more Shares pursuant to the Plan.

2.29 “Option Price” means the exercise price for each Share subject to an Option.

2.30 “Other Agreement” shall have the meaning set forth in Section 16 .

2.31 “Other Equity-Based Award” means a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, other than an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Unit, Dividend Equivalent Right, Performance Award or Annual Incentive Award.

2.32 “Outside Director” means a member of the Board who is not an officer or employee of the Company.

2.33 “Performance Award” means an Award made subject to the attainment of performance goals (as described in Section 14 ) over a Performance Period of up to ten (10) years.

2.34 “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for “qualified performance-based compensation” paid to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall be construed to mean that an Award which does not satisfy the requirements for “qualified performance-based compensation” under Code Section 162(m) does not constitute performance-based compensation for other purposes, including for purposes of Code Section 409A.

2.35 “Performance Measures” means measures as described in Section 14 on which the performance goals are based and which have been approved by the Company’s stockholders pursuant to the Plan in order to qualify Awards as Performance-Based Compensation.

2.36 “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

2.37 “Plan” means this MedEquities Realty Trust, Inc. 2014 Equity Incentive Plan, as amended from time to time.

2.38 “Purchase Price” means the purchase price for each Share pursuant to a grant of Restricted Stock, Stock Units or Unrestricted Stock.

2.39 “Restatement Effective Date” means August 13, 2015, the date the amendment and restatement of the Plan was approved by the Board.

2.40 “Restricted Stock” means Shares awarded to a Grantee pursuant to Section 10 .

2.41 “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee under Section 9 .

2.42 “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

2.43 “Service” means service as a Service Provider to the Company or any Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or any Affiliate. Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Committee, which determination shall be final, binding and conclusive. Notwithstanding any other provision to the contrary, for any individual providing services solely as a director, only service to the Company or any of its Subsidiaries constitutes Service. Except as may otherwise be required to comply with Code Section 409A, if the Service Provider’s

employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, a termination of Service shall be deemed to have occurred when the entity ceases to be an Affiliate unless the Service Provider transfers his or her employment or other service relationship to the Company or its remaining Affiliates.

2.44 “Service Provider” means an employee, officer, director, or a consultant or adviser (who is a natural person) providing services to the Company or any of its Affiliates.

2.45 “Share” means a share of Common Stock.

2.46 “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under Section 9 .

2.47 “Stock Units” means a bookkeeping entry representing the equivalent of one Share awarded to a Grantee pursuant to Section 10 .

2.48 “Stock Exchange” means the New York Stock Exchange or another established national or regional stock exchange.

2.49 “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Code Section 424(f).

2.50 “Substitute Award” means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity acquired by the Company or an Affiliate or with which the Company or an Affiliate combines.

2.51 “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding voting securities of the Company, its parent or any of its Subsidiaries. In determining Share ownership, the attribution rules of Code Section 424(d) shall be applied.

2.52 “Unrestricted Stock” shall have the meaning set forth in Section 11 .

Unless the context otherwise requires, all references in the Plan to “including” shall mean “including without limitation.”

References in the Plan to any Code Section shall be deemed to include, as applicable, regulations promulgated under such Code Section.

3.	ADMINISTRATION OF THE PLAN

3.1 Committee .

The Plan shall be administered by the Committee, constituted as follows:

(i) The Committee will consist of the Compensation Committee of the Board or, in the absence of a Compensation Committee, the Board or such committee as the Board shall select. Once appointed, the Committee will serve in its designated

capacity until otherwise directed by the Board. The Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), or remove all members of the Committee and thereafter directly administer the Plan. Notwithstanding the foregoing, unless the Board determines otherwise, at any time that the Company Shares are registered pursuant to Section 12 of the Exchange Act, the Plan will be administered only by a committee consisting of no fewer than two directors of the Company, each of whom is (A) a “non-employee director” within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, (B) an “outside director” within the meaning of Section 162(m)(4)(C)(i) of the Code, and (C) an “independent director” for purpose of the rules and regulations of the Stock Exchange or quotation system on which the Shares are principally traded; provided, however, the failure of the Committee to be composed solely of individuals who are “non-employee directors,” “outside directors,” and “independent directors” shall not render ineffective or void any Awards made by, or other actions taken by, such Committee.

(ii) The Plan may be administered by different bodies with respect to different Grantees.

(iii) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Grantee, any stockholder and any employee or any Affiliate. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings.

(iv) The Committee may delegate to a committee of one or more Directors of the Company or, to the extent permitted by Applicable Law, to one or more officers or a committee of officers, the authority to grant Awards to employees and officers of the Company and its Affiliates who are not directors, Covered Employees, or “officers,” as such term is defined by Rule 16a-1(f) of the Exchange Act.

3.2 Terms of Awards.

Subject to the other terms and conditions of the Plan, the Committee shall have full and final authority to:

(i) designate Grantees;

(ii) determine the type or types of Awards to be made to a Grantee;

(iii) determine the number of Shares to be subject to an Award;

(iv) establish the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the Shares subject thereto, the treatment of an Award in the event of a Change in Control, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options);

(v) prescribe the form of each Award Agreement evidencing an Award;

(vi) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement;

(vii) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect;

(viii) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan;

(ix) amend, modify, or reprice (except as such practice is prohibited by Section 3.4 herein) the terms of any outstanding Award; and

(x) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.

Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify Awards to eligible individuals who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom. Notwithstanding the foregoing, no amendment, modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee’s rights under such Award.

3.3 Forfeiture; Recoupment.

The Company may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee with respect to an Award thereunder on account of actions taken by, or failed to be taken by, such Grantee in violation or breach of or in conflict with any (a) employment agreement, (b) non-competition agreement, (c) agreement prohibiting solicitation of employees or clients of the Company or any Affiliate, (d) confidentiality obligation with respect to the Company or any Affiliate, or (e) other agreement, as and to the extent specified in such Award Agreement. The Company may annul an outstanding Award if the Grantee thereof is an employee and is terminated for Cause as defined in the Plan or the applicable Award Agreement or for “cause” as defined in any other agreement between the Company or any Affiliate and such Grantee, as applicable.

If the Company adopts a “clawback” or recoupment policy, any Award will be subject to repayment to the Company to the extent so provided under the terms of such policy. Such policy may authorize the Company to recover from a Grantee incentive-based compensation (including Options awarded as compensation) awarded to or received by such Grantee during a period of up to three (3) years, as determined by the Committee, preceding the date on which the Company is required to prepare an accounting restatement due to material noncompliance by the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws. In addition, and notwithstanding the foregoing, such policy may otherwise authorize the Company to recover from a Grantee any amounts or awards as may in the future be prescribed by the rules and regulations of the Securities and Exchange Commission and/or the primary stock exchange on which the Shares are listed, if any.

3.4 No Repricing.

Except for adjustments to Options or SARs contemplated by Section 18 , the Company may not, without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to reduce the Option Price or SAR Exercise Price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for or substitution of Options or SARs with an Option Price or SAR Exercise Price that is less than the exercise price of the original Options or SARs; (c) cancel outstanding Options or SARs with an Option Price or SAR Exercise Price above the current Fair Market Value of a Share in exchange for cash or other securities; or (d) take any other action with respect to Options or SARS that would be treated as a repricing under the Stock Exchange or quotation system on which the Shares are principally traded.

3.5 Deferral Arrangement.

The Committee may permit or require the deferral of any award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or Dividend Equivalent Rights and, in connection therewith, provisions for converting such credits into Stock Units and for restricting deferrals to comply with hardship distribution rules affecting tax-qualified retirement plans subject to Code Section 401(k)(2)(B)(IV), provided that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of Options or SARs. Any such deferrals shall be made in a manner that complies with Code Section 409A.

3.6 No Liability.

No member of the Board or the Committee (or any other person to whom administrative authority has been delegated hereunder) shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement.

3.7 Share Issuance/Book-Entry.

Notwithstanding any provision of the Plan to the contrary, the issuance of the Shares under the Plan may be evidenced in such a manner as the Committee, in its discretion, deems appropriate, including, without limitation, book-entry or direct registration or issuance of one or more share certificates.

4.	SHARES SUBJECT TO THE PLAN

4.1 Number of Shares Available for Awards.

Subject to adjustment as provided in Section 18 , the aggregate number of Shares reserved under this Plan shall be 1,356,723. Subject to adjustment as provided in Section 18 , the number of Shares available for issuance as Incentive Stock Options shall be 624,350. Shares issued or to be issued under the Plan shall be authorized but unissued shares or treasury Shares or any combination of the foregoing, as may be determined from time to time by the Board or by the Committee.

4.2 Adjustments in Authorized Shares.

The Committee shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Code Section 424(a) applies. The number of Shares reserved pursuant to Section 4 shall be increased by the corresponding number of awards assumed and, in the case of a substitution, by the net increase in the number of Shares subject to awards before and after the substitution. Available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and do not reduce the number of Shares available under the Plan, subject to requirements of the Stock Exchange on which the Shares are listed.

4.3 Share Usage.

Shares covered by an Award shall be counted as used as of the Grant Date. Any Shares that are subject to Awards shall be counted against the limit set forth in Section 4.1 as one (1) Share for every one (1) Share subject to an Award. With respect to SARs, the number of Shares subject to an award of SARs will be counted against the aggregate number of Shares available for issuance under the Plan regardless of the number of Shares actually issued to settle the SAR upon exercise. If any Shares covered by an Award granted under the Plan are not purchased or are forfeited or expire, or if an Award otherwise terminates without delivery of any Shares subject thereto, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination or expiration, again be available for making Awards under the Plan in the same amount as such Shares were counted against the limit set forth in Section 4.1 . The number of Shares available for issuance under the Plan shall not be increased by (i) any Shares tendered or withheld or Award surrendered in connection with the purchase of Shares upon exercise of an Option as described in Section 12.2 , (ii) any Shares deducted or delivered from an Award payment in connection with the Company’s tax withholding obligations as described in Section 19.3 or (iii) any Shares purchased by the Company with proceeds from option exercises.

5.	EFFECTIVE DATE, DURATION AND AMENDMENTS

5.1 Effective Date.

The Plan shall be effective as of the Effective Date.

5.2 Term.

The Plan first became effective on the Effective Date. The Plan was subsequently amended and restated effective as of the Restatement Effective Date. The Plan shall continue in effect until the day immediately prior to the 10-year anniversary of the Effective Date, unless sooner terminated on any date as provided in Section 5.3 or extended with approval by the stockholders of the Company.

5.3 Amendment and Termination of the Plan.

The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any Shares as to which Awards have not been made. An amendment shall be contingent on approval of the Company’s stockholders to the extent stated by the Board, required by Applicable Laws or required by the Stock Exchange on which the Shares are listed. No amendment will be made to the no-repricing provisions of Section 3.4 or the option pricing provisions of Section 8.1 without the approval of the Company’s stockholders. No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan.

6.	AWARD ELIGIBILITY AND LIMITATIONS

6.1 Service Providers and Other Persons.

Subject to this Section 6 , Awards may be made under the Plan to: (i) any Service Provider, as the Committee shall determine and designate from time to time and (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Committee.

6.2 Limitation on Shares Subject to Awards and Cash Awards.

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act and the transition period under Treasury Regulation Section 1.162-27(f)(2) has lapsed or does not apply, Awards intended to qualify as Performance-Based Compensation shall be subject to the following limitations:

(i) the maximum number of Shares subject to Options or SARs that can be granted under the Plan to any person eligible for an Award under Section 6 is One Million (1,000,000) Shares in a calendar year (for this purpose, tandem SARs/Options shall be treated as one Award);

(ii) the maximum number of Shares that can be granted under the Plan, other than pursuant to Options or SARs, to any person eligible for an Award under Section 6 is One Million (1,000,000) Shares in a calendar year; and

(iii) the maximum amount that may be paid as an Annual Incentive Award in a calendar year to any person eligible for an Award shall be Five Million Dollars ($5,000,000) and the maximum amount that may be paid as a cash-settled Performance Award in respect of a performance period by any person eligible for an Award shall be Five Million Dollars ($5,000,000).

The preceding limitations in this Section 6.2 are subject to adjustment as provided in Section 18 .

6.3 Stand-Alone, Additional, Tandem and Substitute Awards.

Subject to Section 3.4 , Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted at any time. Subject to Section 3.4 , if an Award is granted in substitution or exchange for another Award, the Committee shall require the surrender of such other Award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate. Notwithstanding Section 8.1 and Section 9.1 but subject to Section 3.4 , the Option Price of an Option or the SAR Exercise Price of an SAR that is a Substitute Award may be less than 100% of the Fair Market Value of a Share on the original date of grant; provided, that, the Option Price or grant price is determined in accordance with the principles of Code Section 424 and the regulations thereunder for any Incentive Stock Option and consistent with Code Section 409A for any other Option or SAR.

7.	AWARD AGREEMENT

Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Committee shall from time to time determine. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-Qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-Qualified Stock Options.

8.	TERMS AND CONDITIONS OF OPTIONS

8.1 Option Price.

The Option Price of each Option shall be fixed by the Committee and stated in the Award Agreement evidencing such Option. Except in the case of Substitute Awards, the Option Price of each Option shall be at least the Fair Market Value of a Share on the Grant Date; provided, however , that in the event that a Grantee is a Ten Percent Stockholder, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of a Share on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a Share.

8.2 Vesting.

Subject to Sections 8.3 and 18.3 , each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Committee and stated in the Award Agreement. For purposes of this Section 8.2 , fractional numbers of Shares subject to an Option shall be rounded down to the next nearest whole number.

8.3 Term.

Each Option granted under the Plan shall terminate, and all rights to purchase Shares thereunder shall cease, upon the expiration of ten (10) years from the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated in the Award Agreement relating to such Option; provided, however, that in the event that the Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five (5) years from its Grant Date.

8.4 Termination of Service.

Each Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee’s Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

8.5 Limitations on Exercise of Option.

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the stockholders of the Company as provided herein or after the occurrence of an event referred to in Section 18 which results in termination of the Option.

8.6 Method of Exercise.

Subject to the terms of Section 12 and Section 19.3 , an Option that is exercisable may be exercised by the Grantee’s delivery to the Company of notice of exercise on any business day, at the Company’s principal office, on the form specified by the Company and in accordance with any additional procedures specified by the Committee. Subject to the terms of Section 12 and Section 19.3 , such notice shall specify the number of Shares with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the Shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to an Award.

8.7 Rights of Holders of Options.

Unless otherwise stated in the applicable Award Agreement, an individual or entity holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject Shares or to direct the voting of the subject Shares or to receive notice of any meeting of the Company’s stockholders) until the Shares covered thereby are fully paid and issued to him. Except as provided in Section 18 , no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

8.8 Delivery of Share Certificates.

Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price with respect thereto, such Grantee shall be entitled to receive such evidence of such Grantee’s ownership of the Shares subject to such Option as shall be consistent with Section 3.7 .

8.9 Transferability of Options.

Except as provided in Section 8.10 , during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise an Option. Except as provided in Section 8.10 , no Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

8.10 Family Transfers.

If authorized in the applicable Award Agreement or by the Committee, in its sole discretion, a Grantee may transfer, not for value, all or part of an Option which is not an Incentive Stock Option to any Family Member. For the purpose of this Section 8.10 , a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 8.10 , any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and Shares acquired pursuant to the Option shall be subject to the same restrictions on transfer of shares as would have applied to the Grantee. Subsequent transfers of transferred Options are prohibited except to Family Members of the original Grantee in accordance with this Section 8.10 or by will or the laws of descent and distribution. The events of termination of Service of Section 8.4 shall continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods specified, in Section 8.4 .

8.11 Limitations on Incentive Stock Options.

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000. Except to the extent provided in the regulations under Code Section 422, this limitation shall be applied by taking Options into account in the order in which they were granted.

8.12 Notice of Disqualifying Disposition.

If any Grantee shall make any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.

9.	TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

9.1 Right to Payment and Grant Price.

A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the SAR Exercise Price as determined by the Committee. The Award Agreement for a SAR shall specify the SAR Exercise Price, which shall be at least the Fair Market Value of one (1) Share on the Grant Date. SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in conjunction with all or part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR Exercise Price that is no less than the Fair Market Value of one Share on the SAR Grant Date; and provided further that a Grantee may only exercise either the SAR or the Option with which it is granted in tandem and not both.

9.2 Other Terms.

The Committee shall determine on the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

9.3 Term.

Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten (10) years from the date such SAR is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated in the Award Agreement relating to such SAR.

9.4 Transferability of SARS.

Except as provided in Section 9.5 , during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise a SAR. Except as provided in Section 9.5 , no SAR shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

9.5 Family Transfers.

If authorized in the applicable Award Agreement and by the Committee, in its sole discretion, a Grantee may transfer, not for value, all or part of a SAR to any Family Member. For the purpose of this Section 9.5 , a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 9.5 , any such SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and Shares acquired pursuant to a SAR shall be subject to the same restrictions on transfer or shares as would have applied to the Grantee. Subsequent transfers of transferred SARs are prohibited except to Family Members of the original Grantee in accordance with this Section 9.5 or by will or the laws of descent and distribution.

10.

TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

10.1 Grant of Restricted Stock or Stock Units.

Awards of Restricted Stock or Stock Units may be made for consideration or no consideration. To the extent required by Applicable Law, Grantees will be required to pay the par value of the Shares; provided, however, that, to the extent permitted by Applicable Law, par value shall be deemed paid by past Service or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate of the Company).

10.2 Restrictions.

At the time a grant of Restricted Stock or Stock Units is made, the Committee may, in its sole discretion, establish a period of time (a “restricted period”) applicable to such Restricted Stock or Stock Units. Each Award of Restricted Stock or Stock Units may be subject to a different restricted period. The Committee may in its sole discretion, at the time a grant of Restricted Stock or Stock Units is made, prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Stock or Stock Units as described in Section 14 , and which shall be set forth in the Award Agreement relating to such grant. Except as authorized by the Committee in writing, neither Restricted Stock nor Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other restrictions prescribed by the Committee with respect to such Restricted Stock or Stock Units.

10.3 Restricted Stock Certificates.

Pursuant to Section 3.7 , to the extent that ownership of Restricted Stock is evidenced by a book-entry registration or direct registration, such registration shall be notated to evidence the restrictions imposed on such Award of Restricted Stock under the Plan and the applicable Award Agreement. Subject to Section 3.7 and the immediately following sentence, the Company may issue, in the name of each Grantee to whom Restricted Stock have been granted, share

certificates representing the total number of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Committee may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the shares of Restricted Stock are forfeited to the Company or the restrictions applicable thereto lapse and such Grantee shall deliver a stock power to the Company with respect to each certificate, or (ii) such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

10.4 Rights of Holders of Restricted Stock.

Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Shares. Awards of Restricted Stock may provide for the right to receive any dividends declared or paid with respect to such Shares; provided, however, that to the extent such dividend rights are provided with respect to Restricted Stock that vests or is earned based upon the achievement of performance goals, dividends shall not be paid currently, but shall, instead, be paid (or, to the extent deemed reinvested into additional Shares of Restricted Stock, vest) only to the extent (and when) such Restricted Stock vests. The Award Agreement may provide that dividends are payable in cash or deemed reinvested in additional Shares of Restricted Stock at a price per Share equal to the Fair Market Value of a Share on the date that such dividend is paid. All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, extraordinary dividend, share dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant. Absent advance written consent by the Committee, holders of Restricted Stock may not make an election under Code Section 83(b) with regard to the grant of Restricted Stock, and any holder who attempts to make such an election without first obtaining such consent shall forfeit the Restricted Stock.

10.5 Rights of Holders of Stock Units.

10.5.1 Voting and Dividend Equivalent Rights.

Holders of Stock Units shall have no rights as stockholders of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the Shares subject to such Stock Units, to direct the voting of the Shares subject to such Stock Units, or to receive notice of any meeting of the Company’s stockholders); provided, however, that the Committee may provide in an Award Agreement evidencing a grant of Stock Units that the holder of such Stock Units shall be entitled to receive Dividend Equivalent Rights.

10.5.2 Creditor’s Rights.

A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

10.6 Termination of Service.

Unless the Committee otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any Restricted Stock or Stock Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted Stock or Stock Units, the Grantee shall have no further rights with respect to such Award, including but not limited to any right to vote Restricted Stock or any right to receive dividends with respect to Restricted Stock or Stock Units.

10.7 Delivery of Shares.

Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Committee and set forth in the Award Agreement relating to such Restricted Stock or Stock Units, the restrictions applicable to Restricted Stock or Stock Units settled in Shares shall lapse, and, unless otherwise provided in the applicable Award Agreement, a book-entry or direct registration or a share certificate evidencing ownership of such Shares shall, consistent with Section 3.7 , be issued, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee’s beneficiary or estate, shall have any further rights with regard to a Stock Unit once the Shares represented by the Stock Unit has been delivered.

11.

TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS

The Committee may, in its sole discretion, grant (or sell) an Unrestricted Stock Award to any Grantee pursuant to which such Grantee may receive Shares free of any restrictions (“Unrestricted Stock”) under the Plan. Unrestricted Stock Awards may be granted or sold to any Grantee as provided in the immediately preceding sentence in respect of past or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate or other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee. To the extent required by Applicable Law, Grantees will be required to pay the par value of any Shares received pursuant to an Award; provided, however, that, to the extent permitted by Applicable Law, par value shall be deemed paid by past Service or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate of the Company).

The Committee may, in its sole discretion, grant Awards to Grantees in the form of Other Equity-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan. Awards granted pursuant to this Section 11 may be granted with vesting, value and/or payment contingent upon the attainment of one or more performance goals. The Committee shall determine the terms and conditions of such Awards at the date of grant or thereafter. Unless the Committee otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Other Equity-Based Awards, the Grantee shall have no further rights with respect to such Award.

12.

FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

12.1 General Rule.

Payment of the Option Price for the Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company.

12.2 Surrender of Shares.

To the extent the Award Agreement so provides, payment of the Option Price for Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be made all or in part through the tender or attestation to the Company of Shares, which shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of exercise or surrender, as applicable.

12.3 Cashless Exercise.

With respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price for Shares purchased pursuant to the exercise of an Option may be made all or in part (i) by delivery (on a form acceptable to the Committee) by the Grantee of an irrevocable direction to a licensed securities broker acceptable to the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 19.3 , or, (ii) with the consent of the Company, by the Grantee electing to have the Company issue to Grantee only that the number of Shares equal in value to the difference between the Option Price and the Fair Market Value of the Shares subject to the portion of the Option being exercised.

12.4 Other Forms of Payment.

To the extent the Award Agreement so provides and/or unless otherwise specified in an Award Agreement, payment of the Option Price for Shares purchased pursuant to exercise of an Option or the Purchase Price for Restricted Stock may be made in any other form that is consistent with Applicable Laws, regulations and rules, including, without limitation, Service to the Company or an Affiliate or net exercise.

13.

TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

13.1 Dividend Equivalent Rights.

A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the Shares specified in the Dividend Equivalent Right (or other award to which it relates) if such Shares had been issued to and held by the recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee,

provided that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of Options or SARs, and, provided, further, that to the extent such Dividend Equivalent Rights are provided with respect to an Award that vests or is earned based upon the achievement of performance goals, any dividend equivalent amounts shall not be paid currently, but shall, instead, be paid (or, to the extent deemed reinvested into additional Shares or Share-based Awards, issued) only to the extent such Award vest (with the Dividend Equivalent amount paid or issued, as the case may be, at the same time the cash is paid or Shares are issued at or after vesting of the Award). The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Agreement. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid in cash or may be deemed to be reinvested in additional Shares or Share-based Awards, which may thereafter accrue additional dividend equivalents. Any such reinvestment shall be based on the Fair Market Value of a Share on the date the dividend was paid.

13.2 Termination of Service.

Except as may otherwise be provided by the Committee either in the Award Agreement or in writing after the Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights or interest equivalents shall automatically terminate upon the Grantee’s termination of Service for any reason.

14.

TERMS AND CONDITIONS OF PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS

14.1 Grant of Performance Awards and Annual Incentive Awards.

Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Awards and/or Annual Incentive Awards to a Plan participant in such amounts and upon such terms as the Committee shall determine.

14.2 Value of Performance Awards and Annual Incentive Awards.

Each Performance Award and Annual Incentive Award shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Awards that will be paid out to the Plan participant.

14.3 Earning of Performance Awards and Annual Incentive Awards.

Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Awards or Annual Incentive Awards shall be entitled to receive payout on the value and number of the Performance Awards or Annual Incentive Awards earned by the Plan participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

14.4 Form and Timing of Payment of Performance Awards and Annual Incentive Awards.

Payment of earned Performance Awards and Annual Incentive Awards shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Awards in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Awards at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period; provided that, unless specifically provided in the Award Agreement pertaining to the grant of the Award, such payment shall occur no later than the 15th day of the third month following the end of the calendar year in which the Performance Period ends. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

14.5 Performance Conditions.

The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions.

14.6 Performance Awards or Annual Incentive Awards Granted to Designated Covered Employees.

If and to the extent that the Committee determines that a Performance or Annual Incentive Award to be granted to a Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as “qualified performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 14.6 .

14.6.1 Performance Goals Generally.

The performance goals for Performance or Annual Incentive Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 14.6 . Performance goals applicable to Awards intended to qualify as Performance-Based Compensation shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to the grant, exercise and/or settlement of such Awards. Performance goals may differ for Awards granted to any one Grantee or to different Grantees.

14.6.2 Timing For Establishing Performance Goals.

Performance goals applicable to Awards intended to qualify as Performance-Based Compensation shall be established not later than the earlier of (i) 90 days after the beginning of any performance period applicable to such Awards and (ii) the day on which twenty-five percent (25%) of any performance period applicable to such Awards has expired, or at such other date as may be required or permitted for “qualified performance-based compensation” under Code Section 162(m).

14.6.3 Settlement of Awards; Other Terms.

Settlement of such Awards shall be in cash, Shares, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Awards. The Committee shall specify the circumstances in which such Performance or Annual Incentive Awards shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a performance period or settlement of Awards.

14.6.4 Performance Measures.

The performance goals upon which the payment or vesting of a Performance or Annual Incentive Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures, with or without adjustment:

(a) funds from operations;

(b) adjusted funds from operations;

(c) earnings before any one or more of the following: interest, taxes, depreciation, amortization and/or stock compensation;

(d) operating (or gross) income or profit;

(e) pretax income before allocation of corporate overhead and/or bonus;

(f) operating efficiencies;

(g) operating income as a percentage of net revenue;

(h) return on equity, assets, capital, capital employed or investment;

(i) after tax operating income;

(j) net income;

(k) earnings or book value per share;

(l) financial ratios;

(m) cash flow(s);

(n) total rental income or revenues;

(o) capital expenditures as a percentage of rental income;

(p) total operating expenses, or some component or combination of components of total operating expenses, as a percentage of rental income;

(q) stock price or total stockholder return, including any comparisons with stock market indices;

(r) appreciation in or maintenance of the price of the common stock or any of our publicly-traded securities;

(s) dividends;

(t) debt or cost reduction;

(u) comparisons with performance metrics of peer companies;

(v) comparisons of our stock price performance to the stock price performance of peer companies;

(w) strategic business objectives, consisting of one or more objectives based on meeting specified cost, acquisition or leasing targets, meeting or reducing budgeted expenditures, attaining division, group or corporate financial goals, meeting business expansion goals and meeting goals relating to leasing, acquisitions, joint ventures or collaborations or dispositions;

(x) economic value-added models; or

(y) any combination of any of the foregoing.

Business criteria may be (but are not required to be) measured on a basis consistent with U.S. Generally Accepted Accounting Principles.

Any Performance Measure(s) may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the performance of the Company, Subsidiary, and/or Affiliate or past performance or the past performance of any of the Company, Subsidiary, and/or Affiliate, operating units, business segments or divisions and/or the past or current performance of other companies, and in the case of earnings based measures, may use or employ comparisons relating to capital, stockholders’ equity and/or shares outstanding, or to assets or net assets, as the Committee may deem appropriate. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 14 .

14.6.5 Evaluation of Performance.

The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occur during a Performance Period: (a) asset impairments or write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) accruals for reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in the Company’s annual report to stockholders for the applicable year; (f) foreign exchange gains and losses, (g) the effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or regulatory action; and (h) any other event either not directly related to operations or not within the reasonable control of management. To the extent such inclusions or exclusions affect Awards to Covered Employees that are intended to qualify as Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

14.6.6 Adjustment of Performance-Based Compensation.

Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis, or any combination as the Committee determines.

14.6.7 Board Discretion.

In the event that applicable tax and/or securities laws change to permit Board discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval provided the exercise of such discretion does not violate Code Sections 162(m) or 409A. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 14.6.4 .

14.7 Status of Awards Under Code Section 162(m).

It is the intent of the Company that Awards under Section 14.6 granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute “qualified performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Section 14.6 , including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. If any provision of the Plan or any agreement relating to such Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

15.

TERMS AND CONDITIONS OF LONG-TERM INCENTIVE UNITS

LTIP Units are intended to be profits interests in the operating partnership affiliated with the Company, if any (such operating partnership, if any, the “Operating Partnership”), the rights and features of which, if applicable, will be set forth in the agreement of limited partnership for the Operating Partnership (the “Operating Partnership Agreement”). Subject to the terms and provisions of the Plan and the Operating Partnership Agreement, the Committee, at any time and from time to time, may grant LTIP Units to Plan participants in such amounts and upon such terms as the Committee shall determine. LTIP Units must be granted for service to the Operating Partnership. Each LTIP Unit awarded will be equivalent to an award of one Share for purposes of reducing the number of Shares available under the Plan on a one-for-one basis pursuant to Section 4.3.

15.1 Vesting.

Subject to Section 18 , each LTIP Unit granted under the Plan shall vest at such times and under such conditions as shall be determined by the Committee and stated in the Award Agreement.

16.

PARACHUTE LIMITATIONS

Unless the Grantee is party to a written agreement or other legally enforceable contract that expressly addresses Code Section 280G or Code Section 4999 (in which case, the provisions in such agreement or contract relating to Code Section 280G and Code Section 4999 shall control and the provisions in this Section 16 shall not be applicable to the Grantee), if the Grantee is a “disqualified individual,” as defined in Code Section 280G(c), then, notwithstanding any other provision of the Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or an Affiliate (an “Other Agreement”) providing any right to exercise, vesting, payment or benefit, and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), any right to exercise, vesting, payment or benefit to the Grantee under the Plan shall be reduced or eliminated:

(i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under the Plan, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment or benefit to the Grantee under the Plan to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) as then in effect (a “Parachute Payment”) and

(ii) if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under the Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment.

The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any accelerated vesting of Performance Awards, then by reducing or eliminating any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting of Restricted Stock or Stock Units, then by reducing or eliminating any other remaining Parachute Payments.

17.

REQUIREMENTS OF LAW

17.1 General.

No participant in the Plan will be permitted to acquire, or will have any right to acquire, Shares thereunder if such acquisition would be prohibited by any share ownership limits contained in charter or bylaws or would impair the Company’s status as a REIT. The Company shall not be required to offer, sell or issue any Shares under any Award if the offer, sale or issuance of such Shares would constitute a violation by the Grantee, any other individual or entity exercising an Option, or the Company or an Affiliate of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the offering, listing, registration or qualification of any Shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Shares hereunder, no Shares may be offered, issued or sold to the Grantee or any other individual or entity exercising an Option pursuant to such Award unless such offering, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award. Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any Option or any SAR that may be settled in Shares or the delivery of any Shares underlying an Award, unless a registration statement under such Act is in effect with respect to the Shares covered by such Award, the Company shall not be required to offer, sell or issue such Shares unless the Committee has received evidence satisfactory to it that the Grantee or any other individual or entity exercising an Option or SAR or accepting delivery of such Shares may acquire such Shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Committee shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or a SAR or the issuance of Shares pursuant to the Plan to comply with any Applicable Laws. As to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in Shares) shall not be exercisable until the Shares covered by such Option (or SAR) are registered under the securities laws thereof or are exempt from such registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

17.2 Rule 16b-3.

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of the Exchange Act will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Committee does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative with respect to such Awards to the extent permitted by Applicable Law and deemed advisable by the Committee, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify the Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

18.

EFFECT OF CHANGES IN CAPITALIZATION

18.1 Changes in Shares.

If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of Shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse stock split, spin-off, combination of share, exchange of shares, share dividend or other distribution payable in capital shares, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which grants of Options and other Awards may be made under the Plan, including, without limitation, the limits set forth in Section 6.2 , shall be adjusted proportionately and accordingly by the Company in a manner deemed equitable by the Committee. In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to the unexercised portion of an outstanding Option or SAR, as applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share. The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Company’s stockholders of securities of any other entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such manner as the Company deems appropriate, adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Stock Appreciation Rights to reflect such distribution.

18.2 Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control.

Subject to Section 18.3 , if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities which

does not constitute a Change in Control, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of Shares subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price of the Shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing an Award, or in another agreement with the Grantee, or otherwise set forth in writing, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation. In the event of a transaction described in this Section 18.2 , Performance Awards shall be adjusted (including any adjustment to the Performance Measures applicable to such Awards deemed appropriate by the Committee) so as to apply to the securities that a holder of the number of Shares subject to the Performance Awards would have been entitled to receive immediately following such transaction.

18.3 Change in Control in which Awards are not Assumed.

Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence of a Change in Control in which outstanding Options, SARs, Stock Units, Dividend Equivalent Rights, Restricted Stock, LTIP Units or other Equity-Based Awards are not being assumed or continued:

(i) in each case with the exception of any Performance Award, all outstanding Restricted Stock and LTIP Units shall be deemed to have vested, all Stock Units shall be deemed to have vested and the Shares subject thereto shall be delivered, and all Dividend Equivalent Rights shall be deemed to have vested and the Shares subject thereto shall be delivered, immediately prior to the occurrence of such Change in Control, and

(ii) either of the following two actions shall be taken:

(A) fifteen (15) days prior to the scheduled consummation of a Change in Control, all Options and SARs outstanding hereunder shall become immediately exercisable and shall remain exercisable for a period of fifteen (15) days, or

(B) the Committee may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Stock, Stock Units, and/or SARs and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Committee acting in good faith), in the case of Restricted Stock or Stock Units, equal to the formula or fixed price per share paid to holders of Shares and, in the case of Options or SARs, equal to the product of the number of Shares subject to the Option or SAR (the “Award Shares”) multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of Shares pursuant to such transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such Award Shares.

(iii) for Performance Awards denominated in Shares, Stock Units or LTIP Units, if less than half of the Performance Period has lapsed, the Awards shall be converted into Restricted Stock or Stock Units assuming target performance has been achieved (or Unrestricted Stock if no further restrictions apply). If more than half the Performance Period has lapsed, the Awards shall be converted into Restricted Stock or Stock Units based on actual performance to date (or Unrestricted Stock if no further restrictions apply). If actual performance is not determinable, then Performance Awards shall be converted into Restricted Stock or Stock Units assuming target performance has been achieved, based on the discretion of the Committee (or Unrestricted Stock if no further restrictions apply).

(iv) Other Equity Based Awards shall be governed by the terms of the applicable Award Agreement.

With respect to the Company’s establishment of an exercise window, (i) any exercise of an Option or SAR during such fifteen (15)-day period shall be conditioned upon the consummation of the event and shall be effective only immediately before the consummation of the event, and (ii) upon consummation of any Change in Control, the Plan and all outstanding but unexercised Options and SARs shall terminate. The Committee shall send notice of an event that will result in such a termination to all individuals and entities that hold Options and SARs not later than the time at which the Company gives notice thereof to its stockholders.

18.4 Change in Control in which Awards are Assumed.

Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence of a Change in Control in which outstanding Awards are being assumed or continued, the following provisions shall apply to such Award, to the extent assumed or continued:

The Plan, Options, SARs, Stock Units, Restricted Stock and Other Equity-Based Awards theretofore granted shall continue in the manner and under the terms so provided in the event of any Change in Control to the extent that provision is made in writing in connection with such Change in Control for the assumption or continuation of the Options, SARs, Stock Units, Restricted Stock and Other Equity-Based Awards theretofore granted, or for the substitution for such Options, SARs, Stock Units, Restricted Stock and Other Equity-Based Awards for new common stock options and stock appreciation rights and new common stock units, restricted stock and other equity-based awards relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation rights exercise prices.

18.5 Adjustments

Adjustments under this Section 18 related to Shares or securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Committee shall determine the effect of a Change in Control upon Awards other than Options, SARs, Stock Units and

Restricted Stock, and such effect shall be set forth in the appropriate Award Agreement. The Committee may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 18.1, 18.2, 18.3 and 18.4 . This Section 18 does not limit the Company’s ability to provide for alternative treatment of Awards outstanding under the Plan in the event of change in control events that do not constitute a Change in Control.

18.6 No Limitations on Company.

The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets (including all or any part of the business or assets of any Subsidiary or other Affiliate) or engage in any other transaction or activity.

19.

GENERAL PROVISIONS

19.1 Disclaimer of Rights.

No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual or entity the right to remain in the employ or Service of the Company or an Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or an Affiliate either to increase or decrease the compensation or other payments to any individual or entity at any time, or to terminate any employment or other relationship between any individual or entity and the Company or an Affiliate. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, in another agreement with the Grantee, or otherwise in writing, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to provide Service. The obligation of the Company to pay any benefits pursuant to the Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan and Awards shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.

19.2 Nonexclusivity of the Plan.

Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Company to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as it may determine to be desirable.

19.3 Withholding Taxes.

The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions

applicable to an Award or upon the issuance of any Shares upon the exercise of an Option or pursuant to an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay in cash to the Company or an Affiliate, as the case may be, any amount that the Company or an Affiliate may reasonably determine to be necessary to satisfy such withholding obligation; provided, that if there is a same-day sale of Shares subject to an Award, the Grantee shall pay such withholding obligation on the day on which such same-day sale is completed. Subject to the prior approval of the Company or an Affiliate, which may be withheld by the Company or an Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or an Affiliate to withhold Shares otherwise issuable to the Grantee or (ii) by delivering to the Company or an Affiliate Shares already owned by the Grantee. The Shares so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the Shares used to satisfy such withholding obligation shall be determined by the Company or an Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 19.3 may satisfy his or her withholding obligation only with Shares that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. The maximum number of Shares that may be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of Shares pursuant to such Award, as applicable, cannot exceed such number of Shares having a Fair Market Value equal to the minimum statutory amount required by the Company or an Affiliate to be withheld and paid to any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of Shares. Notwithstanding Section 2.20 or this Section 19.3 , for purposes of determining taxable income and the amount of the related tax withholding obligation pursuant to this Section 19.3 , for any Shares subject to an Award that are sold by or on behalf of a Grantee on the same date on which such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such shares shall be the sale price of such shares on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such date), so long as such Grantee has provided the Company or an Affiliate, or its designee or agent, with advance written notice of such sale.

19.4 Captions.

The use of captions in the Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

19.5 Other Provisions.

Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Committee, in its sole discretion.

19.6 Number and Gender.

With respect to words used in the Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.

19.7 Severability.

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

19.8 Governing Law.

The validity and construction of the Plan and the instruments evidencing the Awards hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.

19.9 Code Section 409A.

The Company intends to comply with Code Section 409A, or an exemption to Code Section 409A, with regard to Awards hereunder that constitute deferred compensation within the meaning of Code Section 409A, and the Plan and all Award Agreements shall be interpreted accordingly. To the extent that the Company determines that a Grantee would be subject to the additional twenty percent (20%) tax imposed on certain nonqualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of any Award granted under the Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Board. Notwithstanding anything to the contrary in this Plan or any Award Agreement, if a Grantee is deemed on the date of the Grantee’s termination of employment to be a “specified employee” within the meaning of Code Section 409A(a)(2)(B), then, to the extent required by Code Section 409A, any payment or the provision of any benefit pursuant to an Award that is considered deferred compensation under Code Section 409A and that is payable on account of such Grantee’s “separation from service” shall not be made or provided until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service,” and (ii) the date of the Grantee’s death. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 19.9 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Grantee in a lump sum, and any remaining payments and benefits due under this this Plan and any Award Agreement shall be paid or provided in accordance with the normal payment dates specified for them therein.

* * *

Exhibit 10.5

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

STOCK UNITS AGREEMENT

MedEquities Realty Trust, a Maryland corporation (the “ Company ”), hereby grants stock units (“ Stock Units ”) for shares of its common stock, $0.01 par value per share (“ Common Stock ”), to the Grantee named below, subject to the vesting and other conditions set forth below. Additional terms and conditions of the grant are set forth in this cover sheet and in the attachment (collectively, the “ Agreement ”) and in the Company’s 2014 Equity Incentive Plan (as amended from time to time, the “ Plan ”). Capitalized terms used but not defined herein shall have the meanings given them in the Plan.

Name of Grantee:

Number of Stock Units:

Grant Date:

Vesting Schedule: Subject to your continuous Service and other limitations set forth in this Agreement and the Plan, 50% of your Stock Units will vest based on the achievement of absolute total return to stockholders (“ TSR ”) (the “ TSR Performance Units ”) and 50% of the Stock Units will vest based on the achievement of relative TSR as compared to the performance of the MSCI US REIT Index (the “ MSCI US REIT Index Performance Units ”), during the performance period commencing on the Grant Date and ending on third (3 ^rd ) anniversary of the Grant Date (the “ Performance Period ”). Vesting of the Stock Units is dependent upon the achievement of the applicable hurdle amounts for the TSR Performance Units and the MSCI US REIT Index Performance Units during the Performance Period. For performance between the hurdle amounts for the TSR Performance Units and the MSCI US REIT Index Performance Units, the amount earned will be interpolated on a linear basis. The hurdle amounts for the TSR Performance Units and the MSCI US REIT Index Performance Units are as follows:


TSR Performance Units
TSR Performance			% of Award Earned
	25.5	%		0	%
	27.5	%		25	%
	29.5	%		50	%
	31.5	%		75	%
	33.5	%		100	%


MSCI US REIT Index Performance Units
MSCI US REIT Index Performance	% of Award Earned
= Index		0	%
Index +3%		50	%
Index +6% or greater		100	%

For the sake of clarity, TSR is calculated as (i) (a) the value per Share at the end of the Performance Period, assuming reinvestment on the payment date of dividends and any other stockholder payouts during the Performance Period in additional Shares, less (b) the value per Share at the beginning of the Performance Period, divided by (ii) the value per Share at the beginning of the Performance Period, expressed as a percentage. For purposes of this Agreement, the value per Share at the beginning of the Performance Period will be $[ ], and the value per Share at the end of the Performance Period will be (y) if the Shares are listed on a Stock Exchange or publicly traded on a Securities Market, the average closing stock price over last fifteen (15) trading days ending on the last trading day of the Performance Period, or (z) if the Shares are not listed on a Stock Exchange or publicly traded on a Securities Market, as determined by the Committee in good faith.

By your signature below, you agree to all of the terms and conditions described herein, in the attached Agreement and in the Plan, a copy of which is also attached. You acknowledge that you have carefully reviewed the Plan, and agree that the Plan will control in the event any provision of this cover sheet or Agreement should appear to be inconsistent.


Grantee:		Date:
	(Signature)

Company:		Date:
	(Signature)
Title:

Attachment

This is not a stock certificate or a negotiable instrument.

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

STOCK UNITS AGREEMENT


Stock Units		This Agreement evidences an award of stock units for Shares in the number set forth on the cover sheet and subject to the vesting and other conditions set forth herein, in the Plan and on the cover sheet (the “ Stock Units ”).

Transfer of Unvested Stock Units		Except as authorized by the Committee in writing, unvested Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered, whether by operation of law or otherwise, nor may the Stock Units be made subject to execution, attachment or similar process. If you attempt to do any of these things without the Committee’s written authorization, the Stock Units will immediately become forfeited.

Vesting		The Company will issue your Stock Units in the name set forth on the cover sheet. Your rights under this Stock Units grant and this Agreement shall vest in accordance with the vesting schedule set forth on the cover sheet so long as you continue in Service through the vesting dates set forth on the cover sheet.

Delivery		As your Stock Units vest, the Company will issue the Shares to which the then vested Stock Units relate. The resulting aggregate number of vested Shares will be rounded to the nearest whole number, and you cannot vest in more than the number of Shares covered by this grant. The issuance of Shares shall be made within fifteen (15) days of the date on which Stock Units representing such Shares are vested.

Evidence of Issuance		The issuance of the Shares under the grant of Stock Units evidenced by this Agreement shall be evidenced in such a manner as the Company, in its discretion, will deem appropriate, including, without limitation, book-entry, registration or issuance of one or more Share certificates. You will have no further rights with regard to a Stock Unit once the Share related to such Stock Unit has been issued.

Forfeiture of Unvested Stock Units		Unless the termination of your Service triggers accelerated vesting of your Stock Units, or other treatment pursuant to the terms of this Agreement, the Plan, or in an employment or any other written agreement between the Company or any Affiliate, as applicable, and


		you, you will automatically forfeit to the Company all of the unvested Stock Units in the event you are no longer providing Service for any reason.

Leaves of Absence		For purposes of this Agreement, your Service does not terminate when you go on a bona fide leave of absence that was approved by your employer in writing if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. Your Service terminates in any event when the approved leave ends unless you immediately return to active employee work. Your employer may determine, in its discretion, which leaves count for this purpose, and when your Service terminates for all purposes under the Plan in accordance with the provisions of the Plan. Notwithstanding the foregoing, the Company may determine, in its discretion, that a leave counts for this purpose even if your employer does not agree.

Withholding Taxes		You agree as a condition of this grant that you will make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the vesting or receipt of the Stock Units within a reasonable period of time, or you shall forfeit the Shares. In the event that the Company or any Affiliate determines that any federal, state, local or foreign tax or withholding payment is required relating to the vesting or receipt of Shares arising from this grant, the Company or any Affiliate shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate (including withholding the delivery of vested Shares otherwise deliverable under this Agreement).

Retention Rights		This Agreement and the grant evidenced hereby do not give you the right to be retained by the Company or any Affiliate in any capacity. Unless otherwise specified in an employment or other written agreement between the Company or any Affiliate and you, the Company or any Affiliate reserves the right to terminate your Service at any time and for any reason.

Stockholder Rights		You, or your estate or heirs, do not have any of the rights of a stockholder with respect to any vested or unvested Stock Units (other than with respect to the Dividend Equivalent Rights described below) until the Shares have been issued to you and either a certificate evidencing your Shares have been issued or an appropriate entry has been made on the Company’s books.


		Your grant shall be subject to the terms of Section 18 of the Plan in the event of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.

Dividend Equivalent Rights		You shall also be entitled to Dividend Equivalent Rights with respect to your Stock Units, as described herein. If the Company declares a normal cash dividend on its Shares and the record date of such dividend is prior to the earlier of the date your Stock Units are settled in full or terminate, you will receive a dividend equivalent credit equal to such normal cash dividend for each outstanding Stock Unit. Any such dividend equivalent credits shall be accumulated (without interest) and shall be subject to the same terms and conditions as are applicable to the Stock Units to which the dividend equivalents relate, including, without limitation, the restrictions on transfer, forfeiture, vesting and payment provisions contained in this Agreement. For avoidance of doubt, dividend equivalents shall be paid in cash on the date the Stock Units to which they relate are converted into Shares.

Legends		If and to the extent that the Shares are issued and represented by certificates rather than book entry, all certificates representing the Shares issued under this grant shall, where applicable, have endorsed thereon the following legends:

		“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING, FORFEITURE AND OTHER RESTRICTIONS ON TRANSFER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”

		To the extent the Shares are represented by a book entry, such book entry will contain an appropriate legend or restriction similar to the foregoing.


Grantee’s Representation		In the event the Stock Units or Shares issued pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, at the time of grant or vesting, you shall, if required by the Company, concurrently with the grant or vesting of such Stock Units and/or Shares, deliver to the Company a completed Accredited Investor Questionnaire in the form attached hereto as Exhibit A .

Clawback		If the Company adopts a “clawback” or recoupment policy, this Award will be subject to repayment to the Company to the extent so provided under the terms of such policy.

Applicable Law		This Agreement will be interpreted and enforced under the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

The Plan		The text of the Plan is incorporated in this Agreement by reference. *Certain capitalized terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan.* This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant; except that any written employment, consulting, confidentiality, non-competition, non-solicitation and/or severance agreement between you and the Company or any Affiliate shall supersede this Agreement with respect to its subject matter. Any other prior agreements, commitments or negotiations concerning this grant are superseded.

Data Privacy		In order to administer the Plan, the Company may process personal data about you. Such data includes, but is not limited to, information provided in this Agreement and any changes thereto, other appropriate personal and financial data about you such as your contact information, payroll information and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan. By accepting this grant, you give explicit consent to the Company to process any such personal data.

Code Section 409A		It is intended that this Award comply with Code Section 409A or an exemption to Code Section 409A, and this Award shall be interpreted accordingly. To the extent that the Company determines


		that you would be subject to the additional 20% tax imposed on certain non-qualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Company. For purposes of this Award, a termination of Service only occurs upon an event that would be a Separation from Service within the meaning of Code Section 409A.

By signing this Agreement, you agree to all of the terms and conditions described above and in the Plan.

Exhibit 10.6

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

MedEquities Realty Trust, Inc., a Maryland corporation (the “ Company ”), hereby grants shares of its common stock, $0.01 par value per share (“ Common Stock ”), to the Grantee named below, subject to the vesting and other conditions set forth below. Additional terms and conditions of the grant are set forth in this cover sheet and in the attachment (collectively, the “ Agreement ”) and in the Company’s 2014 Equity Incentive Plan (as amended from time to time, the “ Plan ”). Capitalized terms used but not defined herein shall have the meanings given them in the Plan.

Name of Grantee:

Number of Restricted Shares of Common Stock (“ Shares ”):

Grant Date:

Vesting Schedule:


Grantee:		Date:
	(Signature)

Company:		Date:
	(Signature)
Title:

Attachment

This is not a stock certificate or a negotiable instrument.

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT


Restricted Stock		This Agreement evidences an award of Shares in the number set forth on the cover sheet and subject to the vesting and other conditions set forth herein, in the Plan and on the cover sheet (the “ Restricted Stock ”).

Transfer of Unvested Restricted Stock		Except as authorized by the Committee in writing, unvested Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered, whether by operation of law or otherwise, nor may the Restricted Stock be made subject to execution, attachment or similar process. If you attempt to do any of these things without the Committee’s written authorization, the Restricted Stock will immediately become forfeited.

Issuance and Vesting		The Company will issue your Restricted Stock in the name set forth on the cover sheet.

		Your rights under this Restricted Stock grant and this Agreement shall vest in accordance with the vesting schedule set forth on the cover sheet so long as you continue in Service through the vesting dates set forth on the cover sheet.

Evidence of Issuance		The issuance of the Shares under the grant of Restricted Stock evidenced by this Agreement shall be evidenced in such a manner as the Company, in its discretion, deems appropriate, including, without limitation, book-entry, direct registration or issuance of one or more share certificates, with any unvested Restricted Stock bearing the appropriate restrictions imposed by this Agreement. As your interest in the Restricted Stock vests, the recordation of the number of Restricted Stock attributable to you will be appropriately modified if necessary.

Forfeiture of Unvested Restricted Stock		Unless the termination of your Service triggers accelerated vesting of your Restricted Stock or other treatment pursuant to the terms of this Agreement, the Plan, or in an employment or any other written agreement between the Company or any Affiliate and you, you will automatically forfeit to the Company all of the unvested Restricted Stock in the event you are no longer providing Service.

Leaves of Absence		For purposes of this Agreement, your Service does not terminate when you go on a bona fide leave of absence that was approved by your employer in writing if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. Your Service terminates in any event when the approved leave ends unless you immediately return to active employee work.


		Your employer may determine, in its discretion, which leaves count for this purpose, and when your Service terminates for all purposes under the Plan in accordance with the provisions of the Plan. Notwithstanding the foregoing, the Company may determine, in its discretion, that a leave counts for this purpose even if your employer does not agree.

Withholding Taxes		You agree as a condition of this grant that you will make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the vesting or receipt of the Restricted Stock. In the event that the Company or any Affiliate determines that any federal, state, local or foreign tax or withholding payment is required relating to the vesting or receipt of Shares arising from this grant, the Company or any Affiliate shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate (including withholding the delivery of vested Shares otherwise deliverable under this Agreement).

Retention Rights		This Agreement and the grant evidenced hereby do not give you the right to be retained by the Company or any Affiliate in any capacity. Unless otherwise specified in an employment or other written agreement between the Company or any Affiliate and you, the Company or any Affiliate reserves the right to terminate your Service at any time and for any reason.

Stockholder Rights		You will be entitled to receive all dividends or other distributions made on outstanding Shares. No adjustments are made for dividends or other rights if the applicable record date occurs before an appropriate book entry is made (or your certificate is issued), except as described in the Plan.

		Your grant shall be subject to the terms of Section 18 of the Plan in the event of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.

Legends		If and to the extent that the Shares are represented by certificates rather than book entry, all certificates representing the Shares issued under this grant shall, where applicable, have endorsed thereon the following legends:

		“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.


		THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING, FORFEITURE AND OTHER RESTRICTIONS ON TRANSFER. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”

		To the extent the Shares are represented by a book entry, such book entry will contain an appropriate legend or restriction similar to the foregoing.

Grantee’s Representation		In the event the Shares granted pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, at the time of grant or vesting, you shall, if required by the Company, concurrently with the grant or vesting of the Shares, deliver to the Company a completed Accredited Investor Questionnaire in the form attached hereto as Exhibit A .

Clawback		If the Company adopts a “clawback” or recoupment policy, this Award will be subject to repayment to the Company to the extent so provided under the terms of such policy.

Applicable Law		This Agreement will be interpreted and enforced under the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

The Plan		The text of the Plan is incorporated in this Agreement by reference.

		Certain capitalized terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan.

		This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant; except that any written employment, consulting, confidentiality, non-competition, non-solicitation and/or severance agreement between you and the Company or any Affiliate shall supersede this Agreement with respect to its subject matter, including without limitation your employment agreement with the Company dated July 31, 2014. Any other prior agreements, commitments or negotiations concerning this grant are superseded.

Data Privacy		In order to administer the Plan, the Company may process personal data about you. Such data includes, but is not limited to, information provided in this Agreement and any changes thereto, other appropriate personal and financial data about you such as your contact information, payroll information and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan.

		By accepting this grant, you give explicit consent to the Company to process any such personal data.


Code Section 409A		It is intended that this Award comply with Code Section 409A or an exemption to Code Section 409A, and this Award shall be interpreted accordingly. To the extent that the Company determines that you would be subject to the additional 20% tax imposed on certain non-qualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Company. For purposes of this Award, a termination of Service only occurs upon an event that would be a Separation from Service within the meaning of Code Section 409A.

Section 83(b) Election		Absent advance written consent by the Committee, you may not make an election under Code Section 83(b) with regard to this grant of Restricted Stock, and any attempt to make such an election without first obtaining such consent shall result in the forfeiture of the Restricted Stock.

By signing this Agreement, you agree to all of the terms and conditions described above and in the Plan.

Exhibit 10.7

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

Name of Grantee:

Number of Restricted Shares of Common Stock (“ Shares ”):

Grant Date:

Vesting Schedule:


Grantee:		Date:
	(Signature)

Company:		Date:
	(Signature)
Title:

Attachment

This is not a stock certificate or a negotiable instrument.

MEDEQUITIES REALTY TRUST, INC.

2014 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT


Restricted Stock		This Agreement evidences an award of Shares in the number set forth on the cover sheet and subject to the vesting and other conditions set forth herein, in the Plan and on the cover sheet (the “ Restricted Stock ”).

Transfer of Unvested Restricted Stock		Except as authorized by the Committee in writing, unvested Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered, whether by operation of law or otherwise, nor may the Restricted Stock be made subject to execution, attachment or similar process. If you attempt to do any of these things without the Committee’s written authorization, the Restricted Stock will immediately become forfeited.

Issuance and Vesting		The Company will issue your Restricted Stock in the name set forth on the cover sheet.

		Your rights under this Restricted Stock grant and this Agreement shall vest in accordance with the vesting schedule set forth on the cover sheet so long as you continue in Service through the vesting dates set forth on the cover sheet.

Change in Control		Notwithstanding the vesting schedule set forth above, upon the consummation of a Change in Control, the Restricted Stock will become 100% vested.

Evidence of Issuance		The issuance of the Shares under the grant of Restricted Stock evidenced by this Agreement shall be evidenced in such a manner as the Company, in its discretion, deems appropriate, including, without limitation, book-entry, direct registration or issuance of one or more share certificates, with any unvested Restricted Stock bearing the appropriate restrictions imposed by this Agreement. As your interest in the Restricted Stock vests, the recordation of the number of Restricted Stock attributable to you will be appropriately modified if necessary.

Forfeiture of Unvested Restricted Stock		Unless the termination of your Service triggers accelerated vesting of your Restricted Stock or other treatment pursuant to the terms of this Agreement, the Plan, or any other written agreement between the Company or any Affiliate and you, you will automatically forfeit to the Company all of the unvested Restricted Stock in the event you are no longer providing Service.

Withholding Taxes		You agree as a condition of this grant that you will make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the vesting or receipt of the Restricted Stock. In the event that the


		Company or any Affiliate determines that any federal, state, local or foreign tax or withholding payment is required relating to the vesting or receipt of Shares arising from this grant, the Company or any Affiliate shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate (including withholding the delivery of vested Shares otherwise deliverable under this Agreement).

Retention Rights		This Agreement and the grant evidenced hereby do not give you the right to be retained by the Company or any Affiliate in any capacity. Unless otherwise specified in a written agreement between the Company or any Affiliate and you, the Company or any Affiliate reserves the right to terminate your Service at any time and for any reason.

Stockholder Rights		You will be entitled to receive all dividends or other distributions made on outstanding Shares. No adjustments are made for dividends or other rights if the applicable record date occurs before an appropriate book entry is made (or your certificate is issued), except as described in the Plan.

		Your grant shall be subject to the terms of any applicable agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.

Legends		If and to the extent that the Shares are represented by certificates rather than book entry, all certificates representing the Shares issued under this grant shall, where applicable, have endorsed thereon the following legends:

		“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING, FORFEITURE AND OTHER RESTRICTIONS ON TRANSFER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”

		To the extent the Shares are represented by a book entry, such book entry will contain an appropriate legend or restriction similar to the foregoing.



Grantee’s Representation		In the event the Shares issued pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, at the time of grant or vesting, you shall, if required by the Company, concurrently with the grant or vesting of the Shares, deliver to the Company a completed Accredited Investor Questionnaire in the form attached hereto as Exhibit A .

Clawback		If the Company adopts a “clawback” or recoupment policy, this Award will be subject to repayment to the Company to the extent so provided under the terms of such policy.

Applicable Law		This Agreement will be interpreted and enforced under the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

The Plan		The text of the Plan is incorporated in this Agreement by reference.

		Certain capitalized terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan.

		This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant; except that any written employment, consulting, confidentiality, non-competition, non-solicitation and/or severance agreement between you and the Company or any Affiliate shall supersede this Agreement with respect to its subject matter. Any other prior agreements, commitments or negotiations concerning this grant are superseded.

Corporate Activity		Your grant shall be subject to the terms of any applicable agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.

Data Privacy		In order to administer the Plan, the Company may process personal data about you. Such data includes, but is not limited to, information provided in this Agreement and any changes thereto, other appropriate personal and financial data about you such as your contact information, payroll information and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan.

		By accepting this grant, you give explicit consent to the Company to process any such personal data.

Code Section 409A		It is intended that this Award comply with Code Section 409A or an exemption to Code Section 409A. To the extent that the Company determines that you would be subject to the additional 20% tax imposed on


		certain non-qualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Company. For purposes of this Award, a termination of Service only occurs upon an event that would be a Separation from Service within the meaning of Code Section 409A.

Section 83(b) Election		Absent advance written consent by the Committee, you may not make an election under Code Section 83(b) with regard to this grant of Restricted Stock, and any attempt to make such an election without first obtaining such consent shall result in the forfeiture of the Restricted Stock.

By signing this Agreement, you agree to all of the terms and conditions described above and in the Plan.

Exhibit 10.8

MEDEQUITIES REALTY TRUST, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Agreement ”) dated as of August 13, 2015 by and among MedEquities Realty Trust, Inc., a Maryland corporation (“ MedEquities ”), and MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Operating Partnership ” and, together with MedEquities, the “ Company ”), each with its principal place of business at 3100 West End Avenue, Suite 1000, Nashville, Tennessee 37203, and John W. McRoberts, residing at the address on file with the Company (the “ Employee ”) is an amendment and restatement of the Employment Agreement by and among the Company and the Employee, dated July 31, 2014.

W I T N E S S E T H

WHEREAS , MedEquities is the sole member of the general partner of the Operating Partnership;

WHEREAS , the parties originally entered into an employment agreement dated as of July 31, 2014 (the “Effective Date”), to reflect the Employee’s executive capacities in the Company’s business and to provide for the Company’s employment of the Employee (the “ Original Agreement ”); and

WHEREAS , the parties wish to change certain terms relating to the Employee’s compensation as set forth in the Original Agreement, and to memorialize those changes by entering into this Agreement, which will supersede, in its entirety, the Original Agreement.

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

1. POSITION AND DUTIES .

(a) During the Employment Term (as defined in Section 2 hereof), the Employee shall serve as the Chief Executive Officer and Chairman of the Company. In this capacity, the Employee shall have the duties, authorities and responsibilities as are required by the Employee’s position commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to the Employee as the Board of Directors of the Company shall designate from time to time that are not inconsistent with the Employee’s position with the Company and that are consistent with the bylaws of MedEquities and the amended and restated agreement of limited partnership of the Operating Partnership as they may be further amended from time to time, including, but not limited to, managing the affairs of the Company. The Employee’s principal place of employment with the Company shall be in Franklin, Tennessee, provided that the Employee understands and agrees that the Employee may be required to travel from time to time for business purposes. The Employee shall report directly to the Board of Directors of the Company.

(b) During the Employment Term, the Employee shall devote substantially all of the Employee’s business time, energy, business judgment, knowledge and skill and the Employee’s best efforts to the performance of the Employee’s duties with the Company, provided that the foregoing shall not prevent the Employee from (i) serving on the boards of directors of non-profit organizations, (ii) participating in charitable, civic, educational, professional, community or industry affairs, and (iii) managing the Employee’s personal investments and/or personal business as necessary, so long as such activities in the aggregate do not interfere or conflict with the Employee’s duties hereunder or create a potential business or fiduciary conflict.

2. EMPLOYMENT TERM . The Company agrees to employ the Employee pursuant to the terms of this Agreement, and the Employee agrees to be so employed, for a term of three years (the “ Initial Term ”) commencing as of the Effective Date. Commencing with the last day of the Initial Term, and on each subsequent anniversary of such date, the term of this Agreement shall be automatically extended for successive one-year periods, provided , however , that either party hereto may elect not to extend this Agreement by giving written notice to the other party at least sixty (60) days prior to any such anniversary date. Notwithstanding the foregoing, the Employee’s employment hereunder may be earlier terminated in accordance with Section 7 hereof, subject to Section 8 hereof. The period of time between the Effective Date and the end of the Initial Term and any successor terms (or earlier upon a termination of the Employee’s employment hereunder) shall be referred to herein as the “ Employment Term .” If the Employee’s employment continues following any expiration of the Employment Term due to either party giving notice not to extend this Agreement, such employment will be entirely “at-will,” and will not be covered by this Agreement (except for the applicable restrictive covenant provisions, which are intended to survive expiration of this Agreement as set forth herein).

3. BASE SALARY . The Company agrees to pay the Employee a base salary, as approved by the Compensation Committee of the Board of Directors of MedEquities (the “ Compensation Committee ”) in its sole discretion, payable in accordance with the regular payroll practices of the Company, but not less frequently than monthly. The Employee’s Base Salary shall be subject to review by the Compensation Committee from time to time, and may be increased (but not decreased) by the Compensation Committee in its sole discretion. The base salary as determined by the Compensation Committee and adjusted from time to time shall constitute “ Base Salary ” for purposes of this Agreement.

4. ANNUAL BONUS . During the Employment Term, the Employee shall be eligible to receive an annual discretionary incentive payment under the Company’s annual bonus plan as may be in effect from time to time (the “ Annual Bonus ”) based on a target percentage, the target of which is anticipated to be 100% of the Employee’s Base Salary, subject to being set by the Compensation Committee (the “ Target Bonus ”), upon the attainment of one or more pre-established performance goals established by the Board of Directors of MedEquities (the “ Board ”) or the Compensation Committee in its sole discretion. The Annual Bonus shall be paid no later than the end of the applicable two and one-half (2 ¹ ⁄ ₂ ) month period with respect to short-term deferrals as defined in Treas. Reg. § 1.409A-1(b)(4).

5. EQUITY AWARDS . The Employee shall be considered to receive equity and other long-term incentive awards (including long-term incentive units in the Operating Partnership) under any applicable plan adopted by the Company during the Employment Term.

6. EMPLOYEE BENEFITS .

(a) BENEFIT PLANS . During the Employment Term, the Employee shall be entitled to participate in any employee benefit plan that the Company has adopted or may adopt, maintain or contribute to for the benefit of its employees generally, subject to satisfying the applicable eligibility requirements, except to the extent such plans are duplicative of the benefits otherwise provided hereunder. The Employee’s participation will be subject to the terms of the applicable plan documents and generally applicable Company policies. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time, according to the terms of such employee benefit plan.

(b) VACATIONS . During the Employment Term, the Employee shall be entitled to paid vacation per calendar year (as prorated for partial years) in accordance with the Company’s policy on accrual and use applicable to employees as in effect from time to time, but in no event shall Employee accrue less than four (4) weeks of vacation per calendar year (pro-rated for any partial year of service).

(c) EXPENSES . Upon presentation of reasonable substantiation and documentation as the Company may specify from time to time, the Employee shall be reimbursed in accordance with the Company’s expense reimbursement policy, for all reasonable out-of-pocket business and entertainment expenses incurred and paid by the Employee during the Employment Term and in connection with the performance of the Employee’s duties hereunder. The Company shall also reimburse Employee’s expenses for legal or other advisors incurred in the review and finalization of this Agreement. During the Employment Term, the Company will pay the Employee an amount of up to $25,000 per year for policies of life, disability, executive health and wellness, and/or long-term care for his benefit and beneficiaries of his choosing. Such amount shall increase on January 1st of each year under the Employment Term by multiplying by the percentage increase in the Consumer Price Index (as published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984=100)) (or any similar successor index produced by the federal government) for such year. The amount shall be paid by the Company promptly upon presentation by the Employee of copies of the premium notices.

7. TERMINATION . The Employee’s employment and the Employment Term shall terminate on the first of the following to occur:

(a) DISABILITY . Upon ten (10) days’ prior written notice by the Company to the Employee of termination due to Disability. For purposes of this Agreement, “ Disability ” shall be defined as the inability of the Employee to have performed the Employee’s material duties hereunder due to a physical or mental injury, infirmity or incapacity which is determined to be permanent by a physician selected by the Company or its insurers and reasonably acceptable to the Employee, for one hundred eighty (180) days (including weekends and holidays) in any 365-day period.

(b) DEATH . Automatically upon the date of death of the Employee.

(c) CAUSE . Immediately upon written notice by the Company to the Employee of a termination for Cause. “ Cause ” shall mean:

(i) Employee’s refusal to substantially perform, following notice by the Company to the Employee, Employee’s duties to the Company, or gross negligence or willful misconduct in connection with the performance of the Employee’s duties to the Company;

(ii) Employee’s conviction or plea of guilty or nolo contendere of a felony;

(iii) Employee’s conviction of any other criminal offense involving an act of dishonesty intended to result in personal enrichment of Employee at the expense of the Company or an affiliate of the Company; or

(iv) Employee’s breach of any material Company policy, or term of this Agreement or any other employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Employee and the Company or an affiliate of the Company.

Any determination of Cause by the Company will be made by a resolution approved by a majority of the members of the Board, provided that no such determination may be made until the Employee has been given written notice detailing the specific Cause event, an opportunity to appear before the full Board with legal counsel, and a period of thirty (30) days following receipt of such notice to cure such event (if susceptible to cure) to the satisfaction of the Board. Notwithstanding anything to the contrary contained herein, the Employee’s right to cure as set forth in the preceding sentence shall not apply if there are habitually repeated breaches by the Employee.

(d) WITHOUT CAUSE . Immediately upon written notice by the Company to the Employee of an involuntary termination without Cause (other than for death or Disability).

(e) GOOD REASON . Upon written notice by the Employee to the Company of a termination for Good Reason. “ Good Reason ” shall mean the occurrence of any of the following events, without the express written consent of the Employee, unless such events are not habitually repeated and are fully corrected in all material respects by the Company within thirty (30) days following written notification by the Employee to the Company of the occurrence of one of the following:

(i) a reduction in or material delay in payment of the Employee’s aggregate Base Salary (including the Target Bonus opportunity), excluding any reductions in bonuses caused by the failure to achieve performance targets (as the same may be in effect from time to time);

(ii) the assignment to the Employee of substantial duties or responsibilities inconsistent with the Employee’s position at the Company, or any other action by the Company which results in a substantial diminution of the Employee’s duties, authorities or responsibilities (other than temporarily while physically or mentally incapacitated or as required by applicable law);

(iii) a requirement that the Employee work principally from a location that is thirty (30) miles further from the Employee’s residence than the Company’s address first written above;

(iv) a material adverse change in the reporting structure applicable to the Employee;

(v) any failure of a nominating committee of the Board to nominate the Employee for re-election to the Board at any annual meeting of the Company’s shareholders while the Employee serves as the Chief Executive Officer of the Company, provided that, at the time of each annual meeting, (i) the Employee is not experiencing a Disability, (ii) the Company has not notified the Employee of its intention to terminate the Executive’s employment for Cause, and (iii) the Employee has not notified the Company of his intention to resign his employment; or

(vi) the Company’s material breach of the terms of this Agreement or any other agreement or document which grants or gives the Employee the right to receive equity in the Company.

The Employee shall provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within ninety (90) days after the first occurrence of such circumstances that the Employee knows or reasonably should have known to constitute Good Reason, and actually terminate employment within thirty (30) days following the expiration of the Company’s thirty (30)-day cure period described above (it being understood that each instance of any such circumstances shall constitute a separate basis for such termination and a separate event or condition occurring on the date of such instance for purposes of calculating the ninety (90) day period). The failure by the Employee to provide written notice in detail of the circumstances constituting “Good Reason” within the time period set forth in the preceding sentence shall result in the Employee being deemed not to have terminated employment for Good Reason and to have irrevocably waived any claim of such circumstances constituting Good Reason under this Agreement.

(f) WITHOUT GOOD REASON . Upon thirty (30) days’ prior written notice by the Employee to the Company of the Employee’s voluntary termination of employment without Good Reason (which the Company may, in its sole discretion, make effective earlier than any notice date).

(g) EXPIRATION OF EMPLOYMENT TERM; NON-EXTENSION OF AGREEMENT . Upon the expiration of the Employment Term due to a non-extension of the Agreement by the Company or the Employee pursuant to the provisions of Section 2 hereof.

8. CONSEQUENCES OF TERMINATION .

(a) DEATH . In the event that the Employee’s employment and the Employment Term end on account of the Employee’s death, all outstanding equity-based awards

held by the Employee on the date of death shall immediately become fully vested and, to the extent applicable, exercisable, and the Employee or the Employee’s estate, as the case may be, shall be entitled to a lump sum payment of the following within sixty (60) days following termination of employment, or such earlier date as may be required by applicable law:

(i) any unpaid Base Salary through the termination date;

(ii) any Annual Bonus earned and accrued but unpaid;

(iii) any accrued but unused vacation time in accordance with Company policy; and

(iv) reimbursement for any unreimbursed business expenses incurred through the termination date (collectively, Sections 8(a)(i) through 8(a)(iv) hereof shall be hereafter referred to as the “ Accrued Benefits ”).

(b) DISABILITY . In the event that the Employee’s employment and/or Employment Term ends on account of the Employee’s Disability, all outstanding equity-based awards held by the Employee on the date of death shall immediately become fully vested, and the Company shall pay or provide the Employee with the following:

(i) the Accrued Benefits; and

(ii) subject to (A) the Employee’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”) and (B) the Employee’s continued compliance with the obligations in Sections 9 and 10 hereof, Employee shall be reimbursed for the amount equal to the COBRA continuation coverage premiums paid by the Employee that is required for coverage of the Employee (and/or his eligible dependents) under the Company’s major medical group health plan, for a period of eighteen (18) months, or, if less, until the Employee or his eligible dependents are no longer entitled to such COBRA coverage.

(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON OR AS A RESULT OF EMPLOYEE NON-EXTENSION OF THIS AGREEMENT . If the Employee’s employment and the Employment Term are terminated (x) by the Company for Cause, (y) by the Employee without Good Reason, or (z) as a result of the Employee’s non-extension of the Employment Term as provided in Section 2 hereof, the Company shall pay to the Employee the Accrued Benefits.

(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON; TERMINATION AS A RESULT OF COMPANY NON-EXTENSION OF THIS AGREEMENT . If the Employee’s employment and the Employment Term are terminated (x) by the Company other than for Cause (other than death or Disability), (y) by the Employee for Good Reason, or (z) as a result of the Company’s non-extension of the Employment Term as provided in Section 2 hereof and Employee was willing and able to remain employed, the Company shall pay or provide the Employee with the following:

(i) the Accrued Benefits;

(ii) subject to the Employee’s continued compliance with the obligations in Sections 9 and 10 hereof, an amount equal to three (3) times the sum of (A) the Base Salary in effect on the termination date, and (B) the average Annual Bonus earned by the Employee for the two (2) Company fiscal years ending during the Employment Period and immediately preceding the Company fiscal year in which such termination occurs (regardless of whether such amount was paid out on a current basis or deferred), paid monthly in equal installments for a period of twelve (12) months, and subject to Section 23, beginning sixty (60) days following such termination;

(iii) subject to (A) the Employee’s timely election of continuation coverage under COBRA and (B) the Employee’s continued compliance with the obligations in Sections 9 and 10 hereof, Employee shall be reimbursed for the amount equal to the COBRA continuation coverage premiums paid by the Employee that is required for coverage of the Employee (or his eligible dependents) under the Company’s major medical group health plan, for a period of eighteen (18) months, or such period of time, up to twenty-four (24) months that the Employee and his eligible dependents are eligible for COBRA continuation coverage. Upon the Employee and his dependents becoming ineligible for COBRA continuation coverage, Employee shall be reimbursed for the premiums paid by Employee for medical insurance for himself and his dependents for a period of time extending to twenty-four (24) months following termination of employment; provided, however, that Company’s obligation to make additional payments under this paragraph will cease during any period that Employee is employed by a third party that provides comparable coverage at no cost to Employee; and

(iv) all of the Employee’s equity-based awards that are outstanding on the termination date shall immediately become fully vested and, as applicable, exercisable, without any action by the Board or Compensation Committee; provided , however , that to the extent an award, not including stock options or stock appreciation rights, is intended to qualify as performance-based compensation for purposes of Internal Revenue Code Section 162(m), and the vesting of such award would cause the Company or an affiliate adverse tax consequences under Internal Revenue Code Section 162(m), such award shall not vest as a result of the termination of the Employee’s employment and shall, instead, remain outstanding after such termination and shall be subject to the terms and conditions of the applicable award agreement and plan document (other than continued employment).

Payments and benefits provided in this Section 8(d) shall be in lieu of any termination or severance payments or benefits for which the Employee may be eligible under any of the plans, policies or programs of the Company or under the Worker Adjustment Retraining Notification Act of 1988 or any similar state statute or regulation.

For purposes of Section 8(d)(ii)(B) , in the event that the Employee’s termination occurs prior to the end of the completion of two (2) Company fiscal years during the Employment Term, then the amount in Section 8(d)(ii)(B) shall be determined by using the Employee’s Target Bonus for any such fiscal year not yet completed, together with Annual Bonus actually earned by the Employee for the fiscal year completed during the Employment Term (if any), annualized for any such partial fiscal year.

(e) EFFECT OF CHANGE IN CONTROL . In the event of a Change in Control (defined below):

(i) all of the Employee’s equity-based awards that are outstanding at the time of the Change in Control shall immediately become fully vested and, as applicable, exercisable, without any action by the Board or Compensation Committee; and

(ii) “Change in Control” has the meaning given in the MedEquities Realty Trust, Inc. 2014 Equity Incentive Plan in effect on the date hereof.

(f) CODE SECTION 280G . If the Employee is a “disqualified individual,” as defined in Code Section 280G(c), then, notwithstanding any other provision of this Agreement or of any other agreement, contract, or understanding heretofore or hereafter entered into by the Employee with the Company (an “ Other Agreement ”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Employee (including groups or classes of employees or beneficiaries of which the Employee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Employee (a “ Benefit Arrangement ”), any right to exercise, vesting, payment or benefit to the Employee under this Agreement, any Other Agreement and/or any Benefit Arrangement shall be reduced or eliminated to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Employee under this Agreement, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment or benefit to the Employee under this Agreement to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) as then in effect (a “ Parachute Payment ”) if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Employee from the Company under this Agreement, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Employee without causing any such payment or benefit to be considered a Parachute Payment.

The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any accelerated vesting of performance awards, then by reducing or eliminating any accelerated vesting of options or stock appreciation rights, then by reducing or eliminating any accelerated vesting of restricted stock or stock units, then by reducing or eliminating any other remaining Parachute Payments.

(g) OTHER OBLIGATIONS . Upon any termination of the Employee’s employment with the Company, unless otherwise specified in a written agreement between the Company and the Employee and unless the Company shall be in breach of any of its payment obligations in this Section 8, the Employee shall be deemed to have resigned from the Board and any other position as an officer, director or fiduciary of the Company and its affiliates, and shall take any and all actions reasonably requested by the Company to effectuate the foregoing.

Agreement and any other claims that the Employee may have in respect of the Employee’s employment with the Company or any of its affiliates, and the Employee acknowledges that such amounts are fair and reasonable, and are the Employee’s sole and exclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of the Employee’s employment hereunder or any breach of this Agreement.

9. RELEASE . Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement beyond the Accrued Benefits shall only be payable if the Employee delivers to the Company and does not revoke a general release of claims in favor of the Company in substantially the form attached on Exhibit A hereto. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.

10. RESTRICTIVE COVENANTS .

(a) CONFIDENTIALITY . During the course of the Employee’s employment with the Company, the Employee will have access to Confidential Information. For purposes of this Agreement, “ Confidential Information ” means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, plans, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company or any of its affiliates, including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, raw partners and/or competitors. The Employee agrees that the Employee shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of the Employee’s assigned duties and for the benefit of the Company, either during the period of the Employee’s employment or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company’s and its affiliates’ part to maintain the confidentiality of such information, and to use such information only for certain limited purposes, in each case, which shall have been obtained by the Employee during the Employee’s employment by the Company (or any predecessor). The foregoing shall not apply to information that (i) was known to the Employee or the public prior to its disclosure to the Employee; (ii) becomes generally known to the public subsequent to disclosure to the Employee through no wrongful act of the Employee or any representative of the Employee; or (iii) the Employee is required to disclose by applicable law, regulation or legal process (provided that the Employee provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).

Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company or any of its affiliates, (iii) in the course of the Employee’s employment by a competitor, the Employee would inevitably use or disclose such Confidential Information, (iv) the Company and its affiliates have substantial relationships with their customers and the Employee has had and will continue to have access to these customers, (v) the Employee has received and will receive specialized training from the Company and its affiliates, and (vi) the Employee is expected to generate goodwill for the Company and its affiliates in the course of the Employee’s employment. Accordingly, during the Employee’s employment and for a period of one (1) year thereafter, the Employee agrees that the Employee will not, whether on the Employee’s own behalf or on behalf or in conjunction with any person, firm, partnership, joint venture, association corporation or other business organization, directly or indirectly, own, manage, operate, control, invest in, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation) or render services, including, without limitation, brokerage or advisory services, to any person, firm, corporation or other entity, in whatever form, engaged in the business of acquiring, owning, leasing and/or financing healthcare properties (the “Business”) or in any other business in which the Company or any of its affiliates is engaged on the termination date or in which they have planned, on or prior to such date, to be engaged in on or after such date within the Restricted Territory (defined below). Notwithstanding the foregoing, nothing herein shall prohibit the Employee from (i) being a passive owner of not more than five percent (5%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company or any of its affiliates, so long as the Employee has no active participation in the business of such corporation or (ii) owning, managing, operating, controlling, or being employed by any firm, corporation or other entity in the same capacity in which the Employee was engaged immediately prior to the Termination of the Employee’s employment hereunder, as long as (a) the Board has been apprised of the identity of, and the Employee’s role with, such firm, corporation or other entity and (b) the Board has previously approved in writing the Employee’s role with such firm, corporation or other entity, in the case of both (a) and (b), prior to the Employee’s termination of employment. In addition, the provisions of this Section 10(b) shall not be violated by the Employee commencing employment with a subsidiary, division or unit of any entity that engages in a business in competition with the Company or any of its affiliates so long as: (i) the Employee and such subsidiary, division or unit does not engage in a business in competition with the Company or any of its affiliates; and (ii) the Employee informs such entity of the restrictions contained in this Section 10 .

For the purposes of this Agreement, the “Restricted Territory” shall mean any state within the United States of America.

(i) During the Employee’s employment with the Company and for a period of one (1) year thereafter, the Employee agrees that the Employee shall not, except in the furtherance of the Employee’s duties hereunder, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid or induce any customer of the Company or any of its affiliates to purchase goods or services then sold by the Company or any of its affiliates from another person, firm, corporation or other entity or assist or aid any other persons or entity in identifying or soliciting any such customer.

(ii) During the Employee’s employment with the Company and for a period of one (1) year thereafter, the Employee agrees that the Employee shall not, except in the furtherance of the Employee’s duties hereunder, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company or any of its affiliates to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent (provided that this restriction shall not apply to professional service firms), or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company or any of its affiliates and any of their respective vendors, joint venturers, licensors or tenants. An employee, representative or agent shall be deemed covered by this Section 10(c)(ii) while so employed or retained and for a period of six (6) months thereafter.

(iii) Notwithstanding the foregoing, the provisions of this Section 10(c) shall not be violated by (A) general advertising or solicitation not specifically targeted at Company-related persons or entities or hiring a respondent to such advertising or solicitation, (B) the Employee serving as a reference, upon request, for any employee of the Company or any of its affiliates so long as such reference is not for an entity that is employing or retaining the Employee, or (C) actions taken by any person or entity with which the Employee is associated if the Employee is not personally involved in any manner in the matter and has not identified such Company-related person or entity for soliciting or hiring.

(d) NONDISPARAGMENT . The Employee agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products other than in the good faith performance of the Employee’s duties to the Company while the Employee is employed by the Company. The Company hereby covenants and agrees that it shall not, directly or indirectly, make or solicit or encourage others to make or solicit any negative comments or otherwise disparaging remarks concerning the Employee. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings (including, without limitation, filings or submissions to the Securities and Exchange Commission), or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings).

(e) RETURN OF COMPANY PROPERTY . On the date of the Employee’s termination of employment with the Company for any reason (or at any time prior thereto at the Company’s request), the Employee shall return all property belonging to the Company or its affiliates (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company). The Employee may retain the Employee’s rolodex and similar address books provided that such items only include contact information.

and proper protection of the Company and its affiliates and their Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent the Employee from obtaining other suitable employment during the period in which the Employee is bound by the restraints. The Employee acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and its affiliates and that the Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. The Employee further covenants that the Employee will not challenge the reasonableness or enforceability of any of the covenants set forth in this Section 10 . It is also agreed that each of the Company’s affiliates will have the right to enforce all of the Employee’s obligations to that affiliate under this Agreement, including without limitation pursuant to this Section 10 .

(g) REFORMATION . If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.

(h) TOLLING . In the event of any violation of the provisions of this Section 10 by the Employee, the Employee acknowledges and agrees that the post-termination restrictions contained in this Section 10 shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.

(i) SURVIVAL OF PROVISIONS . The obligations contained in Sections 10 hereof shall survive the termination or expiration of the Employment Term and the Employee’s employment with the Company and shall be fully enforceable thereafter.

(j) COOPERATION . Upon the receipt of reasonable notice from the Company (including outside counsel), the Employee agrees that while employed by the Company, the Employee will respond and provide information with regard to matters in which the Employee has knowledge as a result of the Employee’s employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of any claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of any claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of the Employee’s employment with the Company.

Employee of Section 10 hereof, any severance being paid to the Employee pursuant to this Agreement or otherwise shall immediately cease. If the Company adopts a “clawback” or recoupment policy, payments under this Agreement will be subject to repayment to the Company, but only to the extent required by applicable law, regulation or listing requirement and so provided under the terms of such policy.

12. NO ASSIGNMENTS . This Agreement is personal to each of the parties hereto. Except as provided in this Section 12 hereof, no party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto. The Company may assign this Agreement to any successor to all or substantially all of the business and/or assets of the Company, provided that the Company shall require such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “ Company ” shall mean the Company and any successor to its business and/or assets, which assumes and agrees to perform the duties and obligations of the Company under this Agreement by operation of law or otherwise.

13. NOTICE . For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile or electronic mail, (c) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Employee:

At the address (or to the facsimile number) shown

in the books and records of the Company.

If to the Company:

3100 West End Avenue, Suite 1000,

Nashville, TN 37203

Attention: President

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

14. SECTION HEADINGS; INCONSISTENCY . The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. In the event of any inconsistency between the terms of this Agreement and any form, award, plan or policy of the Company, the terms of this Agreement shall govern and control.

15. SEVERABILITY . The provisions of this Agreement shall be deemed severable. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not

affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by applicable law.

16. COUNTERPARTS . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

17. INDEMNIFICATION . In addition to any rights to indemnification to which the Employee is entitled under the bylaws of MedEquities or the amended and restated agreement of limited partnership of the Operating Partnership as they may be further amended from time to time, the Company hereby agrees to indemnify the Employee and hold the Employee harmless to the maximum extent permitted under the applicable laws of the Tennessee Business Corporation Act and the Tennessee Revised Uniform Limited Partnership Act or any successor provisions thereof and any other applicable state laws, in respect of any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorney’s fees), losses, and damages resulting from the Employee’s good faith performance of the Employee’s duties and obligations with the Company. Costs and expenses incurred by the Employee in defense of such actions, suits or proceedings (including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law made by or on behalf of the Employee to repay the amounts so paid if it shall ultimately be determined that the Employee is not entitled to be indemnified by the Company under this Agreement. This obligation shall survive the termination of the Employee’s employment with the Company.

18. LIABILITY INSURANCE . The Company shall cover the Employee under directors’ and officers’ liability insurance both during and, while potential liability exists, after the term of this Agreement in the same amount and to the same extent as the Company covers its other officers and directors.

19. GOVERNING LAW . This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Tennessee (without regard to its choice of law provisions). The parties acknowledge and agree that in connection with any dispute hereunder, each party shall pay all of its own costs and expenses, including, without limitation, its own legal fees and expenses.

agreement of the parties hereto in respect of the subject matter contained herein and supersedes any and all prior agreements or understandings between the Employee and the Company with respect to the subject matter hereof, including, without limitation, the Original Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The payment or provision to the Employee by the Company of any remuneration, benefits or other financial obligations pursuant to this Agreement and any indemnification obligations, shall be allocated between the Company and the Operating Partnership by the Compensation Committee based on any reasonable method so long as such allocation does not unduly burden the Employee.

21. REPRESENTATIONS . The Employee represents and warrants to the Company that (a) the Employee has the legal right to enter into this Agreement and to perform all of the obligations on the Employee’s part to be performed hereunder in accordance with its terms, and (b) the Employee is not a party to any agreement or understanding, written or oral, and is not subject to any restriction, which, in either case, could prevent the Employee from entering into this Agreement or performing all of the Employee’s duties and obligations hereunder. In addition, the Employee acknowledges that the Employee is aware of Section 304 (Forfeiture of Certain Bonuses and Profits) of the Sarbanes-Oxley Act of 2002 and the right of the Company thereunder to be reimbursed for certain payments to the Employee in compliance therewith.

22. TRUST. Notwithstanding anything contained herein or in any other agreement, the Company shall, at the direction of Employee, pay over any benefit (whether cash, equity, or equity-based award) that would otherwise be due to Employee to a trust designated by Employee. Any equity or equity-based award paid over to a trust pursuant to this Section 22 shall be registered in the name of the trust, and shall remain subject to the same restrictions or forfeiture conditions that would otherwise apply.

23. TAX MATTERS .

(a) WITHHOLDING . The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

(b) SECTION 409A COMPLIANCE . Notwithstanding anything in this Agreement to the contrary, this Section 23(b) shall control with respect to any payment or benefit payable hereunder that is subject to Code Section 409A.

(i) Compliance with Section 409A . The intent of the parties is that payments and benefits under this Agreement comply with (or qualify for an exemption from) Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “ Code Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted accordingly. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Employee and the Company of the applicable provision without violating the provisions of Code Section 409A.

(ii) Termination of Employment . A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of “deferred compensation” (as such term is defined in Code Section 409A) upon or following termination of employment unless such termination of employment is also a “separation from service” from Employer within the meaning of Code Section 409A and Treasury Regulation 1.409A-1(h) and, for purposes of any such provision of this Agreement, references to a “termination of employment” or any similar term or phrase shall mean “separation from service.”

(iii) Separate Payments . For purposes of Code Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.

(iv) Specified Employee . Notwithstanding anything to the contrary in this Agreement, if the Employee is deemed on the termination date to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Employee, and (B) the date of the Employee’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 23(b)(iv) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(v) No Acceleration; Employee Action/Timing of Payments . For purposes of Code Section 409A, (A) Employee may not, directly or indirectly, designate the calendar year of any payment; (B) no acceleration of the time and form of payment of any nonqualified deferred compensation to Employee or any portion thereof, shall be permitted, and (C) any payment to be made after receipt of an executed and irrevocable release within any specified period, in which such period begins in one taxable year of Employee and ends in a second taxable year of Employee, will be made in the second taxable year.

(vi) Offsets . Notwithstanding any other provision herein to the contrary, in no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect. Any payment by the Company pursuant to Section 6(d) hereof in respect of any federal, state or local tax liability shall be made by the Company no later than the end of the calendar year following the calendar year in which Employee remits the related taxes.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date first written above.


MEDEQUITIES REALTY TRUST, INC.

By:		/s/ William C. Harlan

Name:		William C. Harlan

Title:		President

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

By:		/s/ William C. Harlan

Name:		William C. Harlan

Title:		President

EMPLOYEE

/s/ John W. McRoberts

John W. McRoberts

EXHIBIT A

GENERAL RELEASE

I, , in consideration of and subject to the performance by MedEquities Realty Trust, Inc., a Maryland corporation (“ MedEquities ”), and MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Operating Partnership ” and, together with MedEquities and its subsidiaries, the “ Company ”), of its obligations under the Employment Agreement dated as of August 13, 2015 (the “ Agreement ”), including, without limitation, all payment obligations required thereunder, do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees, attorneys, advisors, successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “ Released Parties ”) to the extent provided below (this “ General Release ”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.

1. I understand that any payments or benefits paid or granted to me under Section 8 of the Agreement, other than the Accrued Benefits, represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive certain of the payments and benefits specified in Section 8 of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or

under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).

3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action or other matters covered by paragraph 2 above.

4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

5. I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claims, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided , however , that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding. Additionally, I am not waiving (i) any right to the Accrued Benefits or any severance benefits to which I am entitled under the Agreement, (ii) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Agreement or the Company’s organizational documents or otherwise, or (iii) my rights as an equity or security holder in the Company or its affiliates.

6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove waived or released. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.

7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.\

8. I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees.

9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.

10. Any non disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), any other self regulatory organization or any governmental entity.

11. I hereby acknowledge that Sections 8 through 13, 17 through 23 of the Agreement shall survive my execution of this General Release.

12. I represent that I am not aware of any claim by me other than the claims that are released by this General Release. I acknowledge that I may hereafter discover claims or facts in addition to or different than those which I now know or believe to exist with respect to the subject matter of the release set forth in paragraph 2 above and which, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.

13. Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof.

14. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

I HAVE READ IT CAREFULLY;

I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

I HAVE HAD AT LEAST [21][45] DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE TO CONSIDER IT, AND THE CHANGES MADE SINCE MY RECEIPT OF THIS RELEASE ARE NOT MATERIAL OR WERE MADE AT MY REQUEST AND WILL NOT RESTART THE REQUIRED [21][45] DAY PERIOD;

I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.


SIGNED:						DATED:

Exhibit 10.9

MEDEQUITIES REALTY TRUST, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Agreement ”) dated as of August 13, 2015, by and among MedEquities Realty Trust, Inc., a Maryland corporation (“ MedEquities ”), and MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Operating Partnership ” and, together with MedEquities, the “ Company ”), each with its principal place of business at 3100 West End Avenue, Suite 1000, Nashville, Tennessee 37203, and William C. Harlan, residing at the address on file with the Company (the “ Employee ”) is an amendment and restatement of the Employment Agreement by and among the Company and the Employee, dated July 31, 2014.

W I T N E S S E T H

WHEREAS , MedEquities is the sole member of the general partner of the Operating Partnership;

WHEREAS , the parties originally entered into an employment agreement dated as of July 31, 2014 (the “Effective Date”) to reflect the Employee’s executive capacities in the Company’s business and to provide for the Company’s employment of the Employee (the “Original Agreement”); and

1. POSITION AND DUTIES .

(a) During the Employment Term (as defined in Section 2 hereof), the Employee shall serve as the Chief Operating Officer and President of the Company. In this capacity, the Employee shall have the duties, authorities and responsibilities as are required by the Employee’s position commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to the Employee as the Chief Executive Officer of the Company shall designate from time to time that are not inconsistent with the Employee’s position with the Company and that are consistent with the bylaws of MedEquities and the amended and restated agreement of limited partnership of the Operating Partnership as they may be further amended from time to time, including, but not limited to, managing the affairs of the Company. The Employee’s principal place of employment with the Company shall be in Franklin, Tennessee, provided that the Employee understands and agrees that the Employee may be required to travel from time to time for business purposes. The Employee shall report directly to the Chief Executive Officer of the Company.

6. EMPLOYEE BENEFITS .

(c) EXPENSES . Upon presentation of reasonable substantiation and documentation as the Company may specify from time to time, the Employee shall be reimbursed in accordance with the Company’s expense reimbursement policy, for all reasonable out-of-pocket business and entertainment expenses incurred and paid by the Employee during the Employment Term and in connection with the performance of the Employee’s duties hereunder. The Company shall also reimburse Employee’s expenses for legal or other advisors incurred in the review and finalization of this Agreement. During the Employment Term, the Company will pay the Employee an amount of up to $25,000 per year for policies of life, disability, executive health and wellness and/or long-term care for his benefit and beneficiaries of his choosing. Such amount shall increase on January 1st of each year under the Employment Term by multiplying by the percentage increase in the Consumer Price Index (as published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984=100)) (or any similar successor index produced by the federal government) for such year. The amount shall be paid by the Company promptly upon presentation by the Employee of copies of the premium notices.

7. TERMINATION . The Employee’s employment and the Employment Term shall terminate on the first of the following to occur:

(b) DEATH . Automatically upon the date of death of the Employee.

(c) CAUSE . Immediately upon written notice by the Company to the Employee of a termination for Cause. “ Cause ” shall mean:

(ii) Employee’s conviction or plea of guilty or nolo contendere of a felony;

(d) WITHOUT CAUSE . Immediately upon written notice by the Company to the Employee of an involuntary termination without Cause (other than for death or Disability).

(iii) a requirement that the Employee work principally from a location that is thirty (30) miles further from the Employee’s residence than the Company’s address first written above;

(iv) a material adverse change in the reporting structure applicable to the Employee;

(v) any failure of a nominating committee of the Board to nominate the Employee for re-election to the Board at any annual meeting of the Company’s shareholders while the Employee serves as the President of the Company, provided that, at the time of each annual meeting, (i) the Employee is not experiencing a Disability, (ii) the Company has not notified the Employee of its intention to terminate the Executive’s employment for Cause, and (iii) the Employee has not notified the Company of his intention to resign his employment;

(vi) the replacement of John McRoberts as Chief Executive Officer of the Company with anyone other than Employee, provided, that such replacement of John McRoberts is not the result of (1) a termination of the employment agreement between John McRoberts and the Company and the Operating Partnership dated July 31, 2014 (the “McRoberts Employment Agreement”) (a) by the Company or (b) by John McRoberts with “good reason” (as defined in the McRoberts Employment Agreement), or (2) the Company’s non-extension of the term of the McRoberts Employment Agreement, if John McRoberts was willing and able to remain employed by the Company ; or

(vii) the Company’s material breach of the terms of this Agreement or any other agreement or document which grants or gives the Employee the right to receive equity in the Company.

8. CONSEQUENCES OF TERMINATION .

(a) DEATH . In the event that the Employee’s employment and the Employment Term end on account of the Employee’s death, all outstanding equity-based awards held by the Employee on the date of death shall immediately become fully vested and, to the extent applicable, exercisable, and the Employee or the Employee’s estate, as the case may be, shall be entitled to a lump sum payment of the following within sixty (60) days following termination of employment, or such earlier date as may be required by applicable law:

(i) any unpaid Base Salary through the termination date;

(ii) any Annual Bonus earned and accrued but unpaid;

(iii) any accrued but unused vacation time in accordance with Company policy; and

(i) the Accrued Benefits; and

(i) the Accrued Benefits;

(e) EFFECT OF CHANGE IN CONTROL . In the event of a Change in Control (defined below):

(ii) “Change in Control” has the meaning given in the MedEquities Realty Trust, Inc. 2014 Equity Incentive Plan in effect on the date hereof.

The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any accelerated vesting of performance awards, then by reducing or eliminating any accelerated vesting of options or stock appreciation rights, then by reducing or eliminating any accelerated vesting of restricted stock or stock units, then by reducing or eliminating any other remaining Parachute Payments.

(h) EXCLUSIVE REMEDY . The amounts payable to the Employee following termination of employment and the Employment Term hereunder pursuant to Sections 7 and 8 hereof shall be in full and complete satisfaction of the Employee’s rights under this Agreement and any other claims that the Employee may have in respect of the Employee’s employment with the Company or any of its affiliates, and the Employee acknowledges that such amounts are fair and reasonable, and are the Employee’s sole and exclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of the Employee’s employment hereunder or any breach of this Agreement.

10. RESTRICTIVE COVENANTS .

disclosure to the Employee through no wrongful act of the Employee or any representative of the Employee; or (iii) the Employee is required to disclose by applicable law, regulation or legal process (provided that the Employee provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).

(b) NONCOMPETITION . The Employee acknowledges that (i) the Employee performs services of a unique nature for the Company that are irreplaceable, and that the Employee’s performance of such services to a competing business will result in irreparable harm to the Company, (ii) the Employee has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company or any of its affiliates, (iii) in the course of the Employee’s employment by a competitor, the Employee would inevitably use or disclose such Confidential Information, (iv) the Company and its affiliates have substantial relationships with their customers and the Employee has had and will continue to have access to these customers, (v) the Employee has received and will receive specialized training from the Company and its affiliates, and (vi) the Employee is expected to generate goodwill for the Company and its affiliates in the course of the Employee’s employment. Accordingly, during the Employee’s employment and for a period of one (1) year thereafter, the Employee agrees that the Employee will not, whether on the Employee’s own behalf or on behalf or in conjunction with any person, firm, partnership, joint venture, association corporation or other business organization, directly or indirectly, own, manage, operate, control, invest in, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation) or render services, including, without limitation, brokerage or advisory services, to any person, firm, corporation or other entity, in whatever form, engaged in the business of acquiring, owning, leasing and/or financing healthcare properties (the “Business”) or in any other business in which the Company or any of its affiliates is engaged on the termination date or in which they have planned, on or prior to such date, to be engaged in on or after such date within the Restricted Territory (defined below). Notwithstanding the foregoing, nothing herein shall prohibit the Employee from (i) being a passive owner of not more than five percent (5%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company or any of its affiliates, so long as the Employee has no active participation in the business of such corporation or (ii) owning, managing, operating, controlling, or being employed by any firm, corporation or other entity in the same capacity in which the Employee was engaged immediately prior to the Termination of the Employee’s employment hereunder, as long as (a) the Board has been apprised of the identity of, and the Employee’s role with, such firm, corporation or other entity and (b) the Board has previously approved in writing the Employee’s role with such firm, corporation or other entity, in the case of both (a) and (b), prior to the Employee’s termination of employment. In addition, the provisions of this Section 10(b) shall not be violated by the Employee commencing employment with a subsidiary, division or unit of any entity that engages in a business in competition with the Company or any of its affiliates so long as: (i) the Employee and such subsidiary, division or unit does not engage in a business in competition with the Company or any of its affiliates; and (ii) the Employee informs such entity of the restrictions contained in this Section 10 .

For the purposes of this Agreement, the “Restricted Territory” shall mean any state within the United States of America.

(e) RETURN OF COMPANY PROPERTY . On the date of the Employee’s termination of employment with the Company for any reason (or at any time prior

thereto at the Company’s request), the Employee shall return all property belonging to the Company or its affiliates (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company). The Employee may retain the Employee’s rolodex and similar address books provided that such items only include contact information.

(f) REASONABLENESS OF COVENANTS . In signing this Agreement, the Employee gives the Company assurance that the Employee has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed under this Section 10 hereof. The Employee agrees that these restraints are necessary for the reasonable and proper protection of the Company and its affiliates and their Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent the Employee from obtaining other suitable employment during the period in which the Employee is bound by the restraints. The Employee acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and its affiliates and that the Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. The Employee further covenants that the Employee will not challenge the reasonableness or enforceability of any of the covenants set forth in this Section 10 . It is also agreed that each of the Company’s affiliates will have the right to enforce all of the Employee’s obligations to that affiliate under this Agreement, including without limitation pursuant to this Section 10 .

11. EQUITABLE RELIEF AND OTHER REMEDIES . The Employee acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 10 hereof would be inadequate and, in recognition of this fact, the Employee agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages. In the event of a violation by the Employee of Section 10 hereof, any severance being paid to the Employee pursuant to this Agreement or otherwise shall immediately cease. If the Company adopts a “clawback” or recoupment policy, payments under this Agreement will be subject to repayment to the Company, but only to the extent required by applicable law, regulation or listing requirement and so provided under the terms of such policy.

If to the Employee:

At the address (or to the facsimile number) shown

in the books and records of the Company.

If to the Company:

3100 West End Avenue, Suite 1000,

Nashville, TN 37203

Attention: Chief Executive Officer

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

15. SEVERABILITY . The provisions of this Agreement shall be deemed severable. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by applicable law.

16. COUNTERPARTS . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

provisions). The parties acknowledge and agree that in connection with any dispute hereunder, each party shall pay all of its own costs and expenses, including, without limitation, its own legal fees and expenses.

20. MISCELLANEOUS . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and such officer or director as may be designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement together with all exhibits hereto sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes any and all prior agreements or understandings between the Employee and the Company with respect to the subject matter hereof, including, without limitation, the Original Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The payment or provision to the Employee by the Company of any remuneration, benefits or other financial obligations pursuant to this Agreement and any indemnification obligations, shall be allocated between the Company and the Operating Partnership by the Compensation Committee based on any reasonable method so long as such allocation does not unduly burden the Employee.

23. TAX MATTERS .

(C) any payment to be made after receipt of an executed and irrevocable release within any specified period, in which such period begins in one taxable year of Employee and ends in a second taxable year of Employee, will be made in the second taxable year.

(vii) Reimbursements . To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement may constitute nonqualified deferred compensation (within the meaning of Code Section 409A), (A) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Employee, (B) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect. Any payment by the Company pursuant to Section 6(d) hereof in respect of any federal, state or local tax liability shall be made by the Company no later than the end of the calendar year following the calendar year in which Employee remits the related taxes.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date first written above.


MEDEQUITIES REALTY TRUST, INC.

By:		/s/ John W. McRoberts

Name:		John W. McRoberts

Title:		Chief Executive Officer

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

By:		/s/ John W. McRoberts

Name:		John W. McRoberts

Title:		Chief Executive Officer

EMPLOYEE

/s/ William C. Harlan

William C. Harlan

EXHIBIT A

GENERAL RELEASE

3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action or other matters covered by paragraph 2 above.

11. I hereby acknowledge that Sections 8 through 13, 17 through 23 of the Agreement shall survive my execution of this General Release.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

I HAVE READ IT CAREFULLY;

I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.


SIGNED:						DATED:

Exhibit 10.10

MEDEQUITIES REALTY TRUST, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Agreement ”) dated as of August 13, 2015, by and among MedEquities Realty Trust, Inc., a Maryland corporation (“ MedEquities ”), and MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Operating Partnership ” and, together with MedEquities, the “ Company ”), each with its principal place of business at 3100 West End Avenue, Suite 1000, Nashville, Tennessee 37203, and Jeffery C. Walraven residing at the address on file with the Company (the “ Employee ”) is an amendment and restatement of the Employment Agreement by and among the Company and the Employee, dated July 31, 2014.

W I T N E S S E T H

WHEREAS , MedEquities is the sole member of the general partner of the Operating Partnership;

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

1. POSITION AND DUTIES.

(a) During the Employment Term (as defined in Section 2 hereof), the Employee shall serve as the Chief Financial Officer and Executive Vice President of the Company. In this capacity, the Employee shall have the duties, authorities and responsibilities as are required by the Employee’s position commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to the Employee as the Chief Executive Officer of the Company shall designate from time to time that are not inconsistent with the Employee’s position with the Company and that are consistent with the bylaws of MedEquities and the amended and restated agreement of limited partnership of the Operating Partnership as they may be further amended from time to time, including, but not limited to, managing the affairs of the Company. The Employee’s principal place of employment with the Company shall be in Franklin, Tennessee, provided that the Employee understands and agrees that the Employee may be required to travel from time to time for business purposes. The Employee shall report directly to the Chief Executive Officer of the Company.

2. EMPLOYMENT TERM. The Company agrees to employ the Employee pursuant to the terms of this Agreement, and the Employee agrees to be so employed, for a term of three years (the “ Initial Term ”) commencing as of the Effective Date. Commencing with the last day of the Initial Term, and on each subsequent anniversary of such date, the term of this Agreement shall be automatically extended for successive one-year periods, provided , however , that either party hereto may elect not to extend this Agreement by giving written notice to the other party at least sixty (60) days prior to any such anniversary date. Notwithstanding the foregoing, the Employee’s employment hereunder may be earlier terminated in accordance with Section 7 hereof, subject to Section 8 hereof. The period of time between the Effective Date and the end of the Initial Term and any successor terms (or earlier upon a termination of the Employee’s employment hereunder) shall be referred to herein as the “ Employment Term .” If the Employee’s employment continues following any expiration of the Employment Term due to either party giving notice not to extend this Agreement, such employment will be entirely “at-will,” and will not be covered by this Agreement (except for the applicable restrictive covenant provisions, which are intended to survive expiration of this Agreement as set forth herein).

3. BASE SALARY. The Company agrees to pay the Employee a base salary, as approved by the Compensation Committee of the Board of Directors of MedEquities (the “ Compensation Committee ”) in its sole discretion, payable in accordance with the regular payroll practices of the Company, but not less frequently than monthly. The Employee’s Base Salary shall be subject to review by the Compensation Committee from time to time, and may be increased (but not decreased) by the Compensation Committee in its sole discretion. The base salary as determined by the Compensation Committee and adjusted from time to time shall constitute “ Base Salary ” for purposes of this Agreement.

4. ANNUAL BONUS. During the Employment Term, the Employee shall be eligible to receive an annual discretionary incentive payment under the Company’s annual bonus plan as may be in effect from time to time (the “ Annual Bonus ”) based on a target percentage, the target of which is anticipated to be 100% of the Employee’s Base Salary, subject to being set by the Compensation Committee (the “ Target Bonus ”), upon the attainment of one or more pre-established performance goals established by the the Board of Directors of MedEquities (the “ Board ”) or the Compensation Committee in its sole discretion. The Annual Bonus shall be paid no later than the end of the applicable two and one-half (2 ¹ ⁄ ₂ ) month period with respect to short-term deferrals as defined in Treas. Reg. § 1.409A-1(b)(4).

5. EQUITY AWARDS. The Employee shall be considered to receive equity and other long-term incentive awards (including long-term incentive units in the Operating Partnership) under any applicable plan adopted by the Company during the Employment Term.

6. EMPLOYEE BENEFITS.

(a) BENEFIT PLANS. During the Employment Term, the Employee shall be entitled to participate in any employee benefit plan that the Company has adopted or may adopt, maintain or contribute to for the benefit of its employees generally, subject to satisfying the applicable eligibility requirements, except to the extent such plans are duplicative of the benefits otherwise provided hereunder. The Employee’s participation will be subject to the terms of the applicable plan documents and generally applicable Company policies. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time, according to the terms of such employee benefit plan.

(b) VACATIONS. During the Employment Term, the Employee shall be entitled to paid vacation per calendar year (as prorated for partial years) in accordance with the Company’s policy on accrual and use applicable to employees as in effect from time to time.

(c) BUSINESS AND ENTERTAINMENT EXPENSES. Upon presentation of reasonable substantiation and documentation as the Company may specify from time to time, the Employee shall be reimbursed in accordance with the Company’s expense reimbursement policy, for all reasonable out-of-pocket business and entertainment expenses incurred and paid by the Employee during the Employment Term and in connection with the performance of the Employee’s duties hereunder. During the Employment Term, the Company will pay the Employee an amount of up to $17,750 per year for policies of life, disability, executive health and wellness, and/or long-term care for his benefit and beneficiaries of his choosing. Such amount shall increase on January 1st of each year under the Employment Term by multiplying by the percentage increase in the Consumer Price Index (as published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984=100)) (or any similar successor index produced by the federal government) for such year. The amount shall be paid by the Company promptly upon presentation by the Employee of copies of the premium notices.

7. TERMINATION. The Employee’s employment and the Employment Term shall terminate on the first of the following to occur:

(a) DISABILITY. Upon ten (10) days’ prior written notice by the Company to the Employee of termination due to Disability. For purposes of this Agreement, “ Disability ” shall be defined as the inability of the Employee to have performed the Employee’s material duties hereunder due to a physical or mental injury, infirmity or incapacity for one hundred eighty (180) days (including weekends and holidays) in any 365-day period as determined by the Board in its reasonable discretion.

(b) DEATH. Automatically upon the date of death of the Employee.

(c) CAUSE. Immediately upon written notice by the Company to the Employee of a termination for Cause. “ Cause ” shall mean:

(i) Employee’s refusal to substantially perform duties, or gross negligence or willful misconduct in connection with the performance of the Employee’s duties to the Company;

(ii) Employee’s conviction or plea of guilty or nolo contendere of a felony;

(iv) Employee’s material breach of any Company policy or term of this Agreement or any other employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Employee and the Company or an affiliate of the Company.

Any determination of Cause by the Company will be made by a resolution approved by a majority of the members of the Board, provided that no such determination may be made until the Employee has been given written notice detailing the specific Cause event, an opportunity to appear before the full Board with legal counsel, and a period of thirty (30) days following receipt of such notice to cure such event (if susceptible to cure) to the satisfaction of the Board. Notwithstanding anything to the contrary contained herein, the Employee’s right to cure and appear before the full Board with legal counsel as set forth in the preceding sentence shall not apply if there are habitual or repeated breaches by the Employee.

(d) WITHOUT CAUSE. Immediately upon written notice by the Company to the Employee of an involuntary termination without Cause (other than for death or Disability).

(e) GOOD REASON. Upon written notice by the Employee to the Company of a termination for Good Reason. “ Good Reason ” shall mean the occurrence of any of the following events, without the express written consent of the Employee, unless such events are fully corrected in all material respects by the Company within thirty (30) days following written notification by the Employee to the Company of the occurrence of one of the following:

(iii) a requirement that the Employee work principally from a location that is thirty (30) miles further from the Employee’s residence than the Company’s address first written above; or

(iv) the Company’s material breach of the terms of this Agreement.

The Employee shall provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within ninety (90) days after the first

occurrence of such circumstances that the Employee knows or reasonably should have known to constitute Good Reason, and actually terminate employment within thirty (30) days following the expiration of the Company’s thirty (30)-day cure period described above. The failure by the Employee to provide written notice in detail of the circumstances constituting “Good Reason” within the time period set forth in the preceding sentence shall result in the Employee being deemed not to have terminated employment for Good Reason and to have irrevocably waived any claim of such circumstances constituting Good Reason under this Agreement.

(f) WITHOUT GOOD REASON. Upon thirty (30) days’ prior written notice by the Employee to the Company of the Employee’s voluntary termination of employment without Good Reason (which the Company may, in its sole discretion, make effective earlier than any notice date).

(g) EXPIRATION OF EMPLOYMENT TERM; NON-EXTENSION OF AGREEMENT. Upon the expiration of the Employment Term due to a non-extension of the Agreement by the Company or the Employee pursuant to the provisions of Section 2 hereof.

8. CONSEQUENCES OF TERMINATION.

(a) DEATH. In the event that the Employee’s employment and the Employment Term end on account of the Employee’s death, the Employee or the Employee’s estate, as the case may be, shall be entitled to a lump sum payment of the following within sixty (60) days following termination of employment, or such earlier date as may be required by applicable law:

(i) any unpaid Base Salary through the termination date;

(ii) any Annual Bonus earned and accrued but unpaid;

(iii) any accrued but unused vacation time in accordance with Company policy; and

(b) DISABILITY. In the event that the Employee’s employment and/or Employment Term ends on account of the Employee’s Disability, the Company shall pay or provide the Employee with the following:

(i) the Accrued Benefits; and

(ii) subject to (A) the Employee’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”) and (B) the Employee’s continued compliance with the obligations in Sections 9 and 10 hereof, Employee shall be reimbursed for the amount equal to the COBRA continuation coverage premiums paid by the Employee that is required for coverage of the Employee (or his eligible dependents) under the Company’s major medical group health plan, for a period of eighteen (18) months, or, if less, until the Employee or his eligible dependents are no longer entitled to such COBRA coverage.

(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON OR AS A RESULT OF EMPLOYEE NON-EXTENSION OF THIS AGREEMENT. If the Employee’s employment and the Employment Term are terminated (x) by the Company for Cause, (y) by the Employee without Good Reason, or (z) as a result of the Employee’s non-extension of the Employment Term as provided in Section 2 hereof, the Company shall pay to the Employee the Accrued Benefits.

(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON; TERMINATION AS A RESULT OF COMPANY NON-EXTENSION OF THIS AGREEMENT. If the Employee’s employment and the Employment Term are terminated (x) by the Company other than for Cause (other than death or Disability), (y) by the Employee for Good Reason, or (z) as a result of the Company’s non-extension of the Employment Term as provided in Section 2 hereof and Employee was willing and able to remain employed, the Company shall pay or provide the Employee with the following:

(i) the Accrued Benefits;

(ii) subject to the Employee’s continued compliance with the obligations in Sections 9 and 10 hereof, an amount equal to two (2) times the sum of (A) the Base Salary in effect on the termination date, and (B) the average Annual Bonus earned by the Employee for the two (2) Company fiscal years ending during the Employment Period and immediately preceding the Company fiscal year in which such termination occurs (regardless of whether such amount was paid out on a current basis or deferred), paid monthly in equal installments for a period of twelve (12) months, and subject to Section 23, beginning sixty (60) days following such termination;

(iv) all of the Employee’s equity-based awards that are outstanding on the termination date shall immediately become fully vested and, as applicable, exercisable, without any action by the Board or Compensation Committee; provided , however , that to the extent an award is intended to qualify as performance-based compensation for purposes of Internal Revenue Code Section 162(m), such award shall not vest as a result of the termination of the Employee’s employment and shall, instead, remain outstanding after such termination and shall be subject to the terms and conditions of the applicable award agreement and plan document (other than continued employment).

(e) EFFECT OF CHANGE IN CONTROL . In the event of a Change in Control (defined below):

(ii) “Change in Control” has the meaning given in the MedEquities Realty Trust, Inc. 2014 Equity Incentive Plan in effect on the date hereof.

(f) CODE SECTION 280G. If the Employee is a “disqualified individual,” as defined in Code Section 280G(c), then, notwithstanding any other provision of this Agreement or of any other agreement, contract, or understanding heretofore or hereafter entered into by the Employee with the Company (an “ Other Agreement ”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Employee (including groups or classes of employees or beneficiaries of which the Employee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Employee (a “ Benefit Arrangement ”), any right to exercise, vesting, payment or benefit to the Employee under this Agreement, any Other Agreement and/or any Benefit Arrangement shall be reduced or eliminated:

(i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Employee under this Agreement, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment or benefit to the Employee under this Agreement to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) as then in effect (a “ Parachute Payment ”); and

(ii) if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Employee from the Company under this Agreement, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Employee without causing any such payment or benefit to be considered a Parachute Payment.

The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by

reducing or eliminating any accelerated vesting of performance awards, then by reducing or eliminating any accelerated vesting of options or stock appreciation rights, then by reducing or eliminating any accelerated vesting of restricted stock or stock units, then by reducing or eliminating any other remaining Parachute Payments.

(g) OTHER OBLIGATIONS. Upon any termination of the Employee’s employment with the Company, unless otherwise specified in a written agreement between the Company and the Employee, the Employee shall be deemed to have resigned from the Board and any other position as an officer, director or fiduciary of the Company and its affiliates, and shall take any and all actions reasonably requested by the Company to effectuate the foregoing.

(h) EXCLUSIVE REMEDY. The amounts payable to the Employee following termination of employment and the Employment Term hereunder pursuant to Sections 7 and 8 hereof shall be in full and complete satisfaction of the Employee’s rights under this Agreement and any other claims that the Employee may have in respect of the Employee’s employment with the Company or any of its affiliates, and the Employee acknowledges that such amounts are fair and reasonable, and are the Employee’s sole and exclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of the Employee’s employment hereunder or any breach of this Agreement.

9. RELEASE. Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement beyond the Accrued Benefits shall only be payable if the Employee delivers to the Company and does not revoke a general release of claims in favor of the Company in substantially the form attached on Exhibit A hereto. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination.

10. RESTRICTIVE COVENANTS.

such information only for certain limited purposes, in each case, which shall have been obtained by the Employee during the Employee’s employment by the Company (or any predecessor). The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to the Employee; (ii) becomes generally known to the public subsequent to disclosure to the Employee through no wrongful act of the Employee or any representative of the Employee; or (iii) the Employee is required to disclose by applicable law, regulation or legal process (provided that the Employee provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).

(b) NONCOMPETITION. The Employee acknowledges that (i) the Employee performs services of a unique nature for the Company that are irreplaceable, and that the Employee’s performance of such services to a competing business will result in irreparable harm to the Company, (ii) the Employee has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company or any of its affiliates, (iii) in the course of the Employee’s employment by a competitor, the Employee would inevitably use or disclose such Confidential Information, (iv) the Company and its affiliates have substantial relationships with their customers and the Employee has had and will continue to have access to these customers, (v) the Employee has received and will receive specialized training from the Company and its affiliates, and (vi) the Employee is expected to generate goodwill for the Company and its affiliates in the course of the Employee’s employment. Accordingly, during the Employee’s employment and for a period of one (1) year thereafter, the Employee agrees that the Employee will not, whether on the Employee’s own behalf or on behalf or in conjunction with any person, firm, partnership, joint venture, association corporation or other business organization, directly or indirectly, own, manage, operate, control, invest in, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation) or render services, including, without limitation, brokerage or advisory services, to any person, firm, corporation or other entity, in whatever form, engaged in the business of acquiring, owning, leasing and/or financing healthcare properties (the “Business”) or in any other business in which the Company or any of its affiliates is engaged on the termination date or in which they have planned, on or prior to such date, to be engaged in on or after such date within the Restricted Territory (defined below). Notwithstanding the foregoing, nothing herein shall prohibit the Employee from (i) being a passive owner of not more than five percent (5%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company or any of its affiliates, so long as the Employee has no active participation in the business of such corporation or (ii) owning, managing, operating, controlling, or being employed by any firm, corporation or other entity in the same capacity in which the Employee was engaged immediately prior to the Termination of the Employee’s employment hereunder, as long as (a) the Board has been apprised of the identity of, and the Employee’s role with, such firm, corporation or other entity and (b) the Board has previously approved in writing the Employee’s role with such firm, corporation or other entity, in the case of both (a) and (b), prior to the Employee’s termination of employment. In addition, the provisions of this Section 10(b) shall not be violated by the Employee commencing employment with a subsidiary, division or unit of any entity that engages in a business in competition with the Company or any of its affiliates so long as: (i) the Employee and such subsidiary, division or unit does not engage in a business in competition with the Company or any of its affiliates; and (ii) the Employee informs such entity of the restrictions contained in this Section 10 .

For the purposes of this Agreement, the “Restricted Territory” shall mean any state within the United States of America.

(c) NONSOLICITATION; NONINTERFERENCE. (i) During the Employee’s employment with the Company and (A) if the Employee’s employment and the Employment Term are terminated by the Company for Cause, by the Employee without Good Reason or as a result of the Employee’s non-extension of the Employment Term as provided in Section 2 hereof, for a period of three (3) years thereafter, or (B) if the Employee’s employment and the Employment Term are terminated by the Company other than for Cause, by the Employee for Good Reason or as a result of the Company’s non-extension of the Employment Term as provided in Section 2 hereof and Employee was willing and able to remain employed, for a period of one (1) year thereafter, the Employee agrees that the Employee shall not, except in the furtherance of the Employee’s duties hereunder, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid or induce any customer of the Company or any of its affiliates to purchase goods or services then sold by the Company or any of its affiliates from another person, firm, corporation or other entity or assist or aid any other persons or entity in identifying or soliciting any such customer.

(ii) During the Employee’s employment with the Company and (A) if the Employee’s employment and the Employment Term are terminated by the Company for Cause, by the Employee without Good Reason or as a result of the Employee’s non-extension of the Employment Term as provided in Section 2 hereof, for a period of three (3) years thereafter, or (B) if the Employee’s employment and the Employment Term are terminated by the Company other than for Cause, by the Employee for Good Reason or as a result of the Company’s non-extension of the Employment Term as provided in Section 2 hereof and Employee was willing and able to remain employed, for a period of one (1) year thereafter, the Employee agrees that the Employee shall not, except in the furtherance of the Employee’s duties hereunder, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company or any of its affiliates to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company or any of its affiliates and any of their respective vendors, joint venturers, licensors or tenants. An employee, representative or agent shall be deemed covered by this Section 10(c)(ii) while so employed or retained and for a period of one (1) year thereafter.

(iii) Notwithstanding the foregoing, the provisions of this Section 10(c) shall not be violated by (A) general advertising or solicitation not specifically targeted at Company-related persons or entities, (B) the Employee serving as a reference, upon request, for any employee of the Company or any of its affiliates so long as such reference is not for an entity that is employing or retaining the Employee, or (C) actions taken by any person or entity with which the Employee is associated if the Employee is not personally involved in any manner in the matter and has not identified such Company-related person or entity for soliciting or hiring.

(d) NONDISPARAGMENT. The Employee agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products other than in the good faith performance of the Employee’s duties to the Company while the Employee is employed by the Company. The Company hereby covenants and agrees that it shall not, directly or indirectly, make or solicit or encourage others to make or solicit any negative comments or otherwise disparaging remarks concerning the Employee. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings (including, without limitation, filings or submissions to the Securities and Exchange Commission), or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings).

(e) RETURN OF COMPANY PROPERTY. On the date of the Employee’s termination of employment with the Company for any reason (or at any time prior thereto at the Company’s request), the Employee shall return all property belonging to the Company or its affiliates (including, but not limited to, any Company-provided laptops, computers, software, cell phones, wireless electronic mail devices or other equipment, or documents, records and property belonging to the Company). The Employee may retain the Employee’s rolodex and similar address books provided that such items only include contact information.

(f) REASONABLENESS OF COVENANTS. In signing this Agreement, the Employee gives the Company assurance that the Employee has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed under this Section 10 hereof. The Employee agrees that these restraints are necessary for the reasonable and proper protection of the Company and its affiliates and their Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent the Employee from obtaining other suitable employment during the period in which the Employee is bound by the restraints. The Employee acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and its affiliates and that the Employee has sufficient assets and skills to provide a livelihood while such covenants remain in force. The Employee further covenants that the Employee will not challenge the reasonableness or enforceability of any of the covenants set forth in this Section 10 . It is also agreed that each of the Company’s affiliates will have the right to enforce all of the Employee’s obligations to that affiliate under this Agreement, including without limitation pursuant to this Section 10 .

(g) REFORMATION. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.

(h) TOLLING. In the event of any violation of the provisions of this Section 10 , the Employee acknowledges and agrees that the post-termination restrictions contained in this

Section 10 shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.

(i) SURVIVAL OF PROVISIONS. The obligations contained in Sections 10 hereof shall survive the termination or expiration of the Employment Term and the Employee’s employment with the Company and shall be fully enforceable thereafter.

(j) COOPERATION. Upon the receipt of reasonable notice from the Company (including outside counsel), the Employee agrees that while employed by the Company, the Employee will respond and provide information with regard to matters in which the Employee has knowledge as a result of the Employee’s employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of any claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of any claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of the Employee’s employment with the Company.

11. EQUITABLE RELIEF AND OTHER REMEDIES. The Employee acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 10 hereof would be inadequate and, in recognition of this fact, the Employee agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages. In the event of a violation by the Employee of Section 10 hereof, any severance being paid to the Employee pursuant to this Agreement or otherwise shall immediately cease. If the Company adopts a “clawback” or recoupment policy, payments under this Agreement will be subject to repayment to the Company to the extent so provided under the terms of such policy.

12. NO ASSIGNMENTS. This Agreement is personal to each of the parties hereto. Except as provided in this Section 12 hereof, no party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto. The Company may assign this Agreement to any successor to all or substantially all of the business and/or assets of the Company, provided that the Company shall require such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “ Company ” shall mean the Company and any successor to its business and/or assets, which assumes and agrees to perform the duties and obligations of the Company under this Agreement by operation of law or otherwise.

If to the Employee:

At the address (or to the facsimile number) shown

in the books and records of the Company.

If to the Company:

3100 West End Avenue, Suite 1000,

Nashville, TN 37203

Attention: Chief Executive Officer

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

14. SECTION HEADINGS; INCONSISTENCY. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. In the event of any inconsistency between the terms of this Agreement and any form, award, plan or policy of the Company, the terms of this Agreement shall govern and control.

15. SEVERABILITY. The provisions of this Agreement shall be deemed severable. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by applicable law.

16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

17. INDEMNIFICATION. The Company hereby agrees to indemnify the Employee and hold the Employee harmless to the extent provided under the By-Laws of the Company against and in respect of any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorney’s fees), losses, and damages resulting from the Employee’s good faith performance of the Employee’s duties and obligations with the Company. This obligation shall survive the termination of the Employee’s employment with the Company.

18. LIABILITY INSURANCE. The Company shall cover the Employee under directors’ and officers’ liability insurance both during and, while potential liability exists, after the term of this Agreement in the same amount and to the same extent as the Company covers its other officers and directors.

19. GOVERNING LAW . This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in

accordance with the laws of the State of Tennessee (without regard to its choice of law provisions). The parties acknowledge and agree that in connection with any dispute hereunder, each party shall pay all of its own costs and expenses, including, without limitation, its own legal fees and expenses.

20. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and such officer or director as may be designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement together with all exhibits hereto sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes any and all prior agreements or understandings between the Employee and the Company with respect to the subject matter hereof, including, without limitation, the Original Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The payment or provision to the Employee by the Company of any remuneration, benefits or other financial obligations pursuant to this Agreement and any indemnification obligations, shall be allocated between the Company and the Operating Partnership by the Compensation Committee based on any reasonable method.

21. REPRESENTATIONS. The Employee represents and warrants to the Company that (a) the Employee has the legal right to enter into this Agreement and to perform all of the obligations on the Employee’s part to be performed hereunder in accordance with its terms, and (b) the Employee is not a party to any agreement or understanding, written or oral, and is not subject to any restriction, which, in either case, could prevent the Employee from entering into this Agreement or performing all of the Employee’s duties and obligations hereunder. In addition, the Employee acknowledges that the Employee is aware of Section 304 (Forfeiture of Certain Bonuses and Profits) of the Sarbanes-Oxley Act of 2002 and the right of the Company to be reimbursed for certain payments to the Employee in compliance therewith.

22. TAX MATTERS.

in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Employee and the Company of the applicable provision without violating the provisions of Code Section 409A.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.


MEDEQUITIES REALTY TRUST, INC.

By:		/s/ William C. Harlan

Name:		William C. Harlan

Title:		President

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP

By:		/s/ William C. Harlan

Name:		William C. Harlan

Title:		President

EMPLOYEE

/s/ Jeffery C. Walraven

Jeffery C. Walraven

EXHIBIT A

GENERAL RELEASE

I, , in consideration of and subject to the performance by MedEquities Realty Trust, Inc., a Maryland corporation (“ MedEquities ”), and MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “ Operating Partnership ” and, together with MedEquities and its subsidiaries, the “ Company ”), of its obligations under the Employment Agreement dated as of August 13, 2015 (the “ Agreement ”), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees, attorneys, advisors, successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “ Released Partie s ”) to the extent provided below (this “ General Release ”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.

1. I understand that any payments or benefits paid or granted to me under Section 8 of the Agreement represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive certain of the payments and benefits specified in Section 8 of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or

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3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action or other matters covered by paragraph 2 above.

5. I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claims, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided , however , that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding. Additionally, I am not waiving (i) any right to the Accrued Benefits or any severance benefits to which I am entitled under the Agreement, (ii) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Company’s organizational documents or otherwise, or (iii) my rights as an equity or security holder in the Company or its affiliates.

6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.

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10. Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), any other self-regulatory organization or any governmental entity.

11. I hereby acknowledge that Sections 8 through 13, 17 through 22 of the Agreement shall survive my execution of this General Release.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

I HAVE READ IT CAREFULLY;

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AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

I HAVE HAD AT LEAST [21][45] DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE TO CONSIDER IT, AND THE CHANGES MADE SINCE MY RECEIPT OF THIS RELEASE ARE NOT MATERIAL OR WERE MADE AT MY REQUEST AND WILL NOT RESTART THE REQUIRED [21][45] -DAY PERIOD;

I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.


SIGNED:						DATED:

A-4

Exhibit 10.11

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of July 31, 2014, by and among MedEquities Realty Trust, Inc., a Maryland corporation (together with any successor entity thereto, the “ Company ”); FBR Capital Markets & Co., a Delaware corporation, as the initial purchaser/placement agent (“ FBR ”) for the benefit of FBR, the purchasers of the Company’s common stock, $0.01 par value per share (the “ Common Stock ”), as participants (the “ Participants ”) in the private placement by the Company of shares of its Common Stock, and the direct and indirect transferees of FBR and each of the Participants.

This Agreement is made pursuant to the Purchase/Placement Agreement (the “ Purchase/Placement Agreement ”), dated as of July 25, 2014, between the Company and FBR in connection with the purchase and sale and/or placement of an aggregate of 10,000,000 shares of Common Stock (plus up to an additional 1,500,000 shares of Common Stock to cover additional allotments, if any). In order to induce FBR to enter into the Purchase/Placement Agreement, the Company has agreed to provide to FBR, the Participants, and their respective direct and indirect transferees the registration rights provided for in this Agreement. The execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Purchase/Placement Agreement.

The parties hereby agree as follows:

1. Definitions . As used in this Agreement, the following terms shall have the following meanings:

“ Accredited Investor Shares ” Shares initially sold by the Company to “accredited investors” (within the meaning of Rule 501(a) promulgated under the Securities Act) as Participants.

“ Affiliate ” As to any specified Person, (i) any Person directly or indirectly owning, controlling or holding, with power to vote, ten percent or more of the outstanding voting securities of such other Person, (ii) any Person, ten percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such other Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such other Person, (iv) any executive officer, director, trustee or general partner of such Person and (ii) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. An indirect relationship shall include circumstances in which a Person’s spouse, children, parents, siblings or mother, father, sister- or brother-in-law is or has been associated with a Person.

“ Agreement ” As defined in the preamble.

“ Board of Directors ” As defined in Section 6(a) hereof.

“ Business Day ” With respect to any act to be performed hereunder, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York or other applicable places where such act is to occur are authorized or obligated by applicable law, regulation or executive order to close.

“ Closing Date ” July 31, 2014 or such other time or such other date as FBR and the Company may agree.

“ Commission ” The Securities and Exchange Commission.

“ Common Stock ” As defined in the preamble.

“ Company ” As defined in the preamble.

“ Controlling Person ” As defined in Section 7(a) hereof.

“ End of Suspension Notice ” As defined in Section 6(b) hereof.

“ Exchange Act ” The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission pursuant thereto.

“ FBR ” As defined in the preamble.

“ FINRA ” The Financial Industry Regulatory Authority, formerly the National Association of Securities Dealers, Inc.

“ Holder ” Each record owner of any Registrable Shares from time to time, including FBR and its Affiliates to the extent FBR or any such Affiliate holds any Registrable Shares.

“ Indemnified Party ” As defined in Section 7(c) hereof.

“ Indemnifying Party ” As defined in Section 7(c) hereof.

“ IPO Registration Statement ” As defined in Section 2(b) hereof.

“ Issuer Free Writing Prospectus ” As defined in Section 2(c) hereof.

“ JOBS Act ” The Jumpstart Our Business Startups Act, as amended, and the rules and regulations promulgated by the Commission thereunder.

“ Liabilities ” As defined in Section 7(a) hereof.

“ No Objections Letter ” As defined in Section 5(t) hereof.

“ Nominee ” As defined in Section 3(c) hereof.

“ Participants ” As defined in the preamble.

“ Person ” An individual, partnership, corporation, limited liability company, trust, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity.

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“ Proceeding ” An action (including a class action), claim, suit or proceeding (including without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or, to the knowledge of the Person subject thereto, threatened.

“ Prospectus ” The prospectus included in any Registration Statement, including any preliminary prospectus at the “time of sale” within the meaning of Rule 159 under the Securities Act and all other amendments and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus.

“ Purchase/Placement Agreement ” As defined in the preamble.

“ Purchaser Indemnitee ” As defined in Section 7(a) hereof.

“ Registrable Shares ” The Rule 144A Shares, the Accredited Investor Shares, the Regulation S Shares, upon original issuance thereof, and at all times subsequent thereto, including upon the transfer thereof by the original holder or any subsequent holder and any shares or other securities issued in respect of such Registrable Shares by reason of or in connection with any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any exchange for or replacement of such Registrable Shares or any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata distribution with respect to the Common Stock, until, in the case of any such Rule 144A Share, Accredited Investor Share or Regulation S Share, the earliest to occur of (i) the date on which the resale of such share has been registered pursuant to the Securities Act and it has been disposed of in accordance with the Registration Statement relating to it, (ii) in the event the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the date on which such share has been transferred pursuant to Rule 144 (or any similar provision then in effect) or (iii) the date on which it is sold to the Company or ceases to be outstanding.

“ Registration Default ” As defined in Section 2(f) hereof.

“ Registration Expenses ” Any and all fees and expenses incident to the Company’s and FBR’s performance of or compliance with this Agreement, including, without limitation (i) all Commission, securities exchange, FINRA or other registration, listing, inclusion and filing fees; (ii) all fees and expenses incurred in connection with compliance with international, federal or state securities or blue sky laws (including, without limitation, any registration, listing and filing fees and fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of a blue sky memorandum and compliance with the rules of FINRA); (iii) all expenses in preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements, certificates and any other documents relating to the performance under and compliance with this Agreement; (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on any securities exchange pursuant to Section 5(n) of this Agreement; (v) the fees and disbursements of counsel for the Company and of the independent registered public accounting firm of the Company (including, without limitation, the expenses of any

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special audit and “comfort” letters required by or incident to the performance of this Agreement); (vi) reasonable fees and disbursements of Sidley Austin LLP, or one such other nationally recognized securities law counsel, reasonably acceptable to the Company and FBR, if Sidley Austin LLP is unable or unwilling to serve in such capacity, for the Holders (such counsel, “ Selling Holders’ Counsel ”); provided , however , that Holders holding a majority of the Registrable Shares (or, in the case of an Underwritten Offering in which Holders elect to sell Registrable Shares, Holders holding a majority of the Registrable Shares held by the Holders who have elected to sell Registrable Shares in such Underwritten Offering) may object to the appointment of Sidley Austin LLP or such other nationally-recognized securities law counsel as Selling Holders’ Counsel and appoint a new Selling Holders’ Counsel; provided , further however , that if Holders electing to sell Registrable Shares in an Underwritten Offering object to the appointment of Sidley Austin LLP or such other nationally-recognized securities law counsel as Selling Holders’ Counsel and appoint a new Selling Holders’ Counsel, such objection and appointment shall only be applicable to such Underwritten Offering; and (vii) any fees and disbursements customarily paid in connection with offerings and issuances of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement); provided , however , that Registration Expenses shall exclude brokers’ or underwriters’ discounts and commissions, transfer taxes and transfer fees, if any, relating to the sale or disposition of Registrable Shares by a Holder.

“ Registration Statement ” Any registration statement of the Company filed or confidentially submitted with the Commission under the Securities Act that covers the resale of Registrable Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement.

“ Regulation S ” Regulation S (Rules 901-905) promulgated by the Commission under the Securities Act, as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such regulation.

“ Regulation S Shares ” Shares initially resold by FBR pursuant to the Purchase/Placement Agreement to “non-U.S. persons” (in accordance with Regulation S) in an “offshore transaction” (in accordance with Regulation S).

“ Rule 144 ” Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 144A ” Rule 144A promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 144A Shares ” Shares initially resold by FBR pursuant to the Purchase/Placement Agreement to “qualified institutional buyers” (as such term is defined in Rule 144A).

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“ Rule 158 ” Rule 158 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 159 ” Rule 159 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 405 ” Rule 405 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 415 ” Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 424 ” Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 429 ” Rule 429 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Rule 433 ” Rule 433 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule.

“ Securities Act ” The Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder.

“ Selling Holders’ Counsel ” As defined in clause (vi) of the definition for Registration Expenses.

“ Shares ” The shares of Common Stock being offered and sold pursuant to the terms and conditions of the Purchase/Placement Agreement.

“ Shelf Filing Deadline ” As defined in Section 2(a) hereof.

“ Shelf Registration Statement ” As defined in Section 2(a) hereof.

“ Special Election Meeting ” As defined in Section 3(a) hereof.

“ Suspension Event ” As defined in Section 6(b) hereof.

“ Suspension Notice ” As defined in Section 6(b) hereof.

“ Trigger Date ” As defined in Section 3(a) hereof.

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“ Underwritten Offering ” A sale of securities of the Company to an underwriter or underwriters for re-offering to the public.

2. Registration Rights .

(a) Mandatory Shelf Registration . As set forth in Section 5 hereof, the Company agrees to file with the Commission as soon as reasonably practicable following the date of this Agreement (but in no event later than September 29, 2014, (the “ Shelf Filing Deadline ”)) a shelf Registration Statement on Form S-11 or such other form under the Securities Act then available to the Company providing for the resale of any Registrable Shares pursuant to Rule 415 from time to time by the Holders (a “ Shelf Registration Statement ”). The Company shall use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as practicable, but in no event later than the date that is 180 days immediately following the initial filing thereof, except as provided in Section 2(b)(ii) below. Any Shelf Registration Statement shall provide for the resale from time to time, and pursuant to any method or combination of methods legally available (including, without limitation, an Underwritten Offering, a direct sale to purchasers or a sale through brokers or agents, which may include sales over the internet) by the Holders of any and all Registrable Shares.

(b) IPO Registration . If the Company proposes to file a registration statement on Form S-11 or such other form under the Securities Act providing for the initial public offering of shares of Common Stock (the “ IPO Registration Statement ”), the Company will notify in writing each Holder of the filing before (but no earlier than ten Business Days before) or within five Business Days after the initial filing and afford each Holder an opportunity to include in the IPO Registration Statement all or any part of the Registrable Shares then held by such Holder. Each Holder desiring to include in the IPO Registration Statement all or any part of the Registrable Shares held by such Holder shall, within 20 days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Shares such Holder wishes to include in the IPO Registration Statement. Any election by any Holder to include any Registrable Shares in the IPO Registration Statement will not affect the inclusion of such Registrable Shares in the Shelf Registration Statement until such Registrable Shares have been sold under the IPO Registration Statement.

(i) Right to Terminate IPO Registration . The Company shall have the right to terminate or withdraw the IPO Registration Statement initiated by it and referred to in this Section 2(b) prior to the effectiveness of the IPO Registration Statement whether or not any Holder has elected to include Registrable Shares in such registration; provided , however that , the Company must provide each Holder that elected to include any Registrable Shares in such IPO Registration Statement prompt written notice of such termination or withdrawal. Furthermore, in the event the IPO Registration Statement is not declared effective within 120 days following the initial filing of the IPO Registration Statement, unless a road show for the Underwritten Offering pursuant to the IPO Registration Statement is actually in progress at such time, the Company shall promptly provide a new written notice to all Holders giving them another opportunity to elect to include Registrable Shares in the pending IPO Registration Statement. Each Holder receiving such notice shall have the same election rights afforded such Holder as described in clause (b) above.

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(ii) Shelf Registration not Impacted by IPO Registration Statement . The Company’s obligation to file the Shelf Registration Statement pursuant to Section 2(a) hereof shall not be affected by the filing or effectiveness of the IPO Registration Statement. In addition, the Company’s obligation to file and use its commercially reasonable efforts to cause to become and keep effective the Shelf Registration Statement pursuant to Section 2(a) hereof shall not be affected by the filing or effectiveness of an IPO Registration Statement; provided , however that , if the Company files an IPO Registration Statement before the filing or effective date of the Shelf Registration Statement and the Company is using commercially reasonable efforts to pursue the completion of such initial public offering, the Company shall have the right to defer causing the Commission to declare such Shelf Registration Statement effective until up to 60 days after the date that is 180 days immediately following the initial filing of the Shelf Registration Statement. Notwithstanding any other provision in this Agreement to the contrary, if the Company files an IPO Registration Statement before the effective date of the Shelf Registration Statement and the deadline for causing such Shelf Registration Statement to go effective is after the 60 day period beginning on the closing date of the Company’s initial public offering pursuant to the IPO Registration Statement, the Company shall cause the Shelf Registration Statement to be declared effective no later than 60 days after the closing date of the Company’s initial public offering pursuant to the IPO Registration Statement.

(c) Issuer Free Writing Prospectus . The Company represents and agrees that, unless it obtains the prior consent of Holders of a majority of the Registrable Shares that are registered under a Registration Statement at such time or the consent of the managing underwriter in connection with any Underwritten Offering of Registrable Shares, and each Holder represents and agrees that, unless it obtains the prior consent of the Company and any such underwriter, it will not make any offer relating to the Shares that would constitute an “issuer free writing prospectus,” as defined in Rule 433 (an “ Issuer Free Writing Prospectus ”), or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission. The Company represents that any Issuer Free Writing Prospectus will not include any information that conflicts with the information contained in any Registration Statement or the related Prospectus, and any Issuer Free Writing Prospectus, when taken together with the information in such Registration Statement and the related Prospectus, will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(d) Underwriting . The Company shall advise all Holders of the lead managing underwriter for the Underwritten Offering proposed under the IPO Registration Statement. The right of any such Holder’s Registrable Shares to be included in the IPO Registration Statement pursuant to Section 2(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Shares in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter(s) selected for such underwriting and complete, execute and deliver, or cause to be delivered, any questionnaires, powers of attorney, indemnities, custody agreements, securities escrow agreements and other documents, including opinions of counsel, reasonably required under the terms of such underwriting, and furnish to the Company such information as the Company may reasonably request in writing for inclusion in the Registration Statement;

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provided , however , that no Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, such Holder’s ownership of Registrable Shares included in such underwriting and such Holder’s intended method of distribution and any other representation, warranty or agreement required by law or reasonably requested by the underwriters. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation on the number of shares to be included in the IPO Registration Statement and the related Underwritten Offering, then the managing underwriter(s) may exclude shares (including Registrable Shares) from the IPO Registration Statement and Underwritten Offering, and any shares included in such IPO Registration Statement and Underwritten Offering shall be allocated first , to the Company, and second , to each of the Holders requesting inclusion of their Registrable Shares in such IPO Registration Statement (on a pro rata basis based on the total number of Registrable Shares then held by each such Holder who is requesting inclusion); provided , however , that the number of Registrable Shares to be included in the IPO Registration Statement shall not be reduced unless all other securities of the Company held by (i) officers, directors, other employees of the Company and consultants and (ii) other holders of the Company’s capital stock with registration rights that are inferior (with respect to such reduction) to the registration rights of the Holders set forth herein, are first entirely excluded from the underwriting and registration; provided , further , however , that Holders of Registrable Shares shall be permitted to include Registrable Shares comprising at least 25% of the total securities included in the Underwritten Offering proposed under the IPO Registration Statement.

By electing to include the Registrable Shares in the IPO Registration Statement, the Holder of such Registrable Shares shall be deemed to have agreed not to effect any public sale or distribution of securities of the Company of the same or similar class or classes of the securities included in the IPO Registration Statement or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during such periods as reasonably requested (but in no event for a period longer than 30 days prior to and 180 days following the effective date of the IPO Registration Statement) by the representatives of the underwriters, if an Underwritten Offering, or by the Company in any other registration.

If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter(s), delivered by the later of (i) two Business Days after the IPO price range is communicated by the Company to such Holder and (ii) ten Business Days prior to the effective date of the IPO Registration Statement. Any Registrable Shares excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.

(e) Expenses . The Company shall pay all Registration Expenses in connection with the registration of the Registrable Shares pursuant to this Agreement. Each Holder participating in a registration pursuant to this Section 2 shall bear such Holder’s proportionate share (based on the total number of Registrable Shares sold in such registration) of all discounts and commissions payable to underwriters or brokers and all transfer taxes and transfer fees in connection with a registration of Registrable Shares pursuant to this Agreement.

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(f) Penalty Provisions . If the Company does not file a Registration Statement registering the resale of the Registrable Shares on or prior to the Shelf Filing Deadline, other than as a result of the Commission being unable to accept such filings (a “ Registration Default ”), then each of John McRoberts, William Harlan and Jeffery Walraven, if employed by the Company and at any time is owed an annual and/or discretionary bonus with respect to services performed during the period from July 31, 2014 to July 31, 2015, whether under an employment agreement with the Company, a bonus plan or any other bonus arrangement, including any bonus compensation for which payment would otherwise be deferred until after that period, shall forfeit 50% of the amount that would otherwise be payable to him in respect of such bonus, and shall thereafter forfeit an additional 10% of the amount that would otherwise be payable to him in respect of such bonus for each complete calendar month any such Registration Default continues after the Shelf Filing Deadline until the Shelf Registration Statement is filed.

(g) JOBS ACT Submissions . For purposes of this Agreement, if the Company elects to confidentially submit a draft of the Shelf Registration Statement with the Commission pursuant to the JOBS Act, the initial confidential submission of the draft Shelf Registration Statement with the Commission shall be deemed to be a filing with the Commission for purposes of this Section 2 and the date on which the Company makes such confidential submission will be deemed to be the date of the initial filing of such Shelf Registration Statement.

3. Special Election Meeting . (a) Unless a Registration Statement registering the resale of the Registrable Shares has been declared effective by the Commission and the Registrable Shares have been listed for trading on a national securities exchange prior to the date that is 180 days immediately following the initial filing of the Shelf Registration Statement, or, if the Company completes its initial public offering pursuant to an IPO Registration Statement prior to the date that is 180 days immediately following the initial filing of the Shelf Registration Statement, on a date that is on or before 60 days after the completion of such initial public offering (each, a “ Trigger Date ”), a special meeting of stockholders (the “ Special Election Meeting ”) shall be called in accordance with the Bylaws of the Company, unless Holders of at least two-thirds of the outstanding Registrable Shares (other than any shares of Common Stock held by the executive officers and directors of the Company) waive or defer the requirement that the Company holds the Special Election Meeting. The Special Election Meeting shall occur as soon as possible following the Trigger Date but in no event more than 30 days after the Trigger Date.

(b) Purposes of Meeting . The Special Election Meeting shall be called solely for the purposes of: (i) considering and voting upon proposals to remove one or more of the then-serving directors of the Company; and (ii) electing such number of directors as there are then vacancies on the Board of Directors of the Company (including any vacancies created by the removal of any director pursuant to this Section 3(b)). The removal of any director pursuant to Section 3(b)(i) hereof shall be effective immediately upon the receipt of the final report of the Inspector of Elections for the Special Election Meeting of the result of the vote on the proposal to remove such director.

(c) Nominations . Nominations of individuals for election to the Board of Directors of the Company at the Special Election Meeting may only be made (i) by or at the direction of the Board of Directors, (ii) in accordance with the Company’s Bylaws, or (iii) upon receipt by the

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Company of written notice of Holders entitled to cast, or direct the casting of, not less than 20% of all the votes entitled to be cast at the Special Election Meeting (excluding the votes entitled to be cast by the executive officers or directors of the Company, their Affiliates or holders of shares of common stock issued to the executive officers or directors of the Company or their Affiliates) and containing the information specified by Section 3(d) hereof; provided , however , executive officers and directors of the Company shall not be entitled to nominate, or participate in the nomination of, any individual for election as a director at the Special Election Meeting. Each individual whose nomination is made in accordance with this Section 3(c) is hereinafter referred to as a “ Nominee .”

(d) Procedure for Stockholder Nominations . For nominations of individuals for election to the Board of Directors to be properly brought before the Special Election Meeting by Holders pursuant to Section 3(c) hereof, the Holders must have given notice thereof in writing to the Secretary of the Company not later than 5:00 p.m., Eastern Time, on the 10th day following the Trigger Date. Such notice shall include each such proposed Nominee’s written consent to serve as a director, if elected, and shall specify:

(i) as to each proposed Nominee, the name, age, business address and residence address of such proposed Nominee and all other information relating to such proposed Nominee that would be required, pursuant to Regulation 14A promulgated under the Exchange Act (or any successor provision), to be disclosed in a contested solicitation of proxies with respect to the election of such individual as a director; and

(ii) as to each Holder giving the notice, the class, series and number of all shares of capital stock of the Company that are owned by such Holder, beneficially or of record.

(e) Notice . Not less than 15 days nor more than 25 days before the Special Election Meeting, the Secretary of the Company shall give to each stockholder entitled to vote at, or to receive notice of, such meeting at such stockholder’s address as it appears in the share transfer records of the Company, notice in writing setting forth (i) the time and place of the Special Election Meeting, (ii) the purposes for which the Special Election Meeting has been called and (iii) the name of each Nominee.

(f) No Conflicts . The Company represents and warrants that the Articles of Incorporation and Bylaws of the Company reflect, and the Articles of Incorporation, Bylaws and applicable law (including the Maryland General Corporation Law) do not conflict with, the rights of Holders and the procedures for a Special Election Meeting set forth in this Section 3, and, so long as any Holder owns any Registrable Shares, agrees not to amend or modify the Articles of Incorporation or Bylaws of the Company or take (or allow to be taken) any action that could cause the Articles of Incorporation or Bylaws of the Company to be inconsistent or conflict with any rights of Holders and/or the procedures for a Special Election Meeting set forth in this Section 3.

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4. Rules 144 and 144A Reporting . With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of the Registrable Shares to the public without registration, the Company agrees to:

(a) make and keep current public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration statement under the Securities Act filed by the Company for an offering of its securities to the general public;

(b) file with the Commission in a timely manner all reports and other documents required to be filed by the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);

(c) so long as a Holder owns any Registrable Shares, if the Company is not required to file reports and other documents under the Securities Act and the Exchange Act, it will make available other information as required by, and so long as necessary to permit sales of Registrable Shares pursuant to, Rule 144 or Rule 144A, and in any event shall make available (either by mailing a copy thereof, by posting on the Company’s website, or by press release) to each Holder a copy of:

(i) the Company’s annual consolidated financial statements (including at least balance sheets, statements of profit and loss, statements of stockholders’ equity and statements of cash flows) prepared in accordance with U.S. generally accepted accounting principles in the United States, accompanied by an audit report of the Company’s independent accountants, no later than 90 days after the end of each fiscal year of the Company;

(ii) the Company’s unaudited quarterly consolidated financial statements (including at least balance sheets, statements of profit and loss, statements of stockholders’ equity and statements of cash flows) prepared in a manner consistent with the preparation of the Company’s annual consolidated financial statements, no later than 45 days after the end of each of the first three fiscal quarters of the Company; and

(iii) any other information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act;

(d) hold, a reasonable time after the availability of such financial statements (and in any event within 60 days after the applicable fiscal quarter end and 90 days after the applicable fiscal year end) and upon reasonable notice to the Holders and FBR (either by mail, by posting on the Company’s website, or by press release), a quarterly investor conference call to discuss such financial statements, which call will also include an opportunity for the Holders to ask questions of management with regard to such financial statements, and will also cooperate with, and make management reasonably available to, FBR personnel in connection with making Company information available to investors; and

(e) so long as a Holder owns any Registrable Shares, furnish to the Holder promptly upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to the reporting requirements of the Exchange Act), (ii) a copy of the most recent annual or quarterly report and financial statements of the Company, and (iii) such other reports and documents of the Company, and take such further actions, as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such Registrable Shares without registration.

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5. Registration Procedures . In connection with the obligations of the Company with respect to any registration pursuant to this Agreement, the Company shall use its commercially reasonable efforts to effect or cause to be effected the registration of the Registrable Shares under the Securities Act to permit the sale of such Registrable Shares by the Holder or Holders in accordance with the Holder’s or Holders’ intended method or methods of distribution, and the Company shall:

(a) notify FBR and Selling Holders’ Counsel, in writing, at least ten Business Days prior to filing a Registration Statement, of its intention to file a Registration Statement with the Commission and, at least five Business Days prior to filing, provide a copy of the Registration Statement to FBR, its counsel and Selling Holders’ Counsel for review and comment; prepare and file with the Commission, as specified in this Agreement, a Registration Statement(s), which Registration Statement(s) shall (x) comply as to form in all material respects with the requirements of the Securities Act and the applicable form registration statement and include all financial statements required by the Commission to be filed therewith and (y) be acceptable to FBR, its counsel and Selling Holders’ Counsel; notify FBR and Selling Holders’ Counsel in writing, at least five Business Days prior to filing of any amendment or supplement to such Registration Statement and, at least three Business Days prior to filing, provide a copy of such amendment or supplement to FBR, its counsel and Selling Holders’ Counsel for review and comment; promptly following receipt from the Commission, provide to FBR, its counsel and Selling Holders’ Counsel copies of any comments made by the staff of the Commission relating to such Registration Statement and of the Company’s responses thereto for review and comment; and use its commercially reasonable efforts to cause such Registration Statement to become effective as soon as practicable after filing and to remain effective, subject to Section 6 hereof, until the earlier of (i) such time as all Registrable Shares covered thereby have been sold in accordance with the intended distribution of such Registrable Shares, (ii) the date on which all Registrable Shares covered thereby have either been transferred pursuant to Rule 144 (or any successor or analogous rule) or are eligible for resale, without any volume or manner-of-sale restrictions or compliance by the Company with any current public information requirements, pursuant to Rule 144 (subject to the condition that the Registrable Shares have been transferred to an unrestricted CUSIP, are listed or included on the New York Stock Exchange or the Nasdaq Global Market, pursuant to Section 5(n) of this Agreement, or on an alternative trading system with the Registrable Shares qualified under the applicable state securities or “blue sky” laws of all 50 states), or (iii) the date on which all Registrable Shares covered thereby have been sold to the Company or cease to be outstanding; provided , however , that the Company shall not be required to cause the IPO Registration Statement to remain effective for any period longer than 90 days following the effective date of the IPO Registration Statement (subject to extension as provided in Section 6(c) hereof) provided , further , that if the Company has an effective Shelf Registration Statement on Form S-11(or other registration statement form then available to the Company) under the Securities Act and becomes eligible to use Form S-3 or such other short-form registration statement form under the Securities Act, the Company may, upon 30 Business Days prior written notice to all Holders, register any Registrable Shares registered but not yet distributed under the effective Shelf Registration Statement on such a short-form Shelf

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Registration Statement and, once the short-form Shelf Registration Statement is declared effective, de-register such shares under the previous Registration Statement or transfer the filing fees from the previous Registration Statement (such transfer pursuant to Rule 429, if applicable) unless any Holder registered under the initial Shelf Registration Statement notifies the Company within 15 Business Days of receipt of the Company notice that such a registration under a new Registration Statement and de-registration of the initial Shelf Registration Statement would interfere with its distribution of Registrable Shares already in progress, in which case, the Company shall delay the effectiveness of the short-form Registration Statement and termination of the then-effective initial Registration Statement or any short-form Registration Statement for a period of not less than 30 days from the date that the Company receives the notice from such Holders requesting a delay;

(b) subject to Section 5(i) hereof, (i) prepare and file with the Commission such amendments and post-effective amendments to each such Registration Statement as may be necessary to keep such Registration Statement effective for the period described in Section 5(a) hereof; (ii) cause each Prospectus contained therein to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; and (iii) comply with the provisions of the Securities Act with respect to the offering and sale of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof;

(c) furnish to the Holders, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder may reasonably request, in order to facilitate the public offering and sale or other disposition of the Registrable Shares; the Company consents, subject to Section 6 hereof, to the use of such Prospectus, including each preliminary Prospectus, by the Holders, if any, in connection with the offering and sale of the Registrable Shares covered by any such Prospectus;

(d) use its commercially reasonable efforts to register or qualify, or obtain exemption from registration or qualification for, all Registrable Shares by the time the applicable Registration Statement is declared effective by the Commission under all applicable state securities or “blue sky” laws of such jurisdictions as FBR or any Holder of Registrable Shares covered by a Registration Statement shall reasonably request in writing, keep each such registration or qualification or exemption effective during the period such Registration Statement is required to be kept effective pursuant to Section 5(a) and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided , however , that the Company shall not be required to (i) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 5(d) and except as may be required by the Securities Act, (ii) subject itself to taxation in any such jurisdiction, or (iii) submit to the general service of process in any such jurisdiction;

(e) use its commercially reasonable efforts to cause all Registrable Shares covered by such Registration Statement to be registered and approved by such other governmental agencies or authorities as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Shares;

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(f) notify FBR and each Holder promptly and, if requested by FBR or any Holder, confirm such advice in writing (1) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (2) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any Proceeding for that purpose, (3) of any request by the Commission or any other federal, state or foreign governmental authority for (A) amendments or supplements to a Registration Statement or related Prospectus or (B) additional information and (4) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (which information shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) and (5) at the request of any such Holder, promptly to furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchaser of such securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(g) use its commercially reasonable efforts to avoid the issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use or effectiveness of a Registration Statement or suspending the qualification of (or exemption from qualification of) any of the Registrable Shares for sale in any jurisdiction, as promptly as practicable;

(h) upon request, promptly furnish to each requesting Holder of Registrable Shares covered by a Registration Statement, without charge, at least one conformed copy of such Registration Statement and any post-effective amendment or supplement thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);

(i) except as provided in Section 6 hereof, upon the occurrence of any event contemplated by Section 5(f)(4) hereof, use its commercially reasonable efforts to promptly prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(j) if requested by the representative(s) of the underwriters, if any, or any Holders of Registrable Shares being sold in connection with such offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the representative(s) of the underwriters, if any, or such Holders indicate relates to them or that they reasonably request be included therein and (ii) make all required filings of such Prospectus supplement or such post effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment;

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(k) in the case of an Underwritten Offering, use its commercially reasonable efforts to furnish to each Holder of Registrable Shares covered by such Registration Statement and the underwriters a signed counterpart, addressed to each such Holder and the underwriters, of: (i) an opinion of counsel for the Company, dated the date of each closing under the underwriting agreement, reasonably satisfactory to such Holder and the underwriters; and (ii) a “comfort” letter, dated the effective date of such Registration Statement and the date of each closing under the underwriting agreement, signed by the independent public accountants who have certified the Company’s financial statements included in such Registration Statement, covering substantially the same matters with respect to such Registration Statement (and the Prospectus included therein) and with respect to events subsequent to the date of such financial statements, as are customarily covered in accountants’ letters delivered to underwriters in underwritten public offerings of securities and such other financial matters as such Holder and the underwriters may reasonably request;

(l) enter into customary agreements (including in the case of an Underwritten Offering, an underwriting agreement in customary form and reasonably satisfactory to the Company) and take all other reasonable action in connection therewith in order to expedite or facilitate the offering and sale of the Registrable Shares included in such Registration Statement and, in the case of an Underwritten Offering, make representations and warranties to the Holders covered by such Registration Statement and to the underwriters in such form and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same to the extent customary if and when requested;

(m) make available for inspection by representatives of the Holders and the representative(s) of any underwriters participating in any offering and sale of Registrable Shares pursuant to a Registration Statement and any special counsel or accountants retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company and cause the respective officers, directors and employees of the Company to supply all information reasonably requested by any such representatives, the representative(s) of the underwriters, counsel thereto or accountants in connection with a Registration Statement; provided , however , that such records, documents or information that the Company determines, in good faith, to be confidential and notifies such representatives, representative of the underwriters, counsel thereto or accountants are confidential shall not be disclosed by such representatives, representative(s) of the underwriters, counsel thereto or accountants unless (i) the disclosure of such records, documents or information is necessary to avoid or correct a misstatement or omission in a Registration Statement or Prospectus, (ii) the release of such records, documents or information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) such records, documents or information have been generally made available to the public; provided , further , that the representatives of the Holders and any underwriters will use commercially reasonable efforts, to the extent practicable, to coordinate the foregoing inspection and information gathering and not materially disrupt the Company’s business operations;

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(n) use its commercially reasonable efforts (including, without limitation, seeking to cure any deficiencies cited by the exchange or market in the Company’s listing or inclusion application) to list or include all Registrable Shares on the New York Stock Exchange or the Nasdaq Global Market;

(o) prepare and file in a timely manner all documents and reports required by the Exchange Act and, to the extent the Company’s obligation to file such reports pursuant to Section 15(d) of the Exchange Act expires prior to the expiration of the effectiveness period of the Registration Statement as required by Section 5(a) hereof, register the Registrable Shares under the Exchange Act and maintain such registration through the effectiveness period required by Section 5(a) hereof;

(p) provide a CUSIP number for all Registrable Shares, not later than the effective date of the Registration Statement;

(q) (i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, (ii) make generally available to its stockholders, as soon as reasonably practicable, earnings statements covering at least 12 months beginning after the effective date of the Registration Statement that satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, but in no event later than 45 days after the end of each fiscal year of the Company and (iii) not file any Registration Statement or Prospectus or amendment or supplement to such Registration Statement or Prospectus to which any Holder of Registrable Shares covered by any Registration Statement shall have reasonably objected on the grounds that such Registration Statement or Prospectus or amendment or supplement does not comply in all material respects with the requirements of the Securities Act, such Holder having been furnished with a copy thereof at least two Business Days prior to the filing thereof;

(r) provide and cause to be maintained a registrar and transfer agent for all Registrable Shares covered by any Registration Statement from and after a date not later than the effective date of such Registration Statement;

(s) in connection with any sale or transfer of the Registrable Shares (whether or not pursuant to a Registration Statement) that will result in the securities being delivered no longer being Registrable Shares, cooperate with the Holders and the representative of the underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Registrable Shares to be sold, which certificates shall not bear any restrictive transfer legends (other than as required by the Company’s charter, as amended) and to enable such Registrable Shares to be in such denominations and registered in such names as the representative(s) of the underwriters, if any, or the Holders may request at least three Business Days prior to any sale of the Registrable Shares;

(t) in connection with the initial filing of a Shelf Registration Statement and each amendment thereto with the Commission pursuant to Section 2(a) hereof, cooperate with FBR in connection with the filing with FINRA of all forms and information required or requested by FINRA in order to obtain written confirmation from FINRA that FINRA does not object to the fairness and reasonableness of the underwriting terms and arrangements (or any deemed underwriting terms and arrangements) (each such written confirmation, a “ No Objections

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Letter ”) relating to the resale of Registrable Shares pursuant to the Shelf Registration Statement, including, without limitation, information provided to FINRA through its Public Offering System, and pay all costs, fees and expenses incident to FINRA’s review of the Shelf Registration Statement and the related underwriting terms and arrangements, including, without limitation, all filing fees associated with any filings or submissions to FINRA and the legal expenses, filing fees and other disbursements of FBR and any other FINRA member that is the Holder of, or is affiliated or associated with an owner of, Registrable Shares included in the Shelf Registration Statement (including in connection with any initial or subsequent member filing);

(u) in connection with the initial filing of a Shelf Registration Statement and each amendment thereto with the Commission pursuant to Section 2(a) hereof, provide to FBR and its representatives, the opportunity to conduct due diligence, including, without limitation, an inquiry of the Company’s financial and other records, and make available members of its management for questions regarding information which FBR may request in order to fulfill any due diligence obligation on its part and, concurrent with the initial filing of a Shelf Registration Statement (other than a IPO Registration Statement) with the Commission pursuant to Section 2(a) hereof, pay the sum of $75,000 to FBR, by wire transfer of immediately available funds, to cover FBR’s costs and expenses associated with its due diligence review of the Shelf Registration Statement and the information contained therein;

(v) upon effectiveness of the first Registration Statement filed under this Agreement, take such actions and make such filings as are necessary to effect the registration of the Common Stock under the Exchange Act simultaneously with or immediately following the effectiveness of the Registration Statement; and

(w) in the case of an Underwritten Offering, use its commercially reasonable efforts to cooperate and assist in any filings required to be made with FINRA and in the performance of any due diligence investigation by any underwriter and its counsel (including any “qualified independent underwriter,” if applicable) that is required to be retained in accordance with the rules and regulations of FINRA.

The Company may require the Holders to furnish (and if so, each Holder shall furnish) to the Company such information regarding the proposed distribution by such Holder of such Registrable Shares as the Company may from time to time reasonably request in writing or as shall be required to effect the registration of the Registrable Shares, and no Holder shall be entitled to be named as a selling stockholder in any Registration Statement and no Holder shall be entitled to use the Prospectus forming a part thereof if such Holder does not provide such information to the Company. Any Holder that sells Registrable Shares pursuant to a Registration Statement or as a selling security holder pursuant to an Underwritten Offering shall be required to be named as a selling stockholder in the related prospectus and to deliver a prospectus to purchasers. Each Holder further agrees to furnish promptly to the Company in writing all information required from time to time to make the information previously furnished by such Holder not misleading.

Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(f)(3) or 5(f)(4) hereof, such Holder will immediately discontinue disposition of Registrable Shares pursuant to a Registration Statement

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until such Holder’s receipt of the copies of the supplemented or amended Prospectus. If so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice.

6. Black-Out Period . (a) Subject to the provisions of this Section 6 and a good faith determination by a majority of the independent members of the board of directors of the Company (the “ Board of Directors ”) that it is in the best interests of the Company to suspend the use of the Registration Statement, following the effectiveness of a Registration Statement (and the filings with any international, federal or state securities commissions), the Company, by written notice to FBR and the Holders, may direct the Holders to suspend sales of the Registrable Shares pursuant to a Registration Statement for such times as the Company reasonably may determine is necessary and advisable (but in no event for more than an aggregate of 90 days in any rolling 12 month period commencing on the Closing Date or more than 60 days in any rolling 90 day period), if any of the following events shall occur: (i) the representative(s) of the underwriters of an Underwritten Offering of primary shares by the Company has advised the Company that the sale of Registrable Shares pursuant to the Registration Statement would have a material adverse effect on the Company’s primary Underwritten Offering; (ii) the majority of the independent members of the Board of Directors of the Company shall have determined in good faith that (A) the offer or sale of any Registrable Shares would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving the Company, (B) after obtaining the advice of counsel, the sale of Registrable Shares pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, and (C) (x) the Company has a bona fide business purpose for preserving the confidentiality of such transaction, (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate such transaction, or (z) the proposed transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis, as applicable; or (iii) the majority of the independent members of the Board of Directors of the Company shall have determined in good faith, after obtaining the advice of counsel, that it is required by law, rule or regulation or that it is in the best interests of the Company to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate information into the Registration Statement for the purpose of (1) including in the Registration Statement any prospectus required under Section 10(a)(3) of the Securities Act; (2) reflecting in the Prospectus included in the Registration Statement any facts or events arising after the effective date of the Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represent a fundamental change in the information set forth therein; or (3) including in the Prospectus included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its best efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis or to take such action as is necessary to make resumed use of the Registration Statement compatible with the Company’s best interests, as applicable, so as to permit the Holders to resume sales of the Registrable Shares as soon as possible.

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(b) In the case of an event that causes the Company to suspend the use of a Registration Statement (a “ Suspension Event ”), the Company shall give written notice (a “ Suspension Notice ”) to FBR and the Holders to suspend sales of the Registrable Shares and such notice shall state generally the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is using its best efforts and taking all reasonable steps to terminate suspension of the use of the Registration Statement as promptly as possible. The Holders shall not effect any sales of the Registrable Shares pursuant to such Registration Statement (or such filings) at any time after they have received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice (as defined below). If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies other than permanent file copies then in such Holder’s possession of the Prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders may recommence effecting sales of the Registrable Shares pursuant to the Registration Statement (or such filings) following further notice to such effect (an “ End of Suspension Notice ”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and FBR in the manner described above promptly following the conclusion of any Suspension Event and its effect.

(c) Notwithstanding any provision herein to the contrary, if the Company shall give a Suspension Notice pursuant to this Section 6, the Company agrees that it shall extend the period of time during which the applicable Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of receipt by the Holders of the Suspension Notice to and including the date of receipt by the Holders of the End of Suspension Notice and provide copies of the supplemented or amended Prospectus necessary to resume sales.

7. Indemnification and Contribution . (a) The Company agrees to indemnify and hold harmless (i) each Holder of Registrable Shares and any underwriter (as determined under the Securities Act) for such Holder (including, if applicable, FBR), (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) any such Person described in clause (i) (any of the Persons referred to in this clause (ii) being hereinafter referred to as a “ Controlling Person ”), and (iii) the respective officers, directors, partners, members, employees, representatives and agents of any such Person or any Controlling Person (any Person referred to in clause (i), (ii) or (iii) above may hereinafter be referred to as a “ Purchaser Indemnitee ”), to the fullest extent lawful, from and against any and all losses, claims, damages, judgments, actions, out-of-pocket expenses, and other liabilities (the “ Liabilities ”), including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or Proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Purchaser Indemnitee, joint or several, directly or indirectly related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto), any Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus (or any amendment or supplement thereto) or any preliminary

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Prospectus, or any other document used to sell the Shares, or (x) with respect to such Registration Statement any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and (y) with respect to any such Prospectus, Issuer Free Writing Prospectus, preliminary Prospectus, or any other document used to sell the Shares, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such Liabilities arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Purchaser Indemnitee furnished to the Company, or any underwriter in writing by such Purchaser Indemnitee expressly for use therein. The Company shall notify the Holders promptly of the institution, threat or assertion of any claim, Proceeding (including any governmental investigation), or litigation of which it shall have become aware in connection with the matters addressed by this Agreement which involves the Company or a Purchaser Indemnitee. The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of any Purchaser Indemnitee.

(b) In connection with any Registration Statement in which a Holder of Registrable Shares is participating, and as a condition to such participation, such Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act and their respective officers, directors, partners, members, employees, representatives and agents of such Person or Controlling Person to the same extent as the foregoing indemnity from the Company to each Purchaser Indemnitee, but only with reference to untrue statements or omissions or alleged untrue statements or omissions made in reliance upon and in strict conformity with information relating to such Holder furnished to the Company in writing by such Holder expressly for use in such Registration Statement (or any amendment thereto), Prospectus (or any amendment or supplement thereto), Issuer Free Writing Prospectus (or any amendment or supplement thereto) or any preliminary Prospectus. Absent gross negligence or willful misconduct, the liability of any Holder pursuant to this paragraph shall in no event exceed the net proceeds received by such Holder from sales of Registrable Shares pursuant to such Registration Statement (or any amendment thereto), Prospectus (or any amendment or supplement thereto), Issuer Free Writing Prospectus (or any amendment or supplement thereto) or any preliminary Prospectus.

(c) If any suit, action, Proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to paragraph (a) or (b) above, such Person (the “ Indemnified Party ”) shall promptly notify the Person from whom such indemnity may be sought (the “ Indemnifying Party ”) in writing of the commencement thereof (but the failure to so notify an Indemnifying Party shall not relieve it from any liability which it may have under this Section 7, except to the extent the Indemnifying Party is materially prejudiced by the failure to give notice), and the Indemnifying Party, upon request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying Party may reasonably designate in such Proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such Proceeding. Notwithstanding the foregoing, in any such Proceeding, any Indemnified Party shall have the

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right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Party failed within a reasonable time after notice of commencement of the action to assume the defense and employ counsel reasonably satisfactory to the Indemnified Party, (iii) the Indemnifying Party and its counsel do not actively and vigorously pursue the defense of such action or (iv) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and Indemnifying Party, or any Affiliate of the Indemnifying Party, and such Indemnified Party shall have been reasonably advised by counsel that, either (x) there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party or such Affiliate of the Indemnifying Party or (y) a conflict may exist between such Indemnified Party and the Indemnifying Party or such Affiliate of the Indemnifying Party (in which case the Indemnifying Party shall not have the right to assume nor direct the defense of such action on behalf of such Indemnified Party; it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Indemnified Parties, which firm shall be designated in writing by those Indemnified Parties who sold a majority of the Registrable Shares sold by all such Indemnified Parties and any such separate firm for the Company, the directors, the officers and such control Persons of the Company as shall be designated in writing by the Company). The Indemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there is a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify any Indemnified Party from and against any loss or liability by reason of such settlement or judgment to the extent required hereby. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened Proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding and (ii) does not include a statement as to or an admission of, fault, culpability or a failure to act by or on behalf of the Indemnified Party.

(d) If the indemnification provided for in paragraphs (a) and (b) of this Section 7 is for any reason held to be unavailable to an Indemnified Party in respect of any Liabilities referred to therein (other than by reason of the exceptions provided therein) or is insufficient to hold harmless a party indemnified thereunder, then each Indemnifying Party under such paragraphs, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities (i) in such proportion as is appropriate to reflect the relative benefits of the Indemnified Party on the one hand and the Indemnifying Party(ies) on the other hand in connection with the statements or omissions that resulted in such Liabilities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party(ies) and the Indemnified Party, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and any Purchaser Indemnitees on the other hand

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shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by such Purchaser Indemnitees and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if such Indemnified Parties were treated as one entity for such purpose), or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d) above. The amount paid or payable by an Indemnified Party as a result of any Liabilities referred to in Section 7(d) above shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Purchaser Indemnitee be required to contribute any amount in excess of the amount by which the net proceeds received by such Purchaser Indemnitee from sales of Registrable Shares exceeds the amount of any damages that such Purchaser Indemnitee has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. For purposes of this Section 7, each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) FBR or a Holder of Registrable Shares shall have the same rights to contribution as FBR or such Holder, as the case may be, and each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) the Company, and each officer, director, partner, employee, representative, agent or manager of the Company shall have the same rights to contribution as the Company. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or Proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise, except to the extent that any party is materially prejudiced by the failure to give notice. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(f) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Parties may otherwise have to the Indemnified Parties referred to above. The Purchaser Indemnitee’s obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Registrable Shares sold by each of the Purchaser Indemnitees hereunder and not joint.

8. Market Stand-off Agreement . Each Holder hereby agrees that it shall not, to the extent requested by the Company or an underwriter of securities of the Company, directly or indirectly sell, offer to sell (including without limitation any short sale), grant any option or otherwise transfer or dispose of any Registrable Shares or other shares of Common Stock of the Company or any securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company then owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound) (i) in the case of the Company and each of its

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officers, directors and employees, in each case to the extent such person or entity holds shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock, for a period beginning 30 days prior to, and continuing for 180 days following, the effective date of, the IPO Registration Statement; (ii) in the case of all other Holders who include Registrable Shares in the IPO Registration Statement, beginning 30 days prior to, and continuing for 180 days following, the effective date of the IPO Registration Statement, and (iii) in the case of all other Holders who do not include Registrable Shares in the IPO Registration Statement, for a period beginning 30 days prior to, and continuing for 60 days following, the effective date of an IPO Registration Statement filed under the Securities Act; provided , however , that :

(a) the restrictions above shall not apply to Registrable Shares sold pursuant to the IPO Registration Statement;

(b) all executive officers and directors of the Company then holding shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company enter into agreements that are no less restrictive;

(c) the Holders shall be allowed any concession or proportionate release allowed to any officer or director that entered into agreements that are no less restrictive (with such proportion being determined by dividing the number of shares being released with respect to such officer or director by the total number of issued and outstanding shares held by such officer or director); provided , that nothing in this Section 8(c) shall be construed as a right to proportionate release for the executive officers and directors of the Company upon the expiration of the 60 day period applicable to all Holders other than the executive officers and directors of the Company; and

(d) this Section 8 shall not be applicable if a Shelf Registration Statement filed under the Securities Act has been declared effective by the Commission prior to the filing of an IPO Registration Statement.

In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the securities subject to this Section 8 and to impose stop transfer instructions with respect to the Registrable Shares and such other securities of each Holder (and the securities of every other Person subject to the foregoing restriction) until the end of such period.

9. Termination of the Company’s Obligation . The Company shall have no obligation pursuant to this Agreement with respect to any Registrable Shares proposed to be sold by a Holder in a registration pursuant to this Agreement if, in the opinion of counsel to the Company, (i) all such Registrable Shares proposed to be sold by a Holder may be sold in a single transaction without registration under the Securities Act pursuant to Rule 144, (ii) the Company has become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act for a period of at least 90 days and is current in the filing of all such required reports, and (iii) the Registrable Shares have been listed for trading on a national securities exchange.

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10. Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders beneficially owning not less than a majority of the then outstanding Registrable Shares ( provided , however , that for purposes of this Section 10, Registrable Shares that are owned, directly or indirectly, by an Affiliate, director or executive officer of the Company shall not be deemed to be outstanding), enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any Registration Statement filed pursuant to the terms hereof, unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of Registrable Shares of the Holders that is included, or (b) to have its securities registered on a registration statement that could be declared effective prior to, or within 180 days of, the effective date of any registration statement filed pursuant to this Agreement.

11. Miscellaneous .

(a) Remedies . In the event of a breach by the Company of any of its obligations under this Agreement, each of FBR and the Holders, in addition to being entitled to exercise all rights provided herein or, in the case of FBR, in the Purchase/Placement Agreement, or granted by law, including the rights granted in Section 2(f) hereof and recovery of damages, will be entitled to specific performance of its rights under this Agreement. Subject to Section 7, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(b) Amendments and Waivers . Except as specified in Section 3(a), the provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, without the written consent of the Company and Holders beneficially owning not less than a majority of the then outstanding Registrable Shares; provided , however , that for purposes of this Section 11(b), Registrable Shares that are owned, directly or indirectly, by an Affiliate of the Company shall not be deemed to be outstanding; provided , further , however , that any amendments, modifications or supplements to, or any waivers or consents to departures from, the provisions of Section 8 hereof that would have the effect of extending the 60 or 180 day periods referenced therein shall be approved by, and shall only be applicable to, those Holders who provide written consent to such extension to the Company . No amendment shall be deemed effective unless it applies uniformly to all Holders. Notwithstanding the foregoing, a waiver or consent to or departure from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders may be given by such Holder; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the first and second sentences of this paragraph.

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(c) Notices . All notices and other communications, provided for or permitted hereunder, shall be made in writing and delivered by facsimile (with receipt confirmed), overnight courier or registered or certified mail, return receipt requested, or by electronic mail:

(i) if to a Holder, at the most current address given by the transfer agent and registrar of the Shares to the Company; and

(ii) if to the Company, shall be sufficient in all respects if delivered to the Company at the offices of the Company at MedEquities Realty Trust, Inc., 201 Seaboard Lane, Suite 100, Franklin, Tennessee 37067, Attention: William C. Harlan (facsimile: (615) 658-8141; with a copy to Morrison & Foerster LLP, 2000 Pennsylvania Avenue, NW, Washington D.C. 20006, Attention: John A. Good (facsimile: (202) 887-0763); and

(iii) if to FBR, at the offices of FBR at 1001 Nineteenth Street North, Arlington, Virginia 22209, Attention: Gavin Beske, Esq., (facsimile: 703-469-1012); with a copy to Clifford Chance US LLP, 31 West 52 ^nd Street, New York, NY 10019, Attention: Jay Bernstein, Esq. (facsimile: 212-878-8375).

(d) Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including, without limitation and without the need for an express assignment or assumption, subsequent Holders. The Company agrees that the Holders shall be a third party beneficiary to the agreements made hereunder by the Participants and the Company, and the Holders shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect their rights hereunder.

(e) Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(f) Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE COURT IN THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE

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LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT.

(h) Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties hereto that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(i) Entire Agreement . This Agreement, together with the Purchase/Placement Agreement, is intended by the parties hereto as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.

(j) Registrable Shares Held by the Company or its Affiliates . Whenever the consent or approval of Holders of a specified percentage of Registrable Shares is required hereunder, Registrable Shares held by the Company or its Affiliates or by the executive officers or directors of the Company shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

(k) Adjustment for Stock Splits, etc. Wherever in this Agreement there is a reference to a specific number of shares, then upon the occurrence of any subdivision, combination, or stock dividend of such shares, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination, or stock dividend.

(l) Survival . This Agreement is intended to survive the consummation of the transactions contemplated by the Purchase/Placement Agreement. The indemnification and contribution obligations under Section 7 of this Agreement shall survive the termination of the Company’s obligations under Section 2 of this Agreement.

(m) Attorneys’ Fees . In any action or Proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by the court, shall be entitled to recover its reasonable attorneys’ fees in addition to any other available remedy.

(n) Actions by Holders and Stockholders . Any approvals, consents, waivers or other actions of Holders or stockholders of the Company contemplated hereunder may be obtained by vote at a meeting or by written consent.

[ Signature page follows ]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.


COMPANY:

MEDEQUITIES REALTY TRUST, INC.

By:	/s/ John W. McRoberts
	Name:	John W. McRoberts
	Title:	CEO

FBR:

FBR CAPITAL MARKETS & CO.

By:	/s/ Paul Dellisola
	Name:	Paul Dellisola
	Title:	Senior Managing Director

Signature Page

Exhibit 10.12

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of July 25, 2014, by and among MedEquities Realty Trust, Inc., a Maryland corporation (the “ Company ”), and the undersigned Purchasers (each a “ Purchaser ” and together the “ Purchasers ”).

WHEREAS , the Company has proposed to issue and sell shares of the Company’s common stock, $0.01 par value per share (the “ Common Stock ”), as described in the Company’s Preliminary Offering Memorandum, dated July 1, 2014 (the “ 144A Offering ”);

WHEREAS , concurrently with the completion of the 144A Offering, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company in a private placement, upon the terms and conditions set forth in this Agreement, such number of shares of Common Stock as provided in this Agreement (the “ Shares ”);

WHEREAS , such purchase and sale of the Shares shall occur concurrently with, and be conditioned on, the closing of the 144A Offering; and

WHEREAS , each of the Purchasers is currently, or, after the closing of the 144A Offering, will become, an officer and/or a director of the Company or is the spouse of an officer of the Company.

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants, agreements and warranties herein contained, the parties to this Agreement hereby agree as follows:

1.	PURCHASE OF SHARES

Subject to the terms and conditions of this Agreement, the Company agrees to issue and sell to each Purchaser at the Closing (as defined below), and each Purchaser agrees to purchase at the Closing, the number of Shares set forth opposite such Purchaser’s name on Exhibit A hereto at a price per share of $15.00, for a total purchase price as set forth opposite such Purchaser’s name on Exhibit A hereto (each, a “ Purchase Price ”).

2.	CLOSING

2.1

Closing

Upon the terms and subject to the satisfaction or waiver of all of the conditions to closing set forth in this Agreement, the closing (the “ Closing ”) of the purchase and sale of the Shares shall take place at the offices of Morrison & Foerster LLP, 2000 Pennsylvania, N.W., Suite 6000, Washington, DC 20006, or at such other location as the Company and the Purchasers may mutually agree upon. The Closing shall take place concurrently with, and shall be subject to the closing of, the 144A Offering.

2.2

Closing Deliveries

(a) Deliveries by the Purchasers . At the Closing, each Purchaser shall deliver to the Company such Purchaser’s applicable Purchase Price, by wire transfer of immediately available funds to the account designated in writing to the Purchasers by the Company for such purpose.

(b) Deliveries by the Company . At the Closing, the Company shall instruct American Stock Transfer & Trust Company, LLC, the Company’s transfer agent, to register the Shares in book-entry form in the name of the Purchasers.

3.	COMPANY REPRESENTATIONS AND WARRANTIES

The Company hereby represents and warrants to the Purchasers that:

3.1

Organization and Standing

The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and has all requisite corporate power and authority to own, lease and operate its assets and properties, to carry on its business as presently conducted, to execute and deliver this Agreement and to carry out the transactions contemplated hereby.

3.2

Authorization

The execution, delivery and performance of this Agreement by the Company, the fulfillment of and compliance with the respective terms and provisions hereof, and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company (none of which actions have been modified or rescinded, and all of which actions are in full force and effect). When executed by the Company, this Agreement will constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

3.3

Title to Shares

The Shares have been duly authorized and, upon payment by each Purchaser of such Purchaser’s applicable Purchase Price and delivery by the Company to the Purchasers of the Shares pursuant to the terms hereof, the Shares will be validly issued and fully paid and nonassessable, and the Purchasers will acquire good and marketable title thereto, free and clear of all mortgages, liens, pledges, charges, claims, security interests and other encumbrances (other than any restrictions created by the Purchasers or any restrictions created by federal or state securities laws).

3.4

Non-Contravention

The issuance and sale by the Company of the Shares does not conflict with the articles of amendment and restatement or bylaws of the Company.

3.5

Non-Solicitation

Each Purchaser is currently, or, after the closing of the 144A Offering, will become, an officer and/or a director of the Company or is the spouse of an officer of the Company and (i) was not contacted by the Company or its representatives for the purpose of investing in any securities of the Company offered hereby through any advertisement, article, notice or any other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees were invited by any general advertising and (ii) the Shares were not offered or sold to such Purchaser by any form of general solicitation or general advertising.

3.6

Offering; Exemption

Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 4 of this Agreement, no registration under the Securities Act of 1933, as amended (the “ Securities Act ”), or any applicable state securities law is required for the offer and sale of the Shares by the Company to the Purchasers as contemplated hereby.

4.	PURCHASER REPRESENTATIONS AND WARRANTIES

Each Purchaser hereby represents and warrants to the Company that:

4.1

Legal Capacity

Such Purchaser has the full and unrestricted legal capacity to execute and deliver this Agreement and to carry out the transactions contemplated hereby.

4.2

Authorization; Binding Obligation

When executed by such Purchaser, this Agreement will constitute a valid and binding obligation of such Purchaser, enforceable in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

4.3

Non-Contravention

The purchase by such Purchaser of such Purchaser’s Shares does not conflict with any material contract by which such Purchaser or such Purchaser’s property is bound or any laws or regulations or decree, ruling or judgment of any court applicable to such Purchaser or such Purchaser’s property.

4.4

Purchase Entirely for Own Account

The Shares to be received by such Purchaser will be acquired for investment for such Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and such Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same, except, in each case, as a bona fide gift to an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated

under the Securities Act (“ Rule 501(a) ”). Such Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Shares to be received by such Purchaser, except as a bona fide gift to an “accredited investor” as that term is defined in Rule 501(a).

4.5

Investment Experience and Access to Information

(a) Such Purchaser can bear the economic risk of the investment and has such knowledge and experience in financial or business matters that such Purchaser is capable of evaluating the merits and risks of the investment in the Shares.

(b) Such Purchaser has been furnished all information such Purchaser considers necessary or appropriate for deciding whether to purchase the Shares. Such Purchaser has had adequate opportunity to ask questions of, and receive answers from, the officers, employees, agents, accountants and representatives of the Company regarding the business, operations, financial condition, assets and liabilities of the Company and the terms and conditions of the offering of the Shares.

4.6

Restricted Shares

Such Purchaser understands and acknowledges that the Shares being acquired pursuant hereto are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may not be resold without registration under the Securities Act, except in certain limited circumstances. Such Purchaser is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

4.7

Legends

Such Purchaser understands and acknowledges that the Shares, and any securities issued in respect of or in exchange for the Shares, may bear one or all of the following legends (in addition to any other legend which may be required by other arrangements between the parties hereto):

(a) “THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN A TRANSACTION NOT INVOLVING A PUBLIC OFFERING, (II) PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (IV) TO THE

COMPANY OR ANY OF ITS SUBSIDIARIES, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND IN CASE (I) OR (II), ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

(b) Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate so legended.

4.8

Accredited Purchaser

Such Purchaser (i) has furnished true and complete information on the Purchaser certificate attached hereto as Exhibit B (the “ Purchaser Certificate ”) and (ii) is an “accredited investor” as that term is defined in Rule 501(a). Such Purchaser is aware that the Company is relying upon the representations, warranties and agreements contained in this Agreement and the Purchaser Certificate for the purpose of determining whether this transaction meets the requirements of the exemption from the registration requirements of the Securities Act and any applicable state securities laws.

4.9

Non-Solicitation

Such Purchaser is currently, or, after the closing of the 144A Offering, will become, an officer and/or a director of the Company or is the spouse of an officer of the Company and (i) was not contacted by the Company or its representatives for the purpose of investing in any securities of the Company offered hereby through any advertisement, article, notice or any other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees were invited by any general advertising and (ii) the Shares were not offered or sold to such Purchaser by any form of general solicitation or general advertising.

5.	MISCELLANEOUS

5.1

Confidentiality

The Purchasers agree that, except with the prior written consent of the Company, the Purchasers shall at all times hold in confidence and trust and not use or disclose any confidential information of the Company provided to or learned by the Purchasers in connection with this Agreement. Notwithstanding the foregoing, the Purchasers may disclose any confidential information of the Company (i) as required by any court or other governmental body, provided that the Purchasers provide the Company with prompt notice of such court order or requirement to the Company to enable the Company to seek a protective order or otherwise to prevent or restrict such disclosure or (ii) discussing or using such confidential information if the same hereafter is in the public domain (other than as a result of a breach of this Agreement).

5.2

Notices

(a) All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing, to the following addresses:

If to the Company, to:

MedEquities Realty Trust, Inc.

201 Seaboard Lane, Suite 100

Franklin, Tennessee 37067

Attention: Secretary

with a copy (which shall not constitute notice) to:

Morrison & Foerster LLP

2000 Pennsylvania, NW, Suite 6000

Washington, DC 20006-1888

Attention: John A. Good and David P. Slotkin

Facsimile: (202) 785-7522

If to the Purchasers, to:

The address appearing in such Purchaser’s Purchaser Certificate.

5.3

Assignment; Successors and Assigns

This Agreement and the rights granted hereunder may not be assigned by the Purchasers without the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns as provided in this Agreement.

5.4

Third Party Beneficiaries

Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by any reason of this Agreement, except as expressly provided in this Agreement.

5.5

Entire Agreement

This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter of this Agreement. The express terms of this Agreement control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms of this Agreement.

5.6

Amendments

This Agreement may be amended or modified only by an agreement in writing signed by each of the parties hereto.

5.7

No Implied Waivers; Remedies

No failure or delay on the part of any party in exercising any right, privilege, power, or remedy under this Agreement, and no course of dealing shall operate as a waiver of any such right, privilege, power or remedy; nor shall any single or partial exercise of any right, privilege, power or remedy under this Agreement preclude any other or further exercise of any such right, privilege, power or remedy or the exercise of any other right, privilege, power or remedy. No waiver shall be asserted against any party unless signed in writing by such party. The rights, privileges, powers and remedies available to the parties are cumulative and not exclusive of any other rights, privileges, powers or remedies provided by statute, at law, in equity or otherwise. Except as provided in this Agreement, no notice to or demand on any party in any case shall entitle such party to any other or further notice or demand in any similar or other circumstances or constitute a waiver of the right of the party giving such notice or making such demand to take any other or further action in any circumstances without notice or demand.

5.8

Governing Law

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF. EACH OF THE PARTIES HEREBY IRREVOCABLY AGREES THAT THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION IN CONNECTION WITH ANY ACTIONS OR PROCEEDINGS ARISING BETWEEN THE PARTIES UNDER THIS AGREEMENT. EACH OF THE PARTIES HEREBY IRREVOCABLY CONSENTS AND SUBMITS TO THE JURISDICTION OF SAID COURT FOR ANY SUCH ACTION OR PROCEEDING. EACH OF THE PARTIES HEREBY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN SAID COURT.

5.9

Waiver of Trial by Jury

EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF ANY HOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

5.10

Headings

The headings contained in this Agreement are for convenience only and shall not affect the construction or interpretation of any provisions of this Agreement.

5.11

Severability

If any provision of the Agreement shall be held to be invalid, the remainder of the Agreement shall not be affected thereby.

5.12

Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts of this Agreement, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

Signatures on following page

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date first written above.


COMPANY:

MEDEQUITIES REALTY TRUST, INC.

By:		/s/ Jeffery C. Walraven
Name:		Jeffery C. Walraven
Title:		Chief Financial Officer, Secretary and Treasurer

PURCHASERS:

/s/ John W. McRoberts
Name:		John W. McRoberts
Title:		Chairman and Chief Executive Officer

/s/ William C. Harlan
Name:		William C. Harlan
Title:		President and Director

/s/ Randall L. Churchey
Name:		Randall L. Churchey
Title:		Director Nominee

/s/ John N. Foy
Name:		John N. Foy
Title:		Director Nominee

/s/ Stuart C. McWhorter
Name:		Stuart C. McWhorter
Title:		Director Nominee

/s/ Forrest G. Gardner
Name:		Forrest G. Gardner
Title:		Senior Vice President of Asset and
		Investment Management


/s/ Stephanie J. Carpenter
Name:		Stephanie J. Carpenter


/s/ David L. Travis
Name:		David L. Travis

Exhibit A


Name of Purchaser	Number of Shares		Total Purchase Price
John W. McRoberts		183,333	$	2,749,995
William C. Harlan		166,667	$	2,500,005
Forrest G. Gardner		6,667	$	100,005
Randall L. Churchey		13,333	$	199,995
John D. Foy		13,333	$	199,995
Stuart C. McWhorter		3,333	$	49,995
Stephanie J. Carpenter		16,667	$	250,005
David L. Travis		2,500	$	37,500

Exhibit B

PURCHASER CERTIFICATE

ADDITIONAL INFORMATION TO BE COMPLETED BY PURCHASER:

(Please print or type)


Name of Purchaser:

Purchaser’s Residence/Business Address:



		Telephone:

		Facsimile:

Purchaser’s Mailing Address (if different):



		Telephone:

		Facsimile:

Purchaser’s Taxpayer ID/Social Security Number:

Exhibit 10.14

PURCHASE AND SALE AGREEMENT

by and between

KENTFIELD THCI HOLDING COMPANY, LCC

a Delaware limited liability company

and

1125 SIR FRANCIS DRAKE BOULEVARD OPERATING COMPANY, LLC

a Delaware limited liability company,

as Sellers,

AND

MEDEQUITIES REALTY TRUST, INC.

a Maryland corporation

or its assignee

as Purchaser

Premises Location: 1125 Sir Francis Drake Boulevard

Kentfield, Marin County, California 94904

Dated As Of: June 1, 2014

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “ Agreement ”) is made and entered into as of the Effective Date (as hereinafter defined) by and among Vibra Healthcare LLC, a Delaware limited liability company (“ Parent ”), Vibra Healthcare II, LLC, a Delaware limited liability company (“ Affiliate ”) (Parent and Affiliate herein sometimes referred to as “ Guarantor ” and collectively as the “ Parent Entities ”), Kentfield THCI Holding Company, LLC, a Delaware limited liability company (the “ Owner ”) and 1125 Sir Francis Drake Boulevard Operating Company, LLC, a Delaware limited liability company (herein, the “ Operator ”) (the Owner and the Operator collectively with the Parent Entities, herein referred to as the “ Seller Parties ”), on the one hand, the principal place of business of each of which is located at 4550 Lena Drive, Suite 225, Mechanicsburg, Pennsylvania 17055, and MedEquities Realty Trust, Inc. a Maryland corporation or its designated assignee (such party purchasing the Property, as defined below, herein “ Purchaser ”) on the other hand, the principal place of business of which is located at 201 Seaboard Lane, Suite 100, Franklin, Tennessee 37067. The “ Effective Date ” shall be the date the Title Company (as hereinafter defined) receives an original counterpart of this Agreement signed by all of the Seller Parties on the one hand and by the Purchaser on the other hand, as evidenced by the Title Company’s signature hereto.

This Purchase and Sale Agreement is entered into by the Purchaser, on the one hand, and the Seller Parties, on the other hand, as part of a transaction in which the Purchaser shall acquire the Property and lease the Property back to the Tenant (the “ Sale Leaseback ”) pursuant to that certain Facility Lease Agreement to be dated as of the closing (the “ Facility Lease ”). This Purchase and Sale Agreement is the “Purchase and Sale Agreement” referred to in the Facility Lease Agreement.

ARTICLE I.

PROPERTY

Section 1.01. Property . To accomplish the Sale Leaseback, Seller Parties hereby agree to sell and convey to Purchaser, and Purchaser hereby agrees to purchase from Seller Parties, upon the terms and conditions set forth herein, the following properties and assets, free and clear of all liens and encumbrances:

(a) Real Property . That certain tract of real property comprising approximately 2.61 acres of land located at 1125 Sir Francis Drake Boulevard, Kentfield, California 94904, more particularly described in Exhibit A-1 attached hereto and made a part hereof for all purposes, together with all of Owner’s right, title and interest in and to (i) all and singular the rights and appurtenances pertaining to such real property, including any easements, and all right, title and interest of Owner in and to adjacent streets, alleys and rights-of-way, and (ii) any and all water, water rights or similar rights or privileges (including tap rights) appurtenant to or used in connection with the ownership or operation of such real property and (iii) all zoning, conditional use, variances, waiver, planning approvals, and other planning approvals related to the ownership, operation, and possible future development, expansion, redevelopment, revocation of such real property (the “ Entitlements ”) (all of the foregoing being hereinafter collectively referred to as the “ Real Property ”).

(b) Improvements . All improvements, structures and fixtures now constructed and completed with respect to and situated on the Real Property, including, without limitation, (i) that long term care hospital building consisting of approximately 29,045 square feet with sixty (60) licensed long term care hospital (“ LTCH ”) beds (the “ LTCH ”) located on the Real Property, (ii) an adjoining free standing medical office building consisting of approximately 11,046 square feet (the “ MOB ”) located on the Real Property, (iii) any other related medical and administrative facilities, if any, serving the LTCH and/or the MOB, (iv) all surface and structural parking facilities, loading docks and similar facilities, all landscaping and other improvements, structures and fixtures located on or servicing the Real Property (all of the foregoing being hereinafter collectively referred to as the “ Improvements ”).

(c) Leases; Certain Other Intangibles . All of Operator’s rights, title and interest as Landlord in (i) all leases, if any, covering all or any portion of the Real Property and/or the Improvements, including the LTCH and the MOB (such leasing arrangements herein referred to as a “ Lease ” and collectively as “ Leases ”), (ii) all other intangible rights owned by the Owner which are appurtenant to the Real Property and/or the Improvements, including (to the extent assignable) all roof, structural, mechanical (including HVAC) and other warranties issued with respect to the Improvements and as pertains to the Real Property and Improvements, but not otherwise, and (iii) all local, state and federal licensures, approvals, certifications and permits required and necessary for the operation of any of the Real Estate and/or Improvements for their current, future and intended use, but excluding any licenses, approvals, certifications and permits for the Hospital which, subject to the applicable provisions of the Facility Lease including Section 9.06 thereof, shall remain the property of the Operator (all of the foregoing being hereinafter collectively referred to as the “ Intangible Property ”).

(d) Personal Property . All of Owner’s and Operator’s right, title and interest in all beds, fixed and moveable equipment, furniture, furnishings, machinery, heating, plumbing, ventilation and air conditioning systems and equipment, carpet, tile, floor coverings, security devices, sprinkler systems, supplies, telephone exchange numbers, tenant lease files, leasing records, tenant credit reports, telephone systems, audio systems, keys, surveys, plans and specifications (whether in cad, electronic or other format), maintenance equipment and supplies and all other tangible personal property situated on the Real Property and used in connection therewith by either or both of Owner and Operator (all of the foregoing being hereinafter collectively referred to as the “ Personal Property ”). Notwithstanding the foregoing provisions, the parties acknowledge that certain equipment and personal property as identified on Exhibit A-2 hereto, is leased from third parties as identified in the lease(s) described on Exhibit A-2 . Such leased equipment and personal property, while not being conveyed to the Landlord, shall be subject to the applicable provisions of the Facility Lease, including but not limited to, Section 8.01 and Section 9.06 thereof, which sections require that the Property be returned to Landlord in an operable, fully equipped condition upon termination or expiration of the Facility Lease.

All of the foregoing items purchased under this Agreement are collectively referred to as the “ Property ”.

ARTICLE II.

PURCHASE PRICE

Section 2.01. Purchase Price . The total purchase price for the Property agreed upon by Seller and Purchaser, subject to adjustment(s) as set forth in this Agreement, is an amount equal up to an aggregate of FIFTY TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($52,500,000.00) less the Transaction Costs (the “ Purchase Price ”).

The allocation of the Initial Investment (as defined in Section 6.03 below) shall be agreed upon by the Owner and Operator, on the one hand and by the Purchaser on the other hand prior to Closing. A schedule setting forth such allocation shall be attached here as Exhibit B to set forth such agreed upon allocation prior to Closing.

Section 2.02. Deposit . Owner has previously remitted to Purchaser a due diligence deposit of Thirty Thousand and No/100 Dollars ($30,000.00) (the “ DD Deposit ”) to be used solely by the Purchaser to engage its counsel to prepare this Agreement and other related documentation and to conduct initial legal due diligence pertaining to the Owner and Operator and the Property. If for any reason the transaction contemplated by this Agreement is not consummated through no fault of either Owner and Operator, including but not limited to the failure to obtain the various consents from Health Care REIT, Inc. (“ HCR ”) or MidCap Funding IV, LLC (“ MidCap ”) as more fully described below, then the full amount of the DD Deposit shall be promptly refunded by Purchaser to the Seller Parties.

ARTICLE III.

REVIEW ITEMS

Section 3.01. Survey . Owner has delivered to Purchaser a copy of Owner’s existing survey of the Property dated May 26, 2010. Purchaser, at Owner’s sole cost and expense, shall have the right to obtain a new or recertified survey of the Property (the “ Survey ”) prepared by a surveyor licensed in the State in which the Property is located and approved by Purchaser. Subject to approval of the Survey by Purchaser and the Title Company, the metes and bounds description of the Real Property contained in the Survey will be the description of the Real Property used in the Deed (as hereinafter defined).

Section 3.02. Title Review Items . Purchaser shall have the right to order an ALTA form commitment for title insurance (the “ Title Commitment ”), at Owner’s expense, issued by the Title Company which shall set forth the state of title to the Real Property and the Improvements.

Section 3.03. Leases . Owner and/or Operator, as applicable, shall, within five (5) days following the Effective Date, deliver to Purchaser copies of the Leases and copies of any subleases for the Property. With respect to Leases with third parties for space within the MOB,

Operator shall continue to lease such space directly to such third party tenants. Landlord further reserves the right to require that Operator be the landlord of any new leases executed with third parties for space in the MOB. Any existing and subsequently executed leases, wither with third parties or affiliates of Operator, shall be made subordinate to the Facility Lease on terms reasonably acceptable to the Purchaser.

Section 3.04. Other Review Items. To the extent not previously delivered, Owner and/or Operator, as applicable, shall, within ten (10) business days following the Effective Date, deliver to Purchaser the items shown on Schedule 3.04 to this Agreement, to the extent in their possession

Section 3.05. Inspection . Purchaser shall have the right, at all reasonable times, to conduct on-site inspections of the Property and physical inspections and non-destructive tests of the Property during the Review Period (as hereinafter defined), including, without limitation, the right to enter and inspect all portions of the Property (subject to the rights of tenants or subtenants in possession pursuant to the Leases), to interview tenants and to inspect and audit all of each Owner and Operator’s books and records relating to the Property, the LTCH and the MOB; provided, however, Purchaser agrees not to unreasonably interfere with any tenant’s possession and/or Owner’s or Operator’s operations of the Property, the Hospital, or the MOB, as applicable, or cause any damage to the Property.

Owner and Operator each hereby direct the manager of the Property to cooperate with the reasonable requests of Purchaser and provide Purchaser with such assistance as Purchaser reasonably deems appropriate in order to exercise its inspection rights hereunder. Owner and Operator’s representative may be present during Purchaser’s on-site inspections and tenant interviews.

Purchaser shall, at its expense, repair any damage to the Property caused by Purchaser’s inspection or testing thereof, and shall indemnify and hold harmless Owner and Operator from and against any and all claims, actions, suits, liens, damages, liabilities, losses and expenses to personal property or personal injury to the extent directly attributable to any acts performed in exercising Purchaser’s rights under this Article III. This agreement to indemnify each of Owner and Operator shall survive the Closing and any termination of this Agreement.

ARTICLE IV.

REVIEW PERIOD

Section 4.01. Review Period . Purchaser has from the Effective Date until 5:00 p.m., eastern daylight time, on the thirty first (31st) day following the later of (a) the date Purchaser actually receives full, complete copies or originals of all of the documents required to be delivered to Purchaser under Article III; or (b) June 16, 2014 (such time period, the “ Review Period ”) to review and approve such items and to conduct such inspections, interviews, tests and audits as Purchaser, in its sole discretion, deems appropriate.

Section 4.02. Waiver Notice . If for any or no reason Purchaser, in its sole and absolute discretion, is not satisfied with the items to be delivered to Purchaser under Article III, with the

results of such inspections, interviews, tests or audits or with any other fact or situation with respect to the Property, the LTCH or the MOB, then in such event, Purchaser shall have the right to terminate this Agreement.

If Purchaser fails, for any or no reason, to deliver to Owner and Operator written notice (the “ Waiver Notice ”) waiving this termination right on or before the end of the Review Period (which waiver may be subject to conditions as mutually agreed by the parties), this Agreement shall be deemed automatically terminated, and the Seller Parties shall have no further obligation or liability hereunder, and the full amount of the DD Deposit shall be promptly refunded by Purchaser to the Seller Parties. Purchaser’s failure to deliver the Waiver Notice on or before the expiration of the Review Period shall be deemed Purchaser’s election to terminate this Agreement under this Section 4.02.

Section 4.03. Termination . If this Agreement has been terminated in accordance with, and subject to the terms of this Article IV, the parties hereto shall thereupon be relieved of all liabilities and obligations hereunder, and Purchaser will promptly return any due diligence materials delivered by Owner and Operator.

Section 4.04. Seller’s Obligation to Remove Liens . Notwithstanding Purchaser’s delivery of a Waiver Notice, or anything else to the contrary in this Agreement, Owner and/or Operator, as applicable, must remove at or prior to the Closing any and all liens and encumbrances (except those encumbrances which may be approved in writing by Purchaser, mortgages, security interests and mechanics and materialmen liens created, suffered or incurred by, through or under Owner and Operator, against the Property.

Section 4.05. Environmental Audit . Subject to the consent provisions of Section 3.04 above, Purchaser shall have the right to have Phase I and Phase II environmental studies performed of the Property during the Review Period.

Section 4.06. Service Contracts . Owner agrees that all service and maintenance contracts related to the Property with third parties designated to be terminated by Purchaser (collectively, the “ Service Contracts ”) must be terminated on or before the Closing Date, unless Purchaser otherwise elects, by written notice prior to the end of the Review Period, to assume same. The Service Contracts exclude management and leasing agreements that relate solely to the Property, all of which must be terminated by Owner, as applicable, at such party’s sole cost, on or before the Closing Date.

Section 4.07. Closing Deadline . The Seller Parties may terminate this Agreement at their sole discretion if Closing has not occurred by the Closing Date, and Purchaser’s sole and exclusive remedy under this Agreement for such termination shall be the retention of the DD Deposit.

ARTICLE V.

GOOD AND MARKETABLE TITLE

Section 5.01. Conveyance . At the Closing, Owner and/or Operator, as applicable, will convey good and indefeasible fee simple title to the Real Property and the Improvements to Purchaser by the Deed and title to the Personal Property and the Intangible Property by one or more instruments in the form of the Bill of Sale (as hereinafter defined), free and clear of any and all deeds of trust, mortgages or other liens or indebtedness; subject, however, to the following (collectively, the “ Permitted Exceptions ”):

(a) General real estate taxes for the year in which the Closing occurs and subsequent years not yet due and payable.

(b) All easements, restrictions, rights-of-way, party wall agreements, encroachments, covenants, reservations, agreements, leases, tenancies, licenses, conditions and other matters affecting all or any portion of the Property to the extent (i) reflected on Schedule B to the Title Commitment (other than the standard printed exceptions on Schedule B to the Title Commitment) and not disapproved by Purchaser during the Review Period; (ii) reflected on the Survey, as recertified, and not disapproved by Purchaser during the Review Period; and/or (iii) created by or consented and agreed to in writing by Purchaser prior to or at the Closing.

(c) The rights of tenants, as tenants only, under unrecorded written leases delivered by Owner and Operator, as applicable, to Purchaser and approved by Purchaser prior to the Closing.

Section 5.02. Owner Policy . At the Closing, Purchaser must be able to obtain a standard ALTA form Owner Policy of Title Insurance (the “ Owner Policy ”) issued by the Title Company in Purchaser’s favor in the amount of the Initial Investment (as defined in Section 6.03 below), insuring Purchaser’s fee simple title to the Real Property and the Improvements, subject only to the Permitted Exceptions, together with such endorsements as Purchaser may request on or before the end of the Review Period.

ARTICLE VI.

CLOSING

Section 6.01. Closing . Subject to satisfaction or waiver of the Conditions Precedent to Closing set forth in Section 9.06 of this Agreement, the purchase and sale of the Property (the “ Closing ”) will be held through escrow at the offices of the Title Company and will occur on or about 11:00 a.m. eastern daylight time on the earlier of the date which is: (i) thirty-one (31) business days following receipt by Owner of Purchaser’s written notice of its intent to close following the expiration of the Review Period or (ii) June 30, 2014 (the “ Closing Date ”).

Section 6.02. Seller’s Obligations . At the Closing, each of the Owner and Operator, as applicable, shall execute and deliver to Purchaser, and/or cause the execution and delivery by all other parties of, the following with respect to the Property:

(a) That certain Special Warranty Deed (the “ Deed ”) from the Owner in the form attached hereto as Exhibit C and made a part hereof for all purposes.

(b) That certain Blanket Conveyance, Bill of Sale and Assignment (“ Bill of Sale ”) from the Owner and Operator in the form attached hereto as Exhibit D and made a part hereof for all purposes.

(c) That certain FIRPTA Affidavit (the “ FIRPTA Affidavit ”) from the Fee Owner in the form attached hereto as Exhibit E and made a part hereof for all purposes.

(d) If required by Purchaser, those certain Tenant Estoppel Certificates (the “ Tenant Estoppel Certificates ”) in the form attached hereto as Exhibit F from all third party tenants of the Operator in the MOB (each of which shall become a sublease upon execution of the Facility Lease), if any, which Landlord identifies as a material lease (the “ Required Estoppels ”) and made a part hereof for all purposes.

(e) Original counterparts (to the extent available) of all Leases, lease files (including all correspondence, applications and credit reports), operating agreements, reciprocal easement agreements, options, warranties, guarantees, permits and other agreements related to the Property, including all modifications, supplements or amendments to each of the foregoing.

(f) To the extent necessary to permit the Title Company to remove any exception in the Owner Policy for mechanics’ and materialmen’s liens and general rights of parties in possession, an affidavit as to debts and liens and parties in possession executed by Owner, made to Purchaser and the Title Company and in a form reasonably acceptable to the Title Company, along with a GAP Affidavit and any other items from Owner and/or Operator, as appropriate, reasonably required by the Title Company.

(g) Certification by each Owner and Operator that, to the best of such party’s actual knowledge, all representations and warranties made by each of them under this Agreement are true, complete and correct in all material respects as of the Closing Date (if accurate or, if not accurate, a description of the basis for such inaccuracy).

(h) Appropriate evidence of each parties’ authority to consummate the transactions contemplated by this Agreement as may be required by the Title Company.

(i) If required by Purchaser, estoppel certificates, in form and substance reasonably satisfactory to Purchaser, from all parties to any declarations, business park covenants or other agreements materially affecting all or any portion of the Property, each to the extent designated by Purchaser during the Review Period and in substantially the form attached hereto as Exhibit G and made a part hereof. Owner will not be in default for failure to deliver such estoppel certificates and Purchaser’s sole recourse for such failure will be to terminate this Agreement.

(j) If Purchaser shall have a mortgage lender with a lien on the Real Property, a subordination, non-disturbance and attornment agreement in a commercially reasonable form that is mutually acceptable to Seller Parties and Purchaser whereby Tenant’s rights are subordinated to the lien of a lender.

(k) The Facility Lease, as more particularly described in Section 9.05.

Section 6.03. Purchaser’s Obligations . At the Closing, Purchaser shall deliver the Purchase Price plus an amount equal to the Transaction Costs (the sum of Purchase Price and Transaction Cost herein, the “ Initial Investment ”) in cash to the Title Company for subsequent disbursement in accordance with this Agreement, including all documents required thereby including the unconditional guaranties of the Facility Lease executed by the Parent Entities, (i) payment of Transaction Costs on behalf of Seller Parties as set forth in this Agreement, (ii) payment and release of the Released Obligations, and (iii) the remaining balance to be disbursed to the Owner and the Operator pursuant to Section 2.02 above.

Purchaser shall also execute and deliver to Owner and/or Operator, as applicable, the following with respect to the Property:

(a) Appropriate evidence of Purchaser’s authority to consummate the transactions contemplated by this Agreement as may be required by the Title Company.

(b) The Facility Lease as more particularly described in Section 9.05.

Section 6.04. Financial Information for Management Transition/Transfer of Roof and Other Warranties . From and after the date hereof, each of the Owner and Operator will provide Purchaser with copies of all current income and expense reports concerning the Property, the LTCH, and the MOB, respectively. Owner and Operator each agree that Purchaser may contact officers of Owner and Operator and their respective officers and managing agents to obtain copies of and to discuss any income and expense reports prepared for the Property and Operator agrees the Purchaser may contact officers of Operator to discuss the operation of the LTCH and MOB, respectively.

Owner and Operator shall use commercially reasonable efforts to obtain at Closing the consents of the issuers of any roof warranties and all other warranties affecting the Property to the assignment of such roof warranties and all other warranties at Closing from the applicable party to Purchaser, including by making property management personnel available at reasonable times and after reasonable notice for inspections of the roof by such roof warranty issuers and the other issuers of the other warranties and executing such documents as reasonably necessary to assign any such roof warranties to Purchaser. Owner and/or Operator, as applicable, shall be responsible for any fees, including but not limited to, inspection fees assessed by the roof warranty issuers to give such consents, together with the cost of any repairs or replacements required by any roof warranty issuer as a condition to delivery of its consent.

Section 6.05. Possession . Possession of the Property must be delivered by Owner to Purchaser at the Closing, subject only to the Permitted Exceptions and the Facility Lease.

Section 6.06. Due Diligence Costs . As consideration for Purchaser to examine the Property and if the Closing occurs, Seller Parties agree to pay directly (or to reimburse to Purchaser) any and all due diligence, third party reports, legal fees and other transaction and closing costs of any nature, whether incurred by Purchaser or Owner or Operator in performing its activities pursuant to this Agreement, in preparing and in closing the transaction described in this Agreement and reimbursement for any prior and ongoing reasonable out-of-pocket travel expenses relating to evaluating and closing the transaction contemplated by this Agreement.

Except as otherwise provided in this Agreement, it is expressly understood and agreed between the parties that the Seller Parties shall be responsible for any and all of Purchaser’s costs, including, but not limited to, Purchaser’s due diligence costs, attorneys’ fees and expenses, consultants fees, and all other expenses incurred in connection with the inspection of the Property (the “ Due Diligence Costs ”) and the closing of the transaction described in this Agreement.

ARTICLE VII.

CLOSING ADJUSTMENTS

Section 7.01. General Prorations . Purchaser, Owner and Operator acknowledge and agree that items of income and expense arising from ownership and operation of the Property which would typically be prorated between the parties as of the Closing Date will be wholly allocable to and paid by the Operator under the Facility Lease from and after Closing. In this regard, the parties do not anticipate the need for proration mechanisms in this Agreement. In the event Purchaser, Owner, or Operator determines that proration of any item of income or expense is appropriate, with the consent of Purchaser, not to be unreasonably withheld, the following provisions shall be applicable:

(a) Rents, if any, as and when collected (the term “rents” as used in this Agreement including base rent, percentage rent, common area maintenance, parking, tax, insurance and other payments due and payable under any Lease for all or any portion of the Improvements, together with all sales and other taxes thereon) and all other income generated by all or any portion of the Property. There will be no proration of rents accrued but not collected as of the Closing Date.

(b) Taxes and other assessments (including personal property taxes on the Personal Property) applicable to the Property. Special assessments certified by any municipal utility district or other taxing authority prior to the Closing Date must be paid in their entirety by Owner at or before the Closing, except to the extent such assessments are payable in installments, in which event they shall be prorated between the parties. If the tax rate or assessed valuation or both have not yet been fixed, the proration shall be based on a good faith estimate as to the amount of such taxes for the current year after consideration of the tax rate and/or assessed valuation last fixed; provided that the parties hereto agree that to the extent the actual taxes for the current year differ from the amount so apportioned at the Closing, the parties hereto will make all necessary adjustments by appropriate payments between themselves following the Closing, and this provision shall survive delivery of the Deed.

(c) Payments under any Service Contracts, if any, which pursuant to Section 4.06 Purchaser has agreed to assume at the Closing.

(d) Gas, electricity and other utility charges, if any, to be apportioned on the basis of the last meter reading.

In making such apportionments, if any, Purchaser will receive credit for all rents and other income paid with respect to the day of the Closing, and Purchaser will be charged for taxes and other expenses incurred with respect to the day of the Closing.

All apportionments are to be subject to post-closing adjustments as necessary to reflect later relevant information not available at the Closing and to correct any errors made at the Closing with respect to such apportionments; provided, however, that such apportionments shall be deemed final and not subject to further post-closing adjustments if no such adjustments have been requested in writing after a period of sixty (60) days from such time as all necessary information is available to make a complete and accurate determination of such apportionments.

All apportionments (regardless of whether all relevant information has been received on errors have been made) are final and not subject to further post-closing adjustment one (1) year following the Closing Date.

Section 7.02. Specific Prorations . Anything hereinabove contained to the contrary notwithstanding, if applicable:

(a) At the Closing, all discounts for the prepayment of any taxes paid at the Closing shall be prorated. Owner shall retain and be entitled to receive any tax refunds issued after Closing to the extent applicable to the period prior to the Closing, but not otherwise. Seller may not initiate nor demand Purchaser initiate or continue any litigation to collect such tax refunds.

(b) As to gas, electricity and other utility charges, Seller may on written notice to Purchaser on or before the Closing Date elect to pay one or more of said items accrued to the date hereinabove fixed for apportionment directly to the person or entity entitled thereunto and to the extent Seller so elects, such item shall not be apportioned hereunder, and Seller’s obligation to pay such item directly in such case shall survive the delivery of the Deed; provided, however, that Seller will not take any action or fail to take any action which would result in the cessation or termination of utility service to the Property.

(c) Owner and Purchaser agree that all rents received after the Closing from any Lease after reasonable costs of collection, if any, incurred by Purchaser shall be applied first to current rentals owed by such tenant, and then to delinquent rentals, if any, owed by such tenant in the inverse order of their maturity, and Purchaser will deliver to Owner any such delinquent rentals owed Seller and received following the Closing. For a period of six (6) months following the Closing, Purchaser shall use reasonable efforts to collect any rental payments past due as of the Closing or due subsequent to Closing for a period prior to Closing, from tenants who were tenants as of the Closing; provided, however, Purchaser shall not be required to declare a lease default or institute any legal action in any court against any tenant. Owner will deliver to Purchaser, within five (5) business days following receipt, any rents received by Owner after the Closing and attributable to the period from and after the Closing. From and after the sixth (6th) month following the Closing Date, Owner shall have the right to pursue reasonable collection remedies against any tenant owing delinquent rentals owed them, provided that (i) Owner shall notify Purchaser of its intent to institute any collection remedy or

proceeding not less than fifteen (15) days prior to the institution thereof, and (ii) Owner shall in no event institute any proceeding to evict or dispossess a tenant from the Property. Purchaser may, by written notice to Owner within ten (10) days of receipt of Seller’s notice of intent to institute collection remedies or proceedings, restrict Owner from collecting such delinquent rentals, but only if Purchaser first pays such party such delinquent rentals in exchange for assignment to Purchaser of all of Seller’s rights and causes of action with respect thereto.

(d) At the Closing, Owner shall credit to the account of Purchaser against the Purchase Price (i) any security deposit reflected as being made under any leases executed with respect to the Property or otherwise actually collected by Owner or Operator, together with all interest, if any, which must be paid thereon to any tenant thereunder; and (ii) all prepaid rents and other charges paid in advance by any tenants of the Property and attributable to the period after the Closing; and in each case, the Lease Assignment shall provide for Purchaser’s assumption of the obligation to return any such sums (and, if applicable, interest thereon) to the extent same are so credited, but not otherwise. If any security deposits are in the form of a letter of credit, Owner must deliver to Purchaser at Closing the original letter of credit, together with all assignment/transfer documentation (fully executed and bank authenticated, as applicable and if permissable) and assignment/transfer fees required by the issuing entity to cause same to be reissued to Purchaser immediately following the Closing.

(e) Leasing commissions and tenant improvement expenses relating to lease agreements pertaining to the Property shall be apportioned between the parties as follows:

(i) All such expenses relating to Leases executed before the Effective Date, and which are not contingent on renewal or expansion of any such Lease after the Effective Date, shall be the sole obligation of Owner, and shall be paid in full by Seller (regardless of whether any portion of such expenses may not otherwise become due until after the Closing Date), on or before the Closing Date and, if Purchaser fails to receive reasonably acceptable evidence of such payment (together with the release of any lien applicable thereto), the unpaid portion shall be credited against the Purchase Price.

(ii) All such expenses relating to Leases executed before the Effective Date, which are solely payable with respect to and contingent upon renewal of any such Lease or expansion into additional space by the tenant under any such Lease after the Closing Date shall be the sole obligation of Purchaser, provided such expenses are disclosed in the Leases and commission agreements delivered to Purchaser during the Review Period. Any such expenses not so disclosed shall render Owner liable for any such expenses and, if Purchaser fails to receive reasonably acceptable evidence of payment (together with the release of any lien applicable thereto) on or before the Closing, Purchaser will receive a credit therefor against the Purchase Price.

(iii) Any such expenses relating to Leases executed between the Effective Date and Closing shall be borne by Owner, and, if Purchaser fails to receive reasonably acceptable evidence of payment (together with the release of any lien applicable thereto) on or before the Closing, Purchaser will receive a credit therefor against the Purchase Price.

(f) Notwithstanding the foregoing, in the event that the Tenant under the Leases is responsible for paying any of the items which are to be prorated, then there shall only be a proration to the extent that the Tenant under such Leases does not pay for the same.

Section 7.03. Transaction Costs . Seller Parties shall be responsible for payment at Closing of: (i) all attorneys’ fees and expenses of counsel to Seller Parties; (ii) all documentary stamp, transfer, surtax, excise taxes, or other levy’s or charges of any kind and nature, payable upon the transfer of the Property and/or recordation of the Deed; (iii) a transaction structuring and closing fee to MedEquities Realty Trust Inc., or its designee, in the amount one percent (1%) of the unadjusted Initial Investment plus the amount of the Leasehold Improvement Funds required to be disbursed by Landlord under Exhibit F-2 “Special Stipulations Concerning Hospital Renovation Project” (such sum herein, the “ Aggregate Investment ”) which fee equals Five Hundred Eighty Thousand and No/100 Dollars ($580,000.00); (iv) the cost of the Owner Policy and any endorsements thereto requested by Purchaser; (v) all attorneys’ fees and expenses of counsel to Purchaser; (vi) the cost of the Survey and any changes requested by Purchaser to the Survey; (vii) Due Diligence Costs; and (viii) any and all other transaction costs actually incurred by Owner, Operator and Purchaser, including, without limitation, any escrow and other charges of the Title Company (all the above herein the “ Transaction Costs ”). It is expressly understood and agreed to between the parties that Purchaser shall not be responsible for any costs, expenses or fees in connection with the purchase of the Property and the closing of the transaction contemplated by this Agreement.

Section 7.04. Brokerage Commissions . Purchaser represents to Owner and Operator that Purchaser has not engaged the services of any broker, finder or other agent in regard to this Agreement. Purchaser hereby agrees to indemnify the Owner and Operator and hold the Owner and Operator harmless against all liability, loss, cost, damage and expense (including, but not limited to, attorneys’ fees and court costs, including any appeal that may be filed) which they shall ever suffer or incur because of any claim by any broker, finder, or other agent, whether or not meritorious, for any fee, commission or other compensation with respect hereto resulting from the acts of Purchaser.

Each of the Seller Parties represents to Purchaser that none of the Seller Parties has engaged the services of any real estate broker, finder or other agent in regard to this Agreement. Except for the fees described in Section 7.03(iii) above, none of the Seller Parties nor any of their respective affiliates or employees will be obligated to pay or will pay, either directly or indirectly, any commissions, fees or other consideration of any sort to any of their respective affiliates or employees or their respective family members related to or arising from this Agreement. Each of the Seller Parties hereby agrees to indemnify Purchaser and hold Purchaser harmless against all liability, loss, cost, damage and expense (including, but not limited to, attorneys’ fees and court costs, including any appeal that may be filed) which Purchaser shall ever suffer or incur because of any claim by any broker, finder, or other agent, whether or not meritorious, for any fee, commission or other compensation with respect hereto resulting from the acts of any of the Seller Parties. This provision shall survive Closing.

Section 7.05. Survival . The terms of this Article shall survive the termination of this Agreement and the Closing and delivery of the Deed.

ARTICLE VIII.

TERMINATION AND REMEDIES

Section 8.01. Purchaser’s Default . In the event (i) Purchaser fails or refuses to tender performance and consummate Closing when required to do so in compliance with the terms of this Agreement, or (ii) Purchaser fails to perform or otherwise breaches any of its other material obligations under this Agreement and such failure or breach continues for a period of ten (10) days after written notice from Seller Parties specifying such failure or breach in reasonable detail, the same shall constitute a “Purchaser Default” hereunder. In the event of any Purchaser Default, the Seller’s Parties shall be entitled, as their sole and exclusive remedy, to terminate this Agreement upon written notice to Purchaser and receive payment from Purchaser of the DD Deposit, the reimbursement of up to Twenty Five Thousand and No/100 Dollars ($25,000.00) for any out-of-pocket costs of any third parties, including any expenses incurred by Seller Parties to obtain the consent HCR and MidCap (including their attorney fees) and assignment and delivery to the Seller Parties, for their future use, of all Due Diligence Materials. Each of the Seller Parties and Purchaser acknowledge and agree that Purchaser’s delivery of such funds and Due Diligence Materials shall be deemed liquidated damages for Purchaser’s breach of this Agreement, it being further agreed that the actual damages to the Seller Parties in the event of such breach are impractical to ascertain and the foregoing sum is a reasonable estimate thereof. None of the Seller Parties shall have any right to specifically enforce Purchaser’s obligations under this Agreement nor to seek or otherwise collect any actual, lost profit, punitive, consequential, treble, or other damages from or against Purchaser, except for the indemnity obligations of Purchaser expressly set forth in this Agreement. In no event shall any officer, director, agent or employee of Purchaser or its partners be personally liable for any of Purchaser’s obligations under this Agreement or the documents to be delivered at the Closing.

Section 8.02. Seller’s Default . In the event (i) Seller Parties fail or refuse to tender performance and consummate Closing when required to do so in compliance with the terms of this Agreement, or (ii) Seller Parties or either of them fail to perform or otherwise breaches any of their other material obligations under this Agreement and such failure or breach continues for a period of ten (10) days after written notice from Purchaser specifying such failure or breach in reasonable detail, the same shall constitute a “Seller Default” hereunder. In the event of any Seller Default, Purchaser shall be entitled, as Purchaser’s sole and exclusive remedies, to either (a) terminate this Agreement upon written notice to Seller Parties, and thereafter retain any unexpended portion of the DD Deposit; or (b) pursue an action to enforce specific performance of Seller Parties’ respective obligations under this Agreement.

ARTICLE IX.

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 9.01. Seller’s Representations . The Seller Parties, jointly and severally, each hereby represent and warrant to Purchaser, except as set forth in that certain schedule (the “ Disclosure Schedule ”) attached hereto as Exhibit H and made a part hereof for all purposes, as follows:

(a) Owner is a duly organized, validly existing limited liability company in good standing under the laws of the State of Delaware and is authorized to conduct business in the State of California. Operator is a duly organized, validly existing limited liability company in good standing under the laws of the State of Delaware and is authorized to conduct business in the State of California. This Agreement has been duly authorized, executed and delivered by each of Owner and Operator, and is and, at the time of the Closing, will be a legal, valid and binding obligation of each of the Owner and the Operator, respectively enforceable against each such party in accordance with its terms.

(b) Neither of the Owner nor Operator has received written notice of any and, to their actual knowledge, there is no current, proposed or threatened eminent domain or similar proceeding, or private purchase in lieu of such proceeding, which would affect the Property in any way whatsoever.

(c) Neither the Owner nor Operator has received any written notice of a claim or has actual knowledge that the Property does not comply with any federal, state, county, city or any other laws, ordinances, rules and regulations, including, but not limited to, those relating to environmental, zoning, land use, subdivision, building, fire, health and safety matters, of any government or any agency, body or subdivision thereof bearing on the construction of the Improvements and/or on the operation, ownership or use of the Property Including the LTCH and the MOB (collectively, “ Applicable Laws ”).

(d) Neither the Owner nor the Operator has received written notice of or had actual knowledge of any pending or threatened, litigation which does or would affect the Property, including the LTCH and the MOB or their ability respectively to fulfill all of their respective obligations under this Agreement. Except as set forth in the Disclosure Schedule, there are no outstanding claims on either the Owner’s nor the Operator’s insurance policies which claims relate to the Property, including the LTCH and the MOB.

(e) Owner has delivered to Purchaser true and complete copies of all Leases. To actual knowledge of Owner, respectively, no material default or breach exists on the part of any tenant under the Leases. Owner, has fully completed all construction obligations and all tenant improvements specified in the Leases to be the responsibility of the landlord, thereunder and has paid all tenant improvement costs, allowances and leasing commissions applicable thereto and no such costs are payable at any time hereafter. Owner has not received any written notice of any default or breach on the part of the landlord under any of the Leases, nor, to its actual knowledge, does there exist any default or breach on the part of the landlord thereunder. No Lease grants any tenant any right to purchase all or any portion of the Property. Except as set forth in the Disclosure Schedule, there are no agreements which would require the payment of a leasing commission by the landlord, upon any renewal or expansion of an existing Lease or new Lease executed or otherwise exercised after the Effective Date. There are no pending contracts for the sale of all or any portion of the Property.

(f) Except as set forth in the Disclosure Schedule, there are no Service Contracts or other written agreements for services, supplies or materials affecting the use, operation or management of the Property. Each of Owner and Operator, as applicable, has delivered to Purchaser true, complete and correct copies of all Service Contracts.

(g) Neither Owner nor Operator has received any written notice or has actual knowledge concerning any alleged violation of any applicable environmental law, rule or regulation which remains uncured.

(h) Neither Owner nor Operator is a foreign corporation, foreign partnership, foreign trust or foreign estate (as defined in the Internal Revenue Code (“ Code ”)), and is not subject to the provisions of Sections 897(a) or 1445 of the Code related to the withholding of sales proceeds to foreign persons.

1. WHENEVER REFERENCE IS MADE IN THIS AGREEMENT TO THE KNOWLEDGE OF EITHER OF THE SELLER PARTIES, SUCH REFERENCE SHALL BE DEEMED LIMITED TO THE ACTUAL KNOWLEDGE AFTER REASONABLE INQUIRY OF CLINT FEGAN (CHIEF FINANCIAL OFFICER), DOUGLAS C. YOHE (GENERAL COUNSEL), AND/OR ANN GORS (CHIEF EXECUTIVE OFFICER OF THE LTCH), (THE “ KNOWLEDGE PARTIES ”). NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, (A) PURCHASER HAS NOT RELEASED SELLER PARTIES FROM AND SELLER PARTIES SHALL REMAIN LIABLE FOR, ANY BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR INDEMNITY SET FORTH HEREIN OR IN ANY CLOSING DOCUMENT WHICH SURVIVES THE CLOSING; AND (B) SELLER PARTIES ACKNOWLEDGE AND AGREE THAT (I) PURCHASER SHALL HAVE THE RIGHT TO DEFEND ANY GOVERNMENT CLAIM BY ALLEGING THAT A SELLER PARTY, NOT PURCHASER, IS LIABLE FOR SUCH CLAIM AND TO OTHERWISE SEEK CONTRIBUTION OR INDEMNITY FROM ANY OR ALL SELLER PARTIES FOR SUCH CLAIM; AND (II) PURCHASER HAS NOT ASSUMED, AND HAS NO OBLIGATION TO INDEMNIFY A SELLER PARTY FOR, ANY GOVERNMENT OR THIRD PARTY CLAIM ASSERTED AFTER THE CLOSING TO THE EXTENT APPLICABLE TO AN ACT OR OMISSION TAKEN OR FAILED TO BE TAKEN PRIOR TO THE CLOSING.

Section 9.02. Representations Pertaining to LTCH and its Business .

With respect to the Purchaser’s analysis and underwriting of the transactions described in this Agreement, the Seller Parties hereby jointly and severally make the following healthcare compliance representations and warranties, each of which are true, correct and accurate, except as set forth in the Disclosure Schedule attached as Exhibit H and made a part hereof:

(a) The Operator has not received any written notice concerning any alleged violation, non-compliance, liability or potential liability regarding of any applicable environmental law, rule or regulation, including laws regarding disposal of medical wastes. Nor does Operator have knowledge or reason to believe that such notice will be given. None of the property owned, leased or operated by the Operator, including but not limited to the LTCH, contains any hazardous materials (as defined under applicable federal or state law) that constitutes or may constitute a violation of any applicable federal or state environmental law.

Except as used by the Operator in the LTCH (and then in compliance with applicable environmental laws) no hazardous materials have been generated, treated, stored or disposed of by Operator or in, on, or from the Property, including the LTCH, in violation of environmental law. There have been no releases or threatened releases of hazardous materials by the Operator or any third party which may give rise to liability under applicable environmental law.

(b) Operator has entered into and maintains in good standing applicable Medicare Provider Agreements and Medicaid Provider Agreements for its operation of the LTCH. Copies of all material licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations and other authorizations for the ownership, operation and payment for services related to the LTCH have been provided to the Purchaser. Operator is not default under any of such licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations or other authorizations, and, no event has occurred, and no condition exists, that with the giving of notice, the passage of time or both would constitute a default thereunder or would result in the suspension, revocation, impairment, forfeiture or non-renewal of any thereof. Operator knows of no reason why it will not be able to maintain, after the date hereof, all material licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations, certifications and other authorizations necessary or appropriate to conduct its business as an operator of the LTCH as now conducted and presently planned to be conducted.

(c) Operator has timely filed all Medicare and Medicaid cost reports and other material reports required to be filed related to the LTCH in connection with such medical reimbursement programs due on or before the date hereof, and all required reports and administrative forms and filings are true, correct and complete in all material respects; (ii) there are no material claims, actions, proceedings or appeals pending before any governmental authority with respect to any cost reports or claims filed with respect to such medical reimbursement programs by Operator for operation of the LTCH on or before the date hereof and there are no reviews, audits (other than customary annual cost report audits) or program integrity reviews that have been conducted or are known to be planned respecting the Operator concerning operation of the LTCH.

(d) No predecessor-in-interest, current-or former owners, employees, controlling persons, officers or directors, physicians or service providers of any of the Operator have: (i) had any civil monetary penalty assessed against it under Section 1128(h) of the Social Security Act or any regulations promulgated thereunder, (ii) been excluded, suspended or debarred from, or otherwise adjudicated, deemed or determined ineligible for, participation in any medical reimbursement program, (iii) been convicted of a criminal offense related to conduct that would trigger an exclusion from any medical reimbursement program, (iv) been fined, penalized or otherwise sanctioned by any third party payor, (v) used any Medicare funds to make any payment for any items or services furnished by any excluded individual, or (vi) committed any act or omission that could result in, or form the basis of, any of the actions described in clauses (ii) or (iii) of this sentence.

(e) To the knowledge of Operator, there is no investigation or civil, administrative or criminal proceeding pending, or threatened, relating to the participation of

Operator, and to its knowledge, Operator is not subject to fiscal audit, program audit, utilization review or quality-related review or audit by any medical reimbursement program related to the LTCH, other than the ordinary and customary audit or utilization review of all providers participating in such medical reimbursement program. Operator has not submitted to any medical reimbursement program any false or fraudulent claims for payment related to the LTCH, nor has Operator violated any condition for participation or knowingly violated, or acted with reckless disregard or deliberate ignorance of, any rule, regulation, policy or standard of any such medical reimbursement program related to the LTCH. Operator has no current, pending or, to the knowledge of Operator, threatened claims by any third-party payor against it for overpayment, recoupment or improper billing practices of any nature.

(f) With respect to the LTCH and the MOB, each of the Operator and Owner, as applicable, has complied with all applicable provisions of the Social Security Act and regulations promulgated thereunder, laws and regulations relating to institutional and professional licensure, pharmacology or dispensing medicines or controlled substances, laboratory services, unprofessional conduct, fee splitting, kickbacks and other prohibited remuneration in exchange for referrals, billing and submission of false or fraudulent claims, medical privacy and confidentiality, 42 U.S.C. Section 1320a-7b or 42 U.S.C. Section 1395nn, the Medicare Regulations and the Medicaid Regulations. Operator has a compliance program that is reasonably designed to provide effective internal controls that promote adherence to, prevent and detect material violations of, any laws and regulations applicable to Operator.

(g) Operator is currently accredited by the Joint Commission without qualification, limitation or exception.

(h) No person excluded from participation in any medical reimbursement program has, since such person’s exclusion, acted in any of the following capacities, directly or indirectly, with respect to the Operator or predecessor-in-interest of Operator: owner, officer, director, partner, agent, contractor, consultant or managing employee. For purposes of this section “managing employee” means a person who exercises operational or managerial control over an entity or a part thereof, or directly or indirectly conducts the day-to-day operations of the entity or a part thereof.

(i) No statement or information contained in this Agreement or in any document furnished by the Operator or Owner for use in the transactions described in this Agreement, shall contain as of the date of such information, any untrue statement of a material fact or omit to state a material fact necessary to make the statements in this Agreement and in such instrument not misleading when such information was delivered or disclosed. There is no fact known to Operator that could reasonably be expected to have a material adverse effect on the condition, operation, ownership or profitability of the LTCH that has not been disclosed in this Agreement or the documents delivered to the Purchaser hereunder.

Section 9.03. Purchaser’s Representations . Purchaser hereby represents and warrants to the Seller Parties, as of the date hereof and as of the Closing Date, as follows:

(a) Purchaser is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Maryland, and has all requisite power and authority to carry on its business as now conducted. This Agreement constitutes a valid and binding obligation of Purchaser enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors.

(b) Purchaser has the capacity and complete authority to enter into and perform this Agreement, and no consent, approval or other action by any person or entity (other than the person signing this Agreement on behalf of Purchaser and any approval to be obtained by Purchaser during the Review Period) will be needed thereafter to authorize Purchaser’s execution and performance of this Agreement.

(c) Neither Purchaser, nor any individual with a direct or indirect ownership of 5% or more of Purchaser, nor any director, officer, agent or employee of Purchaser is debarred, suspended or excluded from any Federal or State health care program (including, but not limited to Medicare or Medicaid) under 42 U.S.C. § 1320a-7.

Section 9.04. Discovery . If Owner or Operator, on the one hand, or Purchaser, on the other hand, discovers, prior to or at the Closing, that any representation or warranty of the other party is false, misleading or inaccurate in any material respect, the discovering party may, at its option, terminate this Agreement and the parties hereto shall be relieved of all liabilities and obligations hereunder and (a) if Purchaser is the discovering party, Purchaser shall be entitled to pursue its remedies under Section 8.02 of this Agreement; and (b) if Owner or Operator is the discovering party, such party shall be entitled to pursue its remedies under Section 8.01 of this Agreement.

If the discovering party elects to proceed to Closing such party cannot later bring a claim against the other as to such discovered matter. Representations and warranties under this Article IX shall fully survive the Closing and the delivery of the Deed, but to the extent that neither the Owner nor Operator, on the one hand, nor Purchaser, on the other hand, has made any claim as to the breach of any such representation or warranty within two (2) years after the Closing Date, such representations and warranties will terminate and be of no further force and effect.

Section 9.05. Operating Covenants . The Owner and the Operator, respectively, each agree to operate and maintain the Property, the LTCH and the MOB, as applicable, prior to the Closing in a manner consistent with its current operating procedures, and shall not, without the prior written consent of Purchaser, do any of the following:

(a) Enter into any contract (other than leases which are subject to clause (b) below) that will not be fully performed by the Owner or Operator, as applicable, on or before the Closing Date or that will not be susceptible of cancellation by Purchaser on or after the Closing Date upon thirty (30) days or less prior written notice, without cost or liability to Purchaser, or amend, modify or supplement any existing contract (other than leases which are subject to clause (b) below) or agreement in any material respect.

(b) Enter into any new lease or amend, modify, supplement or terminate any existing lease. Owner and Operator each agree that, after the Review Period, Purchaser shall have the right, without their consent, to enter into new leases affecting all or any portion of the Property which is or will become vacant, as long as any such lease will only take effect contingent upon and shall commence only for a term beginning from and after the Closing Date.

(c) Fail to maintain its current insurance covering Owner’s and Operator’s respective interests in the Property, the LTCH and the MOB and their respective business operations or fail to advise Purchaser promptly of the occurrence of any fire or other casualty affecting any portion of the Property.

(d) Sell, assign or create any right, title or interest whatsoever in or to the Property (including any so-called “back-up” contracts which are expressly prohibited) or create any voluntary lien, thereon from and after the date of the Title Commitment, other than liens or encumbrances noted in the Title Commitment, without promptly discharging same or otherwise complying with the terms of Section 4.04.

(e) Intentionally take any action which would have the effect of violating any of the representations and warranties of Owner or Operator contained in this Agreement.

Section 9.06. Conditions Precedent of Purchaser . Purchaser shall not be obligated to perform under this Agreement, unless all of the following conditions precedent are satisfied (or waived in writing by Purchaser) and are otherwise true and correct as of the Closing Date:

(a) All of the respective representations and warranties of each of the Owner and Operator, respectively, are true and correct in all material respects.

(b) The Owner and the Operator, respectively, have performed all of their respective covenants, agreements, and obligations under this Agreement in all material respects and each is otherwise not in default.

(c) The Owner and the Operator, as applicable, each have delivered (i) Required Estoppels, if any, in compliance with Section 6.02(e); and (ii) title estoppels, if any, required by Section 6.02(i).

(d) There has been no material adverse change in the matters reflected in the Title Commitment, the Survey, the operating statements pertaining to the Property or the LTCH, the operating financial condition or future prospects of the Operator respecting the LTCH and the MOB, or the other item delivered to, or reviewed by, Purchaser hereunder since the date of delivery, approval or review, as applicable, of such items, except to reflect those items approved or otherwise created in writing by Purchaser.

(e) Within thirty (30) days of the Effective Date, Seller and Purchaser shall agree to the form of both the Facility Lease and the Lease Guaranties (as defined below) relating to Operator’s obligations under the Facility Lease. The Facility Lease and the respective Lease Guarantees will be fully executed and effective upon Closing. Pursuant to the Facility Lease, the Tenant on or before Closing, shall irrevocably lease the Property on a non-cancellable, non-terminable basis in accordance with the terms and provisions set forth in the Facility Lease, a summary of which is set forth in this subsection (e) of this Agreement.

The Facility Lease shall be an absolute-net NNN lease for a term of not less than fifteen (15) years (the “ Lease Term ”). The Facility Lease shall require payment of an initial annual fixed monthly rent of Four Million Five Hundred Ninety-Three Thousand Seven Hundred Fifty and No/100 Dollars ($4,593,750.00) payable in advance monthly installments of Three Hundred Eighty-Two Thousand Eight Hundred Twelve and 50/100 Dollars ($382,812.50). The initial annual fixed monthly rent and each corresponding monthly installment shall be subject to adjustment pursuant to Section 2 of Exhibit F-2 to the Facility Lease “Special Stipulations Concerning Hospital Renovation Project” to account for periodic disbursements of Leasehold Improvement Funds until and including the Final Disbursement Date at which time the Landlord’s Aggregate Investment (being the sum of the Initial Investment plus all Leasehold Improvement Funds) in Sale Leaseback shall have been completed. Beginning on the first anniversary of the Lease Term, and again on the second anniversary of the Lease Term, fixed monthly rent shall be escalated by one and one-half percent (1.5%) and, thereafter, on the third anniversary and each subsequent anniversary thereafter for each Lease Year thereafter throughout the remaining term, including any extensions, the rent then payable under the Facility Lease shall be escalated by increases in the CPI Factor with an annual cap of two percent (2.0%). For purposes of the foregoing adjustment, the “ CPI Factor ” is the percentage equal to a fraction, the numerator of which is the Index (as defined below) most recently published prior to each adjustment date and the denominator of which is the most recent Index which was available to the public on the first day of the preceding lease year. The term “Index” shall mean the Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average for All Items (1982 – 84 = 100) as published by the Bureau of Labor Statistics of the United States Department of Labor. Landlord shall send Tenant notice of the applicable increase (the “Adjustment Notice”) as promptly as practicable following each anniversary of the commencement date. Tenant shall continue to pay the prior fixed monthly rental until receipt of the Adjustment Notice, and Tenant shall remit any shortfall in fixed monthly rental for the period prior to its receipt of the Adjustment Notice with the first payment of fixed monthly rental due after Tenant’s receipt of the Adjustment Notice. Each Adjustment Notice shall set forth in brief appropriate computations to verify the new fixed monthly rental as changed pursuant to the Adjustment Notice. If at the time of preparation of the Adjustment Notice, no CPI-U is compiled and published by the Department of Labor (or any successor federal government agency), then statistics reflecting cost of living increases for the applicable period as compiled by an institution, organization or individual generally recognized as an authority by financial and insurance institutions as selected by Landlord shall be used as the basis for such computation.

Provided that the Tenant is not in default under the Facility Lease and no event or circumstance exists which, with the passage of time, the giving of notice, or a combination of both, may become a default or event of default, then the Tenant shall have the right and option to renew the lease term for an additional term of five (5) years (the “ First Renewal Option ”). If the Tenant exercises the First Renewal Option and provided that Tenant is not in default under the Facility Lease as renewed and extended and provided that no event or circumstance exists which, with the passage of time, the giving of notice or a combination of both may become a default, then the Tenant shall have the right and option to renew the lease term for an additional term of

five (5) years (the “ Second Renewal Option ”). The Facility Lease, if extended by the First Renewal Option and, if applicable by the Second Renewal Option, shall be on such terms and conditions including at such rental rates as shall be more fully set forth in the Facility Lease.

The Lease Guaranties shall be secured by the unconditional assignment, pledge and grant of a security interest in (i) all of the ownership interest of Parent in the Owner and (ii) all of the ownership interest of Parent in the Operator.

The obligations of the Operator under the Facility Lease and the obligations of each of the Guarantors under the Lease Guaranties shall all be cross-defaulted and cross-collateralized with all the other obligations and all collateral, if any, securing any presently existing or hereafter created obligations of the Owner and/or Operator and/or each of the Guarantors and their respective affiliates to the Purchaser or its affiliates. Such cross-collateralization and cross-default rights include the obligations of each of the Guarantors as co-borrowers arising from that certain Ten Million and No/100 Dollars ($10,000,000.00) first mortgage loan (the “ Related Loan ” and the “ Related Co-Borrowers ”, respectively) being made by Purchaser or its affiliate and secured by a first mortgage lien on real property and improvements owned by Vibra Healthcare Real Estate Company II, LLC (“ RealCo II ”), a wholly owned subsidiary of the Affiliate, which real property comprises Vibra Hospital of Western Massachusetts (“ VHWM Hospital ”) located at 1400 State Street, Springfield, Massachusetts.

The Facility Lease shall provide that the Operator shall not assign, transfer or encumber the Facility Lease or sublet any portion of the Property (except for any subleases for the MOB in effect as of the Closing Date) without the prior written approval of Purchaser, which consent shall be in the sole discretion of the Purchaser. In the exercise of such discretion, the Purchaser may condition its approval upon any and all factors it deems relevant to protecting the value of the Property, including but not limited to: (1) requiring that the Facility Lease be extended so that the remaining term of the Facility Lease shall be at least equal to the original lease term; (2) requiring verification to its satisfaction that the successor tenant shall be at least as creditworthy as the Tenant; (3) that the successor tenant shall have similar experience and expertise in the operation of a LTCH; (4) that the successor shall be able to obtain all necessary or appropriate licenses, permits, approvals, accreditations, provider agreements and other documentation necessary or desirable to be obtained for the ownership and operation of the LTCH business as operated by the Tenant.

(f) Any and all authorizations, waivers, consents or other approvals required as determined by the Purchaser for the consummation of the transactions described in this Agreement shall have been obtained and shall be on such terms and in such scope as may be acceptable to the Purchaser in its sole discretion, including but not limited to, (1) consent from HCR under that certain Loan Agreement dated as of June 1, 2010 between Owner and HCR and (2) consent from MidCap under that certain second Amended and Restated Credit and Security Agreement dated September 1, 2013 by and among Seller Parties and certain of their affiliates and MidCap and certain other lenders. To facilitate the parties preparations for closing, the Seller Parties agree to use their best efforts to procedure the written consents of HCR and MidCap, respectively, by May 16, 2014.

(g) The closing of the Related Loan substantially simultaneously with closing of this Agreement.

Notwithstanding the generality of the foregoing, Owner and Operator shall each use its best efforts to satisfy all of the foregoing conditions precedent. If Owner and Operator are unable to satisfy all of the foregoing conditions precedent, Purchaser may waive one or more conditions precedent, extend the Closing Date for up to an additional thirty (30) days or terminate this Agreement, in any such event by written notice to both the Owner and the Operator. If Purchaser elects to close, Purchaser will be deemed to have waived any conditions actually known by Purchaser to be unsatisfied at the Closing. If Purchaser elects to terminate, the Purchaser shall return the DD Deposit to the Seller Parties, and the Seller Parties shall have no further obligation or liability under this Agreement.

Section 9.07. Conditions Precedent of Seller Parties . Seller Parties are not obligated to perform under this Agreement, unless all of the following conditions precedent are satisfied (or waived in writing by Seller Parties) and are otherwise true and correct as of the Closing Date:

(a) All of Purchaser’s representations and warranties are true and correct in all material respects;

(b) Purchaser has performed all of its covenants, agreements, and obligations under this Contract in all material respects and is otherwise not in default;

(d) Written consent of HCR to the sale of the Property upon terms satisfactory to Seller Parties;

(e) Written consent of MidCap to the sale of the Property and the Facility Lease upon terms satisfactory to Seller Parties;

(f) The closing of the Related Loan substantially simultaneously with the closing of this Agreement;

(g) Termination of the existing lease of the Property and Improvements by the Owner to the Operator; and

(h) Subordination of any existing Leases including the existing lease or leases with third party tenants in the MOB on terms reasonably satisfactory to the Purchaser.

If all of the foregoing conditions precedent is not satisfied, Seller Parties may waive one or more conditions precedent, extend the Closing Date for up to an additional thirty (30) days or terminate this Agreement, in any such event by written notice to Purchaser. If Seller Parties elect to close, Seller will be deemed to have waived any conditions actually known by Seller to be unsatisfied at the Closing. If Seller Parties elect to terminate, Purchaser shall immediately return the DD Deposit to the Seller Parties, and the Seller Parties shall have no further obligation or liability under this Agreement.

Section 9.08. Post Closing Claim . If: (i) Purchaser makes a claim against either of the Owner, Operator or any of the other Seller Parties with regard to a representation or warranty which expressly survives Closing, provided that the aggregate amount of such claim and any other claims under this Section has exceeded the sum of $50,000, (ii) Purchaser makes such claim within the two (2) year time period set forth in Section 9.03 above, and (iii) Purchaser obtains a judgment against any of the Seller Parties which remains unpaid for a period of thirty (30) days, Owner and Operator each agree that Purchaser shall have the right to trace the Purchase Price to the extent necessary to satisfy such claim.

Owner and Operator each agree, covenant and represent to Purchaser that each has (or will prior to distribution of any such disposition proceeds) provide written notice to the other Seller Parties and the other Seller Parties’ partners, shareholders and members (and, if such partners, shareholders and members are entities whose sole material asset is their respective interest in Seller Parties, their respective members, partners and affiliates) of this tracing provision. Seller Parties acknowledge and agree that Purchaser has relied and has the right to rely upon the foregoing in connection with Purchaser’s consummation of the transaction set forth in this Agreement.

ARTICLE X.

Section 10.01. Reserved .

ARTICLE XI.

NOTICES

Section 11.01. Notices . Any notice, demand or other communication which may or is required to be given under this Agreement must be in writing and must be: (a) personally delivered; (b) transmitted by United States postage prepaid mail, registered or certified mail, return receipt requested; or (c) transmitted by reputable overnight courier service, such as Federal Express; to Purchaser and Owner, Operator, Parent and Affiliate as listed below.

Except as otherwise specified herein, all notices and other communications shall be deemed to have been duly given on the date of receipt. A notice or other communication not given as herein provided shall only be deemed given if and when such notice or communication and any specified copies are actually received in writing by the party and all other persons to whom they are required or permitted to be given.

Purchaser and each of the Seller Parties may change their respective addresses for purposes hereof by notice given to the other parties in accordance with the provisions of this Section, but such notice shall not be deemed to have been duly given, unless and until it is actually received by the other parties. Notices hereunder shall be directed as follows:


If to Purchaser:		MedEquities Realty Trust, Inc
		201 Seaboard Lane, Suite 100
		Franklin, Tennessee 37067
		Attn: William C. Harlan
		Telephone: (615) 943-5621
		Facsimile: (615) 250-4988
		Email: wharlan@medequities.com

With a copy to:		H3GM
		333 Commerce Street, Suite 1500
		Nashville, Tennessee 37201
		Attn: Glen Allen Civitts, Esq.
		Telephone: (615) 251-1070
		Facsimile: (615) 251-1059
		Email: gac@h3gm.com

If to Owner:		Kentfield THCI Holding Group, LLC
		c/o Vibra Healthcare, LLC
		4550 Lena Drive, Suite 225
		Mechanicsburg, PA 17055
		Attn: Douglas C. Yohe, General Counsel
		Telephone: (717) 591-5737
		Email: dyohe@vibrahealth.com

If to Operator:		1125 Sir Francis Drake Boulevard Operating Company, LLC
		c/o Vibra Healthcare, LLC
		4550 Lena Drive, Suite 225
		Mechanicsburg, PA 17055
		Attn: Douglas C. Yohe, General Counsel
		Telephone: (717) 591-5737
		Email: dyohe@vibrahealth.com

If to Parent		Vibra Healthcare, LLC and Vibra Healthcare II, LLC
Entities:		4550 Lena Drive, Suite 225
		Mechanicsburg, PA 17055
		Attn: Douglas C. Yohe, General Counsel
		Telephone: (717) 591-5737
		Email: dyohe@vibrahealth.com

Notwithstanding the foregoing, any notices delivered by one party to the other party under Article IV may be sent by facsimile and will be deemed given as of the date and time shown on the confirmation slip generated by the sender’s facsimile machine. Purchaser’s counsel may deliver any notice required or otherwise permitted to be given by Purchaser hereunder with the same effect as if given directly by Purchaser.

ARTICLE XII.

RISK OF LOSS

Section 12.01. Minor Damage . In the event of “minor” loss or damage being defined for the purpose of this Agreement as damage to the Property such that the Property could be repaired or restored, in the opinion of an architect mutually acceptable to Owner and Purchaser (with any fees, costs or expenses pertaining to such opinion to be borne equally by Purchaser and Owner), to a condition substantially identical to that of the Property immediately prior to the event of damage at a cost equal to or less than $250,000 and which would not permit any tenant to terminate its Lease, neither Owner nor Purchaser shall have the right to terminate this Agreement as to the Property due to such damage, but Owner shall, at Owner’s option as expressed to Purchaser in writing, either (a) reduce the Purchase Price by an amount equal to the cost to repair such damage, or (b) repair and restore the damaged portion of the Property to a condition substantially identical to that which existed immediately prior to the occurrence of such damage and in either such event Owner shall retain all of Owner’s right, title and interest to any claims and proceeds Owner may have with respect to any casualty, rental loss and other insurance policies relating to the Property.

If Owner elects to repair and restore the damaged portion of the Property, Owner shall act promptly and diligently to complete such repairs in a good and workmanlike manner and shall complete such repairs prior to the Closing Date if reasonably possible. If it is not reasonably possible to complete such repairs prior to the Closing Date, the parties will nonetheless proceed to the Closing, but Owner must give Purchaser a credit equal to the remaining cost to complete such repairs.

Section 12.02. Major Damage . In the event of a “major” loss or damage (being defined as any loss or damage which is not “minor” as defined hereinabove), Purchaser shall have the option of terminating this Agreement by written notice to Owner and Operator, in which event Owner and Operator on the one hand and Purchaser on the other hand shall thereupon be released from any and all liability hereunder, and the Purchaser shall return to Seller Parties any unexpended portion of the DD Deposit.

If Purchaser elects not to terminate this Agreement, Purchaser and Owner and Operator shall proceed with the Closing, provided Owner shall assign all of Owner’s right, title and interest to any claims and proceeds Owner may have with respect to any casualty, rental loss and other insurance policies relating to the Property, and Purchaser shall receive a credit against the Purchase Price in an amount equal to the aggregate amount of any deductible(s) under the insurance policies assigned to Purchaser, together with the uninsured portion of any such damage.

Section 12.03. Vendor and Purchaser Risk . Except as set forth in Section 11.01 and Section 11.02, Owner and Operator, respectively, shall bear the full risk of loss until Closing. Upon the Closing, full risk of loss with respect to the Property shall pass to Purchaser, except to the extent such loss is the responsibility of the Operator as the tenant and occupant pursuant to the Facility Lease.

Section 12.04. Condemnation . If before the Closing any condemnation or eminent domain proceedings are threatened or initiated against all or any portion of the Property and, in the reasonable opinion of Purchaser, such condemnation or eminent domain proceedings would materially interfere with the current use of the Property, then Purchaser may terminate this Agreement upon written notice to Owner and Operator and Purchaser shall thereupon be released from any and all further liability hereunder. If Purchaser does not elect to terminate this Agreement within ten (10) business days after receipt of written notice of the commencement of any such proceedings, or if, in the reasonable opinion of Purchaser, such condemnation or eminent domain proceedings would not materially interfere with Owner’s and Operator’s respective current use of the Property, Owner and Operator shall assign to Purchaser at the Closing all rights and interest of Owner and Operator in and to any condemnation awards payable or to become payable on account of such condemnation or eminent domain proceedings.

ARTICLE XIII.

MISCELLANEOUS

Section 13.01. Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior understanding, letter of intent or written or oral agreements between the parties concerning the Property.

Section 13.02. No Rule of Construction . This Agreement has been drafted by both Owner and Operator on the one hand and Purchaser on the other hand and no rule of construction shall be invoked against either party with respect to the authorship hereof or of any of the documents to be delivered by the respective parties at the Closing.

Section 13.03. Multiple Counterpart; Governing Law . This Agreement may be executed in multiple counterparts each of which shall be deemed an original but, together, shall constitute one and the same instrument, and shall be construed and interpreted under the laws of the State in which the Property is located (without regard to conflicts of laws) and all obligations of the parties created hereunder are performable in the City and County in which the Property is located.

Section 13.04. Attorneys’ Fees . In the event of any litigation or other proceeding brought by any party hereunder, the prevailing party shall be entitled to recover its attorneys’ fees and costs of suit against the non-prevailing party or parties.

Section 13.05. Interpretation . This Agreement shall, unless otherwise specified herein, be subject to the following rules of interpretation: (a) the singular includes the plural and the plural the singular; (b) words importing any gender include the other genders; (c) references to persons or entities include their permitted successors and assigns; (d) words and terms which include a number of constituent parts, things or elements, including the terms Improvements, Permitted Exceptions, Personal Property, Intangible Property and Property, shall be construed as referring separately to each constituent part, thing or element thereof, as well as to all of such constituent parts, things or elements as a whole; (e) references to statutes are to be construed as including all rules and regulations adopted pursuant to the statute referred to and all statutory

provisions consolidating, amending or replacing the statute referred to; (f) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms; (g) the words “approve” or “consent” or “agree” or derivations of said words or words of similar import mean, unless otherwise expressly provided herein or therein, the prior approval, consent, or agreement in writing of the person holding the right to approve, consent or agree with respect to the matter in question, and the words “require” or “judgment” or “satisfy” or derivations of said words or words of similar import mean the requirement, judgment or satisfaction of the person who may make a requirement or exercise judgment or who must be satisfied, which approval, consent, agreement, requirement, judgment or satisfaction shall, unless otherwise expressly provided herein or therein, be in the sole and absolute discretion of the person holding the right to approve, consent or agree or who may make a requirement or judgment or who must be satisfied; (h) the words “include” or “including” or words of similar import shall be deemed to be followed by the words “without limitation”; (i) the words “hereto” or “hereby” or “herein” or “hereof” or “hereunder,” or words of similar import, refer to this Agreement in its entirety; (j) references to sections, articles, paragraphs or clauses are to the sections, articles, paragraphs or clauses of this Agreement; and (k) numberings and headings of sections, articles, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the construction of this Agreement.

Each of the Owner and Operator as well as the other Seller Parties acknowledge that obligations with respect to any covenant, indemnity, representation or warranty under this Agreement which expressly survive the Closing shall be considered a “liability” for purposes of any member or other distribution limitation imposed under the organizational laws applicable to each of such parties and/or their respective members, shareholders and partners.

Section 13.06. Exhibits . The exhibits attached hereto shall be deemed to be an integral part of this Agreement.

Section 13.07. Modifications . This Agreement cannot be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought. Any such modification need not be joined in by the Title Company.

Section 13.08. Reporting Person . Purchaser and each of the Owner and Operator hereby designate the Title Company as the “reporting person” pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended.

Section 13.09. Time of Essence . Time is of the essence to both Owner and Operator on the one hand and Purchaser on the other hand in the performance of this Agreement, and they have agreed that strict compliance is required as to any date and/or time set out herein, including, without limitation, the dates and times set forth in Article IV of this Agreement. If the final day of any period of time set out in any provision of this Agreement falls upon a Saturday, Sunday or a legal holiday under the laws of the State in which the Property is located, then and in such event, the time of such period shall be extended to the next day which is not a Saturday, Sunday or legal holiday.

Section 13.10. Confidentiality . Purchaser on the one hand and all of the Seller Parties on the other hand shall hold, and shall cause and their respective employees and representatives to hold, in strict confidence, and Purchaser and each of the Seller Parties shall not disclose, and shall prohibit their respective employees and representatives from disclosing, to any other person without the prior written consent of the other party, (a) the terms of this Agreement and the Property, including the existing lease and sublease thereon, (b) any of the information in respect of the Property delivered to or for the benefit of Purchaser whether by its employees and representatives (“ Purchaser’s Representatives ”) or by Owner and Operator or their respective employees and representatives and to HCR and MidCap and their respective employees and representatives (“ Sellers’ Representatives ”), and (c) the identity of any direct or indirect owner of any beneficial interest in Owner, Operator or Purchaser.

Notwithstanding anything contained in this Agreement to the contrary, the parties obligations under clauses (a), (b) and (c) of the immediately preceding sentence shall survive the Closing and not be merged therein.

Notwithstanding anything to the contrary hereinabove set forth, the parties may disclose such information (i) on a need-to-know basis to its employees, agents, consultants, members of professional firms serving it or potential lenders, investors, consultants and brokers, on a confidential basis, such terms of the Agreement as are customarily disclosed to such parties in connection with similar acquisitions, (ii) as may be required in order to comply with applicable laws, rules or regulations or a court order or as may be required for any disclosure or filing requirements of the Securities and Exchange Commission, the Securities Act of 1933, as amended (the “ Securities Act ”), the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules promulgated thereunder or any authority governing disclosure filings required by applicable law, rules or regulations, including but not limited to the disclosure of any lease, including any amendments, modifications, extensions or renewals thereto and any collateral material used in connection with a public offering of securities by Purchaser or (iii) to the extent that such information is a matter of public record. By each of the Seller Parties’ execution of this Agreement, each of the Seller Parties hereby confirms its respective agreement to indemnify, defend and hold Purchaser free and harmless from and against any and all problems, conditions, losses, costs, damages, claims, liabilities, expenses, demands or obligations (including reasonable attorneys’ fees, expenses and disbursements), of any kind or nature whatsoever, arising out of Seller Parties’ breach of this Section.

Section 13.11. SEC S-X 3-14 Audit . Each of the Seller Parties acknowledges that Purchaser is, or may elect to assign all of its right, title and interest in and to the Agreement to a company that is either subject to the periodic filing requirements of the Exchange Act and/or is conducting or proposes to conduct a securities offering pursuant to Rule 144A under the Securities Act and/or has filed or proposes to file with the U.S. Securities and Exchange Commission (the “ SEC ”) a registration statement under the Securities Act (a “ Registered Company ”) promoted by the Purchaser or to an affiliate of a Registered Company (a “ Registered Company Affiliate ”). In the event Purchaser is a Registered Company or Purchaser’s assignee

under the Agreement is a Registered Company or a Registered Company Affiliate, the Registered Company may be required to include certain financial and other information related to the Property, the Seller Parties or their affiliates including the Guarantors in an offering memorandum issued in a securities offering under Rule 144A under the Securities Act (an “ OM ”), in a registration statement filed with the SEC under the Securities Act and/or in Form 8-K, Form 10-9 and/or Form 10-K to be filed with the SEC pursuant to the Exchange Act (individually, an “ SEC Filing ” and collectively, “ SEC Filings ”), in each case as required by the Securities Act, the Exchange Act, the rules and regulations of the SEC promulgated under the Securities Act and the Exchange Act and for definitive guidance issued by the SEC (the “ Securities Laws ”). To permit the Registered Company to prepare the OM and/or the SEC Flings in accordance with the Securities Laws, Seller Parties agree to, and shall, provide Purchaser and the Registered Company with such financial and other information concerning the Property and/or the Seller Parties (to the extent existing and available) that may be reasonably requested by Purchaser, the Registered Company and/or Purchasers or Registered Company’s auditors for purposes of preparing and/or auditing such information for inclusion in an OM or SEC Filings pursuant to the Securities Laws, as well as using its best efforts to provide any additional information as may be requested, provided that Purchaser shall reimburse Seller Parties for any additional costs that it may incur in providing such information and will provide consent to the Seller Parties’ auditors for such financial statements and to use such financial statements and the auditor’s report for such financial statements in all SEC Filings information related to the leases (“ SEC Filing Information ”). Such information may include but is not limited to historical revenue and expense data with respect to the Property, financial statements of the Seller Entities, leases with respect to leased portions of the Property, insurance documentation evidencing Property Insurance in place and any claims, if any, and accounts receivable aging related to the Property and the Seller Parties. Each of the Seller Parties shall use good faith efforts to deliver the SEC Filing Information requested by Purchaser, the Registered Company and/or Purchaser’s or the Registered Company’s auditors prior to the expiration of the Review Period, and each of the Seller Parties agrees to cooperate with Purchaser, the Registered Company and Purchaser’s or the Registered Company’s auditors regarding any inquiries by Purchaser, the Registered Company and Purchaser’s or the Registered Company’s auditors following receipt of such information, including delivery by each of the Seller Parties of an executed representation letter prior to Closing in form and substance reasonably requested by Purchaser’s or the Registered Company’s auditors (“ SEC Filings Letter ”). A sample SEC Filings Letter is attached to this Agreement as Exhibit I ; provided, however, Purchaser, Registered Company and/or Registered Company’s auditors may require additions and/or revisions to such letter following review of the SEC Filing Information provided by the Seller Parties. Each of the Seller Parties consents to the disclosure of the SEC Filing Information in any SEC Filings by the Registered Company. Obligations under this Section 13.11 shall survive the Closing and not be merged therein.

[SEE SIGNATURES ON THE FOLLOWING PAGES]

IN WITNESS WHEREOF, this Agreement has been executed by Purchaser and Seller Parties as of (but not necessarily on) the date and year first above written.


WITNESSES:		PURCHASER:
		MedEquities Realty Trust, Inc.,
/s/ Glen Allen Civitts		a Maryland corporation
Print Name:	Glen Allen Civitts	By: /s/ William C. Harlan
/s/ Claire Beebe		Print Name: William C. Harlan
Print Name:	Claire Beebe	Title: President
WITNESSES:		SELLER PARTIES:
			OWNER:
/s/ Douglas C. Yohe
Print Name:	Douglas C. Yohe		Kentfield Rehabilitation and Specialty Hospital, LLC a Delaware limited liability company
/s/ Christy A. Rinker			By: /s/ Clint Fegan
Print Name:	Christy A. Rinker		Print Name: Clint Fegan
			Title: Secretary

			OPERATOR:

			1125 Sir Francis Drake Boulevard Operating Company, LLC. d/b/a
			Kentfield Rehabilitation and Specialty Hospital
			a Delaware limited liability company

			By: /s/ Clint Fegan
			Print Name: Clint Fegan
			Title: Secretary


PARENT ENTITIES:

VIBRA HEALTHCARE, LLC,
a Delaware limited liability company

By:		/s/ Clint Fegan


Print Name:		Clint Fegan


Title:		Secretary

AFFILIATE:

VIBRA HEALTHCARE, II LLC,
a Delaware limited liability company

By:		/s/ Clint Fegan


Print Name:		Clint Fegan


Title:		Secretary

TITLE COMPANY JOINDER

The Title Company joins herein in order to evidence its agreement to perform the duties and obligations of the Title Company set forth herein and the accompanying escrow instructions and to acknowledge receipt, as of the date set forth below, of an original counterpart of this Agreement signed by each of the Seller Parties and Purchaser.

Date: May 19, 2014.


Fidelity National Title Insurance Company
399 Sturges Avenue
Mansfield, Ohio 44903
Phone: (888) 522-8443
Fax: (419) 522-2351

By:		/s/ Suzanne A. Rippel


Name:		Suzanne A. Rippel


Title:		Senior Real Estate Coordinator


E Mail:		suzanne.rippel@fnf.com

SCHEDULE 3.03

LIST OF CERTAIN REVIEW ITEMS

TENANT INFORMATION

1. Rent Roll – Rent roll including square footage, lease term, base rent and scheduled rent escalations.

2. Lease Documents – All leases, lease addendum, lease amendments, subleases, commencement verification letters, and any other letter agreements related thereto.

3. Recent Leasing Activity – Copies of any and all proposals or letters of intent submitted to or received from existing or prospective tenants within the past six months.

4. Tenant Financial Statements, if any

OPERATING INFORMATION

5. Historical Operating Statements – Three (3) years historical operating statements. Current YTD monthly operating statements.

6. Operating Budget – Current year’s operating and capital budget(s).

7. Service Contracts – Copies of all service, maintenance, leasing, management, and other contracts or agreements to be assumed by Buyer at closing.

8. Tax Bills – Three (3) years historical real estate tax bills.

BUILDING INFORMATION

9. Property Condition Reports – All third party reports in Seller’s possession accessing the physical and structural condition of the Property and Property components including, without limitation: Engineering, Structural, Seismographic, Geotechnical, Mechanical, Roof, Environmental, Fire/Life/Safety, Air Quality Investigations; and ADA reports.

10. Survey – Most recent property survey.

Schedule 3.03 - 1

11. Building Plans – Comprehensive set of “As-Built” plans including all specialty plan subsets: Architectural, Structural, Mechanical, Plumbing, Electrical, Roof, and Landscape plans.

12. Active T.I. Plans – Comprehensive set of plans, specifications, construction contracts, and agreements for all tenant improvement or other construction projects currently underway or committed to at the Property.

13. Certificates of Occupancy – Copies of certificates of occupancy for the building shell(s) and all demised tenant spaces.

14. Operating Permits, Licenses & Certifications – Copies of all licenses, permits, certifications, and other authorizations required for onsite operations including, without limitation, Sprinkler Certification(s), Fire Alarm Certification(s), Elevator Permits, Boiler Permit(s), Generator Permit(s), Infra-red Electrical Test(s), Fire Pump Permit(s), UST Permit(s), Back-Flow Certification(s); Swing Stage License(s), etc.

15. Elevator & HVAC Maintenance Logs – Two (2) years historical periodic Elevator & HVAC maintenance reports, including comprehensive inventory of all mechanical systems units stating manufacturer, make/model, capacity, age, condition, and estimated remaining useful life.

16. Warranties & Guaranties – All active warranties and guaranties for products installed and workmanship performed on the project.

17. Personal Property – Inventory of personal property to be transferred to Buyer.

MISCELLANEOUS OTHER INFORMATION

18. Title – Current Preliminary Title Report (including copies of all documents noted as exceptions to title coverage).

19. Violations – Copies of any notices of violations from any agency or entity having public or private jurisdiction over the Property.

20. Litigation – List of all litigation pending against the Property or the Seller relating to the Property.

21. Insurance Documents – Current certificate of property insurance and certificate of liability insurance.

Schedule 3.03 - 2

EXHIBIT A-1

LEGAL DESCRIPTION

All that certain real property situated in the County of Marin, State of California, described as follows:

Unincorporated Area

PARCEL ONE:

Beginning at a point on the Southwest line of Sir Francis Drake Boulevard at the most Easterly corner of Lot B, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County records; running thence from said point of beginning along the Southwest line of said road, North 46 degrees 39 minutes West 137 feet to the most Easterly corner of the lands conveyed by Phillipe Lenoir, et ux, to Henry W. Turner, by Deed recorded June 27, 1913 in Book 154 of Deeds at Page 32, Marin County Records; thence Southwesterly on and along the Southeast line of the lands so described, South 71 degrees 04 minutes West to the center of San Anselmo Creek, at a point 13 feet Southerly measured at right angles from the northerly line of Lot C of Map above referred to; thence Southerly at right angles to said line of Lot C, 1 foot; thence continuing Westerly along said Turner’s Line to the Easterly line of the right of way of the North Shore Railroad at a point 25 feet Southerly from the Northwest corner of Lot C; thence Southeasterly along said right of way line 125 feet to the Southwest corner of Lot B; thence North 69 degrees 20 minutes East on and along the Southeasterly line of said Lot B, 472.6 feet to the Ross Landing and Red Hill Road and the point of beginning.

Excepting from the above, the following described parcel of land:

Beginning at a point on the Southwest line of Sir Francis Drake Boulevard, at the most Easterly corner of Lot B, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence running from said point of beginning along the Southwest line of said road, North 46 degrees 39 minutes West 137 feet to the most Easterly corner of lands conveyed by Phillipe Lenoir, et ux, to Henry W. Turner by Deed recorded June 27, 1913 in Book 154 of Deeds at Page 32, Marin County Records; thence running along the Southeast line of the lands so conveyed to Turner, South 71 degrees 04 minutes West 212 feet; thence leaving said line, South 23 degrees 25 minutes East 129.57 feet to a point on the Southeast line of the aforesaid Lot B; thence along said lot line, North 69 degrees 20 minutes East 266 feet to the point of beginning.

Excepting therefrom the portion conveyed to Marin County Flood Control and Water Conservation District, a political subdivision of the State of California, recorded March 7, 1972 in Book 2547 of Official Records at Page 298, Marin County Records.

A-1 - 1

PARCEL TWO:

Beginning at a point on the Northwesterly line of Lot A, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; said point being distant thereon South 69 degrees 20 minutes West 323.84 feet from the most Northerly corner of said Lot A; thence from said point of beginning, along the northwesterly boundary line of said lot, South 69 degrees 20 minutes West 144.25 feet, more or less, to the most Westerly corner of said Lot A; thence along the Southwesterly line of said lot, which line is also the Northeasterly line of the North Shore Railroad in a Southeasterly direction for a distance of 123 feet to the most Southerly corner of said Lot A; thence leaving said line of the North Shore Railroad and running North 86 degrees 50 minutes East 52.53 feet, more or less, to the Westerly bank of the Arroyo san Anselmo; thence along said Westerly bank North 26 degrees 15 minutes East 49.63 feet to a point; thence leaving said Bank of the Arroyo San Anselmo and continuing along the same course, North 26 degrees 15 minutes East 24.52 feet to a point; thence North 63 degrees 05 minutes West 31.13 feet; thence North 27 degrees 34 minutes West 6.78 feet; thence North 29 degrees 34 minutes 44 seconds East 27.68 feet; thence North 22 degrees 38 minutes 30 seconds West 30.14 feet; thence North 61 degrees 23 minutes 20 seconds East 36.29 feet; thence South 85 degrees 46 minutes 20 seconds East 6.86 feet; thence North 20 degrees 40 minutes West 11.22 feet to the point of beginning.

PARCEL THREE:

That portion of the former right of way of the Northwestern Pacific Railroad Company, as described in Deed to Malcolm Ross Perry, et al, recorded January 21, 1947 in Book 538 of Official Records Page 447, Marin County Records, which lies between the extension Easterly of the Southerly boundary line of Lot 3, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records and a line drawn South 70 degrees 11 minutes West from the most Westerly corner of the land conveyed to Andrea Minutoli, et ux, in Deed recorded April 11, 1944, in Book 463 of Official Records at Page 160, Marin County Records.

Excepting therefrom the following described land:

Beginning at the most Easterly corner of Lot 4, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence North 76 degrees 49 minutes East 5 feet; thence North 22 degrees 11 minutes West 100 feet; thence South 76 degrees 49 minutes West 5 feet to the Northeasterly corner of Lot 5, as shown on the above referred to; thence South 22 degrees 11 minutes East along the Easterly line of Lots 5 and 4 to the point of beginning.

A-1 - 2

And further excepting the following:

Beginning at the most Easterly corner of said Lot 3; thence from said point of beginning along the Easterly boundary line of said Lot 3, North 22 degrees 11 minutes West 50 feet to the most Easterly corner of Lot 4 of said map; thence North 76 degrees 49 minutes East 5 feet; thence South 22 degrees 11 minutes East 50 feet, more or less, to a point which in North 67 degrees 42 minutes East 5 feet from the point of beginning; thence South 67 degrees 42 minutes West 5 feet to the point of beginning.

PARCEL FOUR:

Those portions of the former right of way of the Northwestern Pacific Railroad Company, as described in the Deed recorded June 27, 1913 in Book 538 of Official Records at Page 447, Marin County Records, which is described as follows:

Beginning at a point on the Northeasterly line of said former right of way line; said point begin distant 60 feet Northeasterly from the most Northerly corner of Lot 2, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; running thence from said point of beginning, Southwesterly 19.5 feet along a line which is the extension Easterly of the Northerly line of said Lot 2; thence leaving said line and running Southeasterly parallel with the Northeasterly line of said former right of way line 50 feet to a line which is the extension Easterly of the Northerly line of said Lot 2; thence leaving said line and running Southeasterly parallel with the Northeasterly line of said former right of way line 50 feet to a line which is the extension Easterly of the Southerly line of said Lot 2; thence along said last mentioned line Northeasterly 19.5 feet to the Northeasterly line of said right of way line; thence along said line Northwesterly 50 feet to the point of beginning.

PARCEL FIVE:

Beginning at the most Westerly corner of Parcel Four, described herein and running thence Southwesterly 10 feet along a line which is the extension Easterly of the Northerly line of said Lot 2, to a point; thence leaving said line and running Southeasterly in a straight line to a point in the Southwesterly boundary line of Parcel Four described herein, which point is distant thereon Southeasterly 10 feet from the point of beginning; running thence along said Southwesterly boundary line in a Northwesterly direction, 10 feet to the point of beginning.

PARCEL SIX:

A-1 - 3

with the Easterly boundary line of said Lot 2, 50 feet to a point in a line which is the Easterly extension of the Northerly line of said Lot 2, which point is distant thereon easterly 30.0 feet from the Northeast corner of said Lot 2; thence Easterly along said Easterly extension 0.5 feet; thence leaving said Easterly extension and running South 67 degrees 18 minutes East 14.14 feet; thence Southeasterly in a straight line parallel with the Easterly boundary line of said Lot 2, 40 feet to the point of beginning.

Being a portion of the former railroad right of way lying Northeasterly of Lot 2, map hereinabove referred to.

PARCEL SEVEN:

Beginning at a point on the Northwesterly line of the parcel of land conveyed to Alwyn K. Safholm, et ux, by Deed recorded September 23, 1960 in Book 1401 of Official Records at Page 155, Marin County Records, distant thereon Northeasterly 180 feet from the Northeasterly line of Poplar Avenue; thence continuing along said Northwesterly line Northeasterly 24 feet; thence Southeasterly 6 feet to a point on the Northeasterly line of said Safholm Parcel, distant thereon Southeasterly 6 feet from the Northerly corner thereof; thence along said Northeasterly line Southeasterly 61 feet to the Southeasterly corner of said Safholm Parcel; thence Southwesterly along the Southeasterly line of said parcel, 30 feet; thence leaving said line Northwesterly 67 feet to the point of beginning.

PARCEL EIGHT:

An easement for parking purposes, 10 feet in width, lying Westerly of, adjacent to and parallel with the following described line:

PARCEL NINE:

An easement for parking purposes, 10 feet in width, lying Westerly of, adjacent to, and parallel with the following described line:

A-1 - 4

PARCEL TEN:

An easement, 5 feet in width for sewer purposes lying Southerly of, adjacent to and parallel with the Northerly line of Lot 2, and its extension easterly 30.5 feet, as shown upon that certain map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records.

PARCEL ELEVEN:

Beginning at the Northeasterly corner of the land conveyed to Alwyn K. Safholm, et ux, in Deed recorded September 23, 1960 in Book 1401 of Official Records at Page 155, Marin County Records; thence along the Northwesterly line of said land conveyed to Alwyn K. Safholm, et ux, above referred to, South 67 degrees 42 minutes West 6 feet; thence Easterly to a point on the Easterly line of the land of Alwyn K. Safholm, et ux, above referred to distant thereon Southeasterly 6 feet from the point of beginning; thence along said Easterly line Northwesterly 6 feet to the point of beginning.

PARCEL TWELVE:

Beginning at a point on the intersection lines of the land of the North Shore Railroad Company and the Southwesterly corner of Lot A, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence running Southerly along the Easterly boundary line of the land of the North Shore Railroad Company, 105 feet, more or less, to the middle of the creek; thence running Northerly along the center of said creek to a certain point; said point being the Southeasterly corner of Lot A, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, field for recorded March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence running Westerly along the Southerly boundary line of said Lot A, 67 feet, more or less, to the point of beginning.

Said premises are shown as Lot 63, upon that certain Map entitled “Map of Granton Park”, filed for record February 4, 1907 in Volume 2 of Maps, at Page 77, Marin County Records.

PARCEL THIRTEEN:

A-1 - 5

said Westerly right of way line, North 22 degrees 11 minutes West 124.67 feet to an iron pipe monument; thence North 67 degrees 49 minutes East 180.00 feet to an iron pipe monument; thence South 22 degrees 11 minutes East 50.39 feet to an iron pipe monument; thence North 73 degrees 58 minutes East 34.06 feet; thence South 26 degrees 15 minutes East 72.02 feet to a point on the Southerly line of lands now or formerly of Busse, as above described; thence along said Southerly line, South 68 degrees 08 minutes West 158.97 feet to the point of beginning.

NOTE: Iron pipe monuments are marked with Engineers Tag No. RCE 10734.

Excepting therefrom the portion conveyed to Marin County Flood Control and Water Conservation District, a political subdivision of State of California, recorded March 7, 1972 in Book 2547 of Official Records at Page 298, Marin County Records.

PARCEL FOURTEEN:

Being a portion of the lands conveyed to the Marin County Flood Control and Water Conservation District, by Deed recorded June 30, 1971 in Book 2478 of Official Records at Page 22, Marin County Records.

Beginning at the most Southerly corner of Parcel Two of said Lands of Marin County Flood Control and Water Conservation District; said point of beginning is marked by a found iron pipe and tag PE 10734; thence North 20 degrees 47 minutes 59 seconds West 55.00 feet along the Southwesterly line of the former right of way of the Northwestern Pacific Railroad Company; thence leaving said Southwesterly right of way line, North 69 degrees 20 minutes 16 seconds East 161.09 feet; thence South 36 degrees 39 minutes 32 seconds East 57.22 feet to a point in the Northwesterly line of the lands conveyed to Reese by a Deed recorded February 19, 1965 in Book 1912 of Official Records at Page 364, Marin county Records; thence along said Northwesterly line of Lands of Reese, South 69 degrees 20 minutes 16 seconds West 177.33 feet to the point of beginning.

PARCEL FIFTEEN:

A permanent non-exclusive access easement for ingress and egress and travel over the following described real property:

Being a portion of the Lands of Ralph E. Ellis and Catherine A. Ellis, his wife as Joint Tenants, described by Joint Tenancy Deed, recorded July 9, 1969 in Book 2310 of Official Records at Page 647, Marin County Records.

Beginning at a point in the Southerly line of said Lands of Ellis, distant thereon South 73 degrees 50 minutes 20 seconds West (record South 72 degrees 45 minutes West) 180.57 feet from a found nail and tag LS 2738 marking the most Easterly corner of said lands; thence from said point of beginning, North 36 degrees 39 minutes 32 seconds West 4.75 feet thence South 84 degrees 40 minutes West 43.32 feet; thence North 41 degrees 15 minutes 24 seconds West 39.17 feet to a found hub and tag LS 2738 marking an angle point in the Westerly line of said Lands of Ellis; thence South 28 degrees 16 minutes 50 seconds East (record South 29 degrees 24 minutes East) 49.15 feet to a found nail and tag LS 2738 marking the most Southerly corner of said Lands of Ellis; thence North 73 degrees 50 minutes 20 seconds East 50.51 feet to the point of beginning.

A-1 - 6

PARCEL SIXTEEN:

That portion of Lots C, D, E, F and the former right of way of the Northwestern Pacific Railroad Company, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records, described as follows:

Beginning at a point on the Southwestern line of Sir Francis Drake Boulevard, formerly known as Red Hill and Ross Landing Road, distant thereon South 47 degrees 47 minutes East 13 feet from the Northern corner of said Lot D; thence continuing along said Southwestern line, South 47 degrees 47 minutes East 75 feet to the Eastern corner of the parcel of land described in the Deed from Phillipe Lenoir, et ux to Henry W. Turner, recorded June 27, 1913 in Book 154 of Deeds at Page 32, Marin County Records; thence along the Southeasterly line thereof, South 70 degrees 11 minutes West 233 feet to a point in the center line of San Anselmo creek, distant at a right angle 13 feet Southeasterly from the Northwestern line of said Northwestern line of Lot C; running thence Southeasterly at a right angle to said Northwestern line of Lot C, 1 foot and South 68 degrees 08 minutes West 21.00 feet to the intersection thereof with the Northeastern line of the parcel of land described in the Deed from Eugene P. Aureguy, et al to Russell Reese, et al, recorded February 19, 1965 in Book 1912 of Official Records at Page 354, Marin County Records; thence running along said Northeastern line, North 26 degrees 15 minutes West 72.02 feet to an angle point therein; thence leaving said Reese Parcel (1912/354) and thence running South 73 degrees 59 minutes West 34.06 feet, North 22 degrees 11 minutes West 50.39 feet and South 67 degrees 49 minutes West 180.00 feet to a point on the Westerly line of the former right of way of the Northwestern Pacific Railroad Company as described in the Deed to Malcolm Ross Perry, et al, recorded January 21, 1947 in Book 538 of Official Records at Page 447, Marin County Records; thence running along said Westerly line of the former right of way, North 22 degrees 11 minutes West to its intersection with the most Easterly corner of Lot 13, as shown upon that certain Map entitled, “Bosqui Tract”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence leaving said line of the former right of way and running Easterly to Northwesterly corner of Lot F, as shown upon that certain Map entitled “Bosqui Tract”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence Easterly along the Northerly line of said Lot F to the Westerly bank of San Anselmo Creek; thence Southeasterly along the Westerly bank of said creek and following the meanderings thereof to the Northerly line of Lot D; thence North 72 degrees 45 minutes East along said Northerly line to the Southwesterly line of Ross Landing and Red Hill Road; thence Southeasterly along said line, 13 feet to a point of beginning.

Excepting therefrom that portion conveyed by Cal-West Capital Corporation to Marin County Flood Control and Water Conservation District, a political subdivision of the State of California by Deed recorded June 30, 1971 in Book 2478 of Official Records at Page 22, Marin County Records.

A-1 - 7

Further excepting therefrom that portion conveyed to the County of Marin by Deed recorded October 6, 1965 in Book 1987 of Official Records at Page 216, Marin County Records, and being described as follows:

Beginning at a point on the Westerly line of Red Hill and Ross Landing Road, distant thereon South 47 degrees 47 minutes East 13 feet from the most Northerly corner of Lot D, as shown upon that certain map entitle “Bosqui Tract”, filed for record December 3, 1904 in Volume 2 of Maps, Page 12, Marin County Records; said point also being the Northeaster corner of that certain parcel of land described in the Deed from R.E. Valentine, et ux to Harry G. Henderson, et ux, recorded January 15, 1936 in Book 308 of Official Records at Page 241, Marin County Records; thence leaving said road line and running along the Northerly boundary line of said Henderson Parcel, South 71 degrees 45 minutes West 34.48 feet to a point; thence leaving said line and running North 47 degrees 47 minutes West 13.00 feet, more or less, to a point on the Northerly line of Lot D; thence Northeasterly along said Northerly line of Lot D, 34.83 feet, more or less, to the Northerly corner of said Lot D; thence South 47 degrees 47 minutes East 13 feet to the point of beginning.

PARCEL SEVENTEEN:

Suites A through P, inclusive and 100% interest in the “common area”, as shown upon that certain Map entitled “Map of Vertical Subdivision of Redwood Medical Center, being a portion of Lots B & C, Amended Map of Bosqui Tract, recorded by Marin County Records, in Book 2, Page 18, in the County of Marin, California”, filed for record March 13, 1963 in Volume 11 of Maps, at Page 68, Marin County Records.

PARCEL EIGHTEEN:

An easement for ingress, egress and travel, 20 feet in width with a vertical clearance of 8 feet more particularly described as follows:

Beginning at a point which bears South 46 degrees 39 minutes East 23.00 feet, South 60 degrees 50 minutes West 38.66 feet, South 87 degrees 54 minutes West 52.30 feet South 68 degrees 44 minutes 30 seconds West 169.5 feet and South 23 degrees 17 minutes East 10.006 feet from the most Easterly corner of Lot B, as shown upon that certain Map entitled “Bosqui Tract”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence running from said true point of beginning, South 68 degrees 44 minutes 30 seconds West 74.8 feet, North 22 degrees 08 minutes West 57.5 feet, North 67 degrees 52 minutes East 19.3 feet, North 22 degrees 08 minutes West 52.0 feet, North 67 degrees 42 minutes East 14.2 feet, South 22 degrees 08 minutes East 90.05 feet, North 68 degrees 44 minutes 30 seconds East 40.89 feet and South 23 degrees 17 minutes East 20.012 feet to the point of beginning.

Assessor’s Parcel Number 074-011-83, 074-011-84, 074-011-86, 074-280-22

A-1 - 8

EXHIBIT A-2

IDENTIFICATION OF ITEMS OF LEASED EQUIPMENT AND LEASED PERSONAL

PROPERTY TOGETHER WITH IDENTIFICATION OF APPLICABLE LEASE

INCLUDING LESSOR NAME AND DATE OF LEASE AND IDENTIFICATION BY

NAME AND DATE OF ALL AMENDMENTS, IF ANY, THERETO

See attached Excel spreadsheet entitled “Kentfield Equipment Leases – 5/12/2014” and related descriptive schedules provided separately by Doug Yohe to Forrest Gardner on May 13, 2014.

A-2

EXHIBIT B

ALLOCATION OF INITIAL INVESTMENT

[To be provided prior to Closing]

B - 1

EXHIBIT C

GRANT DEED


WHEN RECORDED MAIL TO:





MAIL TAX STATEMENTS TO:						DECLARATION OF TAX SHOWN ON
						SEPARATE PAPER AS
						Revenue & Taxation Code 11932-11933
						AS SO DECLARED BY THE UNDERSIGNED



APN:

GRANT DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

KENTFIELD THCI HOLDING COMPANY, LLC, a Delaware limited liability company (“ Grantor ”)

hereby GRANTS to

, (“ Grantee ”)

the real property in the City of Kentfield and County of Marin, State of CALIFORNIA, described as follows:

See Exhibit A attached hereto and made a part hereof,

subject to those items listed on Schedule 1 attached hereto and made a part hereof (the “ Permitted Exceptions ”).

The Grantor for itself and its successors-in-interest does by these presents expressly limit the covenants of this deed to those hereafter expressed and excludes any and all covenants arising or to arise by statutory or other implication. Notwithstanding any and all covenants arising or to arise by statutory or other implication, the Grantor for itself and its successors-in-interest does

C - 1

hereby covenant with the said Grantee that it is lawfully seized and possessed of said land in fee simple, has a good right to convey said land and that said land is free and clear of all liens and encumbrances made or suffered by Grantor except for the Permitted Exceptions.

GRANTOR DOES further covenant and bind itself, its successors, assigns and legal representatives to warrant specially and forever defend the title to the said land to the said Grantee, its successors and assigns against the lawful claims of all persons claiming by, through, or under Grantor, but no further or otherwise and subject, however, to the Permitted Exceptions.

(Remainder of page intentionally left blank.)

C - 2

Dated this day of , 2014.


GRANTOR:

KENTFIELD THCI HOLDING COMPANY, LLC

By:


Name:
Title:

STATE OF CALIFORNIA)

COUNTY OF )

On , 2014, before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

Witness my hand and official seal.

Notary Public

My commission expires:

C - 3

EXHIBIT A

To Grant Deed

Legal Description

All that certain real property situated in the County of Marin, State of California, described as follows:

Unincorporated Area

PARCEL ONE:

Excepting from the above, the following described parcel of land:

C-Exhibit A - 4

PARCEL TWO:

PARCEL THREE:

Excepting therefrom the following described land:

C-Exhibit A - 5

degrees 49 minutes East 5 feet; thence North 22 degrees 11 minutes West 100 feet; thence South 76 degrees 49 minutes West 5 feet to the Northeasterly corner of Lot 5, as shown on the above referred to; thence South 22 degrees 11 minutes East along the Easterly line of Lots 5 and 4 to the point of beginning.

And further excepting the following:

PARCEL FOUR:

PARCEL FIVE:

C-Exhibit A - 6

PARCEL SIX:

Beginning at a point on a line which is the Easterly extension of the Southerly line of Lot 2, as shown upon that certain Map entitled “Amended Map of Bosqui Tract, Ross Valley, Marin Co., Cal.”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records, which point is distant thereon 40.5 feet Easterly from the most Easterly corner of said Lot 2; running thence from said point of beginning, along the Easterly extension of Lot 2, Westerly 10.5 feet; thence leaving said Easterly extension of Lot 2 and running Northwesterly parallel with the Easterly boundary line of said Lot 2, 50 feet to a point in a line which is the Easterly extension of the Northerly line of said Lot 2, which point is distant thereon easterly 30.0 feet from the Northeast corner of said Lot 2; thence Easterly along said Easterly extension 0.5 feet; thence leaving said Easterly extension and running South 67 degrees 18 minutes East 14.14 feet; thence Southeasterly in a straight line parallel with the Easterly boundary line of said Lot 2, 40 feet to the point of beginning.

Being a portion of the former railroad right of way lying Northeasterly of Lot 2, map hereinabove referred to.

PARCEL SEVEN:

PARCEL EIGHT:

An easement for parking purposes, 10 feet in width, lying Westerly of, adjacent to and parallel with the following described line:

PARCEL NINE:

An easement for parking purposes, 10 feet in width, lying Westerly of, adjacent to, and parallel with the following described line:

C-Exhibit A - 7

PARCEL TEN:

PARCEL ELEVEN:

PARCEL TWELVE:

Said premises are shown as Lot 63, upon that certain Map entitled “Map of Granton Park”, filed for record February 4, 1907 in Volume 2 of Maps, at Page 77, Marin County Records.

C-Exhibit A - 8

PARCEL THIRTEEN:

Beginning at a point on the Easterly right of way line formerly of the Northwestern Pacific Railway Company; said point also being the Southwesterly corner of the land described in the Deed to Robert R. Busse, et ux recorded March 25, 1959 in Book 1266 of Official Records at Page 121, Marin County Records; thence South 68 degrees 08 minutes West along the Southeasterly line of said parcel if extended, 60.00 feet to a point; said point being on the Westerly right of way lien formerly of the Northwestern Pacific Railway Company; thence along said Westerly right of way line, North 22 degrees 11 minutes West 124.67 feet to an iron pipe monument; thence North 67 degrees 49 minutes East 180.00 feet to an iron pipe monument; thence South 22 degrees 11 minutes East 50.39 feet to an iron pipe monument; thence North 73 degrees 58 minutes East 34.06 feet; thence South 26 degrees 15 minutes East 72.02 feet to a point on the Southerly line of lands now or formerly of Busse, as above described; thence along said Southerly line, South 68 degrees 08 minutes West 158.97 feet to the point of beginning.

NOTE: Iron pipe monuments are marked with Engineers Tag No. RCE 10734.

PARCEL FOURTEEN:

C-Exhibit A - 9

PARCEL FIFTEEN:

A permanent non-exclusive access easement for ingress and egress and travel over the following described real property:

PARCEL SIXTEEN:

C-Exhibit A - 10

thence running along said Westerly line of the former right of way, North 22 degrees 11 minutes West to its intersection with the most Easterly corner of Lot 13, as shown upon that certain Map entitled, “Bosqui Tract”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence leaving said line of the former right of way and running Easterly to Northwesterly corner of Lot F, as shown upon that certain Map entitled “Bosqui Tract”, filed for record March 13, 1905 in Volume 2 of Maps, at Page 18, Marin County Records; thence Easterly along the Northerly line of said Lot F to the Westerly bank of San Anselmo Creek; thence Southeasterly along the Westerly bank of said creek and following the meanderings thereof to the Northerly line of Lot D; thence North 72 degrees 45 minutes East along said Northerly line to the Southwesterly line of Ross Landing and Red Hill Road; thence Southeasterly along said line, 13 feet to a point of beginning.

PARCEL SEVENTEEN:

C-Exhibit A - 11

PARCEL EIGHTEEN:

An easement for ingress, egress and travel, 20 feet in width with a vertical clearance of 8 feet more particularly described as follows:

Assessor’s Parcel Number 074-011-83, 074-011-84, 074-011-86, 074-280-22

C-Exhibit A - 12

Schedule 1

Permitted Exceptions

C – Schedule 1-1

EXHIBIT D

BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT


THE STATE OF	§
	§	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF	§

That concurrently with the execution and delivery hereof, (“Assignor”), is conveying to (“Assignee”), by Special Warranty Deed (the “Deed”), those certain tracts of land more particularly described on Exhibit A attached to the Deed and made a part thereof for all purposes (the “Property”). Unless otherwise defined herein, all initially capitalized terms shall have the respective meanings ascribed to such terms in that certain Purchase Agreement dated , 2014, by and between Assignor and with respect to the conveyance of the Property.

It is the desire of Assignor hereby to assign, transfer and convey to Assignee, subject, however, to those certain matters more particularly described on Exhibit B attached to the Deed thereto and made a part thereof for all purposes (collectively, the “Permitted Encumbrances”), all Improvements, Personal Property, and Intangible Property, including, without limitation, those items more particularly described on Exhibit A attached hereto and made a part hereof for all purposes (collectively, the “Assigned Properties”); provided, however, the Assigned Properties shall not be deemed to include, Assignee shall have no liability under, and Assignor shall remain solely liable and responsible for, the contracts and other matters set forth on Exhibit B attached hereto and made a part hereof for all purposes (collectively, the “Non-Assigned Properties”).

NOW, THEREFORE, in consideration of the receipt of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, in hand paid by Assignee to Assignor, the receipt and sufficiency of which are hereby acknowledged and confessed by Assignor, Assignor does hereby BARGAIN, ASSIGN, TRANSFER, SET OVER, CONVEY and DELIVER to Assignee, its successors, legal representatives and assigns, subject to the Permitted Encumbrances, all of the Assigned Properties.

TO HAVE AND TO HOLD the Assigned Properties, together with any and all rights and appurtenance thereto in anywise belonging to Assignor unto Assignee, its successors and assigns FOREVER, and Assignor does hereby bind itself and its successors to WARRANT AND FOREVER DEFEND all and singular the Assigned Properties, subject to the Permitted Encumbrances, unto Assignee, its successors and assigns, against every person lawfully claiming or to claim the same or any part thereof by, through or under Assignor, but not otherwise. Assignee, by its acceptance hereof, hereby assumes all obligations of Assignor arising with respect to the Assigned Properties from and after the date hereof, but not otherwise.

Assignor indemnifies Assignee from any claims applicable to the Assigned Properties with respect to the period prior to the date hereof. Assignee indemnifies Assignor from any claims applicable to the Assigned Properties with respect to the period from and after the date hereof.

D - 1

IN WITNESS WHEREOF, Assignor has executed this instrument as of (but not necessarily on this day of , 2014.


WITNESSES:				ASSIGNOR:


				a
Print Name:
				By:
				Print Name:
				Title:
Print Name:

WITNESSES:				ASSIGNEE:


				a
Print Name:

				By:
				Print Name:
				Title:
Print Name:

D - 2

EXHIBIT E

FIRPTA AFFIDAVIT

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform (“Transferee”) that withholding of tax is not required upon the disposition of a U.S. real property interest by “Transferor”), Transferor hereby certifies the following:

Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

Transferor’s U.S. employer identification number is: ;

Transferor is not a “disregarded entity” as defined in IRS Regulation 1.1445-2(b)(iii); and

Transferor’s office address is .

Transferor understands that this certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct, and complete, and I further declare that I have authority to sign this document.

EXECUTED as of (but not necessarily on) this day of , 2014.


TRANSFEROR:

, a


By:
Name:
Title:

SWORN TO AND SUBSCRIBED BEFORE ME this day of , 2014.

E - 1


[Notarial Seal]
		Notary Public, State of
		Print Name:
		My Commission Expires:

E - 2

EXHIBIT F

TENANT ESTOPPEL CERTIFICATE








Attention:

Re:

Lease dated , between or its predecessor in interest (“Landlord”) and (“Tenant”) for Suite (the “Premises”) located at (the “Property”)

Ladies and Gentlemen:

The undersigned, the Tenant under the referenced Lease, hereby certifies and confirms to and agrees with , [IF KNOWN, INSERT NAME OF ULTIMATE PURCHASING ENTITY], and their successors and assigns (collectively, “Buyer”), any lender of Buyer, and such lender’s successors and assigns (collectively, “Lenders”) and Landlord as follows:

1. A true, correct and complete copy of the lease Tenant has entered into and all amendments to the lease and all other agreements modifying or supplementing the lease are attached hereto as Exhibit 1 and incorporated herein by reference (collectively, the “Lease”). The Lease is the sole agreement between Landlord and Tenant relating in any way to the Premises and the Property, and there are no other agreements, oral or written, between Landlord and Tenant relating to the Premises or the Property.

2. The term of the Lease commenced on , , and shall expire on , . Tenant has no right to terminate the Lease prior to its stated expiration other than as specifically set forth in the Lease with respect to casualty and condemnation.

3. The current fixed monthly rent under the Lease is $ , and Tenant has paid rent under the Lease through and including , 200 . The Lease provides for Tenant to pay all operating expenses, real estate taxes, insurance premiums, and all costs of utilities for the Premises. [MAY NEED MODIFICATION IF TENANT PAYS UTILITIES DIRECTLY.].

4. The amount of the security deposit being held by Landlord is $ .

5. The number of rentable [LEASEABLE] square feet included with the Premises is approximately .

6. No monetary obligations of Tenant under the Lease, including, without limitation, rent have been prepaid, except as follows: .

7. The Landlord has fulfilled all of its obligations under the Lease to date, including without limitation (i) completion of the improvements and the space required to be completed by

F - 1

Landlord to date according to the Lease in accordance with the plans and specifications therefore approved by Tenant and (ii) all Tenant finish and other construction costs or allowances payable by Landlord have been paid and no such costs are payable hereafter under the Lease. As of the date of this certificate, Tenant has no knowledge of any violations of any exclusive use, co-tenancy, parking ratio or similar restrictions set forth in the Lease.

8. There are no existing defenses which Tenant has against enforcement of the Lease by Landlord. Tenant has not advanced any funds by or on behalf of Landlord, and Tenant is not entitled to any credit, offset or reduction in rent. There exists no default under the Lease. Tenant has not given Landlord notice of its intention to vacate the Premises prior to the end of the term of the Lease and no controversy or dispute exists between Landlord and Tenant. Tenant’s interest under the Lease has not been assigned, by operation of law or otherwise, and no sublease, concession agreement or license covering the Premises or any portion thereof has been entered into by Tenant, except as follows: .

9. Tenant is actually using the Premises for the following purposes: .

10. Landlord has not granted to Tenant any free rent periods or tenant improvement contributions under the Lease, and Landlord is not reimbursing Tenant or paying Tenant’s rent obligations under any other lease, except: .

11. Tenant has no options to expand, or extend the term of the Lease, or an option or preferred right or right of first refusal to purchase any portion of the Property except: .

12. There are no actions, whether voluntary or otherwise, pending against Tenant under the bankruptcy laws of the United States or any state thereof.

13. The person executing this estoppel certificate on behalf of Tenant hereby certifies that he/she has knowledge of the matters stated herein and has the authority to execute this estoppel certificate on behalf of Tenant.

14. Tenant acknowledges that, if Buyer or its assigns acquire the Premises, the landlord’s interest in the Lease will be assigned to Lenders, as security for a mortgage loan to be made by Lenders, encumbering the Premises, and confirms that said assignment does not constitute a default under the Lease. Tenant hereby agrees that the subordination and attornment provisions of the Lease shall apply for the benefit of Lenders, and their respective successors and assigns, with respect to any mortgage loan, and all extensions, renewals, increases and modifications thereof.

The undersigned understands that Buyer or its assigns is acquiring the Premises and Lenders, will make a mortgage loan secured by the Premises, each in reliance upon the certifications and agreements set forth herein, and agrees that Buyer, Lenders, and their respective successors and assigns may rely upon the certifications and agreements for that purpose. The undersigned agrees that Lenders, may assign this estoppel and any of Lender’s rights hereunder to any assignee of Lender’s note and mortgage or to any purchaser of the Premises at a foreclosure sale or to any purchaser of the Premises from such Lender.

F - 2

IN WITNESS WHEREOF, the undersigned Tenant has executed and delivered this Estoppel Certificate as of the day of , 2014.




By:


Name:


Title:

F - 3

[DELETE WHERE NO GUARANTY EXISTS: The undersigned Guarantor(s) of the Lease hereby certify to Buyer, Lender and their respective successors and assigns as of the date hereof that their guaranty of the Lease (the “Guaranty”) is in full force and effect and has not been amended or modified and that the undersigned Guarantor(s) have no claims or defenses under the Guaranty or otherwise with respect to their performance in full of all terms, covenants and conditions of the guaranty. Further, Guarantor(s) agrees that in the event Lenders or a purchaser at any foreclosure sale shall succeed to the interest of Landlord under the Lease, Lenders or a purchaser at foreclosure sale shall have the same rights and remedies as Landlord under the Guaranty; provided, however, that Lenders or a purchaser at foreclosure sale shall not be subject to any offsets, defenses or any other claims which Guarantor(s) may then have (whether known or unknown) as a result of the acts or omissions to act of any prior landlord (including Landlord), Tenant or any other party Guarantor(s) agrees that, if Lenders makes a mortgage loan secured by the Premises, the Guaranty will not be amended, modified or terminated without Lender’s prior written consent.]




By:


Name:


Title:

F - 4

EXHIBIT G

DECLARATION ESTOPPEL CERTIFICATE

THIS DECLARATION ESTOPPEL CERTIFICATE (this “Certificate”) has been executed this day of , 2014, by (“Owner”) and ARCHITECTURAL CONTROL COMMITTEE (the “Committee”) to and for the benefit of (“ ”). Owner and Committee are collectively referred to as “Declarant” and and its successors and assigns are collectively referred to as “Beneficiary”.

R E C I T A L S:

A. Beneficiary has now or will soon hereafter acquire fee title to that certain project located at (the “Property”). The current Owner of the Property is (“Seller”).

B. Reference is made to that certain [Declaration of Covenants and Restrictions] dated , , recorded under File No. , County, , as amended by instruments dated , , recorded under , , , recorded under and and , under (such instrument, as so amended and assigned, is hereinafter referred to as the “Declaration”). Unless otherwise defined herein, all initially capitalized terms have the respective meanings assigned to such terms in the Declaration.

C. As a condition to Beneficiary’s acquisition of the Property, Beneficiary has requested and Declarant has agreed to deliver this Certificate with respect to certain matters covered under the Declaration. Beneficiary would not have agreed to acquire the Property in the absence of this Certificate.

In consideration of the recitals set forth above, Declarant hereby certifies to Beneficiary, and otherwise consents and approves, the following:

ARTICLE I

DECLARATION MATTERS

Section 1.01 Declaration . The Declaration is currently in full force and effect and has not, except as noted above, been modified or otherwise amended. The Declaration does not contain any reacquisition or similar options. Seller has not defaulted under, nor otherwise violated the terms set forth in, the Declaration. The current members of the Committee are:

G - 1

Section 1.02 Assessments . All general and special assessments or other payments due with respect to the Property have been paid in full and no amounts are currently due and owing. No default assessments have been levied against the Property nor have any assessment or similar liens been filed against the Property. The general assessments and the special assessments levied and expected to be levied under the Declaration for the and 2013 calendar years in the aggregate and the portion thereof allocable to the Property are as follows:


	Aggregate		Property Share
General	$	-2013	$	-2013
Special	$	-2013	$	-2013

Section 1.03 Improvements . Declarant has reviewed and approved all information, if any, concerning the improvements located upon the Property (collectively, the Improvements”) which is required to be submitted to Declarant for approval under the Declaration. All Improvements have been constructed and are otherwise in full compliance with the Declaration. The current use and operation of the Property does not violate the Declaration and the Property satisfies (or has been granted a permitted variance from) all setback, parking, outside storage, landscaping, signage, screening and other construction requirements set forth in the Declaration.

Section 1.04 Notice . Effective upon Declarant’s receipt of written notice of Beneficiary’s acquisition of the Property, (a) Beneficiary will be entitled to all voting and other benefits under the Declaration with respect to the Property; and (b) all notices, demands or other written communication delivered by Declarant under the Declaration or any other instrument applicable thereto, must be delivered to Beneficiary in the manner set forth therein to the following address (or such other or further addresses as Beneficiary may hereafter designate):

ARTICLE II

MISCELLANEOUS

Section 2.01 Authority . All approvals and other actions required to authorize Declarant’s execution of this Certificate have been received or otherwise taken.

Section 2.02 Reliance . Declarant acknowledges that Beneficiary has the right to rely and will rely upon this Certificate in connection with Beneficiary’s acquisition of the Property.

IN WITNESS WHEREOF, this Certificate has been executed as of (but not necessarily on) the date and year first above written.

G - 2

OWNER:

By:

Print Name:

Title:

COMMITTEE:

ARCHITECTURAL CONTROL COMMITTEE

By:

Print Name:

Title:


THE STATE OF		§
		§
COUNTY OF		§

This instrument was acknowledged before me on this day of , 2014, by , a of , as managing partner of , a , on behalf of such entity.


[Notarial Seal]
				Notary Public, State of
				Print Name:
				My Commission Expires:


THE STATE OF		§
		§
COUNTY OF		§

This instrument was acknowledged before me on this day of , 2014, by , a member of the Architectural Control Committee, on behalf of such entity.

G - 3



[Notarial Seal]				Notary Public, State of
				Print Name:
				My Commission Expires:

G - 4

EXHIBIT H

DISCLOSURE SCHEDULE

Seller discloses the following items with regards to its representations, warranties and covenants set forth in Article IX of this Agreement.

NONE

SELLER AGREES THAT ATTACHMENT OF THIS SCHEDULE TO THIS AGREEMENT DOES NOT INDICATE PURCHASER’S ACCEPTANCE OF THE ABOVE ITEMS NOR MODIFY OR OTHERWISE WAIVE ANY OF PURCHASER’S RIGHTS UNDER THIS AGREEMENT, INCLUDING PURCHASER’S RIGHT, FOR ANY OR NO REASON, TO TERMINATE THIS AGREEMENT DURING THE REVIEW PERIOD.

H - 1

EXHIBIT I

SAMPLE SEC FILINGS LETTER

FORM OF SEC S-X 3-14 LETTER

We are providing this letter in connection with your audit of the historical statement of certain revenues and certain expenses of [ ], located at [ ] (the “Property”) for the purpose of expressing an opinion as to whether the historical statement presents fairly, in all material respects, certain revenues and certain expenses for the year ended December 31, 20[ ] of the Property on the accrual basis of accounting. We confirm that we are responsible for the following:

a. The fair presentation in the historical statement of certain revenues and certain expenses on the accrual basis of accounting.

b. The design and implementation of programs and controls to prevent and detect fraud.

We confirm, to the best of our knowledge and belief, the following representations made to you during your audit.

i. The financial statements referred to above are fairly presented on the accrual basis of accounting.

ii. We have made available to you all financial records and related data.

iii. We have no knowledge of any fraud or suspected fraud affecting the Property involving (1) management, (2) employees or (3) others where the fraud could have a material effect on the financial statements.

iv. We have no knowledge of any allegations of fraud or suspected fraud affecting the Property received in communications from employees, former employees, analysts, regulators, short sellers, or others.

v. There are no unasserted claims or assessments that legal counsel has advised us are probable of assertion and must be disclosed in accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies.

vi. Related-party transactions have been appropriately identified, properly recorded, and disclosed in the financial statements.

vii. No events have occurred subsequent to December 31, 20[ ] that require consideration as adjustments to or disclosures in the financial statements.



(CEO Signature and Title)				(CFO Signature and Title)

I - 1

Exhibit 10.15

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

This FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “ First Amendment ”) is made on July 28, 2014 by and between KENTFIELD THCI HOLDING COMPANY, LLC (“ Owner ”) and 1125 SIR FRANCIS DRAKE BOULEVARD OPERATING COMPANY, LLC (“ Operator ”) (collectively, the “ Seller ”), and MEDEQUITIES REALTY TRUST, INC. (the “ Buyer ”). This Amendment will be effective as of the date upon which it is last executed by Seller or Buyer, as indicated by their signatures below (the “ Effective Date ”).

WHEREAS the Buyer and Seller are parties to that certain Purchase and Sale Agreement made on June 1, 2014 (the “ PSA ”), whereby Buyer agreed to purchase, and Seller agreed to sell and convey the Property generally located at 1125 Sir Francis Drake Boulevard, Kentfield, Marin County, California; and

WHEREAS, the Buyer and Seller have agreed to amend the PSA as more fully set forth below; and

NOW, THEREFORE, intending to be legally bound, the Buyer and Seller agree as follows:

1. Defined Terms . Capitalized terms not otherwise defined in this First Amendment shall have the same meaning or meanings given to such terms in the PSA.

2. Correction of Name of Owner . By virtue of typographic error, the name of the Owner appearing on the cover page is shown incorrectly to be “Kentfield THCI Holding Company LCC;” it is hereby corrected and amended to be “Kentfield THCI Holding Company, LLC”.

3. Assignment of PSA to Wholly Owned Subsidiary . MedEquities Realty Trust, Inc. hereby assigns all of its rights and obligations under the PSA to its wholly owned subsidiary, MRT of Kentfield CA – LTACH, LLC, a Delaware limited liability company. From and after the date hereof, the term “Purchaser” in the PSA shall refer to and mean MRT of Kentfield CA – LTACH, LLC, and MRT of Kentfield CA – LTACH, LLC shall be the Landlord under the Facility Lease following closing of the PSA. MRT of Kentfield CA – LTACH, LLC hereby assumes the rights and obligations of Purchaser under the PSA. Sellers acknowledge such assignment and shall treat MRT of Kentfield CA – LTACH, LLC as the Purchaser under such agreement.

4. Purchase Price . The parties agree that Purchase Price set forth in Section 2.01 of the PSA shall be amended to be Fifty-One Million and No/100 Dollars ($51,000,000.00), less the Transaction Costs.

5. Adjustment of Outside Date for Review Period . In Section 4.01 of the PSA, the parties agree that the stipulated date June 16, 2014 shall be deleted and the date June 30, 2014 shall be inserted in lieu thereof.

6. Adjustment of Closing Date . In Section 6.01 of the PSA, the parties agree that the stipulated date of June 30, 2014 shall be deleted and the date August 29, 2014 shall be inserted in lieu thereof.

7. Amended Lease Payment . In Section 9.06, subsection (e), second paragraph, the parties agree that the second sentence shall be deleted and the following shall be inserted in lieu thereof:

The Facility Lease shall require payment of an initial fixed annual rent of Four Million Four Hundred Sixty-Two Thousand Five Hundred and No/100 Dollars ($4,462,500.00) payable in advance monthly installments of Three Hundred Seventy-One Thousand Eight Hundred Seventy-Five and No/100 Dollars ($371,875.00).

8. Amended of Collateral for Lease Obligations . In Section 9.06, the fourth full paragraph (pertaining to the Lease Guaranties being secured by a pledge of the equity of the Parent in the Owner and by a pledge of the equity of the Parent in the Operator) is hereby deleted; it being understood and agreed that such pledge is prohibited by the Sellers’ existing working capital lender; provided, however, that if such prohibition terminates, or consent thereto by the current working capital lender or any successor lender is obtained, the Parent shall then pledge such equity as security for the Lease Guaranties.

9. Closing Contingent by Buyer Contingent on Closing of Amarillo Term Loan to Longhorn Borrower . The parties agree to add a new subsection (h) to Section 9.06 which reads as follows:

(h)

The closing of the Amarillo Term Loan to the Longhorn Borrower substantially simultaneously with closing of this Agreement and vice versa .

10. Closing by Seller Parties Contingent on Closing of Amarillo Term Loan to Longhorn Borrower . The parties agree to add a new subsection (i) to Section 9.07 which reads as follows:

(i)

The closing of the Amarillo Term Loan to the Longhorn Borrower substantially simultaneously with this Agreement and vice versa .

11. Allocation of Initial Investment . The parties agree that “Exhibit B Allocation of Initial Investment” shall be agreed upon by the parties within ninety (90) days after Closing and shall be attached hereto when such agreement is reached.

12. No Further Amendments . This Amendment is intended to supplement and modify the terms and provisions of the PSA as set forth herein and the provisions hereof are hereby incorporated into and made a part of the PSA. Except as set forth in this Amendment, the PSA remains unmodified and in full force and effect.

IN WITNESS WHEREOF, the parties have duly executed this First Amendment as of the Effective Date.


BUYER:

MEDEQUITIES REALTY TRUST, INC.

By:		/s/ William Harlan
Name:		William Harlan
Its:		President
Date:		August 1, 2014

SELLER:

KENTFIELD THCI HOLDING COMPANY, LLC

By:		/s/ Clint Fegan
Name:		Clint Fegan
Its:		Secretary
Date:		August 1, 2014

AND

1125 SIR FRANCIS DRAKE BOULEVARD OPERATING COMPANY, LLC

By:		/s/ Clint Fegan
Name:		Clint Fegan
Its:		Secretary
Date:		August 1, 2014

JOINDER

MRT of Kentfield CA – LTACH, LLC joins in execution of this First Amendment to acknowledge and agree to the provisions of Section 3 hereof.


MRT OF KENTFIELD CA - LTACH, LLC

By:		/s/ William Harlan
Name:		William Harlan
Its:		President
Date:		August 1, 2014

EXHIBIT B

Allocation of Initial Investment

[To be attached within ninety (90) days of Closing]

Exhibit 10.24

FIRST AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF JULY 30, 2015

by and among

MEDEQUITIES REALTY

OPERATING PARTNERSHIP, LP,

AS THE BORROWER,

KEYBANK NATIONAL ASSOCIATION,

THE OTHER LENDERS WHICH ARE PARTIES TO THIS AGREEMENT

AND

OTHER LENDERS THAT MAY BECOME

PARTIES TO THIS AGREEMENT,

KEYBANK NATIONAL ASSOCIATION,

AS THE AGENT,

AND

KEYBANC CAPITAL MARKETS, INC.

AND

J.P. MORGAN SECURITIES, LLC

AS CO-LEAD ARRANGERS AND BOOK RUNNERS,

FIFTH THIRD BANK,

AS DOCUMENTATION AGENT,

AND

JPMORGAN CHASE BANK, N.A.

AND

CITIBANK, N.A.

AS CO-SYNDICATION AGENTS

FIRST AMENDED AND RESTATED CREDIT AGREEMENT

THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this “ Agreement ”) is made as of July 30, 2015, by and among MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership (the “ Borrower ”), KEYBANK NATIONAL ASSOCIATION (“ KeyBank ”), the other lending institutions which are parties to this Agreement as “Lenders”, and the other lending institutions that may become parties hereto as “Lenders” pursuant to §18, KEYBANK NATIONAL ASSOCIATION , as Agent for the Lenders (the “ Agent ”), and KEYBANC CAPITAL MARKETS , INC. and J.P. MORGAN SECURITIES, LLC as Co-Lead Arrangers and Book Runners.

R E C I T A L S

WHEREAS , the Borrower, KeyBank, the Agent and the Lenders have entered into that certain Credit Agreement dated as of November 7, 2014, as amended by that certain First Amendment to Credit Agreement dated May 6, 2015 (as so amended, the “Original Credit Agreement”); and

WHEREAS , the parties desire to enter into this Agreement to amend and restate the Original Credit Agreement in its entirety; and

WHEREAS , Wells Fargo Bank, National Association (“Wells Fargo”), was a Lender under the Original Credit Agreement, but shall not be a Lender under this Agreement;

NOW, THEREFORE , in consideration of the recitals herein and mutual covenants and agreements contained herein, the parties hereto hereby amend and restate the Original Credit Agreement and covenant and agree as follows:

§1.	DEFINITIONS AND RULES OF INTERPRETATION.

§1.1 Definitions . The following terms shall have the meanings set forth in this §l or elsewhere in the provisions of this Agreement referred to below:

ACH . An acute care hospital that is not an STACH.

Acknowledgments . The Acknowledgments executed by a Guarantor in favor of the Agent, acknowledging the pledge of Equity Interests in such Guarantor to the Agent, such Acknowledgments to be in form and substance satisfactory to the Agent, as the same may be modified, amended or restated.

Acquisition Closing Costs . The actual deal costs incurred by REIT and its Subsidiaries in connection with acquisitions of Real Estate determined in accordance with GAAP.

Actual Debt Service Coverage Ratio . The ratio of Adjusted Net Operating Income from the Borrowing Base Properties determined as of the end of the fiscal quarter most recently ended, divided by the actual annual interest and Letter of Credit Fees that were paid or payable by Borrower under this Agreement for the preceding twelve (12) calendar months,

provided that until the first anniversary of the date of the Original Credit Agreement interest and Letter of Credit Fees paid or payable by Borrower for the previous quarter or quarters shall be annualized in a manner reasonably satisfactory to Agent.

Additional Commitment Request Notice . See §2.11(a).

Additional Guarantor . Each additional Subsidiary of the Borrower which becomes a Subsidiary Guarantor pursuant to §5.5.

Adjusted Consolidated EBITDA . With respect to any period of determination, the sum of (a) Consolidated EBITDA for the applicable period, less (b) the amount equal to Capital Reserves for such period.

Adjusted Net Operating Income . On any date of determination with respect to any period, an amount equal to (a) Net Operating Income from the Borrowing Base Properties that are included in the calculation of Borrowing Base Availability for the trailing twelve (12) month period, less (b) the Capital Reserves relating to the Borrowing Base Properties that are included in the calculation of Borrowing Base Availability for such period. Notwithstanding the foregoing, with respect to any EBITDAR Stabilized Properties (1) that are Borrowing Base Properties (other than MOBs and SNFs) that are included in the calculation of Borrowing Base Availability, the amount included in the preceding sentence with respect to such Borrowing Base Property shall be the lesser of (i) the amount determined with respect to such Borrowing Base Property pursuant to the preceding sentence and (ii) the amount that would result from dividing (A) an amount equal to (X) the trailing twelve (12) month Tenant EBITDAR for such Borrowing Base Property less (Y) the Capital Reserves relating to the applicable Borrowing Base Property that is included in the calculation of Borrowing Base Availability, by (B) 1.40, and (2) that are Borrowing Base Properties that are SNFs, the amount included in the preceding sentence with respect to such Borrowing Base Property shall be the lesser of (i) the amount determined with respect to such Borrowing Base Property pursuant to the preceding sentence and (ii) the amount that would result from dividing (A) an amount equal to (X) the trailing twelve (12) month Tenant EBITDAR for such Borrowing Base Property less (Y) the Capital Reserves relating to the applicable Borrowing Base Property that is included in the calculation of Borrowing Base Availability, by (B) 1.20 (or with respect to the Texas Ten Portfolio, 1.00 through and including July 30, 2016 and 1.20 thereafter), and provided further that with respect to the Texas Ten Portfolio only, if all of the properties in the Texas Ten Portfolio are leased to a single tenant pursuant to a master lease which is cross-defaulted, and all of the properties subject to the master lease are Borrowing Base Properties, then for the purposes of calculating the ratio in clause 2(ii)(B) with respect to the Texas Ten Portfolio, all of such Borrowing Base Assets subject to such master lease shall be included in calculating such ratio (provided further that the financial and operating reports with respect to such properties shall be provided to Agent on an individual and aggregate basis). Notwithstanding the foregoing, for the calculation pursuant to the second sentence of this definition above for assets that were previously considered Newly-Built Properties, the calculation of Tenant EBITDAR will initially be based on annualized trailing six (6) month Tenant EBITDAR at the applicable property for the first quarter after inclusion as an EBITDAR Stabilized Property, annualized trailing nine (9) month Tenant EBITDAR at the property for the second quarter after inclusion as an EBITDAR Stabilized Property, and twelve (12) month trailing Tenant EBITDAR at the property for all subsequent periods. The calculation

of Adjusted Net Operating Income shall exclude any property that is no longer a Borrowing Base Property. For the avoidance of doubt, the calculation under the second sentence of this definition above shall not be applicable to MOBs.

Affected Lender . See §4.14.

Affiliate . An Affiliate, as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means (a) the possession, directly or indirectly, of the power to vote ten percent (10%) or more of the stock, shares, voting trust certificates, beneficial interest, partnership interests, member interests or other interests having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (b) the ownership of (i) a general partnership interest, (ii) a managing member’s or manager’s interest in a limited liability company or (iii) a limited partnership interest or preferred stock (or other ownership interest) representing ten percent (10%) or more of the outstanding limited partnership interests, preferred stock or other ownership interests of such Person.

Agent . KeyBank National Association, acting as administrative agent for the Lenders, and its successors and assigns.

Agent’s Head Office . The Agent’s head office located at 127 Public Square, Cleveland, Ohio 44114-1306, or at such other location as the Agent may designate from time to time by notice to the Borrower and the Lenders.

Agent’s Special Counsel . Dentons US LLP or such other counsel as selected by the Agent.

Aggregate Occupancy Rate . On any date of determination, for any Borrowing Base Property, the quotient of (a) the aggregate rentable area for such Borrowing Base Property subject to Leases (based on Net Rentable Area) or if there is no Lease, subject to a management agreement (based on beds, rooms or such other measure as Agent may reasonably determine) as to which (i) tenants or occupants are in occupancy of all of their respective leased premises (or beds, rooms or other measure reasonably determined by Agent, as applicable), (ii) tenants or occupants are not in default of any of their payment or other material obligations under their respective Lease or other occupancy agreement, which default has continued for more than thirty (30) days, (iii) are an arm’s length Lease or occupancy agreement entered into in the ordinary course of business with a party that is not an Affiliate of the REIT or the Advisor, and (iv) tenants, other occupants or any guarantor thereunder are not subject to any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or similar debtor relief proceeding, divided by (b) aggregate rentable area for such Borrowing Base Property (based on Net Rentable Area) if subject to a Lease (based on Net Rentable Area) or if there is no Lease, based on beds, rooms or such other measure as Agent may reasonably determine. The occupancy rate for each Borrowing Base Property (expressed as a percentage) shall be aggregated, with each Borrowing Base Property being weighted based on its Appraised Value, to determine the Aggregate Occupancy Rate, expressed as a percentage.

Agreement . This First Amended and Restated Credit Agreement, including the Schedules and Exhibits hereto.

Agreement Regarding Fees . See §4.2.

Applicable Law . All applicable provisions of constitutions, statutes, rules, regulations and orders of all governmental bodies and all orders and decrees of all courts, tribunals and arbitrators.

Applicable Margin . (a) On any date prior to the IPO Conditions Satisfaction Date, the Applicable Margin for LIBOR Rate Loans and Base Rate Loans shall be as set forth below based on the ratio of the Consolidated Total Indebtedness to the Gross Asset Value:


Pricing Level	Ratio	LIBOR Rate Loans			Base Rate Loans

Pricing Level 1	Less than or equal to 35%		2.75	%		1.75	%
Pricing Level 2	Greater than 35% but less than or equal to 50%		3.25	%		2.25	%
Pricing Level 3	Greater than 50%		3.75	%		2.75	%

The initial Applicable Margin shall be at Pricing Level 2. The Applicable Margin determined pursuant to this subparagraph (a) shall not be adjusted based upon such ratio, if at all, until the first day of the first month following the delivery by the Borrower to the Agent of the Compliance Certificate after the end of a calendar quarter. In the event that the Borrower shall fail to deliver to the Agent a quarterly Compliance Certificate on or before the date required by §7.4(c), then, without limiting any other rights of the Agent and the Lenders under this Agreement, the Applicable Margin shall be at Pricing Level 3 until such failure is cured within any applicable cure period, or waived in writing by the Required Lenders, in which event the Applicable Margin shall adjust, if necessary, on the first day of the first month following receipt of such Compliance Certificate.

(b) On any date commencing on and continuing after the IPO Conditions Satisfaction Date, the Applicable Margin for LIBOR Rate Loans and Base Rate Loans shall be as set forth below based on the ratio of the Consolidated Total Indebtedness to the Gross Asset Value (provided that any interest accrued prior thereto that is payable at the Applicable Margin determined by reference to the terms of subparagraph (a) above shall be payable as provided in this Agreement):


Pricing Level	Ratio	LIBOR Rate Loans			Base Rate Loans

Pricing Level 1	Less than or equal to 35%		2.00	%		1.00	%

Pricing Level 2	Greater than 35% but less than or equal to 45%		2.25	%		1.25	%

Pricing Level 3	Greater than 45%		2.50	%		1.50	%

The Applicable Margin determined pursuant to this subparagraph (b) shall not be adjusted based upon such ratio, if at all, until the first day of the first month following the IPO Conditions Satisfaction Date and thereafter on the first day of the first month following the delivery by the Borrower to the Agent of the Compliance Certificate after the end of a calendar quarter. In the event that the Borrower shall fail to deliver to the Agent a quarterly Compliance Certificate on or before the date required by §7.4(c), then, without limiting any other rights of the Agent and the Lenders under this Agreement, the Applicable Margin shall be at Pricing Level 3 until such failure is cured within any applicable cure period, or waived in writing by the Required Lenders, in which event the Applicable Margin shall adjust, if necessary, on the first day of the first month following receipt of such Compliance Certificate.

(c) In the event that the Agent, REIT or the Borrower reasonably determines that any financial statements previously delivered were incorrect or inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin applied for such Applicable Period, then (a) the Borrower shall as soon as practicable deliver to the Agent the corrected financial statements for such Applicable Period, (b) the Applicable Margin shall be determined as if the Pricing Level for such higher Applicable Margin were applicable for such Applicable Period, and (c) the Borrower shall within three (3) Business Days of written demand thereof by the Agent pay to the Agent the accrued additional amount owing as a result of such increased Applicable Margin for such Applicable Period, which payment shall be applied by the Agent in accordance with this Agreement.

Applicable Tax Percentage . See §8.7.

Appraisal . An MAI appraisal of the value of a parcel of Real Estate, determined on an “as-is” value basis, performed by an independent appraiser selected by the Agent who is not an employee of REIT, the Borrower, any of their respective Subsidiaries, the Agent or a Lender, the form and substance of such appraisal and the identity of the appraiser to be in compliance with the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto and all other regulatory laws and policies (both regulatory and internal) applicable to the Lenders and otherwise acceptable to the Agent.

Appraised Value . The “as-is” value of a parcel of Real Estate determined by the most recent Appraisal of such Real Estate obtained pursuant to this Agreement (which may be determined on a leased fee or fee simple basis as determined by Agent in its sole discretion); subject , however , to such changes or adjustments to the value determined thereby as may be required by the appraisal department of the Agent in its good faith business judgment.

Arranger . KBCM and J.P. Morgan Securities, LLC, or any successor.

Assignment and Acceptance Agreement . See §18.1.

Assignment of Documents . Collectively, each Collateral Assignment of Documents executed by the Borrower and/or a Subsidiary Guarantor, respectively, in favor of the Agent, such assignment to be in the form of Exhibit J attached hereto with such changes as Agent may reasonably require as a result of state law or factors relating to the applicable Borrowing Base Loan.

Assignment of Hedge . An Assignment of Hedge Agreement by the Borrower to the Agent for the benefit of the Lenders, as the same may be modified and amended, pursuant to which the Interest Hedge described in §7.23 is pledged as security for the Obligations and the Hedge Obligations, and any financing statements that may be delivered in connection therewith, such assignment to be in the form of Exhibit L attached hereto, with such changes thereto as Agent may reasonably require after reviewing the Interest Hedge.

Assignment of Interests . Collectively, each of the Assignments of Interests executed by the Borrower or a Subsidiary Guarantor in favor of the Agent, each such agreement to be substantially in the form of the Assignment of Interests delivered by Borrower to the Agent on the Closing Date.

ASC . Ambulatory surgery center.

Authorized Officer . Any of the following Persons: John McRoberts, Chief Executive Officer, and Jeff Walraven, Executive Vice President and Chief Financial Officer, and such other Persons as the Borrower shall designate in a written notice to the Agent.

Balance Sheet Date . March 31, 2015.

Bankruptcy Code . Title 11, U.S.C.A., as amended from time to time or any successor statute thereto.

Base Rate . The greater of (a) the fluctuating annual rate of interest announced from time to time by the Agent at the Agent’s Head Office as its “prime rate”, (b) one half of one percent (0.5%) above the Federal Funds Effective Rate, and (c) one percent (1.0%). The Base Rate is a reference rate used by the lender acting as Agent in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged by the lender acting as the Agent or any other lender on any extension of credit to any debtor. Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of 12:01 a.m. on the Business Day on which such change in the Base Rate becomes effective, without notice or demand of any kind.

Base Rate Loans . Collectively, (a) the Revolving Credit Loans bearing interest calculated by reference to the Base Rate and (b) the Swing Loans.

Borrower . As defined in the preamble hereto.

Borrowing Base Assets . Collectively, (a) the Borrowing Base Properties and (b) the Borrowing Base Loans. The initial Borrowing Base Properties (the “Initial Borrowing

Base Properties”) and the initial Borrowing Base Loans (the “Initial Borrowing Base Loans”) are identified on Schedule 1.2 attached hereto, and are hereby approved by the Agent and the Lenders.

Borrowing Base Availability . (a) Prior to the IPO Conditions Satisfaction Date, the sum of:

(i) for each Borrowing Base Property included in the calculation of Borrowing Base Availability, the lower of (A) the Appraised Value of such Borrowing Base Property and the Borrowing Base Property Cost of such Borrowing Base Property, multiplied by (B) 0.65; and the aggregate Borrowing Base Availability for the Borrowing Base Properties pursuant to this clause (a)(i) shall be the sum of such amounts determined for each Borrowing Base Property; plus

(ii) the aggregate sum for each Borrowing Base Loan of the Borrowing Base Mortgage Loan Amount for each such Borrowing Base Loan multiplied by 0.65.

(b) From and after the IPO Conditions Satisfaction Date, the sum of:

(i) for Borrowing Base Properties included in the calculation of Borrowing Base Availability that are SNFs and MOBs, the lower of:

(A) for each such Borrowing Base Property, the lowest of (1) the Appraised Value of such Borrowing Base Property and the Borrowing Base Property Cost of such Borrowing Base Property, multiplied by (2) 0.60; and the aggregate amount pursuant to this clause (b)(i)(A) shall be the sum of such amounts determined for each such Borrowing Base Property; and

(B) the maximum principal amount of Loans and Letter of Credit Liabilities that would not cause the Implied Debt Service Coverage Ratio (with the Net Operating Income component of such ratio calculated with respect to SNFs and MOBs only) to be less than 1.50 to 1.00;

plus

(ii) for Borrowing Base Properties included in the calculation of Borrowing Base Availability that are not SNFs and MOBs, the lower of:

(A) for each such Borrowing Base Property, the lower of (1) the Appraised Value of such Borrowing Base Property and the Borrowing Base Property Cost of each such Borrowing Base Property, multiplied by (2) 0.50; and the aggregate amount pursuant to this clause (b)(ii)(A) shall be the sum of such amounts determined for each such Borrowing Base Property, and

plus

(iii) the aggregate Borrowing Base Mortgage Loan Amount as determined for each Borrowing Base Loan multiplied by 0.35.

Borrowing Base Certificate . See §7.4(c).

Borrowing Base Property Cost . With respect to any Borrowing Base Properties that are included in the calculation of Borrowing Base Availability, the Borrowing Base Property Cost shall be an amount equal to the sum of the total cost of the applicable Borrowing Base Property determined in accordance with GAAP.

Borrowing Base Loan . Each of the loans which has been approved by the Agent and the Required Lenders for inclusion in the calculation of Borrowing Base Availability and pledged to Agent as Collateral pursuant to the Assignment of Documents, and which is secured by a first priority mortgage loan on a Medical Property which constitutes Eligible Real Estate and satisfies the conditions of §7.20, and which such mortgage loans are made pursuant to loan documents reasonably approved by Agent.

Borrowing Base Loan Documents . Originals of all documents, instruments, agreements, assignments and certificates, including without limitation, any and all loan or credit agreements, notes, allonges or endorsements, mortgages, assignments of leases and rents, security agreements, pledge agreements, assignments of contracts, environmental indemnities, guaranties, mortgagee’s title insurance policies, opinions of counsel, evidences of authorization or incumbency, escrow instructions and UCC-1 financing statements, that are or may be executed (and acknowledged where applicable) and recorded and filed by a Collateral Borrower in connection with a Borrowing Base Loan, as the same may be amended or otherwise modified from time to time in accordance with this Agreement. Borrowing Base Loan Documents shall also include all agreements, permits, assurances and other instruments (such as permits and approvals) that may be delivered to Borrower by the Collateral Borrower pursuant to the Borrowing Base Loan Documents.

Borrowing Base Mortgage Loan Amount . With respect to any Borrowing Base Asset which is a Borrowing Base Loan, the lesser of (a) the Borrower’s or a Subsidiary Guarantor’s purchase price for any Borrowing Base Loan and (b) the outstanding principal balance of the Borrowing Base Loan.

Borrowing Base Property or Borrowing Base Properties . At the time of determination, the Eligible Real Estate owned or leased pursuant to a Ground Lease approved by the Agent, by a Subsidiary Guarantor with respect to which all of the Equity Interests in such Subsidiary Guarantor have been pledged to the Agent pursuant to the Assignment of Interests and which satisfies the provisions of this Agreement to be included in the calculation of Borrowing Base Availability.

Breakage Costs . The cost to any Lender of re-employing funds bearing interest at LIBOR incurred (or reasonably expected to be incurred) in connection with (a) any payment of any portion of the Loans bearing interest at LIBOR prior to the termination of any applicable Interest Period, (b) the conversion of a LIBOR Rate Loan to any other applicable interest rate on a date other than the last day of the relevant Interest Period, or (c) the failure of the Borrower to draw down, on the first day of the applicable Interest Period, any amount as to which the Borrower has elected a LIBOR Rate Loan.

Building . With respect to each Borrowing Base Asset or other parcel of Real Estate, all of the buildings, structures and improvements now or hereafter located thereon.

Business Day . Any day on which banking institutions located in the same city and State as the Agent’s Head Office are located are open for the transaction of banking business and, in the case of LIBOR Rate Loans, which also is a LIBOR Business Day.

Capital Reserve . For any period, an amount equal to (a) the sum of (i) $500 per bed for SNFs, plus (ii) $1,500 per bed for STACHs, IRHs, LTACs and ACHs, plus (iii) $0.50 multiplied by the Net Rentable Areas of the MOBs, plus (iv) $0.75 multiplied by the Net Rentable Area of ASCs, LPCs, IMFs, and STDCs, multiplied by (b) the number of days in such period divided by three hundred sixty-five (365), less any reserve amounts received by the Borrower from tenants in accordance with the terms of their Lease.

Capitalized Lease . A lease under which the discounted future rental payment obligations of the lessee or the obligor are required to be capitalized on the balance sheet of such Person in accordance with GAAP.

Cash Collateral Agreement . The First Amended and Restated Cash Collateral Account Agreement made by and among MRT of Spartanburg SC – SNF, LLC, a Delaware limited liability company, MRT of Las Vegas NV – LTACH, LLC, a Delaware limited liability company, MRT of Fort Worth TX – SNF, LLC, a Delaware limited liability company, MRT of Las Vegas NV – ACH, LLC, a Delaware limited liability company, the Subsidiary Guarantors that own (and with respect to the property in Graham, Texas, expected to own) the Texas Ten Portfolio, Agent, and KeyBank as depository, and such other parties as may hereafter become a party thereto.

Cash Equivalents . As of any date, (a) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from such date, (b) time deposits and certificates of deposits having maturities of not more than one (1) year from such date and issued by any domestic commercial bank having (i) senior long term unsecured debt rated at least A or the equivalent thereof by S&P or A2 or the equivalent thereof by Moody’s and (ii) capital and surplus in excess of $100,000,000.00, (c) commercial paper rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody’s and in either case maturing within one hundred twenty (120) days from such date, and (d) shares of any money market mutual fund rated at least AAA or the equivalent thereof by S&P or at least Aaa or the equivalent thereof by Moody’s.

Cash Flow Available for Distribution . As of any date of determination, an amount equal to the sum of (a) the Consolidated EBITDA of REIT for the preceding four (4) calendar quarters, minus (b) the Consolidated Fixed Charges of REIT for the preceding four (4) calendar quarters, minus (c) actual capital expenditures of REIT and its Subsidiaries determined in accordance with GAAP for the preceding four (4) calendar quarter period.

CERCLA . The federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder.

Change of Control . A Change of Control shall exist upon the occurrence of any of the following:

(a) any Person (including a Person’s Affiliates and associates) or group (as that term is understood under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations thereunder) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of a percentage (based on voting power, in the event different classes of stock or interests shall have different voting powers) of the voting stock or voting interests of REIT equal to at least twenty-five percent (25%);

(b) as of any date a majority of the Board of Directors or Trustees or similar body (the “ Board ”) of REIT, General Partner or the Borrower consists of individuals who were not either (i) directors or trustees of REIT, General Partner or the Borrower as of the corresponding date of the previous year, or (ii) selected or nominated to become directors or trustees by the Board of REIT, General Partner or the Borrower of which a majority consisted of individuals described in clause (i) above, or (iii) selected or nominated to become directors or trustees by the Board of REIT, General Partner or the Borrower, which majority consisted of individuals described in clause (i) above and individuals described in clause (ii) above; or

(c) REIT, General Partner or the Borrower consolidates with, is acquired by, or merges into or with any Person (other than a merger permitted by §8.4); or

(d) General Partner fails to (i) be the sole general partner of Borrower, (ii) own, directly or indirectly, free of any lien, encumbrance or other adverse claim, at least eighty-five percent (85%) of the economic, voting and beneficial interest of the Borrower, or (iii) control the Borrower;

(e) the Borrower fails to own, directly or indirectly, free of any lien, encumbrance or other adverse claim (other than the Lien of the Agent granted pursuant to the Loan Documents), at least one hundred percent (100%) of the economic, voting and beneficial interest of each Subsidiary Guarantor; or

(f) the REIT fails to (i) own directly, free of any lien, encumbrance or other adverse claim, at least one hundred percent (100%) of the economic, voting and beneficial interest of General Partner or (ii) control the General Partner; or

(g) any of John W. McRoberts, Chief Executive Officer and Chairman, William C. Harlan, President, or Jeffery C. Walraven, Chief Financial Officer shall cease to be an executive officer of the REIT holding the position described above and a competent and experienced officer shall not be approved by the Required Lenders within ninety (90) days of such event, which approval the Required Lenders shall not unreasonably withhold, condition or delay.

Provided that the terms of §7.22 are complied with, the occurrence of the IPO Event shall not constitute a Change of Control.

Closing Date . The date of this Agreement.

CMS . The U.S. Centers for Medicare and Medicaid Services.

Code . The Internal Revenue Code of 1986, as amended, and all regulations and formal guidance issued thereunder.

Collateral . All of the property, rights and interests of the Borrower and its Subsidiaries which are subject to the security interests, security title and liens created by the Security Documents.

Collateral Account . A special deposit account established by the Agent pursuant to §12.6 and under its sole dominion and control.

Collateral Borrower . The borrower of a Borrowing Base Loan approved by Agent.

Commitment . With respect to each Lender, the amount set forth on Schedule 1.1 hereto as the amount of such Lender’s commitment to make or maintain Loans to the Borrower and to participate in Letters of Credit for the account of the Borrower, as the same may be changed from time to time in accordance with the terms of this Agreement.

Commitment Increase . See §2.11(a).

Commitment Increase Date . See §2.11(a).

Commitment Percentage . With respect to each Lender, the percentage set forth on Schedule 1.1 hereto as such Lender’s percentage of the Total Commitment, as the same may be changed from time to time in accordance with the terms of this Agreement; provided that if the Commitments of the Lenders have been terminated as provided in this Agreement, then the Commitment of each Lender shall be determined based on the Commitment Percentage of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.

Commodity Exchange Act . The Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time, and any successor statute.

Compliance Certificate . See §7.4(c).

CON . A certificate of need or similar certificate, license or approval issued by the State Regulator for a Borrowing Base Asset.

Condemnation Proceeds . All compensation, awards, damages, judgments and proceeds awarded to the Borrower or a Subsidiary Guarantor by reason of any Taking, net of all reasonable and customary amounts actually expended to collect the same, including, without limitation, reasonable and customary amounts expended in negotiating, litigating, if appropriate, or investigating the amount of such compensation, awards, damages, judgments and proceeds.

Connection Income Taxes . Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

Consolidated . With reference to any term defined herein, that term as applied to the accounts of a Person and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.

Consolidated EBITDA . With respect to any period, an amount equal to the EBITDA of REIT, the Borrower and their respective Subsidiaries for such period determined on a Consolidated basis plus (without duplication) such Person’s Equity Percentage of EBITDA of its Unconsolidated Affiliates and Subsidiaries of Borrower that are not Wholly Owned Subsidiaries for such period.

Consolidated Fixed Charges . With respect to any period, the sum of (a) Consolidated Interest Expense for such period (both expensed and capitalized), plus (b) all of the principal due and payable and principal paid with respect to Indebtedness of REIT, the Borrower and their respective Subsidiaries during such period, other than any balloon, bullet or similar principal payment which repays such Indebtedness in full and any voluntary full or partial prepayments prior to stated maturity thereof, plus (c) all Preferred Distributions paid during such period, plus (d) the principal payment on any Capital Lease Obligations. Such Person’s Equity Percentage in the fixed charges referred to above of its Unconsolidated Affiliates and Subsidiaries of Borrower that are not Wholly Owned Subsidiaries shall be included (without duplication) in the determination of Consolidated Fixed Charges.

Consolidated Interest Expense . With respect to any period, without duplication, (a) total Interest Expense of REIT and its Subsidiaries determined on a Consolidated basis in accordance with GAAP for such period, plus (b) such Person’s Equity Percentage of Interest Expense of its Unconsolidated Affiliates for such period.

Consolidated Tangible Net Worth . As of any date of determination, for the REIT and its Subsidiaries on a consolidated basis, an amount equal to (a) Gross Asset Value minus (b) Consolidated Total Indebtedness.

Consolidated Total Indebtedness . All Indebtedness of REIT and its Subsidiaries determined on a Consolidated basis and shall include (without duplication), such Person’s Equity Percentage of the Indebtedness of its Unconsolidated Affiliates.

Contribution Agreement . The First Amended and Restated Contribution Agreement dated as of even date herewith among the Borrower, REIT, General Partner, TRS and each Additional Guarantor which may hereafter become a party thereto, as the same may be modified, amended or ratified from time to time.

Conversion/Continuation Request . A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with §4.1.

Debt Yield . With respect to all Borrowing Base Assets included in the calculation of the Borrowing Base Availability, the ratio (expressed as a percentage) of (a) the sum of (i) total interest received on the Borrowing Base Loans for the trailing twelve (12) month period plus (ii) the Adjusted Net Operating Income from the Borrowing Base Properties divided by (b) outstanding principal balance of Revolving Credit Loans, Swing Loans and Letter of Credit Liabilities. In calculating Debt Yield, interest paid on an individual Borrowing Base Loan shall only be included to the extent that the Collateral Borrower thereunder is making such payments solely from rent generated from the property after payment of all ordinary operating expenses and capital expenditures for such property from such rent, and not from any cash infusions (whether from equity or debt) from the Collateral Borrower or any other Persons.

Default . See §12.1.

Default Rate . See §4.11.

Defaulted Loan . A Borrowing Base Loan with respect to which a default (other than a payment default) occurs, under such Borrowing Base Loan or related lease that continues unremedied for the applicable grace or cure period under the terms of such Borrowing Base Loan or related lease, as applicable (or, if no grace period is specified, for thirty (30) days.

Defaulting Lender . Any Lender that, as reasonably determined by the Agent, (a) has failed to perform any of its funding obligations hereunder, including in respect of its Loans or participations in respect of Letters of Credit or Swing Loans, within two (2) Business Days of the date required to be funded by it hereunder and such failure is continuing, unless such failure arises out of a good faith dispute between such Lender and either the Borrower or the Agent, (b) (i) has notified the Borrower, the Agent or any Lender that it does not intend to comply with its funding obligations hereunder or (ii) has made a public statement to that effect with respect to its funding obligations under other agreements generally in which it commits to extend credit, unless with respect to this clause (b), such failure is subject to a good faith dispute, (c) has failed, within two (2) Business Days after request by the Agent, to confirm in a manner reasonably satisfactory to the Agent that it will comply with its funding obligations; provided that, notwithstanding the provisions of §2.13, such Lender shall cease to be a Defaulting Lender upon the Agent’s receipt of confirmation that such Defaulting Lender will comply with its funding obligations, or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any bankruptcy, insolvency, reorganization, liquidation, conservatorship, assignment for the benefit of creditors, moratorium, receivership, rearrangement or similar debtor relief law of the United States or other applicable jurisdictions from time to time in effect, including any law for the appointment of the Federal Deposit Insurance Corporation or any other state or federal regulatory authority as receiver, conservator, trustee,

administrator or any similar capacity, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such capacity, charged with reorganization or liquidation of its business or a custodian appointed for it, or (iii) taken any action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a governmental authority (including any agency, instrumentality, regulatory body, central bank or other authority) so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts of the United States or from the enforcement of judgments or writs of attachment of its assets or permit such Lender (or such governmental authority or instrumentality) to reject, repudiate, disavow, or disaffirm any contracts or agreements made with such Person). Any determination by the Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to §2.13(g)) upon delivery of written notice of such determination to the Borrower and each Lender.

Delinquent Loan . A Borrowing Base Loan for which (a) any related loan payment or tenant lease payment has not been received on or before the date on which such payment is due pursuant to the related Borrowing Base Note or lease, as applicable, without regard to any grace period; provided, that a Delinquent Loan shall remain a Delinquent Loan until the related Collateral Borrower or related tenant cures such delinquency and makes two (2) successive monthly payments on a timely basis, including any related grace period, or (b) any payment due on the scheduled maturity date of such Borrowing Base Loan has not been received on or before the date on which such payment is due.

Derivatives Contract . Any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement. Not in limitation of the foregoing, the term “ Derivatives Contract ” includes any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement of similar type, including any such obligations or liabilities under any such master agreement.

Derivatives Termination Value . In respect of any one or more Derivatives Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Derivatives Contracts, (a) for any date on or after the date such Derivatives Contracts have been closed out and termination value(s) determined in accordance therewith,

such termination value(s), and (b) for any date prior to the date referenced in clause (a) above, the amount(s) determined as the mark-to-market value(s) for such Derivatives Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Derivatives Contracts (which may include the Agent or any Lender).

Designated Person . See §6.31.

Development Property . Any Real Estate owned or acquired by the Borrower or its Subsidiaries and on which such Person is pursuing construction of one or more buildings for use as a Medical Property and for which construction is proceeding to completion without undue delay from permit denial, construction delays or otherwise, all pursuant to the ordinary course of business of the Borrower or its Subsidiaries; provided that any Real Estate will no longer be considered to be a Development Property at the date on which all improvements related to the development of such Development Property have been substantially completed (excluding tenants improvements) and a shell certificate of occupancy or the equivalent has been issued.

Directions . See §14.14.

Distribution . Any (a) dividend or other distribution, direct or indirect, on account of any Equity Interest of REIT or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in Equity Interests of identical class to the holders of that class; (b) redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Equity Interest of REIT or any of its Subsidiaries now or hereafter outstanding; and (c) payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests of REIT or any of its Subsidiaries now or hereafter outstanding. Distributions from any Subsidiary of the Borrower and from any Unconsolidated Affiliates to, directly or indirectly, the Borrower or REIT shall be excluded from this definition.

Distribution Cap . See §8.7.

Documentation Agent . Fifth Third Bank, an Ohio banking corporation, and its successors and assigns.

Dollars or $ . Dollars in lawful currency of the United States of America.

Domestic Lending Office . Initially, the office of each Lender designated as such on Schedule 1.1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans.

Drawdown Date . The date on which any Loan is made or is to be made, and the date on which any Loan which is made prior to the Maturity Date, as applicable, is converted in accordance with §4.1.

EBITDA . With respect to REIT and its Subsidiaries for any period (without duplication): (a) Net Income (or Loss) on a Consolidated basis, in accordance with GAAP, exclusive of the following (but only to the extent included in determination of such Net Income

(Loss)): (i) depreciation and amortization expense; (ii) Interest Expense; (iii) income tax expense; (iv) Acquisition Closing Costs and extraordinary or non-recurring gains and losses (including, without limitation, gains and losses on the sale of assets or forgiveness of debt) and income and expense allocated to minority owners; and (v) other non-cash items to the extent not actually paid as a cash expense; plus (b) such Person’s pro rata share of EBITDA of its Unconsolidated Affiliates as provided below. With respect to Unconsolidated Affiliates and Subsidiaries of Borrower that are not Wholly Owned Subsidiaries, EBITDA attributable to such entities shall be excluded but EBITDA shall include a Person’s Equity Percentage of Net Income (or Loss) from such Unconsolidated Affiliates or such Subsidiary of Borrower that is not a Wholly Owned Subsidiary plus its Equity Percentage of (i) depreciation and amortization expense; (ii) Interest Expense; (iii) income tax expense; (iv) Acquisition Closing Costs and extraordinary or non-recurring gains and losses (including, without limitation, gains and losses on the sale of assets or forgiveness of debt) and income and expense allocated to minority owners; and (v) other non-cash items to the extent not actually paid as a cash expense.

EBITDAR Stabilized Property . A completed Medical Property on which all improvements related to the development of such Real Estate have been substantially completed and for which a final certificate of occupancy or equivalent has been issued, which is operating as a Medical Property, and with respect to which either (a) the Operators (or with respect to MOBs or IMFs, the Major Tenants) therein have a ratio of (i) Tenant EBITDAR to (ii) Rent due and payable by an Operator or such other Person under any Lease or Operators’ Agreement for such Real Estate, calculated for the previous twelve (12) calendar months, of not less than 1.00 to 1.00 as of the date of acceptance of such Medical Property as a Borrowing Base Property or (b) such Medical Property has ceased to be a Newly-Built Property.

Eligible Real Estate . Real Estate which at all times satisfies the following requirements:

(a)

which (except with respect to a Borrowing Base Loan) is wholly-owned in fee by a Wholly Owned Subsidiary of Borrower that is a Subsidiary Guarantor (or leased by a Wholly Owned Subsidiary of Borrower that is a Subsidiary Guarantor under a Ground Lease with at least thirty (30) years remaining on its term), and the Equity Interests in such Subsidiary Guarantor have been made subject to a first priority, perfected security interest in favor of the Agent pursuant to the Assignment of Interests;

(b)

which is located within the fifty (50) States of the United States or the District of Columbia;

(c)

which is improved by an income-producing Medical Property, as to which all improvements related to the development of the Medical Property (other than tenant improvements) have been substantially completed and for which a certificate of occupancy or equivalent has been issued;

(d)

as to which all of the representations set forth in §6 of this Agreement and in the other Loan Documents concerning such Borrowing Base Asset are true and correct;

(e)

which, except for MOBs and IMFs, and if approved by Agent and the Required Lenders, LPCs, shall have an initial lease term of at least ten (10) years remaining (if multi-tenant, then taking into account all Leases for such Real Estate, an initial weighted average lease term of at least ten (10) years remaining) at the time of inclusion of such Real Estate as a Borrowing Base Asset;

(f)

which is not subject to any Lien other than the Liens permitted by §8.2(i) and (ix) (except with respect to a Borrowing Base Loan, the Lien of the Borrowing Base Loan Documents evidencing the Borrowing Base Loan);

(g)

as to which (i) such proposed Borrowing Base Asset shall be in compliance in all material respects with all applicable Healthcare Laws, (ii) such Subsidiary Guarantor or the Operators have all Primary Licenses, Permits and other Governmental Approvals necessary to own and operate such proposed Borrowing Base Asset, and (iii) the Operators of such proposed Borrowing Base Asset shall be in material compliance with all requirements necessary for participation in any Medicare or Medicaid or other Third-Party Payor Programs to the extent they participate in such programs.

(h)

as to which the Agent has received and approved all Eligible Real Estate Qualification Documents required by the Agent, or will receive and approve them prior to inclusion of such Real Estate in the calculation of the Borrowing Base Availability; and

(i)

as to which, notwithstanding anything to the contrary contained herein, the Agent and the Required Lenders have approved for inclusion in the calculation of the Borrowing Base Availability.

Eligible Real Estate Qualification Documents . See Schedule 5.3 attached hereto.

Employee Benefit Plan . Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by REIT or any ERISA Affiliate, other than a Multiemployer Plan.

Environmental Engineer . Any firm of independent professional engineers or other scientists generally recognized as expert in the detection, analysis and remediation of Hazardous Substances and related environmental matters and acceptable to the Agent in its reasonable discretion.

Environmental Laws . As defined in the Indemnity Agreement.

Environmental Reports . See §6.19.

EPA . See §6.19(b).

Equity Interests . With respect to any Person, (a) any share of capital stock of (or other ownership or profit interests in) such Person, (b) any warrant, option or other right for the purchase or other acquisition from such Person of (i) any share of capital stock of (or other ownership or profit interests in) such Person, or (ii) any security convertible into or exchangeable for any share of capital stock of (or other ownership or profit interests in) such Person or warrant, right or option for the purchase or other acquisition from such Person of such shares (or such other interests) and whether or not such share, warrant, option, right or other interest is authorized or otherwise existing on any date of determination, and (c) any other ownership or profit interest in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting.

Equity Offering . The issuance and sale after the Closing Date by REIT or any of its Subsidiaries of any equity securities of such Person (other than equity securities issued to REIT or any one or more of its Subsidiaries in their respective Subsidiaries).

Equity Percentage . The aggregate ownership percentage of REIT or its Subsidiaries in each Unconsolidated Affiliate or Subsidiary that is not a Wholly-Owned Subsidiary, which shall be calculated as the greater of (a) such Person’s direct or indirect nominal capital ownership interest in the Unconsolidated Affiliate or such Subsidiary as set forth in the Unconsolidated Affiliate’s or such Subsidiary’s organizational documents, and (b) such Person’s direct or indirect economic ownership interest in the Unconsolidated Affiliate or such Subsidiary reflecting such Person’s current allocable share of income and expenses of the Unconsolidated Affiliate or such Subsidiary.

ERISA . The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time and all regulations and formal guidelines issued thereunder.

ERISA Affiliate . Any Person which is treated as a single employer with REIT or its Subsidiaries under Section 414 of the Code or Section 4001 of ERISA and any predecessor entity of any of them.

ERISA Reportable Event . A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived or any other event with respect to which the Borrower, a Guarantor or an ERISA Affiliate could have liability under Section 4062(e) or Section 4063 of ERISA.

Event of Default . See §12.1.

Excluded Hedge Obligation . With respect to any Guarantor, any Hedge Obligation, if, and to the extent that, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Hedge Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Guarantor or the grant of such security interest

becomes effective with respect to such Hedge Obligation. If a Hedge Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Hedge Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

Excluded Subsidiary . Any Subsidiary of the Borrower which is prohibited from guaranteeing the Indebtedness of any other Person pursuant to (i) any document, instrument or agreement evidencing Secured Debt permitted by this Agreement or (ii) a provision of such Subsidiary’s organizational documents, which provision is included as a condition to the extension of such Secured Debt.

Excluded Taxes . Any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or its Commitment pursuant to an Applicable Law in effect on the date on which (i) such Lender acquires such interest in the Loan or its Commitment (other than pursuant to an assignment request by the Borrower under §4.14 as a result of costs sought to be reimbursed pursuant to §4.3 or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to §4.3, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with §4.3(g) and (d) any U.S. federal withholding Taxes imposed under FATCA.

Extension Request . See §2.12(a)(i).

FATCA . Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

Federal Funds Effective Rate . For any day, the rate per annum (rounded upward to the nearest one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of Cleveland on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate.” Notwithstanding the foregoing, if the Federal Funds Effective Rate shall be less than zero, such rate shall be deemed zero for the purposes of this Agreement.

Fee Owner . The applicable owner of the fee interest in a Borrowing Base Asset that is subject to a Ground Lease.

Foreign Lender . If the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.

Fronting Exposure . At any time there is a Defaulting Lender, (a) with respect to the Issuing Lender, such Defaulting Lender’s Commitment Percentage of the outstanding Letter of Credit Liabilities other than Letter of Credit Liabilities as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or cash collateral or other credit support acceptable to the Issuing Lender shall have been provided in accordance with the terms hereof and (b) with respect to the Swing Loan Lender, such Defaulting Lender’s Commitment Percentage of Swing Loans other than Swing Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders, repaid by the Borrower or for which cash collateral or other credit support acceptable to the Swing Loan Lender shall have been provided in accordance with the terms hereof.

Funds from Operations . With respect to a Person and for a given period, (a) Net Income (or Loss) of such Person computed in accordance with GAAP, calculated without regard to (i) gains (or losses) from debt restructuring and sales of property during such period, and (ii) charges for impairment of real estate or intangible lease assets, plus (b) depreciation with respect to such Person’s real estate assets and amortization (other than amortization of deferred financing costs) of such Person for such period, plus (c) other non-cash items (other than amortization of deferred financing costs), plus (d) costs in connection with acquisitions, all other adjustment for unconsolidated partnerships and joint ventures, plus (e) extraordinary and non-recurring gains and losses. Adjustments for Unconsolidated Affiliates will be calculated to reflect funds from operations on the same basis.

GAAP . Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Person adopting the same principles.

General Partner . MedEquities OP GP, LLC, a Delaware limited liability company.

Governmental Authority . Any national, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau, commission, board, department or other entity (including, without limitation, the Federal Deposit Insurance Corporation, the Comptroller of the Currency or the Federal Reserve Board, any central bank or any comparable authority) or any arbitrator with authority to bind a party at law, and including any supra-national bodies such as the European Union or the European Central Bank.

Gross Asset Value . On a Consolidated basis for REIT and its Subsidiaries, the sum of (without duplication with respect to any Real Estate):

(a) the undepreciated book value determined in accordance with GAAP of:

(i) the Borrowing Base Properties included in the calculation of the Borrowing Base Availability; plus

(ii) Stabilized Properties of Borrower and its Subsidiaries not included in the calculation of the Borrowing Base Availability; plus

(iii) all Development Properties owned by Borrower and its Subsidiaries; plus

(iv) all Land Assets of Borrower and its Subsidiaries; plus

(b) the lesser of (i) the purchase price and (ii) outstanding principal balance of all Mortgage Note Receivables of Borrower and its Subsidiaries, plus

(c) the aggregate amount of all Unrestricted Cash and Cash Equivalents of REIT and its Subsidiaries as of the date of determination, plus

(d) the undepreciated book value determined in accordance with GAAP of other assets of REIT and its Subsidiaries approved by the Agent to be included in the calculation of Gross Asset Value.

Gross Asset Value will be adjusted, as appropriate, for acquisitions, dispositions and other changes to the portfolio during the calendar quarter most recently ended prior to a date of determination. Additionally, without limiting or affecting any other provision hereof, Gross Asset Value shall not include any income or value associated with Real Estate which is not operated or intended to be operated principally as a Medical Property. All income, expense and value associated with assets included in Gross Asset Value disposed of during the calendar quarter period most recently ended prior to a date of determination will be eliminated from calculations. Gross Asset Value will be adjusted to include an amount equal to REIT’s or any of its Subsidiaries’ pro rata share (based upon the greater of such Person’s Equity Percentage in such Unconsolidated Affiliate or such Subsidiary that is not a Wholly Owned Subsidiary or such Person’s pro rata liability for the Indebtedness of such Unconsolidated Affiliate or such Subsidiary that is not a Wholly Owned Subsidiary) of the Gross Asset Value attributable to any of the items listed above in this definition owned by such Unconsolidated Affiliate or such Subsidiary that is not a Wholly Owned Subsidiary.

Ground Lease . Any ground lease reasonably approved by the Agent pursuant to which a Subsidiary Guarantor leases a Borrowing Base Asset.

Ground Lease Default . See §6.33(d).

Guaranteed Pension Plan . Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by REIT or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.

Guarantor . Collectively, REIT, General Partner, TRS and each Subsidiary Guarantor, and individually any one of them.

Guaranty . The First Amended and Restated Unconditional Guaranty of Payment and Performance dated of even date herewith made by REIT, General Partner, TRS and each Subsidiary Guarantor in favor of the Agent and the Lenders, as the same may be modified, amended, restated or ratified, such Guaranty to be in form and substance satisfactory to the Agent.

Hazardous Substances . As defined in the Indemnity Agreement.

Healthcare Investigations . Any inquiries, investigations, probes, audits, reviews or proceedings concerning the business affairs, practices, licensing or reimbursement entitlements of the Borrower, any Subsidiary Guarantor or any Operator (including, without limitation, inquiries involving the Comprehensive Error Rate Testing and any inquiries, investigations, probes, audit, reviews or proceedings initiated by any Fiscal Intermediary/Medicare Administrator Contractor, any Medicaid Integrity Contractor, any Recovery Audit Contractor, any Program Safeguard Contractor, any Zone Program Integrity Contractor, any Medical Fraud Control Unit, any Attorney General, any Department of Insurance, the Office of Inspector General, the Department of Justice, the CMS or similar governmental agencies or contractors for such agencies).

Healthcare Laws . All applicable state and federal statutes, codes, ordinances, orders, rules, regulations, and guidance relating to patient healthcare and/or patient healthcare information, including, without limitation, HIPAA, the Health Information Technology for Economic Clinical Health Act provisions of the American Recovery and Investment Act of 2009 and the respective rules and regulations promulgated thereunder, and all other applicable state and federal laws regarding the privacy and security of protected health information and other confidential patient information; the establishment, construction, ownership, operation, licensure, use or occupancy of the Borrowing Base Assets or any part thereof as a healthcare facility, as the case may be, and all conditions of participation pursuant to Medicare and/or Medicaid certification; fraud and abuse, including without limitation, Public Law No. 111-148 (2010) (Patient Protection and Affordable Care Act, as amended, (commonly referred to as the “PPACA”), Section 1128B(b) of the Social Security Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or State Health Care Programs), commonly referred to as the “Federal Anti-Kickback Statute,” and Section 1877 of the Social Security Act, as amended, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as the “Stark Law”, Section 1128A of the Social Security Act, as amended, 42 U.S.C. Section 1320q-7(a) (Civil Monetary Penalties), commonly referred to as the “Civil Monetary Penalties Law”, and 31 U.S.C. Section 3729-33, commonly referred to as the “False Claims Act”.

Hedge Obligations . All obligations of Borrower to any Lender Hedge Provider to make any payments under any agreement with respect to an interest rate swap, collar, cap or floor or a forward rate agreement or other agreement regarding the hedging of interest rate risk exposure relating to the Obligations, and any confirming letter executed pursuant to such hedging agreement, and which shall include, without limitation, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act, all as amended, restated or otherwise modified. Under no circumstances shall any of the Hedge Obligations secured or guaranteed by any Loan

Document as to a Guarantor include any obligation that constitutes an Excluded Hedge Obligation of such Guarantor. Notwithstanding the foregoing, Hedge Obligations shall not be secured by the Collateral or be a liability of the Borrower or Guarantors pursuant to the Loan Documents unless Borrower’s rights under the agreement described in this definition have been pledged to Agent for the benefit of the Lenders pursuant to §7.23.

HIPAA . The Health Insurance Portability and Accountability Act of 1996, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder. Any reference to HIPAA shall also include applicability of the Health Information Technology for Economic and Clinical Health (HITECH) Act, Title XIII of Division A and Title IV of Division B of the American Recovery and Reinvestment Act of 2009 and any and all rules or regulations promulgated thereunder.

HIPAA Compliance Date . See §7.15(b).

HIPAA Compliance Plan . See §7.15(b).

HIPAA Compliant . See §7.15(b).

IMF . Integrated medical facility.

Implied Debt Service Coverage Amount . At any time determined by Agent, an amount equal to the annual principal and interest payment sufficient to amortize in full over a twenty-five (25) year period a loan amount equal to the aggregate principal balance of all Loans and Letter of Credit Liabilities calculated using a per annum interest rate equal to the greatest of (i) the then-current annual yield on ten (10) year obligations issued by the United States Treasury most recently prior to the date of determination plus three hundred (300) basis points (3.0%), and (ii) six and one-half percent (6.5%). The determination of the Implied Debt Service Coverage Amount and the components thereof by the Agent shall be based on Borrower’s Compliance Certificate as required by §7.4(c) as approved by Agent (or if such certificate has not been submitted pursuant to such section or otherwise, the same shall be determined by Agent in good faith, which determination shall be conclusive and binding absent demonstrable error until such time as Borrower delivers the Compliance Certificate as required by §7.4(c)).

Implied Debt Service Coverage Ratio . The ratio of Adjusted Net Operating Income from the Borrowing Base Properties included in the calculation of Borrowing Base Availability, divided by the Implied Debt Service Coverage Amount.

Increase Notice . See §2.11(a).

Indebtedness . With respect to a Person, at the time of computation thereof, all of the following (without duplication): (a) all obligations of such Person in respect of money borrowed (other than trade debt incurred in the ordinary course of business which is not more than one hundred eighty (180) days past due); (b) all obligations of such Person, whether or not for money borrowed (i) represented by notes payable, or drafts accepted, in each case representing extensions of credit, (ii) evidenced by bonds, debentures, notes or similar instruments, or (iii) constituting purchase money indebtedness, conditional sales contracts, title

retention debt instruments or other similar instruments, upon which interest charges are customarily paid or that are issued or assumed as full or partial payment for property or services rendered; (c) obligations of such Person as a lessee or obligor under a Capitalized Lease; (d) all reimbursement obligations of such Person under any letters of credit or acceptances (whether or not the same have been presented for payment); (e) all Off-Balance Sheet Obligations of such Person; (f) all obligations of such Person in respect of any purchase obligation, repurchase obligation, takeout commitment or forward equity commitment, in each case evidenced by a binding agreement (excluding any such obligation to the extent the obligation can be satisfied solely by the issuance of Equity Interests); (g) net obligations under any Derivatives Contract not entered into as a hedge against existing Indebtedness, in an amount equal to the Derivatives Termination Value thereof; (h) all Indebtedness of other Persons which such Person has guaranteed or is otherwise recourse to such Person (except for guaranties of customary exceptions for fraud, misapplication of funds, environmental indemnities, violations of “special purpose entity” covenants and other similar exceptions to recourse liability until a claim is made with respect thereto, and then shall be included only to the extent of the amount of such claim), including liability of a general partner in respect of liabilities of a partnership in which it is a general partner which would constitute “Indebtedness” hereunder, any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to maintain working capital or equity capital of a Person or otherwise to maintain net worth, solvency or other financial condition of a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss, including, without limitation, through an agreement to purchase property, securities, goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise; (i) all Indebtedness of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness or other payment obligation; and (j) such Person’s pro rata share of the Indebtedness (based upon its Equity Percentage) of any Unconsolidated Affiliate of such Person. Indebtedness of any Person shall include Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venture only to the extent of such Person’s pro rata share of the ownership of such partnership or joint venture (except if such Indebtedness, or portion thereof, is recourse to such Person, in which case the greater of such Person’s pro rata portion of such Indebtedness or the amount of the recourse portion of the Indebtedness, shall be included as Indebtedness of such Person). Indebtedness shall be adjusted to remove any impact of intangibles pursuant to ASC 805, as issued by the Financial Accounting Standards Board.

Indemnified Taxes . (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower or any Guarantor under any Loan Document and (b) to the extent not otherwise described in the immediately preceding clause (a), Other Taxes.

Indemnity Agreement . The First Amended and Restated Indemnity Agreement Regarding Hazardous Materials made by the Borrower and Guarantors, in favor of the Agent and the Lenders, as the same may be modified, amended or ratified, pursuant to which each of the Borrower and the Guarantors agrees to indemnify the Agent and the Lenders with respect to Hazardous Substances and Environmental Laws.

Insolvency Event . With respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in respect of such Person or any substantial part of its property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

Insolvency Laws . The Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

Insurance Proceeds . All insurance proceeds, damages and claims and the right thereto under any insurance policies relating to any portion of any Collateral, net of all reasonable and customary amounts actually expended to collect the same, including, without limitation, reasonable and customary amounts expended in negotiating, litigating, if appropriate, or investigating the amount of such insurance, proceeds, damages and claims.

Insurer . Any non-individual Person, other than a Governmental Authority, located in the United States which, in the ordinary course of its business or activities, agrees to pay for healthcare goods and services received by individuals, including, without limitation, a commercial insurance company, a nonprofit insurance company (such as a Blue Cross/Blue Shield entity), an employer or union who self-insures for employee or member health insurance, an HMO and a PPO. “ Insurer ” shall include insurance companies issuing health, personal injury, workmen’s compensation or other types of insurance.

Interest Expense . With respect to any period, with respect to REIT and its Subsidiaries, without duplication, total interest expense accruing or paid on Indebtedness of REIT and its Subsidiaries, on a consolidated basis, during such period (including capitalized interest, interest expense attributable to Capitalized Leases and amounts attributable to interest incurred under Derivatives Contracts), determined in accordance with GAAP, and including (without duplication) the Equity Percentage of Interest Expense for the Unconsolidated Affiliates of REIT and its Subsidiaries. Interest Expense shall not include non-cash interest expense or capitalized interest funded under a construction loan by an interest reserve.

Interest Hedge . See §7.23.

Interest Payment Date . As to each Loan, the first day of each calendar month during the term of such Loan.

Interest Period . With respect to each LIBOR Rate Loan (a) initially, the period commencing on the Drawdown Date of such LIBOR Rate Loan and ending one (1) week (if available from all Lenders), or one (1), two (2), three (3) or, to the extent available from all Lenders, six (6) months thereafter, and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one (1) of the periods set forth above, as selected by the Borrower in a Loan Request or Conversion/Continuation Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, such Interest Period shall end on the next succeeding LIBOR Business Day, unless such next succeeding LIBOR Business Day occurs in the next calendar month, in which case such Interest Period shall end on the next preceding LIBOR Business Day, as determined conclusively by the Agent in accordance with the then current bank practice in London;

(ii) if the Borrower shall fail to give notice as provided in §4.1, the Borrower shall be deemed to have requested a continuation of the affected LIBOR Rate Loan as a Base Rate Loan on the last day of the then current Interest Period with respect thereto;

(iii) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the applicable calendar month; and

(iv) no Interest Period relating to any LIBOR Rate Loan shall extend beyond the Maturity Date.

Investments . With respect to any Person, all shares of capital stock, evidences of Indebtedness and other securities issued by any other Person and owned by such Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments and options to make such purchases, all interests in real property, and all other investments; provided , however , that the term “ Investment ” shall not include (x) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (y) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms. In determining the aggregate amount of Investments outstanding at any particular time: (a) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (b) there shall be deducted in respect of each Investment any amount received as a return of capital; (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (a) shall be deducted when paid; and (d) there shall not be deducted in respect of any Investment any decrease in the value thereof.

IPO Conditions . The IPO Conditions time shall be deemed to have occurred at such time as all of the following shall have been satisfied (such time, the “ IPO Conditions Satisfaction Date ”):

(a) Agent shall have received from Borrower evidence reasonably satisfactory to Agent of (i) the occurrence of the IPO Event, which shall have occurred in accordance with the terms of §7.22; (ii) the IPO Event shall have resulted in REIT or Borrower receiving not less than $250,000,000.00 in gross equity proceeds to the REIT and/or Borrower; and (iii) REIT and its Subsidiaries shall have paid, redeemed or otherwise cancelled any Preferred Securities which by its terms must be paid, redeemed or otherwise cancelled in connection with the occurrence of the IPO Event. There shall be no amendment or waiver of the terms of (a)(ii) or (a)(iii) of this definition without the prior written approval of the Super-Majority Lenders;

(b) No Default or Event of Default shall have occurred and be continuing or shall arise after giving effect to the IPO Event;

(c) Agent shall have received from Borrower a Compliance Certificate and Borrowing Base Certificate that shall give pro forma effect to the transactions described in this definition and shall show pro forma compliance with the covenants in §8.1, §9.1, §9.4, §9.9 and §9.10 which will be in effect after the occurrence of the IPO Conditions; and

(d) All of the conditions described in this definition shall have been satisfied on or before December 31, 2015; provided, however, that such date may be extended by Agent in its sole discretion to a date not later than January 31, 2016, if not less than ten (10) Business Days prior to December 31, 2015, Borrower shall have provided a written request to Agent to extend the date for satisfaction of the conditions described herein together with the reason(s) for such extension. Such date shall not be extended beyond January 31, 2016 without the prior written approval of the Super-Majority Lenders. In the event that all of the conditions described in this definition shall not have been satisfied on or before December 31, 2015, as the date may be extended as provided above, then the Borrower shall have no further right to satisfy the conditions to the occurrence of the IPO Conditions and the IPO Conditions Satisfaction Date shall not occur, unless otherwise permitted by the Agent and the Required Lenders (and the Super-Majority Lenders as provided in this definition).

IPO Event . The initial public offering of stock in REIT, the registration of the shares of Borrower on the New York Stock Exchange or another national exchange approved by Agent, and the registration of REIT as a public company with the SEC.

IRH . Inpatient rehabilitation hospital.

Issuing Lender . KeyBank, in its capacity as the Lender issuing the Letters of Credit and any successor thereto.

Joinder Agreement . The Joinder Agreement with respect to the Guaranty, the Contribution Agreement and the Indemnity Agreement to be executed and delivered pursuant to §5.5 by any Additional Guarantor, such Joinder Agreement to be substantially in the form of Exhibit A hereto.

KBCM. KeyBanc Capital Markets, Inc. or any successor.

KeyBank . As defined in the preamble hereto.

Lakeway Asset . The real property, improvements and other assets located at 100 Medical Parkway, Lakeway, Texas, and which real property is generally known as Lakeway Regional Medical Center.

Lakeway Loan . The first priority mortgage loan made by MRT of Lakeway, TX ACH LLC, a Wholly-Owned Subsidiary of Borrower, to MRT Lakeway RealCo in the original principal balance of $72,960,000.00 relating to the Lakeway Asset.

Land Assets Land to be developed as a Medical Property with respect to which the commencement of grading, construction of improvements (other than improvements that are not material and are temporary in nature) or infrastructure has not yet commenced and for which no such work is reasonably scheduled to commence within the following twelve (12) months.

Leases . Leases, licenses and agreements, whether written or oral, relating to the use or occupation of space in any Building or of any Real Estate.

Lease Summaries . Summaries or abstracts of the material terms of the Leases.

Lender Hedge Provider . With respect to any Hedge Obligations, any counterparty thereto that, at the time the applicable hedge agreement was entered into, was a Lender or an Affiliate of a Lender.

Lenders . KeyBank, the other lending institutions which are party hereto and any other Person which becomes an assignee of any rights of a Lender pursuant to this Agreement (but not including any participant as described in §18). The Issuing Lender shall be a Lender, as applicable. The Swing Loan Lender shall be a Lender.

Letter of Credit . Any standby letter of credit issued at the request of the Borrower and for the account of the Borrower in accordance with §2.10.

Letter of Credit Commitment . An amount equal to Ten Million and No/100 Dollars ($10,000,000.00), as the same may be changed from time to time in accordance with the terms of this Agreement.

Letter of Credit Liabilities . At any time and in respect of any Letter of Credit, the sum of (a) the maximum undrawn face amount of such Letter of Credit plus (b) the aggregate unpaid principal amount of all drawings made under such Letter of Credit which have not been repaid (including repayment by a Revolving Credit Loan). For purposes of this Agreement, a Lender (other than the Lender acting as the Issuing Lender) shall be deemed to hold a Letter of Credit Liability in an amount equal to its participation interest in the related Letter of Credit under §2.10, and the Lender acting as the Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount equal to its retained interest in the related Letter of Credit after giving effect to the acquisition by the Lenders other than the Lender acting as the Issuing Lender of their participation interests under §2.10.

Letter of Credit Request . See §2.10(a).

LIBOR . For any LIBOR Rate Loan for any Interest Period, the average rate as shown in Reuters Screen LIBOR 01 Page (or any successor service, or if such Person no longer reports such rate as determined by the Agent, by another commercially available source providing such quotations approved by the Agent) at which deposits in U.S. dollars are offered by first class banks in the London Interbank Market at approximately 11:00 a.m. (London time) on the day that is two (2) LIBOR Business Days prior to the first day of such Interest Period with a maturity approximately equal to such Interest Period and in an amount approximately equal to the amount to which such Interest Period relates, adjusted for reserves and taxes if required by future regulations. If such service or such other Person approved by the Agent described above no longer reports such rate or the Agent determines in good faith that the rate so reported no longer accurately reflects the rate available to the Agent in the London Interbank Market, Loans shall accrue interest at the Base Rate plus the Applicable Margin for such Loan. For any period during which a Reserve Percentage shall apply, LIBOR with respect to LIBOR Rate Loans shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. Notwithstanding the foregoing, if the rate shown on Reuters Screen LIBOR01 Page (or any successor service designated pursuant to this definition) shall be less than zero, such rate shall be deemed zero for the purposes of this Agreement; provided, however, that, to the extent one or more Interest Hedges (entered into accordance with §7.23) are in full force and effect, then, for the duration of such Interest Hedges, the provisions of this sentence shall not apply to LIBOR Rate Loans as is equal to the aggregate notional amount of such Interest Hedges.

LIBOR Business Day . Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England.

LIBOR Lending Office . Initially, the office of each Lender designated as such on Schedule 1.1 hereto; thereafter, such other office of such Lender, if any, that shall be making or maintaining LIBOR Rate Loans.

LIBOR Rate Loans . Those Loans bearing interest calculated by reference to LIBOR.

Lien . See §8.2.

Liquidity . As of any date of determination, the sum of (a) Borrower’s Unrestricted Cash and Cash Equivalents plus (b) the amount of the unutilized Total Commitment which may be borrowed by Borrower.

Loan Documents . This Agreement, the Notes, the Guaranty, each Letter of Credit Request, the Security Documents, the Subordination of Management Agreement and all other documents, instruments or agreements now or hereafter executed or delivered by or on behalf of the Borrower or any Guarantor in connection with the Loans.

Loan Request . See §2.7.

Loan and Loans . An individual loan or the aggregate loans (including a Revolving Credit Loan and a Swing Loan (or Loans)), as the case may be, in the maximum

principal amount of the Total Commitment. All Loans shall be made in Dollars. Amounts drawn under a Letter of Credit shall also be considered Revolving Credit Loans as provided in §2.10.

LPC . Large physician clinic.

LTAC . Long term acute care hospital.

Major Tenant . A tenant of the Borrower or any Subsidiary Guarantor which leases space in a Borrowing Base Property pursuant to a Lease which entitles it to occupy thirty-five percent (35%) or more of the Net Rentable Area of such Borrowing Base Property. Agent may in its discretion aggregate any and all Leases to Affiliates to determine whether such tenant should be treated as a Major Tenant.

Management Agreements . Agreements to which any Person that owns a Borrowing Base Property is a party, whether written or oral, providing for the management of the Borrowing Base Property or any of them.

Material Adverse Effect . A material adverse effect on (a) the business, properties, assets, condition (financial or otherwise), prospects or results of operations of REIT and its Subsidiaries, taken as a whole; (b) the ability of the Borrower or any Guarantor to perform any of its material obligations under the Loan Documents; or (c) the validity or enforceability of any of the Loan Documents or the creation, perfection and priority of any Liens of the Agent in the Collateral; or (d) the rights or remedies of the Agent or the Lenders under any of the Loan Documents.

Material Subsidiary . Any Wholly Owned Subsidiary of Borrower. Following the IPO Conditions Satisfaction Date a Material Subsidiary shall be any Wholly Owned Subsidiary of Borrower which has assets that constitute five percent (5.0%) or more of Gross Asset Value and is not an Excluded Subsidiary.

Maturity Date . November 7, 2016, as such date may be extended as provided in §2.12, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof.

Medical Property . Single or multi-tenant facilities consisting of MOBs, SNFs, STACHs, ACHs, ASCs, LPCs, IMFs, STDCs, LTACs and IRHs.

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

Medicare . The health insurance program established by Title XVIII of the Social Security Act, 42 U.S.C. Sections 1395 et seq., and any statutes succeeding thereto.

MOB . Medical office building.

Moody’s . Moody’s Investor Service, Inc.

Mortgage Note Receivables . A mortgage loan secured by a first mortgage lien on a Medical Property, and which Mortgage Note Receivable includes, without limitation, the indebtedness secured by a related first priority security instrument.

Mountain’s Edge . The acute care hospital located in Las Vegas, Nevada owned by MRT of Las Vegas NV-ACH, LLC and leased to Vegas Hospital Care, LLC.

MRT Lakeway RealCo . Lakeway Realty, L.L.C., a Delaware limited liability company, which is a Subsidiary of Borrower; provided, however, that Agent acknowledges that Borrower may elect to cause Lakeway Realty, L.L.C. to change its name and if such name change occurs, Borrower agrees to provide Agent with ten (10) days prior written notice thereof.

Multiemployer Plan . Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by REIT or any ERISA Affiliate.

Net Income (or Loss) . With respect to any Person (or any asset of any Person) with respect to any period, the net income (or loss) of such Person (or attributable to such asset), determined in accordance with GAAP.

Net Offering Proceeds . The gross cash proceeds received by REIT or any of its Subsidiaries as a result of an Equity Offering less the customary and reasonable costs, expenses and discounts paid by REIT or such Subsidiary in connection therewith.

Net Operating Income . For any Real Estate and for a given period, an amount equal to the sum of (a) the rents, common area reimbursements and other income for such Real Estate for such period received in the ordinary course of business from tenants in occupancy paying rent (excluding any reserve amounts received by a Person from tenants in accordance with the terms of their Leases, pre-paid rents and revenues, security deposits except to the extent applied in satisfaction of tenants’ obligations for rent, and any non-recurring fees, charges or amounts) minus (b) all expenses paid or accrued and related to the ownership, operation or maintenance of such Real Estate for such period, including, but not limited to, taxes, assessments and the like, insurance, utilities, payroll costs, maintenance, repair and landscaping expenses, marketing expenses, and general and administrative expenses (including an appropriate allocation for legal, accounting, advertising, marketing and other expenses incurred in connection with such Real Estate, but specifically excluding general overhead expenses of REIT and its Subsidiaries, any property management fees, in each case, in connection with such Real Estate), minus (c) the greater of (i) actual property management expenses of such Real Estate, and (ii) an amount equal to three percent (3%) of the gross revenues from such Real Estate, minus (d) all rents, common area reimbursements and other income for such Real Estate received from tenants in default of payment or other material obligations under their lease, or with respect to leases as to which the tenant or any guarantor thereunder is subject to any Insolvency Event; provided , however , that straight line leveling adjustments required under GAAP and amortization of deferred market rent into income pursuant to ASC 805 shall be excluded from the calculation of Net Operating Income. For the purposes of determining the Implied Debt Service Coverage Ratio and Debt Yield, Net Operating Income from the Borrowing Base Properties shall be calculated on a rolling quarterly annualized basis (that is, if such Real Estate has been owned only for one (1) full quarter, by multiplying the result for the current quarter

times four (4), if such Real Estate has been owned only for two (2) full quarters, by multiplying the results for the prior two (2) quarters by two (2); or if such Real Estate has been owned for three (3) full quarters, by multiplying the results for the previous three (3) quarters by 4/3), and the first quarter in the calculation shall be the first full quarter of ownership. In the instance that the Borrower or a Subsidiary Guarantor has not owned a Borrowing Base Property for at least one (1) quarter, the historic Net Operating Income shall be used. To the extent that the historic Net Operating Income is not available for any reason, Borrower may prepare a pro forma of Net Operating Income to be used for one (1) quarter until actual results for such quarter are available, such proforma to be approved by Agent. With respect to Mountain’s Edge, Net Operating Income shall be based on the first year’s pro forma Net Operating Income as approved by Agent until October 1, 2015, and thereafter actual results shall be annualized to determine Net Operating Income as provided above, until there are four (4) quarters of results after October 1, 2016.

Net Rentable Area . With respect to any Real Estate, the floor area of any buildings, structures or other improvements available for leasing to tenants determined in accordance with the most recent Rent Roll received by the Agent for such Real Estate, the manner of such determination to be reasonably consistent for all Real Estate of the same type unless otherwise reasonably approved by the Agent.

Newly-Built Property . A completed Medical Property on which all improvements related to the development of such Real Estate have been substantially completed and for which a final certificate of occupancy or equivalent has been issued, and which is operating as a Medical Property, but with respect to which the Operators (or with respect to MOBs or IMFs, the Major Tenants) therein do not have a ratio of (a) Tenant EBITDAR to (b) Rent due and payable by an Operator or such other Person under any Lease or Operators’ Agreement for such Real Estate, calculated for the previous twelve (12) calendar months, of not less than 1.00 to 1.00. A Medical Property may only be a Newly-Built Property one time and may not be a Newly-Built Property for more than eighteen (18) months after issuance of a final certificate of occupancy or equivalent, at which time such Medical Property shall be considered to be an EBITDAR Stabilized Property.

Non-Consenting Lender . See §18.8.

Non-Defaulting Lender . At any time, any Lender that is not a Defaulting Lender at such time.

Non-Recourse Exclusions . With respect to any Non-Recourse Indebtedness of any Person, any usual and customary exclusions from the non-recourse limitations governing such Indebtedness, including, without limitation, exclusions for claims that (a) are based on fraud, intentional or material misrepresentation, misapplication of funds, gross negligence or willful misconduct, (b) result from intentional mismanagement of or waste at the Real Property securing such Non-Recourse Indebtedness, (c) arise from the presence of Hazardous Substances on the Real Property securing such Non-Recourse Indebtedness, (d) are the result of any unpaid real estate taxes and assessments (whether contained in a loan agreement, promissory note, indemnity agreement or other document) or (e) result from the borrowing Subsidiary and/or its assets becoming the subject of a voluntary or involuntary bankruptcy, insolvency or similar proceeding.

Non-Recourse Indebtedness . With respect to a Person, (a) Indebtedness for borrowed money (other than construction completion guarantees with respect to Development Properties) in respect of which recourse for payment (except for Non-Recourse Exclusions until a claim is made with respect thereto, and then such Indebtedness shall not constitute Non-Recourse Indebtedness only to the extent of the amount of such claim) is contractually limited to specific assets of such Person encumbered by a Lien securing such Indebtedness or (b) if such Person is a Single Asset Entity, any Indebtedness of such Person. A loan secured by multiple properties owned by Single Asset Entities shall be considered Non-Recourse Indebtedness of such Single Asset Entities even if such Indebtedness is cross-defaulted and cross-collateralized with the loans to such other Single Asset Entities.

Notes . Collectively, the Revolving Credit Notes and the Swing Loan Note.

Notice . See §19.

Obligations . All indebtedness, obligations and liabilities of the Borrower or any Guarantor to any of the Lenders or the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans, the Notes or the Letters of Credit, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise.

OFAC . Office of Foreign Asset Control of the Department of the Treasury of the United States of America.

Off-Balance Sheet Obligations . Liabilities and obligations of REIT or any of its Subsidiaries or any other Person in respect of “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under The Securities Act of 1933, as amended) which REIT would be required to disclose in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of REIT’s report on Form 10-Q or Form 10-K (or their equivalents) which REIT is required to file with the SEC or would be required to file if it were subject to the jurisdiction of the SEC (or any Governmental Authority substituted therefor).

Operator(s) . The Property Manager, any other manager of a Borrowing Base Asset, a Major Tenant, any property sublessee of thirty-five percent (35%) or more of the Net Rentable Area of such Borrowing Base Asset and/or the operator under any Operators’ Agreement, in each case, approved by the Agent as required by this Agreement unless such approval is not required hereunder, and any successor to such Operator approved by the Agent as required by this Agreement unless such approval is not required hereunder. If, with respect to any Borrowing Base Asset, there exists a property manager, a Major Tenant and a property sublessee of thirty-five percent (35%) or more of the Net Rentable Area of such Borrowing Base Asset, or any combination thereof, then “ Operator ” shall refer to all such entities, collectively and individually as applicable and as the context may require.

Operators’ Agreements . Collectively, each property management agreement, a Lease with a Major Tenant and/or another similar agreement regarding the management and operation of the Borrowing Base Asset between the Borrower or a Subsidiary Guarantor, on the one hand, and an Operator, on the other hand.

Original Credit Agreement . As defined in the recitals.

Other Connection Taxes . With respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising solely from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

Other Taxes . All present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to §4.14 as a result of costs sought to be reimbursed pursuant to §4.3).

Outstanding . With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. With respect to Letters of Credit, the aggregate undrawn face amount of issued Letters of Credit.

Participant Register . See §18.4.

Patriot Act . The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as the same may be amended from time to time, and corresponding provisions of future laws.

PBGC . The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities.

Permits . With respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other contractual obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

Permitted Liens . Liens, security interests and other encumbrances permitted by §8.2.

Person . Any individual, corporation, limited liability company, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof.

Plan Assets . Assets of any employee benefit plan subject to Part 4, Subtitle B, Title I of ERISA.

Potential Collateral . Any (a) Equity Interests in a Wholly-Owned Subsidiary of Borrower which is not at the time included in the Collateral and whose assets consist of (i) Eligible Real Estate, or (ii) Real Estate which is capable of becoming Eligible Real Estate through the approval of the Required Lenders, and the completion and delivery of Eligible Real Estate Qualification Documents as required by the Agent, or (b) Borrowing Base Loan.

Preferred Distributions . With respect to any period and without duplication, all Distributions paid, declared but not yet paid or otherwise due and payable during such period on Preferred Securities issued by REIT or any of its Subsidiaries. Preferred Distributions shall not include dividends or distributions: (a) paid or payable solely in Equity Interests of identical class payable to holders of such class of Equity Interests; (b) paid or payable to the Borrower or any of its Subsidiaries; or (c) constituting or resulting in the redemption of Preferred Securities, other than scheduled redemptions not constituting balloon, bullet or similar redemptions in full.

Preferred Securities . With respect to any Person, Equity Interests in such Person which are entitled to preference or priority over any other Equity Interest in such Person in respect of the payment of dividends or distribution of assets upon liquidation, or both.

Prepayment . Any voluntary or involuntary payment or prepayment of principal of a Borrowing Base Loan or any other event (including, without limitation, a casualty to or condemnation of a property subject to a Borrowing Base Loan) resulting in a prepayment of a Borrowing Base Loan, or any other recovery or monetary return by or for Borrower or a Subsidiary Guarantor, whether directly or otherwise, with respect to a Borrowing Base Loan.

Primary Licenses . With respect to any Borrowing Base Asset or Person operating all or a portion of such Borrowing Base Asset, as the case may be, the CON, permit or license to operate as a medical office, acute surgery center, long-term care center, hospital or other health care facility, as the case may be, and each Medicaid/Medicare/TRICARE provider agreement, if applicable.

Property Manager . A nationally or regionally recognized manager of Medical Properties approved by Agent, such approval to not be unreasonably withheld.

Real Estate . All real property, including, without limitation, the Borrowing Base Properties, at the time of determination then owned or leased (as lessee or sublessee) in whole or in part or operated by REIT or any of its Subsidiaries, or an Unconsolidated Affiliate of the Borrower and which is located in the United States of America or the District of Columbia.

Recipient . The Agent and any Lender.

Record . The grid attached to any Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Agent with respect to any Loan referred to in such Note.

Recourse Indebtedness . As of any date of determination, any Indebtedness (whether secured or unsecured) which is recourse to REIT or any of its Subsidiaries. Recourse Indebtedness shall not include Non-Recourse Indebtedness, but shall include any Non-Recourse Exclusions at such time a written claim is made with respect thereto, but only to the extent of such claim.

REIT . MedEquities Realty Trust, Inc., a Maryland corporation.

REIT Status . With respect to a Person, its status as a real estate investment trust as defined in Section 856(a) of the Code.

Related Fund . With respect to any Lender which is a fund that invests in loans, any Affiliate of such Lender or any other fund that invests in loans that is managed by the same investment advisor as such Lender or by an Affiliate of such Lender or such investment advisor.

Release . Any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (other than the storing of materials in reasonable quantities to the extent necessary for the operation of property in the ordinary course of business, and in any event in compliance with all Environmental Laws) of Hazardous Substances.

Rent . As of any date of determination and for any given period, all base rent and additional rent paid by tenants or other occupants of a Medical Property.

Rent Roll . A report prepared by the Borrower showing for all Real Estate, including, without limitation, each Borrowing Base Asset, owned or leased by the Borrower or its Subsidiaries, its occupancy, lease expiration dates, lease rent and other information, including, without limitation, identification of vacant units, market rents and residents subsidized by Medicare and Medicaid, in substantially the form presented to the Agent prior to the date hereof or in such other form as may be reasonably acceptable to the Agent; provided that for single-tenant properties leased under triple net leases, the applicable lease shall constitute the rent roll for such Real Estate and no separate report shall be required.

Representative . See §14.16.

Required Lenders . As of any date, the Lender or Lenders whose aggregate Commitment Percentage is equal to or greater than sixty-six and 7/10 percent (66.7%) of the Total Commitment; provided that in determining said percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Commitment Percentages of the Lenders shall be redetermined for voting purposes only to exclude the Commitment Percentages of such Defaulting Lenders.

Reserve Percentage . For any Interest Period, that percentage which is specified three (3) Business Days before the first day of such Interest Period by the Board of Governors of the Federal Reserve System (or any successor) or any other Governmental Authority with jurisdiction over the Agent or any Lender for determining the maximum reserve requirement (including, but not limited to, any marginal reserve requirement) for the Agent or any Lender with respect to liabilities constituting of or including (among other liabilities) Eurocurrency liabilities in an amount equal to that portion of the Loan affected by such Interest Period and with a maturity equal to such Interest Period.

Revolving Credit Loan or Loans . An individual Revolving Credit Loan or the aggregate Revolving Credit Loans, as the case may be, in the maximum principal amount of the Total Commitment to be made by the Lenders hereunder as more particularly described in §2. Without limiting the foregoing, Revolving Credit Loans shall also include Revolving Credit Loans made pursuant to §2.10(f).

Revolving Credit Notes . See §2.1(b).

S&P . Standard & Poor’s Ratings Group.

Sanctions Laws and Regulations . Any sanctions, prohibitions or requirements imposed by any executive order or by any sanctions program administered by OFAC.

SEC . The federal Securities and Exchange Commission.

Secured Debt . With respect to REIT and its Subsidiaries as of any given date, the aggregate principal amount of all Indebtedness of such Persons on a Consolidated basis outstanding at such date and that is secured in any manner by any Lien.

Security Documents . Collectively, the Joinder Agreements, the Assignments of Documents, the Assignment of Interests, the Acknowledgments, the Assignment of Hedge , the Indemnity Agreement, the Guaranty, the Cash Collateral Agreement, any other security documents executed and delivered pursuant to §5.7, the UCC-1 financing statements and any further collateral assignments to the Agent for the benefit of the Lenders.

Single Asset Entity . A bankruptcy remote, single purpose entity which is a Subsidiary of the Borrower and which is not a Subsidiary Guarantor or an owner of a direct or indirect interest in a Subsidiary Guaranty which owns real property and related assets which are security for Indebtedness of such entity, and which Indebtedness does not constitute Indebtedness of any other Person except as provided in the definition of Non-Recourse Indebtedness (except for Non-Recourse Exclusions).

Single Tenant Limitation . See §9.10(a).

SNF . Skilled nursing facility. A skilled nursing facility may contain within it an assisted living component approved by Agent.

Stabilized Property . A completed Medical Property on which all improvements related to the development of such Real Estate have been substantially completed (excluding

tenant/licensee improvements) and for which a shell certificate of occupancy or equivalent has been issued. Once a property becomes a Stabilized Property under this Agreement, it shall remain a Stabilized Property.

STACH . Specialty procedure and short-stay acute care hospital.

State . A state of the United States of America and the District of Columbia.

State Regulator . See §7.15(a).

STDC . Specialty treatment and diagnostic center.

Subordination of Management Agreement . An agreement pursuant to which a manager of a Borrowing Base Asset subordinates its rights under a Management Agreement to the Loan Documents, such agreement to be in the form and substance satisfactory to Agent.

Subsidiary . For any Person, any corporation, partnership, limited liability company or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership, limited liability company or other entity (without regard to the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person, and shall include all Persons the accounts of which are consolidated with those of such Person pursuant to GAAP. Notwithstanding any ownership interest in the Borrower, the Borrower shall at all times be considered a Subsidiary of REIT.

Subsidiary Guarantor . Each Person, other than REIT, General Partner and TRS, that is a party to the Guaranty, and each Additional Guarantor.

Super-Majority Lenders . As of any date, the Lender or Lenders whose aggregate Commitment Percentage is equal to or greater than seventy-five percent (75.0%) of the Total Commitment; provided that in determining said percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Commitment Percentages of the Lenders shall be redetermined for voting purposes only to exclude the Commitment Percentages of such Defaulting Lenders.

Survey . An instrument survey of each parcel of Real Estate prepared by a registered land surveyor, certified to Agent (if required by Agent), which shall show the location of all buildings, structures, easements and utility lines on such property, shall be sufficient to remove the standard survey exception from the relevant Title Policy, shall show that all buildings and structures are within the lot lines of such Real Estate and shall not show any encroachments by others (or to the extent any encroachments are shown, such encroachments shall be acceptable to the Agent in its reasonable discretion), shall show rights of way, adjoining sites, establish building lines and street lines, the distance to and names of the nearest intersecting streets and such other details as the Agent may reasonably require; and shall show whether or not such Real Estate is located in a flood hazard district as established by the Federal Emergency Management Agency or any successor agency or is located in any flood plain, flood hazard or wetland protection district established under federal, state or local law and shall otherwise be in form and substance reasonably satisfactory to the Agent.

Swing Loan . See §2.5(a).

Swing Loan Commitment . An amount equal to Twenty Million and No/100 Dollars ($20,000,000), as the same may be changed from time to time in accordance with the terms of this Agreement.

Swing Loan Lender . KeyBank, in its capacity as Swing Loan Lender and any successor thereof.

Swing Loan Note . See §2.5(b).

Syndication Agent . JPMorgan Chase Bank, N.A. and CitiBank, N.A.

Taking . The taking or appropriation (including by deed in lieu of condemnation) of any Borrowing Base Asset, or any part thereof or interest therein, whether permanently or temporarily, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other manner or any damage or injury or diminution in value through condemnation, inverse condemnation or other exercise of the power of eminent domain.

Taxable Net Income . The taxable income of the REIT indicated on its Federal income tax return for the applicable calendar year, after giving effect to all available deductions, offsets, credits and other reductions in liability, as reasonably determined by the REIT.

Taxes . All present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

Tenant EBITDAR . For any period for a tenant or Operator, an amount equal to (a) net income (or loss) of such Person determined in accordance with GAAP, plus (b) the sum of the following to the extent deducted in the calculation of net income: (i) interest expenses; (ii) income taxes; (iii) depreciation; (iv) amortization; and (v) Rent.

Texas Ten Portfolio . Initially the portfolio of nine (9) skilled nursing facilities located in the State of Texas, which are owned by Subsidiary Guarantors and leased to GruenePointe 1 El Paso, LLC, GruenePointe 1 Kerens, LLC, GruenePointe 1 Casa Rio, LLC, GruenePointe 1 River City, LLC, GruenePointe 1 Brownwood, LLC, GruenePointe 1 Longview, LLC, GruenePointe 1 Kemp, LLC, GruenePointe 1 Mt. Pleasant, LLC, and GruenePointe 1 Kaufman, LLC, each a Texas limited liability company. The Texas Ten Portfolio shall include that certain skilled nursing facility commonly known as Graham Oaks located in Graham, Texas to be acquired by MRT of Graham TX-SNF, LLC and leased to GruenePointe 1 Graham, LLC upon its acquisition and inclusion as a Borrowing Base Property.

Third-Party Payor Programs . Any participation or provider agreements with any third party payor, including Medicare, Medicaid, TRICARE and any Insurer, and any other

private commercial insurance managed care and employee assistance program, to which the Borrower, any Subsidiary Guarantor or any Operator may be subject with respect to any Borrowing Base Asset.

Title Insurance Company . Any title insurance company or companies approved by the Agent and the Borrower.

Title Policy . With respect to each Borrowing Base Property, an ALTA standard form owner’s title insurance policy (or, if such form is not available, an equivalent, legally promulgated form of owner’s title insurance policy reasonably acceptable to the Agent) issued by a Title Insurance Company (with such reinsurance as the Agent may reasonably require, any such reinsurance to be with direct access endorsements to the extent available under Applicable Law) in an amount approved by the Agent insuring that the Subsidiary Guarantor holds marketable or indefeasible (with respect to Texas) fee simple title or a valid and subsisting leasehold interest to such parcel, subject only to the encumbrances acceptable to Agent in its reasonable discretion and which shall not contain standard exceptions for mechanics liens, persons in occupancy (other than tenants as tenants only under Leases) or matters which would be shown by a survey, and shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Agent in its reasonable discretion.

Titled Agents . The Arranger or any syndication or documentation agent.

Total Commitment . The sum of the Commitments of the Lenders, as in effect from time to time. As of the date of this Agreement, the Total Commitment is Three Hundred Seventy-Five Million and No/100 Dollars ($375,000,000.00), and is subject to increase in §2.11.

TRICARE . The health care program maintained by the United States of America for its uniformed service members, retirees and their families.

TRS . MedEquities Realty TRS, LLC, a Delaware limited liability company.

Type . As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

Unconsolidated Affiliate . In respect of any Person, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting and whose financial results would not be consolidated under GAAP with the financial results of such first Person on the consolidated financial statements of such first Person if such financial statements were prepared in accordance with the full consolidation method of GAAP as of such date.

Unrestricted Cash and Cash Equivalents . As of any date of determination, the sum of (a) the aggregate amount of Unrestricted cash and (b) the aggregate amount of Unrestricted Cash Equivalents (valued at fair market value). As used in this definition, “ Unrestricted ” means the specified asset is readily available for the satisfaction of any and all obligations of such Person and is not subject to any Lien, claim, cash trap, restriction, escrow or reserve. For the avoidance of doubt, Unrestricted Cash and Cash Equivalents shall not include any tenant security deposits or other restricted deposits.

U.S. Person . Any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

U.S. Tax Compliance Certificate . See §4.3(g)(ii)(B)(iii).

Wholly-Owned Subsidiary . As to the Borrower or REIT, any Subsidiary of the Borrower or REIT that is directly or indirectly owned one hundred percent (100%) by the Borrower or REIT, as applicable.

Withholding Agent . The REIT, the Borrower, any other Guarantor and the Agent, as applicable.

§1.2 Rules of Interpretation .

(a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement.

(b) The singular includes the plural and the plural includes the singular.

(d) A reference to any Person includes its permitted successors and permitted assigns.

(e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer.

(f) The words “include”, “includes” and “including” are not limiting.

(g) The words “approval” and “approved”, as the context requires, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted.

(h) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein.

(i) Reference to a particular “§”, refers to that section of this Agreement unless otherwise indicated.

(j) The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement.

(k) In the event of any change in GAAP after the date hereof or any other change in accounting procedures pursuant to §7.3 which would affect the computation of any financial covenant, ratio or other requirement set forth in any Loan Document, then upon the request of the Borrower or the Agent, the Borrower, the Guarantors, the Agent and the Lenders shall negotiate promptly, diligently and in good faith in order to amend the provisions of the Loan Documents such that such financial covenant, ratio or other requirement shall continue to provide substantially the same financial tests or restrictions of the Borrower and the Guarantors as in effect prior to such accounting change, as determined by the Required Lenders in their good faith judgment. Until such time as such amendment shall have been executed and delivered by the Borrower, the Guarantors, the Agent and the Required Lenders, such financial covenants, ratio and other requirements, and all financial statements and other documents required to be delivered under the Loan Documents, shall be calculated and reported as if such change had not occurred.

(l) Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the REIT or any of its Subsidiaries at “fair value”, as defined therein, (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.

(m) To the extent that any of the representations and warranties contained in this Agreement or any other Loan Document is qualified by “Material Adverse Effect” or any other materiality qualifier, then any further qualifier as to representations and warranties being true and correct “in all material respects” contained elsewhere in the Loan Documents shall not apply with respect to any such representations and warranties.

(n) Notwithstanding anything in this Agreement to the contrary, for so long as REIT or any of its Subsidiaries owns an interest, directly or indirectly, in the Lakeway Asset and the Lakeway Loan, then (i) the Lakeway Loan shall not be included in the calculation of Gross Asset Value, and (ii) the indebtedness of MRT Lakeway Realco under the Lakeway Loan shall not be included within the definition of Consolidated Total Indebtedness for the purposes of calculating Consolidated Tangible Net Worth, the Applicable Margin and compliance with the covenant in §9.2.

§2.	THE CREDIT FACILITY.

§2.1 Revolving Credit Loans .

(a) Subject to the terms and conditions set forth in this Agreement, each of the Lenders severally agrees to lend to the Borrower, and the Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the Maturity Date upon notice by the

Borrower to the Agent given in accordance with §2.7, such sums as are requested by the Borrower for the purposes set forth in §2.9 up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to the lesser of (i) the sum of such Lender’s Commitment and (ii) such Lender’s Commitment Percentage of the sum of (A) the Borrowing Base Availability minus (B) the sum of (1) the amount of all outstanding Revolving Credit Loans and Swing Loans, plus (2) the aggregate amount of Letter of Credit Liabilities; provided , that, in all events no Default or Event of Default shall have occurred and be continuing; and provided , further , that the outstanding principal amount of the Revolving Credit Loans (after giving effect to all amounts requested), Swing Loans and Letter of Credit Liabilities shall not at any time (i) exceed the lesser of (A) Borrowing Base Availability and (B) the Total Commitment or (ii) cause a violation of the covenant set forth in §9.1 or §9.11 . Notwithstanding anything to the contrary in this Agreement except pursuant to §2.5(d) or §2.10(f), in the event that the IPO Conditions Satisfaction Date has not occurred on or before December 31, 2015 (or such later date if extended in accordance with this Agreement), the Lenders shall, commencing with the first day after the last day by which the IPO Conditions Satisfaction Date is required to occur, if at all, as provided in the definition of IPO Conditions and continuing thereafter, have no further obligation to lend to the Borrower, and the Borrower shall have no further right to borrow or repay and reborrow, unless the Super-Majority Lenders approve a specific advance of the Loan in their sole and absolute discretion. The Revolving Credit Loans shall be made pro rata in accordance with each Lender’s Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by the Borrower that all of the conditions required of the Borrower set forth in §§10 and 11 have been satisfied on the date of such request. The Agent may assume that the conditions in §§10 and 11 have been satisfied unless it receives prior written notice from a Lender that such conditions have not been satisfied. No Lender shall have any obligation to make Revolving Credit Loans to the Borrower or participate in Letter of Credit Liabilities in the maximum aggregate principal outstanding balance of more than the lesser of the amount equal to its Commitment Percentage of the Commitments and the principal face amount of its Revolving Credit Note.

(b) The Revolving Credit Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit B hereto (collectively, the “ Revolving Credit Notes ”), dated of even date with this Agreement (except as otherwise provided in §18.3) and completed with appropriate insertions. One Revolving Credit Note shall be payable to the order of each Lender in the principal amount equal to such Lender’s Commitment or, if less, the outstanding amount of all Revolving Credit Loans made by such Lender, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes the Agent to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or the time of receipt of any payment of principal thereof, an appropriate notation on the Agent’s Record reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on the Agent’s Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Lender, but the failure to record, or any error in so recording, any such amount on the Agent’s Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due. There shall not be deemed to have occurred, and there has not otherwise occurred, any payment, satisfaction or novation of the indebtedness evidenced by the “Revolving

Credit Notes”, as defined in the Original Credit Agreement, which indebtedness is instead allocated among the Lenders as of the date hereof, as applicable, in accordance with their respective Commitment Percentages. On the Closing Date, the Lenders shall make adjustments among themselves so that the outstanding Revolving Credit Loans are consistent with their Commitment Percentages. On the Closing Date, all amounts due to Wells Fargo under the Original Credit Agreement shall be paid by Borrower to Wells Fargo, and the Lenders consent thereto. Such amounts due to Wells Fargo may be made by the borrowing of a Loan on the Closing Date.

§2.2 [Intentionally Omitted.]

§2.3 Facility Unused Fee . The Borrower agrees to pay to the Agent for the account of the Lenders (other than a Defaulting Lender for such period of time as such Lender is a Defaulting Lender) in accordance with their respective Commitment Percentages a facility unused fee calculated at the rate per annum as set forth below on the average daily amount by which the Total Commitment exceeds the outstanding principal amount of Revolving Credit Loans, Letter of Credit Liabilities and Swing Loans, during each calendar quarter or portion thereof commencing on the date hereof and ending on the Maturity Date. The facility unused fee shall be calculated for each day based on the ratio (expressed as a percentage) of (a) the average daily amount of the outstanding principal amount of the Revolving Credit Loans (other than Revolving Credit Loans made by a Defaulting Lender), Letter of Credit Liabilities and Swing Loans during such quarter to (b) the Total Commitment (other than Commitments made by a Defaulting Lender), and if such ratio is less than fifty percent (50%), the facility unused fee shall be payable at the rate of 0.35%, and if such ratio is equal to or greater than fifty percent (50%), the facility unused fee shall be payable at the rate of 0.25%. The facility unused fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof, and on any earlier date on which the Commitments shall be reduced or shall terminate as provided in §2.4, with a final payment on the Maturity Date.

§2.4 Reduction and Termination of the Commitments . The Borrower shall have the right at any time and from time to time upon five (5) Business Days’ prior written notice to the Agent to reduce by $5,000,000.00 or an integral multiple of $1,000,000.00 in excess thereof ( provided that in no event shall the Total Commitment be reduced in such manner to an amount less than fifty percent (50.0%) of the highest Total Commitment at any time existing under this Agreement) or to terminate entirely the Commitments, whereupon the Commitments of the Lenders shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such termination or reduction to be without penalty except as otherwise set forth in §4.7; provided , however , that no such termination or reduction shall be permitted if, after giving effect thereto, the sum of Outstanding Revolving Credit Loans, the Outstanding Swing Loans and the Letter of Credit Liabilities would exceed the Commitments of the Lenders as so terminated or reduced. Promptly after receiving any notice from the Borrower delivered pursuant to this §2.4, the Agent will notify the Lenders of the substance thereof. Any reduction of the Commitments shall also result in a proportionate reduction (rounded to the next lowest integral multiple of $100,000.00) in the maximum amount of Swing Loans and Letters of Credit. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Lenders the full amount of any facility fee under §2.3 then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated.

§2.5 Swing Loan Commitment .

(a) Subject to the terms and conditions set forth in this Agreement, the Swing Loan Lender agrees to lend to the Borrower (the “ Swing Loans ”), and the Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the date which is five (5) Business Days prior to the Maturity Date upon notice by the Borrower to the Swing Loan Lender given in accordance with this §2.5, such sums as are requested by the Borrower for the purposes set forth in §2.9 in an aggregate principal amount at any one time outstanding not exceeding the Swing Loan Commitment; provided that in all events (i) no Default or Event of Default shall have occurred and be continuing; and (ii) the outstanding principal amount of the Revolving Credit Loans and Swing Loans (after giving effect to all amounts requested) plus Letter of Credit Liabilities shall not at any time exceed the lesser of (a) the Total Commitment and (b) the Borrowing Base Availability, or cause a violation of the covenant set forth in §9.1 or §9.11. Notwithstanding anything to the contrary in this Agreement, in the event that the IPO Conditions Satisfaction Date has not occurred on or before December 31, 2015 (or such later date if extended in accordance with this Agreement), the Swing Loan Lender shall, commencing with the first day after the last day by which the IPO Conditions Satisfaction Date is required to occur, if at all, as provided in the definition of IPO Conditions and continuing thereafter, have no further obligation to lend Swing Loans to the Borrower, and the Borrower shall have no further right to borrow any Swing Loans, unless the Super-Majority Lenders approve a specific advance of a Swing Loan in their sole and absolute discretion. Notwithstanding anything to the contrary contained in this §2.5, the Swing Loan Lender shall not be obligated to make any Swing Loan at a time when any other Lender is a Defaulting Lender, unless the Swing Loan Lender is satisfied that the participation therein will otherwise be fully allocated to the Lenders that are Non-Defaulting Lenders consistent with §2.13(c) and the Defaulting Lender shall not participate therein, except to the extent the Swing Loan Lender has entered into arrangements with the Borrower or such Defaulting Lender that are satisfactory to the Swing Loan Lender in its good faith determination to eliminate the Swing Loan Lender’s Fronting Exposure with respect to any such Defaulting Lender, including the delivery of cash collateral. Swing Loans shall constitute “Revolving Credit Loans” for all purposes hereunder. The funding of a Swing Loan hereunder shall constitute a representation and warranty by the Borrower that all of the conditions set forth in §§10 and 11 have been satisfied on the date of such funding. The Swing Loan Lender may assume that the conditions in §§10 and 11 have been satisfied unless the Swing Loan Lender has received written notice from a Lender that such conditions have not been satisfied. Each Swing Loan shall be due and payable within five (5) Business Days of the date such Swing Loan was provided and the Borrower hereby agrees (to the extent not repaid as contemplated by §2.5(d)) to repay each Swing Loan on or before the date that is five (5) Business Days from the date such Swing Loan was provided. A Swing Loan may not be refinanced with another Swing Loan.

(b) The Swing Loans shall be evidenced by a separate promissory note of the Borrower in substantially the form of Exhibit C hereto (the “ Swing Loan Note ”), dated the date of this Agreement and completed with appropriate insertions. The Swing Loan Note shall be payable to the order of the Swing Loan Lender in the principal face amount equal to the Swing Loan Commitment and shall be payable as set forth below. The Borrower irrevocably authorizes

the Swing Loan Lender to make or cause to be made, at or about the time of the Drawdown Date of any Swing Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on the Swing Loan Lender’s Record reflecting the making of such Swing Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Swing Loans set forth on the Swing Loan Lender’s Record shall be prima facie evidence of the principal amount thereof owing and unpaid to the Swing Loan Lender, but the failure to record, or any error in so recording, any such amount on the Swing Loan Lender’s Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Swing Loan Note to make payments of principal of or interest on any Swing Loan Note when due. There shall not be deemed to have occurred, and there has not otherwise occurred, any payment, satisfaction or novation of the indebtedness, if any, evidenced by the “Swing Loan Note,” as defined in the Original Credit Agreement, which indebtedness is instead evidenced by the Swing Loan Note.

(c) The Borrower shall request a Swing Loan by delivering to the Swing Loan Lender a Loan Request executed by an Authorized Officer no later than 11:00 a.m. (Cleveland time) on the requested Drawdown Date specifying the amount of the requested Swing Loan (which shall be in the minimum amount of $1,000,000.00 or an integral multiple of $100,000.00 in excess thereof) and providing the wire instructions for the delivery of the Swing Loan proceeds. The Loan Request shall also contain the statements and certifications required by §2.7(a), (b) and (c). Each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept such Swing Loan on the Drawdown Date. Notwithstanding anything herein to the contrary, a Swing Loan shall be a Base Rate Loan and shall bear interest at the Base Rate plus the Applicable Margin. The proceeds of the Swing Loan will be disbursed by wire by the Swing Loan Lender to the Borrower no later than 1:00 p.m. (Cleveland time).

(d) The Swing Loan Lender shall, within two (2) Business Days after the Drawdown Date with respect to such Swing Loan, request each Lender to make a Revolving Credit Loan pursuant to §2.1 in an amount equal to such Lender’s Commitment Percentage of the amount of the Swing Loan outstanding on the date such notice is given. In the event that the Borrower does not notify the Agent in writing otherwise on or before noon (Cleveland Time) on the Business Day of the Drawdown Date with respect to such Swing Loan, the Agent shall notify the Lenders that such Loan shall be a LIBOR Rate Loan with an Interest Period of one (1) month, provided that the making of such LIBOR Rate Loan will not be in contravention of any other provision of this Agreement, or if the making of a LIBOR Rate Loan would be in contravention of this Agreement, then such notice shall indicate that such loan shall be a Base Rate Loan. The Borrower hereby irrevocably authorizes and directs the Swing Loan Lender to so act on its behalf, and agrees that any amount advanced to the Agent for the benefit of the Swing Loan Lender pursuant to this §2.5(d) shall be considered a Revolving Credit Loan pursuant to §2.1. Unless any of the events described in §§12.1(g), 12.1(h) or 12.1(i) shall have occurred (in which event the procedures of §2.5(e) shall apply), each Lender shall make the proceeds of its Revolving Credit Loan available to the Swing Loan Lender for the account of the Swing Loan Lender at the Agent’s Head Office prior to 12:00 noon (Cleveland time) in funds immediately available no later than one (1) Business Day after the date such request was made by the Swing Loan Lender just as if the Lenders were funding directly to the Borrower, so that thereafter such Obligations shall be evidenced by the Revolving Credit Notes. The proceeds of such Revolving Credit Loan shall be immediately applied to repay the Swing Loans.

(e) If for any reason a Swing Loan cannot be refinanced by a Revolving Credit Loan pursuant to §2.5(d), each Lender will, on the date such Revolving Credit Loan pursuant to §2.5(d) was to have been made, purchase an undivided participation interest in the Swing Loan in an amount equal to its Commitment Percentage of such Swing Loan. Each Lender will immediately transfer to the Swing Loan Lender in immediately available funds the amount of its participation and upon receipt thereof the Swing Loan Lender will deliver to such Lender a Swing Loan participation certificate dated the date of receipt of such funds and in such amount.

(f) Whenever at any time after the Swing Loan Lender has received from any Lender such Lender’s participation interest in a Swing Loan, the Swing Loan Lender receives any payment on account thereof, the Swing Loan Lender will distribute to such Lender its participation interest in such amount (appropriately adjusted in the case of interest payments to reflect the period of time during which such Lender’s participating interest was outstanding and funded); provided , however , that in the event that such payment received by the Swing Loan Lender is required to be returned, such Lender will return to the Swing Loan Lender any portion thereof previously distributed by the Swing Loan Lender to it.

(g) Each Lender’s obligation to fund a Loan as provided in §2.5(d) or to purchase participation interests pursuant to §2.5(e) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (a) any setoff, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Swing Loan Lender, the Borrower or anyone else for any reason whatsoever; (b) the occurrence or continuance of a Default or an Event of Default; (c) any adverse change in the condition (financial or otherwise) of REIT or any of its Subsidiaries; (d) any breach of this Agreement or any of the other Loan Documents by the Borrower or any Guarantor or any Lender; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Any portions of a Swing Loan not so purchased or converted may be treated by the Agent and the Swing Loan Lender as against such Lender as a Revolving Credit Loan which was not funded by the non-purchasing Lender, thereby making such Lender a Defaulting Lender. Each Swing Loan, once so sold or converted, shall cease to be a Swing Loan for the purposes of this Agreement, but shall be a Revolving Credit Loan made by each Lender under its Commitment.

§2.6 Interest on Loans .

(a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is repaid or converted to a LIBOR Rate Loan at the rate per annum equal to the sum of the Base Rate plus the Applicable Margin.

(b) Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of each Interest Period with respect thereto at the rate per annum equal to the sum of LIBOR determined for such Interest Period plus the Applicable Margin.

(d) Base Rate Loans and LIBOR Rate Loans may be converted to Loans of the other Type as provided in §4.1.

§2.7 Requests for Revolving Credit Loans . The Borrower shall give to the Agent written notice executed by an Authorized Officer in the form of Exhibit D hereto (or telephonic notice confirmed in writing in the form of Exhibit D hereto) of each Revolving Credit Loan requested hereunder (a “ Loan Request ”) by 11:00 a.m. (Cleveland time) one (1) Business Day prior to the proposed Drawdown Date with respect to Base Rate Loans and three (3) Business Days prior to the proposed Drawdown Date with respect to LIBOR Rate Loans. Each such notice shall specify with respect to the requested Revolving Credit Loan the proposed principal amount of such Revolving Credit Loan, the Type of Revolving Credit Loan, the initial Interest Period (if applicable) for such Revolving Credit Loan and the Drawdown Date. Each such notice shall also contain a general statement as to the purpose for which such advance shall be used (which purpose shall be in accordance with the terms of §2.9). Promptly upon receipt of any such notice, the Agent shall notify each of the Lenders thereof. Each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Revolving Credit Loan requested from the Lenders on the proposed Drawdown Date. Nothing herein shall prevent the Borrower from seeking recourse against any Lender that fails to advance its proportionate share of a requested Revolving Credit Loan as required by this Agreement. Each Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000.00 or an integral multiple of $100,000.00 in excess thereof; or (b) for a LIBOR Rate Loan in a minimum aggregate amount of $1,000,000.00 or an integral multiple of $100,000.00 in excess thereof; provided , however , that there shall be no more than six (6) LIBOR Rate Loans outstanding at any one time.

§2.8 Funds for Loans .

(a) Not later than 1:00 p.m. (Cleveland time) on the proposed Drawdown Date of any Revolving Credit Loans, each of the Lenders, will make available to the Agent, at the Agent’s Head Office, in immediately available funds, the amount of such Lender’s Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to §2.1. Upon receipt from each such Lender of such amount, and upon receipt of the documents required by §§10 and 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Revolving Credit Loans made available to the Agent by the Lenders, as applicable, by crediting such amount to the account of the Borrower maintained at the Agent’s Head Office. The failure or refusal of any Lender to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Lender from its several obligation hereunder to make available to the Agent the amount of such other Lender’s Commitment Percentage of any requested Loans, including any additional Revolving Credit Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Lender so failing or refusing.

(b) Unless the Agent shall have been notified by any Lender prior to the applicable Drawdown Date that such Lender will not make available to the Agent such Lender’s Commitment Percentage of a proposed Loan, the Agent may in its discretion assume that such Lender has made such Loan available to the Agent in accordance with the provisions of this Agreement and the Agent may, if it chooses, in reliance upon such assumption make such Loan available to the Borrower, and such Lender shall be liable to the Agent for the amount of such advance. If such Lender does not pay such corresponding amount upon the Agent’s demand therefor, the Agent will promptly notify the Borrower, and the Borrower shall promptly pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for such Loan or (ii) from a Lender at the Federal Funds Effective Rate plus one percent (1%).

§2.9 Use of Proceeds . The Borrower will use the proceeds of the Loans solely for (a) payment of closing costs in connection with this Agreement, (b) repayment of Indebtedness, (c) acquisitions of fee simple ownership of Real Estate or Real Estate subject to a Ground Lease or Mortgage Note Receivables, which prior to the IPO Conditions Satisfaction Date shall be approved by the Required Lenders and (d) general corporate and working capital purposes, which prior to the IPO Conditions Satisfaction Date shall be approved by the Required Lenders. Prior to the occurrence of the IPO Conditions Satisfaction Date, the Borrower shall give Agent not less than ten (10) Business Days’ notice of any requested Loan which pursuant to this §2.9 requires approval of the Required Lenders.

§2.10 Letters of Credit .

(a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through the day that is thirty (30) days prior to the Maturity Date, the Issuing Lender shall issue such Letters of Credit as the Borrower may request upon the delivery of a written request in the form of Exhibit E hereto (a “ Letter of Credit Request ”) to the Issuing Lender, provided that (i) no Default or Event of Default shall have occurred and be continuing, (ii) upon issuance of such Letter of Credit, the Letter of Credit Liabilities shall not exceed the Letter of Credit Commitment, (iii) in no event shall the sum of the outstanding principal amount of the Revolving Credit Loans, Swing Loans and Letter of Credit Liabilities (after giving effect to any requested Letters of Credit) exceed the lesser of the Total Commitment and the Borrowing Base Availability or cause a violation of the covenant set forth in §9.1 or §9.11, (iv) the conditions set forth in §§10 and 11 shall have been satisfied, and (v) in no event shall any amount drawn under a Letter of Credit be available for reinstatement or a subsequent drawing under such Letter of Credit; and provided further that prior to the IPO Conditions Satisfaction Date the issuance of any Letter of Credit shall be subject to the approval of the Required Lenders. Notwithstanding anything to the contrary in this Agreement, in the event that the IPO Conditions Satisfaction Date has not occurred on or before December 31, 2015 (or such later date if extended in accordance with this Agreement), the Issuing Lender shall, commencing with the first day after the last day by which the IPO Conditions Satisfaction Date is required to occur, if at all, as provided in the definition of IPO Conditions and continuing thereafter, have no further obligation to issue, extend, amend, increase or renew any Letters of

Credit, and the Borrower shall have no further right to request the issuance, extension, amendment, increase or renewal of any Letters of Credit, unless the Super-Majority Lenders have approved such matter in their sole and absolute discretion. Notwithstanding anything to the contrary contained in this §2.10, the Issuing Lender shall not be obligated to issue, amend, extend, renew or increase any Letter of Credit at a time when any other Lender is a Defaulting Lender, unless the Issuing Lender is satisfied that the participation therein will otherwise be fully allocated to the Lenders that are Non-Defaulting Lenders consistent with §2.13(c) and the Defaulting Lender shall have no participation therein, except to the extent the Issuing Lender has entered into arrangements with the Borrower or such Defaulting Lender which are satisfactory to the Issuing Lender in its good faith determination to eliminate the Issuing Lender’s Fronting Exposure with respect to any such Defaulting Lender, including the delivery of cash collateral. The Issuing Lender may assume that the conditions in §§10 and 11 have been satisfied unless it receives written notice from a Lender that such conditions have not been satisfied. Each Letter of Credit Request shall be executed by an Authorized Officer of the Borrower. The Issuing Lender shall be entitled to conclusively rely on such Person’s authority to request a Letter of Credit on behalf of the Borrower. The Issuing Lender shall have no duty to verify the authenticity of any signature appearing on a Letter of Credit Request. The Borrower assumes all risks with respect to the use of the Letters of Credit. Unless the Issuing Lender and the Agent otherwise consent, the term of any Letter of Credit shall not exceed a period of time commencing on the issuance of the Letter of Credit and ending one year after the date of issuance thereof, subject to extension pursuant to an “evergreen” clause acceptable to the Agent and the Issuing Lender (but in any event the term shall not extend beyond five (5) Business Days prior to the Maturity Date). The amount available to be drawn under any Letter of Credit shall reduce on a dollar-for-dollar basis the amount available to be drawn under the Total Commitment as a Revolving Credit Loan.

(b) Each Letter of Credit Request shall be submitted to the Issuing Lender at least five (5) Business Days (or such shorter period as the Issuing Lender may approve) prior to the date upon which the requested Letter of Credit is to be issued. Each such Letter of Credit Request shall contain a statement as to the purpose for which such Letter of Credit shall be used (which purpose shall be in accordance with the terms of this Agreement). The Borrower shall further deliver to the Issuing Lender such additional applications (which application as of the date hereof is in the form of Exhibit F attached hereto) and documents as the Issuing Lender may require, in conformity with the then standard practices of its letter of credit department, in connection with the issuance of such Letter of Credit; provided that in the event of any conflict, the terms of this Agreement shall control.

(c) The Issuing Lender shall, subject to the conditions set forth in this Agreement, issue the Letter of Credit on or before five (5) Business Days following receipt of the documents last due pursuant to §2.10(b). Each Letter of Credit shall be in form and substance reasonably satisfactory to the Issuing Lender in its reasonable discretion.

(d) Upon the issuance of a Letter of Credit, each Lender shall be deemed to have purchased a participation therein from the Issuing Lender in an amount equal to its respective Commitment Percentage of the amount of such Letter of Credit. No Lender’s obligation to participate in a Letter of Credit shall be affected by any other Lender’s failure to perform as required herein with respect to such Letter of Credit or any other Letter of Credit.

(e) Upon the issuance of each Letter of Credit, the Borrower shall pay to the Issuing Lender (i) for its own account, a Letter of Credit fronting fee calculated at the rate equal to one-eighth of one percent (0.125%) per annum of the face amount of such Letter of Credit (which fee shall not be less than $1,500 in any event) and an administrative charge of $250, and (ii) for the accounts of the Lenders that are Non-Defaulting Lenders (including the Issuing Lender) in accordance with their respective percentage shares of participation in such Letter of Credit, a Letter of Credit fee calculated at the rate per annum equal to the Applicable Margin then applicable to LIBOR Rate Loans on the face amount of such Letter of Credit. Such fees shall be payable in quarterly installments in arrears with respect to each Letter of Credit on the first day of each calendar quarter following the date of issuance and continuing on each quarter or portion thereof thereafter, as applicable, or on any earlier date on which the Commitments shall terminate and on the expiration or return of any Letter of Credit. In addition, the Borrower shall pay to the Issuing Lender for its own account within five (5) days of demand of the Issuing Lender the standard issuance, documentation and service charges for Letters of Credit issued from time to time by the Issuing Lender.

(f) In the event that any amount is drawn under a Letter of Credit by the beneficiary thereof, the Borrower shall reimburse the Issuing Lender by having such amount drawn treated as an outstanding Base Rate Loan under this Agreement (the Borrower being deemed to have requested a Base Rate Loan on such date in an amount equal to the amount of such drawing and such amount drawn shall be treated as an outstanding Base Rate Loan under this Agreement) and the Agent shall promptly notify each Lender by telecopy, email, telephone (confirmed in writing) or other similar means of transmission, and each Lender shall promptly and unconditionally pay to the Agent, for the Issuing Lender’s own account, an amount equal to such Lender’s Commitment Percentage of such Letter of Credit (to the extent of the amount drawn). If and to the extent any Lender shall not make such amount available on the Business Day on which such draw is funded, such Lender agrees to pay such amount to the Agent forthwith on demand, together with interest thereon, for each day from the date on which such draw was funded until the date on which such amount is paid to the Agent, at the Federal Funds Effective Rate until three (3) days after the date on which the Agent gives notice of such draw and at the Federal Funds Effective Rate plus one percent (1%) for each day thereafter. Further, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Revolving Credit Loans, amounts due with respect to its participations in Letters of Credit and any other amounts due to it hereunder to the Agent to fund the amount of any drawn Letter of Credit which such Lender was required to fund pursuant to this §2.10(f) until such amount has been funded (as a result of such assignment or otherwise). In the event of any such failure or refusal, the Lenders not so failing or refusing shall be entitled to a priority secured position for such amounts as provided in §12.5. The failure of any Lender to make funds available to the Agent in such amount shall not relieve any other Lender of its obligation hereunder to make funds available to the Agent pursuant to this §2.10(f).

(g) If after the issuance of a Letter of Credit pursuant to §2.10(c) by the Issuing Lender, but prior to the funding of any portion thereof by a Lender, for any reason a drawing under a Letter of Credit cannot be refinanced as a Revolving Credit Loan, each Lender will, on the date such Revolving Credit Loan pursuant to §2.10(f) was to have been made, purchase an undivided participation interest in the Letter of Credit in an amount equal to its Commitment Percentage of the amount of such Letter of Credit. Each Lender will immediately

transfer to the Issuing Lender in immediately available funds the amount of its participation and upon receipt thereof the Issuing Lender will deliver to such Lender a Letter of Credit participation certificate dated the date of receipt of such funds and in such amount.

(h) Whenever at any time after the Issuing Lender has received from any Lender any such Lender’s payment of funds under a Letter of Credit and thereafter the Issuing Lender receives any payment on account thereof, then the Issuing Lender will distribute to such Lender its participation interest in such amount (appropriately adjusted in the case of interest payments to reflect the period of time during which such Lender’s participation interest was outstanding and funded); provided , however , that in the event that such payment received by the Issuing Lender is required to be returned, such Lender will return to the Issuing Lender any portion thereof previously distributed by the Issuing Lender to it.

(i) The issuance of any supplement, modification, amendment, renewal or extension to or of any Letter of Credit shall be treated in all respects the same as the issuance of a new Letter of Credit.

(j) The Borrower assumes all risks of the acts, omissions, or misuse of any Letter of Credit by the beneficiary thereof. Neither the Agent, the Issuing Lender nor any Lender will be responsible for (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the issuance of any Letter of Credit, even if such document should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of any beneficiary of any Letter of Credit to comply fully with the conditions required in order to demand payment under a Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telecopy, email or otherwise; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document or draft required by or from a beneficiary in order to make a disbursement under a Letter of Credit or the proceeds thereof; (vii) for the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Agent or any Lender. None of the foregoing will affect, impair or prevent the vesting of any of the rights or powers granted to the Agent, the Issuing Lender or the Lenders hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any act taken or omitted to be taken by the Agent, the Issuing Lender or the other Lenders in good faith will be binding on the Borrower and will not put the Agent, the Issuing Lender or the other Lenders under any resulting liability to the Borrower; provided nothing contained herein shall relieve the Issuing Lender for liability to the Borrower arising as a result of the gross negligence or willful misconduct of the Issuing Lender as determined by a court of competent jurisdiction after the exhaustion of all applicable appeal periods.

§2.11 Increase in Total Commitment . (a) Provided that no Default or Event of Default has occurred and is continuing, subject to the terms and conditions set forth in this §2.11, the Borrower shall have the option, subject to Agent’s prior written consent, at any time and from

time to time, before the Maturity Date to request one or more increases in the Total Commitment to an aggregate amount of not more than $600,000,000.00 by giving written notice to the Agent (each, an “Increase Notice”; and the amount of such requested increase is a “Commitment Increase”); provided that any such individual increase must be in a minimum amount of $10,000,000.00 and increments of $5,000,000.00 in excess thereof unless otherwise approved by the Agent in its sole discretion; and provided further that in the event that the IPO Conditions Satisfaction Date has not occurred on or before December 31, 2015 (or such later date if extended in accordance with this Agreement), the Borrower shall have no further right to request a Commitment Increase. Upon receipt of any Increase Notice, the Agent shall consult with KBCM and shall notify the Borrower of the amount of the facility fees to be paid to any Lenders who increase their respective Commitment in connection with such increase in the Total Commitment (which shall be in addition to the fees to be paid to KBCM pursuant to the Agreement Regarding Fees). If the Borrower agrees to pay the facility fees so determined, the Agent shall send a notice to all Lenders (each, an “Additional Commitment Request Notice”) informing them of the Borrower’s request to increase the Total Commitment and of the facility fees to be paid with respect thereto. Each Lender who desires to increase its Commitment upon such terms shall provide the Agent with a written commitment letter specifying the amount of such increase which it is willing to provide prior to such deadline as may be specified in the Additional Commitment Request Notice. If the requested increase is oversubscribed then the Agent and KBCM shall allocate the Commitment Increase among the Lenders who provide such commitment letters on such basis as the Agent and KBCM shall determine in their sole discretion. If the increases to the Commitments so provided are not sufficient to provide the full amount of the Commitment Increase requested by the Borrower, then the Agent, Arranger or the Borrower may, but shall not be obligated to, invite one or more banks or lending institutions (which banks or lending institutions shall be acceptable to the Agent, KBCM and the Borrower) to become a Lender and provide an additional Commitment. The Agent shall provide all Lenders with a notice setting forth the amount, if any, of the additional Commitment to be provided by each Lender and the revised Commitment Percentages which shall be applicable after the effective date of the Commitment Increase specified therein (each, a “Commitment Increase Date”). In no event shall any Lender be obligated to increase its Commitment.

(b) On any Commitment Increase Date the outstanding principal balance of the Revolving Credit Loans shall be reallocated among the Lenders such that after the applicable Commitment Increase Date the outstanding principal amount of Revolving Credit Loans owed to each Lender shall be equal to such Lender’s Commitment Percentage (as in effect after the applicable Commitment Increase Date) of the outstanding principal amount of all Revolving Credit Loans. The participation interests of the Lenders in Swing Loans and Letters of Credit shall be similarly adjusted. On any Commitment Increase Date, each of those Lenders whose Commitment Percentage is increasing shall advance the funds to the Agent and the funds so advanced shall be distributed among the Lenders whose Commitment Percentage is decreasing as necessary to accomplish the required reallocation of the outstanding Revolving Credit Loans. The funds so advanced shall be Base Rate Loans until converted to LIBOR Rate Loans which are allocated among all Lenders based on their Commitment Percentages.

(c) Upon the effective date of each increase in the Total Commitment pursuant to this §2.11, the Agent shall unilaterally revise Schedule 1.1 in its own records to reflect the name and address, Commitment and Commitment Percentage of each Lender

following such increase and the Borrower shall execute and deliver to the Agent a new Revolving Credit Note for each Lender whose Commitment has changed so that the principal amount of such Lender’s Revolving Credit Note shall equal its Commitment. The Agent shall deliver such replacement Revolving Credit Note to the respective Lenders in exchange for the Revolving Credit Notes replaced thereby which shall be surrendered by such Lenders. Such new Revolving Credit Notes shall provide that they are replacements for the surrendered Revolving Credit Notes, and that they do not constitute a novation, shall be dated as of the applicable Commitment Increase Date and shall otherwise be in substantially the form of the replaced Revolving Credit Notes. Simultaneously with such increase, the Borrower shall deliver an opinion of counsel, addressed to the Lenders and the Agent, relating to the due authorization, execution and delivery of such new Revolving Credit Notes and the enforceability thereof, in form and substance substantially similar to the opinion delivered in connection with the first disbursement under this Agreement. The surrendered Revolving Credit Notes shall be canceled and returned to the Borrower.

(d) Notwithstanding anything to the contrary contained herein, the obligation of the Agent and the Lenders to increase the Total Commitment pursuant to this §2.11 shall be conditioned upon satisfaction of the following conditions precedent which must be satisfied prior to the effectiveness of any increase of the Total Commitment:

(i) Payment of Activation Fee . The Borrower shall pay (A) to the Agent and KBCM those fees described in and contemplated by the Agreement Regarding Fees with respect to the applicable Commitment Increase, and (B) to KBCM such facility fees as the Lenders who are providing an additional Commitment, or increasing their respective Commitment, may require to increase the aggregate Commitment, which fees shall, when paid, be fully earned and non-refundable under any circumstances. KBCM shall pay to the Lenders acquiring the increased Commitment certain fees pursuant to their separate agreement; and

(ii) No Default . On the date any Increase Notice is given and on the date such increase becomes effective, both immediately before and after the Total Commitment is increased, there shall exist no Default or Event of Default; and

(iii) Representations True . The representations and warranties made by the Borrower and the Guarantors in the Loan Documents or otherwise made by or on behalf of the Borrower or the Guarantors in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the date of such Increase Notice and on the date the Total Commitment is increased, both immediately before and after the Total Commitment is increased; and

(iv) Additional Documents and Expenses . The Borrower and the Guarantors shall execute and deliver to the Agent and the Lenders such additional documents (including, without limitation, amendments to the Security Documents to provide that the Collateral secures the same), instruments, certifications and opinions as the Agent may reasonably require (including, without limitation, in the case of the Borrower, a Compliance Certificate and Borrowing Base Certificate, demonstrating compliance with all covenants, representations and warranties set forth in the Loan Documents after giving effect to the increase) and the Borrower shall pay the cost of any title searches, updated UCC searches, all

recording costs and fees, and any and all intangible taxes or other documentary taxes, assessments or charges or any similar fees, taxes or expenses which are incurred by the Agent, KBCM or the Lenders in connection with such increase;

(v) Other . The Borrower shall satisfy such other conditions to such increase as the Agent may require in its reasonable discretion.

§2.12 Extension of Maturity Date.

(a) The Borrower shall have the one-time right and option to extend the Maturity Date to November 7, 2017, upon satisfaction of the following conditions precedent, which must be satisfied prior to the effectiveness of any extension of the Maturity Date:

(i) Extension Request . The Borrower shall deliver written notice of such request (the “Extension Request”) to the Agent not earlier than the date which is one hundred twenty (120) days and not later than the date which is sixty (60) days prior to the Maturity Date (as determined without regard to such extension).

(ii) Payment of Extension Fee . The Borrower shall pay to the Agent for the pro rata accounts of the Lenders in accordance with their respective Commitments an extension fee in an amount equal to fifteen (15) basis points on the Total Commitment in effect on the Maturity Date (as determined without regard to such extension), which fee shall, when paid, be fully earned and non-refundable under any circumstances.

(iii) No Default . On the date the Extension Request is given and on the Maturity Date (as determined without regard to such extension) there shall exist no Default or Event of Default.

(iv) Representations and Warranties . The representations and warranties made by the Borrower and the Guarantors in the Loan Documents or otherwise made by or on behalf of the Borrower and the Guarantors in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the date the Extension Request is given and on the Maturity Date (as determined without regard to such extension) (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date).

(v) IPO Conditions . The IPO Conditions Satisfaction Date shall have occurred.

(vi) Additional Documents and Expenses . The Borrower and the Guarantors shall execute and deliver to the Agent and Lenders such additional opinions, consents and affirmations and other documents (including, without limitation, amendments to the Security Documents) as the Agent may reasonably require, and the Borrower shall pay the cost of any title searches, endorsement or any update of UCC searches, recordings costs and fees, and any and all intangible taxes or other documentary taxes, assessments or charges or any other fees, taxes, charges or expenses which are required to be paid in connection with such extension.

(b) Provided that Borrower has duly exercised its option to extend the initial Maturity Date in accordance with the terms and conditions set forth in §2.12(a) above, Borrower shall have the one-time right and option to further extend the Maturity Date to November 7, 2018, upon further satisfaction of the conditions precedent set forth in §2.12(a)(i)-(vi) (other than clause (a)(v) which will have already been satisfied) above, which must be satisfied prior to the effectiveness of any further extension of the Maturity Date.

(c) Provided that Borrower has duly exercised its option to extend the initial Maturity Date in accordance with the terms and conditions set forth in §2.12(a) and (b) above, Borrower shall have the one-time right and option to further extend the Maturity Date to November 7, 2019, upon further satisfaction of the conditions precedent set forth in §2.12(a)(i)-(vi) (other than clause (a)(v) which will have already been satisfied) above, which must be satisfied prior to the effectiveness of any further extension of the Maturity Date.

§2.13 Defaulting Lenders .

(a) If for any reason any Lender shall be a Defaulting Lender, then, in addition to the rights and remedies that may be available to the Agent or the Borrower under this Agreement or Applicable Law, such Defaulting Lender’s right to participate in the administration of the Loans, this Agreement and the other Loan Documents, including without limitation, any right to vote in respect of, to consent to or to direct any action or inaction of the Agent or to be taken into account in the calculation of the Required Lenders, the Super-Majority Lenders, all of the Lenders or affected Lenders, shall, except as specifically provided in §27, be suspended during the pendency of such failure or refusal. If a Lender is a Defaulting Lender because it has failed to make timely payment to the Agent of any amount required to be paid to the Agent hereunder (without giving effect to any notice or cure periods), in addition to other rights and remedies which the Agent or the Borrower may have under the immediately preceding provisions or otherwise, the Agent shall be entitled (i) to collect interest from such Defaulting Lender on such delinquent payment for the period from the date on which the payment was due until the date on which the payment is made at the Federal Funds Effective Rate plus one percent (1%), (ii) to withhold or setoff and to apply in satisfaction of the defaulted payment and any related interest, any amounts otherwise payable to such Defaulting Lender under this Agreement or any other Loan Document and (iii) to bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. Any amounts received by the Agent in respect of a Defaulting Lender’s Loans shall be applied as set forth in §2.13(d).

(b) Any Non-Defaulting Lender may, but shall not be obligated, in its sole discretion, to acquire all or a portion of a Defaulting Lender’s Commitments. Any Lender desiring to exercise such right shall give written notice thereof to the Agent and the Borrower no sooner than two (2) Business Days and not later than five (5) Business Days after such Defaulting Lender became a Defaulting Lender. If more than one Lender exercises such right, each such Lender shall have the right to acquire an amount of such Defaulting Lender’s Commitments in proportion to the Commitments of the other Lenders exercising such right. If after such fifth Business Day, the Lenders have not elected to purchase all of the Commitments of such Defaulting Lender, then the Borrower (so long as no Default or Event of Default exists) or the Required Lenders may, by giving written notice thereof to the Agent, such Defaulting

Lender and the other Lenders, demand that such Defaulting Lender assign its Commitments to an eligible assignee subject to and in accordance with the provisions of §18.1 for the purchase price provided for below. No party hereto shall have any obligation whatsoever to initiate any such replacement or to assist in finding an eligible assignee. Upon any such purchase or assignment, and any such demand with respect to which the conditions specified in §18.1 have been satisfied, the Defaulting Lender’s interest in the Loans and its rights hereunder (but not its liability in respect thereof or under the Loan Documents or this Agreement to the extent the same relate to the period prior to the effective date of the purchase) shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest to the purchaser or assignee thereof, including an appropriate Assignment and Acceptance Agreement. The purchase price for the Commitments of a Defaulting Lender shall be equal to the amount of the principal balance of the Loans outstanding and owed by the Borrower to the Defaulting Lender plus any accrued but unpaid interest thereon and accrued but unpaid fees. Prior to payment of such purchase price to a Defaulting Lender, the Agent shall apply against such purchase price any amounts retained by the Agent pursuant to §2.13(d).

(c) During any period in which there is a Defaulting Lender, all or any part of such Defaulting Lender’s obligation to acquire, refinance or fund participations in Letters of Credit pursuant to §2.10(g) or Swing Loans pursuant to §2.5(e) shall be reallocated among the Lenders that are Non-Defaulting Lenders in accordance with their respective Commitment Percentages (computed without giving effect to the Commitment of such Defaulting Lender; provided that (i) each such reallocation shall be given effect only if, at the date the applicable Lender becomes a Defaulting Lender, no Default or Event of Default exists, (ii) the conditions set forth in §§10 and 11 are satisfied at the time of such reallocation (and, unless the Borrower shall have notified the Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at the time), (iii) the representations and warranties in the Loan Documents shall be true and correct in all material respects on and as of the date of such reallocation with the same effect as though made on and as of such date, and (iv) the aggregate obligation of each Lender that is a Non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swing Loans shall not exceed the positive difference, if any, of (a) the Commitment of that Non-Defaulting Lender minus (b) the sum of (1) the aggregate outstanding principal amount of the Revolving Credit Loans of that Lender plus (2) such Lender’s pro rata portion in accordance with its Commitment Percentage of outstanding Letter of Credit Liabilities and Swing Loans. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

(d) Any payment of principal, interest, fees or other amounts received by the Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, or otherwise, and including any amounts made available to the Agent for the account of such Defaulting Lender pursuant to §13), shall be applied at such time or times as may be determined by the Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Agent (other than with respect to Letter of Credit Liabilities) hereunder; second, to the payment of any amounts owing by such Defaulting Lender to the Issuing Lender (with respect to Letter of Credit Liabilities) and/or the Swing Loan Lender hereunder; third, if so determined by

the Agent or requested by the Issuing Lender or the Swing Loan Lender, to be held as cash collateral for future funding obligations of such Defaulting Lender of any participation in any Letter of Credit or Swing Loan; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Agent; fifth, if so determined by the Agent and the Borrower, to be held in a non-interest bearing deposit account and released pro rata in order to (x) satisfy obligations of such Defaulting Lender to fund Loans or participations under this Agreement and (y) be held as cash collateral for future funding obligations of such Defaulting Lender of any participation in any Letter of Credit or Swing Loan; sixth, to the payment of any amounts owing to the Agent or the Lenders (including the Issuing Lender and the Swing Loan Lender) as a result of any judgment of a court of competent jurisdiction obtained by the Agent or any Lender (including the Issuing Lender and the Swing Loan Lender) against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (i) such payment is a payment of the principal amount of any Revolving Credit Loans or funded participations in Letters of Credit or Swing Loans in respect of which such Defaulting Lender has not fully funded its appropriate share and (ii) such Revolving Credit Loans or funded participations in Letters of Credit or Swing Loans were made at a time when the conditions set forth in §§10 and 11, to the extent required by this Agreement, were satisfied or waived, such payment shall be applied solely to pay the Revolving Credit Loans of, and funded participations in Letters of Credit or Swing Loans owed to, all Non-Defaulting Lenders on a pro rata basis until such time as all Revolving Credit Loans and funded and unfunded participations in Letters of Credit and Swing Loans are held by the Lenders pro rata in accordance with their Commitment Percentages without regard to §2.13(c), prior to being applied to the payment of any Revolving Credit Loans of, or funded participations in Letters of Credit or Swing Loans owed to, such Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this §2.13(d) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto, and to the extent allocated to the repayment of principal of the Loan, shall not be considered outstanding principal under this Agreement.

(e) Within five (5) Business Days of written demand by the Issuing Lender or the Swing Loan Lender from time to time, the Borrower shall deliver to the Agent for the benefit of the Issuing Lender and the Swing Loan Lender cash collateral in an amount sufficient to cover all Fronting Exposure with respect to the Issuing Lender and the Swing Loan Lender (after giving effect to §§2.5(a), 2.10(a) and 2.13(c)) on terms satisfactory to the Issuing Lender and/or the Swing Loan Lender in its good faith determination (and such cash collateral shall be in Dollars). Any such cash collateral shall be deposited in the Collateral Account as collateral (solely for the benefit of the Issuing Lender and/or the Swing Loan Lender) for the payment and performance of each Defaulting Lender’s pro rata portion in accordance with their respective Commitment Percentages of outstanding Letter of Credit Liabilities and Swing Loans. Moneys in the Collateral Account deposited pursuant to this §2.13(e) shall be applied by the Agent to

reimburse the Issuing Lender and/or the Swing Loan Lender immediately for each Defaulting Lender’s pro rata portion in accordance with their respective Commitment Percentages of any funding obligation with respect to a Letter of Credit or Swing Loan which has not otherwise been reimbursed by the Borrower or such Defaulting Lender.

(f) (i) Each Lender that is a Defaulting Lender shall not be entitled to receive any facility unused fee pursuant to §2.3 for any period during which that Lender is a Defaulting Lender.

(ii) Each Lender that is a Defaulting Lender shall not be entitled to receive Letter of Credit fees pursuant to §2.10(e) for any period during which that Lender is a Defaulting Lender.

(iii) With respect to any facility unused fee or Letter of Credit fees not required to be paid to any Defaulting Lender pursuant to clause (i) or (ii) above, the Borrower shall (x) pay to each Non-Defaulting Lender that is a Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Liabilities or Swing Loans that has been reallocated to such Non-Defaulting Lender pursuant to §2.13(c), (y) pay to the Issuing Lender and the Swing Loan Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Lender’s or the Swing Loan Lender’s Fronting Exposure to such Defaulting Lender and (z) not be required to pay any remaining amount of any such fee.

(g) If the Borrower (so long as no Default or Event of Default exists) and the Agent agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Agent will so notify the parties hereto, whereupon as of the date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), that Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swing Loans to be held on a pro rata basis by the Lenders in accordance with their Commitments (without giving effect to §2.13(c)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

§3.	REPAYMENT OF THE LOANS.

§3.1 Stated Maturity . The Borrower promises to pay on the Maturity Date and there shall become absolutely due and payable on the Maturity Date all of the Revolving Credit Loans, Swing Loans and other Letter of Credit Liabilities Outstanding on such date, together with any and all accrued and unpaid interest thereon.

§3.2 Mandatory Prepayments.

(a) If at any time the sum of the aggregate outstanding principal amount of the Revolving Credit Loans, the Swing Loans and the Letter of Credit Liabilities exceeds the lesser of (i) the Total Commitment and (ii) the Borrowing Base Availability, or would cause a Default under §9.11, then the Borrower shall, within five (5) Business Days of such occurrence, pay the amount of such excess to the Agent for the respective accounts of the Lenders for application to the Revolving Credit Loans as provided in §3.4, together with any additional amounts payable pursuant to §4.7, except that the amount of any Swing Loans shall be paid solely to the Swing Loan Lender.

(b) In the event there shall have occurred any Prepayment, Borrower shall, within two (2) Business Days of receipt of such payment, pay the amount of such Prepayment to the Agent for the account of the Lenders for application to the Revolving Credit Loans as provided in §3.4, together with any additional amounts payable pursuant to §4.7.

(c) In the event there shall have occurred a casualty or Taking with respect to any Borrowing Base Property and the Borrower or any Subsidiary Guarantor is required to repay the Loans pursuant to §7.7, the Borrower shall prepay the Loans concurrently with the date of receipt by Borrower, such Subsidiary Guarantor or the Agent of any Insurance Proceeds or Condemnation Proceeds in respect of such casualty or Taking, as applicable, in the amount required pursuant to the relevant provisions of §7.7.

§3.3 Optional Prepayments .

(a) The Borrower shall have the right, at its election, to prepay the outstanding amount of the Revolving Credit Loans and Swing Loans, as a whole or in part, at any time without penalty or premium; provided , that if any prepayment of the outstanding amount of any LIBOR Rate Loans pursuant to this §3.3 is made on a date that is not the last day of the Interest Period relating thereto, such prepayment shall be accompanied by the payment of any amounts due pursuant to §4.7.

(b) The Borrower shall give the Agent, no later than 10:00 a.m. (Cleveland time) at least three (3) days prior written notice of any prepayment pursuant to this §3.3, in each case specifying the proposed date of prepayment of the Loans and the principal amount to be prepaid ( provided that any such notice may be revoked or modified upon one (1) day’s prior notice to the Agent). Notwithstanding the foregoing, no prior notice shall be required for the prepayment of any Swing Loan.

§3.4 Partial Prepayments . Each partial prepayment of the Loans under §3.3 shall be in a minimum amount of $1,000,000.00 or an integral multiple of $100,000.00 in excess thereof, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment. Each partial payment under §§3.2 and 3.3 shall be applied first to the principal of any Outstanding Swing Loans, then, in the absence of instruction by the Borrower, to the principal of Revolving Credit Loans (and with respect to each category of Loans, first to the principal of Base Rate Loans, and then to the principal of LIBOR Rate Loans).

§3.5 Effect of Prepayments . Amounts of the Revolving Credit Loans prepaid under §§3.2 and 3.3 prior to the Maturity Date may be reborrowed as provided in (but subject to the terms of) §2.

§4.	CERTAIN GENERAL PROVISIONS.

§4.1 Conversion Options .

(a) The Borrower may elect from time to time to convert any of its outstanding Revolving Credit Loans to a Revolving Credit Loan of another Type and such Revolving Credit Loans shall thereafter bear interest as a Base Rate Loan or a LIBOR Rate Loan, as applicable; provided that (i) with respect to any such conversion of a LIBOR Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least one (1) Business Day’s prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such LIBOR Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Agent at least three (3) LIBOR Business Days’ prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $1,000,000.00 or an integral multiple of $250,000.00 in excess thereof and, after giving effect to the making of such Loan, there shall be no more than six (6) LIBOR Rate Loans outstanding at any one time; and (iii) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Revolving Credit Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Base Rate Loan in a principal amount of less than $1,000,000.00 or an integral multiple of $250,000.00 or a LIBOR Rate Loan in a principal amount of less than $1,000,000.00 or an integral multiple of $1,000,000.00. On the date on which such conversion is being made, each Lender shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. Each Conversion/Continuation Request relating to the conversion of a Base Rate Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower.

(b) Any LIBOR Rate Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the terms of §4.1; provided that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default.

(c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any LIBOR Rate Loan, such Loan shall, subject to compliance with the other terms of this Agreement, be automatically continued at the end of the applicable Interest Period as a LIBOR Rate Loan with a one (1) month Interest Period.

§4.2 Fees . The Borrower agrees to pay to KeyBank, the Agent and KBCM for their own account certain fees for services rendered or to be rendered in connection with the Loans as provided pursuant to that certain fee letter dated as of June 9, 2015 among the REIT, KeyBank and KBCM (the “Agreement Regarding Fees”). Borrower hereby assumes all obligations of REIT under the Agreement Regarding Fees. All such fees shall be fully earned when paid and nonrefundable under any circumstances.

§4.3 Funds for Payments .

(a) All payments of principal, interest, facility fees, Letter of Credit fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Lenders and the Agent, as the case may be, at the Agent’s Head Office, not later than 2:00 p.m. (Cleveland time) on the day when due, in each case in lawful money of the United States in immediately available funds. The Agent is hereby authorized to charge the accounts of the Borrower with KeyBank set forth on Schedule 4.3 , on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Lenders (including the Swing Loan Lender) under the Loan Documents. Subject to the foregoing, all payments made to the Agent on behalf of the Lenders, and actually received by the Agent, shall be deemed received by the Lenders on the date actually received by the Agent.

(b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim, and free and clear of and without deduction or withholding for any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower or other applicable Guarantor shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this §4.3) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c) The Borrower and the Guarantors shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.

(d) The Borrower and the Guarantors shall jointly and severally indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this §4.3) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error; provided that the determinations in such statement are made on a reasonable basis and in good faith.

(e) Each Lender shall severally indemnify the Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower or a Guarantor has not already indemnified the Agent for such Indemnified Taxes and without limiting the obligation of the Borrower and the Guarantors to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of §18.4 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Agent to the Lender from any other source against any amount due to the Agent under this subsection.

(f) As soon as practicable after any payment of Taxes by the Borrower or any Guarantor to a Governmental Authority pursuant to this §4.3, the Borrower or such Guarantor shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.

(g) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Agent, at the time or times reasonably requested by the Borrower or the Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in the immediately following clauses (ii)(A), (ii)(B) and (ii)(D)) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person:

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), an electronic copy (or an original if requested by the Borrower or the Agent) of an executed IRS Form W-9 (or any successor form) certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), whichever of the following is applicable:

(I) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, an electronic copy (or an original if requested by the Borrower or the Agent) of an executed IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(II) an electronic copy (or an original if requested by the Borrower or the Agent) of an executed IRS Form W-8ECI;

(III) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit K-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN; or

(IV) to the extent a Foreign Lender is not the beneficial owner, an electronic copy (or an original if requested by the Borrower or the Agent) of an executed IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-2 or Exhibit K-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-4 on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), an electronic copy (or an original if requested by the Borrower or the Agent) of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Agent at the time or times prescribed by Applicable Law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Agent in writing of its legal inability to do so.

(h) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this §4.3 (including by the payment of additional amounts pursuant to this §4.3), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this §4.3 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this subsection (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund has not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it reasonably deems confidential) to the indemnifying party or any other Person.

(i) Each party’s obligations under this §4.3 shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

(j) The obligations of the Borrower to the Lenders under this Agreement with respect to Letters of Credit (and of the Lenders to make payments to the Issuing Lender with respect to Letters of Credit and to the Swing Loan Lender with respect to Swing Loans) shall be

absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of this Agreement, any Letter of Credit or any of the other Loan Documents; (ii) any improper use which may be made of any Letter of Credit or any improper acts or omissions of any beneficiary or transferee of any Letter of Credit in connection therewith; (iii) the existence of any claim, set-off, defense or any right which the Borrower or any of its Subsidiaries or Affiliates may have at any time against any beneficiary or any transferee of any Letter of Credit (or persons or entities for whom any such beneficiary or any such transferee may be acting) or the Lenders (other than the defense of payment to the Lenders in accordance with the terms of this Agreement) or any other person, whether in connection with any Letter of Credit, this Agreement, any other Loan Document, or any unrelated transaction; (iv) any draft, demand, certificate, statement or any other documents presented under any Letter of Credit proving to be insufficient, forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (v) any breach of any agreement between the Borrower or any of its Subsidiaries or Affiliates and any beneficiary or transferee of any Letter of Credit; (vi) any irregularity in the transaction with respect to which any Letter of Credit is issued, including any fraud by the beneficiary or any transferee of such Letter of Credit; (vii) payment by the Issuing Lender under any Letter of Credit against presentation of a sight draft, demand, certificate or other document which does not comply with the terms of such Letter of Credit, provided that such payment shall not have constituted gross negligence or willful misconduct on the part of the Issuing Lender as determined by a court of competent jurisdiction after the exhaustion of all applicable appeal periods; (viii) any non-application or misapplication by the beneficiary of a Letter of Credit of the proceeds of such Letter of Credit; (ix) the legality, validity, form, regularity or enforceability of the Letter of Credit; (x) the failure of any payment by the Issuing Lender to conform to the terms of a Letter of Credit (if, in the Issuing Lender’s good faith judgment, such payment is determined to be appropriate); (xi) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; (xii) the occurrence of any Default or Event of Default; and (xiii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

§4.4 Computations . All computations of interest on the Base Rate Loans to the extent applicable shall be based on a three hundred sixty-five (365) or three hundred sixty-six (366)-day year, as applicable, and paid for the actual number of days elapsed. All other computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term “Interest Period” with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The Outstanding Loans and Letter of Credit Liabilities as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount absent manifest error.

§4.5 Suspension of LIBOR Rate Loans . In the event that, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent shall determine that adequate and reasonable methods do not exist for ascertaining LIBOR for such Interest Period, or the Agent shall reasonably determine that LIBOR will not accurately and fairly reflect the cost of the

Lenders making or maintaining LIBOR Rate Loans for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Lenders absent manifest error) to the Borrower and the Lenders. In such event (a) any Loan Request with respect to a LIBOR Rate Loan shall be automatically withdrawn and shall be deemed a request for a Base Rate Loan and (b) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period applicable thereto, become a Base Rate Loan, and the obligations of the Lenders to make LIBOR Rate Loans shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower and the Lenders.

§4.6 Illegality . Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other Governmental Authority having jurisdiction over a Lender or its LIBOR Lending Office shall assert that it is unlawful, for any Lender to make or maintain LIBOR Rate Loans, such Lender shall forthwith give notice of such circumstances to the Agent and the Borrower and thereupon (a) the commitment of the Lenders to make LIBOR Rate Loans shall forthwith be suspended and (b) the LIBOR Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law. Notwithstanding the foregoing, before giving such notice, the applicable Lender shall designate a different lending office if such designation will void the need for giving such notice and will not, in the judgment of such Lender, be otherwise materially disadvantageous to such Lender or increase any costs payable by the Borrower hereunder.

§4.7 Additional Interest . If any LIBOR Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such LIBOR Rate Loan, or if repayment of the Loans has been accelerated as provided in §12.1, or if the Borrower fails to draw down on the first day of the applicable Interest Period any amount as to which the Borrower has elected a LIBOR Rate Loan, the Borrower will pay to the Agent upon demand for the account of the applicable Lenders in accordance with their respective Commitment Percentages (or to the Swing Loan Lender with respect to a Swing Loan), in addition to any amounts of interest otherwise payable hereunder, the Breakage Costs. The Borrower understands, agrees and acknowledges the following: (a) no Lender has any obligation to purchase, sell and/or match funds in connection with the use of LIBOR as a basis for calculating the rate of interest on a LIBOR Rate Loan; (b) LIBOR is used merely as a reference in determining such rate; and (c) the Borrower has accepted LIBOR as a reasonable and fair basis for calculating such rate and any Breakage Costs. The Borrower further agrees to pay the Breakage Costs, if any, whether or not a Lender elects to purchase, sell and/or match funds.

§4.8 Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any present or future Applicable Law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time (or from time to time) hereafter made upon or otherwise issued to any Lender or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), which

affects similarly situated banks or financial institutions generally and is not applicable to a Lender or Agent primarily by reason of such Lender’s or Agent’s particular conduct or condition, shall:

(a) subject any Lender or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Lender’s Commitment, a Letter of Credit or the Loans (other than for Indemnified Taxes, Taxes described in clauses (b) through (d) of the definition of Excluded Taxes, and Connection Income Taxes), or

(b) materially change the basis of taxation (except for changes in taxes on gross receipts, income or profits or its franchise tax) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender under this Agreement or the other Loan Documents, or

(c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law and which are not already reflected in any amounts payable by the Borrower hereunder) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Lender, or

(d) impose on any Lender or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Lender’s Commitment, a Letter of Credit or any class of loans or commitments of which any of the Loans or such Lender’s Commitment forms a part; and the result of any of the foregoing is:

(i) to increase the cost to any Lender, by an amount that such Lender deems to be material, of making, funding, issuing, renewing, extending or maintaining any of the Loans, the Letters of Credit or such Lender’s Commitment, or

(ii) to reduce the amount of principal, interest or other amount payable to any Lender or the Agent hereunder on account of such Lender’s Commitment or any of the Loans or the Letters of Credit, or

(iii) to require any Lender or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Agent from the Borrower hereunder,

then, and in each such case, the Borrower will, within fifteen (15) days of written demand made by such Lender or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or the Agent such additional amounts as such Lender or the Agent shall determine in good faith to be sufficient to compensate such Lender or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Lender and the Agent in determining such amounts may use any reasonable averaging and attribution methods generally applied by such Lender or the Agent.

§4.9 Capital Adequacy . If after the date hereof any Lender determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding liquidity or capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by any Governmental Authority charged with the administration thereof, which affects similarly situated banks or financial institutions generally and is not applicable to a Lender primarily by reason of such Lender’s particular conduct or condition, or (b) compliance by such Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding liquidity or capital adequacy (whether or not having the force of law), has the effect of reducing the return on such Lender’s or such holding company’s capital as a consequence of such Lender’s commitment to make Loans or participate in Letters of Credit hereunder to a level below that which such Lender or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by such Lender to be material, then such Lender may notify the Borrower thereof. The Borrower agrees to pay to such Lender the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Lender of a statement of the amount setting forth the Lender’s calculation thereof. In determining such amount, such Lender may use any reasonable averaging and attribution methods generally applied by such Lender. For purposes of §4.8 and this §4.9, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, publications, orders, guidelines and directives thereunder or issued in connection therewith and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall be deemed to have been adopted and gone into effect after the date hereof regardless of when adopted, enacted or issued.

§4.10 Breakage Costs . The Borrower shall pay all Breakage Costs required to be paid by it pursuant to this Agreement and incurred from time to time by any Lender upon demand within fifteen (15) days from receipt of written notice from the Agent, or such earlier date as may be required by this Agreement.

§4.11 Default Interest; Late Charge . Following the occurrence and during the continuance of any Event of Default, and regardless of whether or not the Agent or the Lenders shall have accelerated the maturity of the Loans, all Loans shall bear interest payable on demand at a rate per annum equal to the sum of the Base Rate plus the Applicable Margin plus four percent (4%) (the “ Default Rate ”), until such amount shall be paid in full (after as well as before judgment), and the fee payable with respect to Letters of Credit shall be increased to a rate equal to four percent (4%) above the Letter of Credit fee that would otherwise be applicable to such time, or if any of such amounts shall exceed the maximum rate permitted by law, then at the maximum rate permitted by law. In addition, the Borrower shall pay a late charge equal to four percent (4%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the other Loan Documents, which is not paid by the Borrower within ten (10) days of the date when due (or, in the case of amounts due at the Maturity Date, within fifteen (15) Business Days of such date).

§4.12 Certificate . A certificate setting forth any amounts payable pursuant to §4.7, §4.8, §4.9, §4.10 or §4.11 and a reasonably detailed explanation of such amounts which are due, submitted by any Lender or the Agent to the Borrower, shall be conclusive in the absence of manifest error, and shall be promptly provided to the Agent and the Borrower upon their written request.

§4.13 Limitation on Interest . Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, all agreements between or among the Borrower, the Guarantors, the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under Applicable Law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under Applicable Law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by Applicable Law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by Applicable Law. This §4.13 shall control all agreements between or among the Borrower, the Guarantors, the Lenders and the Agent.

§4.14 Certain Provisions Relating to Increased Costs . If a Lender gives notice of the existence of the circumstances set forth in §4.8 or any Lender requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of §4.3 (as a result of the imposition of U.S. withholding taxes on amounts paid to such Lender under this Agreement), §4.8 or §4.9, then, upon request of the Borrower, such Lender, as applicable, shall use reasonable efforts in a manner consistent with such institution’s practice in connection with loans like the Loan of such Lender to eliminate, mitigate or reduce amounts that would otherwise be payable by the Borrower under the foregoing provisions, provided that such action would not be otherwise prejudicial to such Lender, including, without limitation, by designating another of such Lender’s offices, branches or affiliates; the Borrower agreeing to pay all reasonably incurred costs and expenses incurred by such Lender in connection with any such action. Notwithstanding anything to the contrary contained herein, if no Default or Event of Default shall have occurred and be continuing, and if any Lender has given notice of the existence of the circumstances set forth in §4.8 or has requested payment or compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of §4.3 (as a result of the imposition of U.S. withholding taxes on amounts paid to such Lender under this Agreement), §4.8 or §4.9 and following the request of the Borrower has been unable to take the steps described above to mitigate such amounts (each, an “ Affected Lender ”), then, within thirty (30) days after such notice or request for payment or compensation, the Borrower shall have the one-time right as to such Affected Lender, to be exercised by delivery of written notice delivered to the Agent and the Affected Lender within thirty (30) days of receipt of such notice, to elect to

cause the Affected Lender to transfer its Commitment. The Agent shall promptly notify the remaining Lenders that each of such Lenders shall have the right, but not the obligation, to acquire a portion of the Commitment, pro rata based upon their relevant Commitment Percentages, of the Affected Lender (or if any of such Lenders does not elect to purchase its pro rata share, then to such remaining Lenders in such proportion as approved by the Agent). In the event that the Lenders do not elect to acquire all of the Affected Lender’s Commitment, then the Agent shall endeavor to obtain a new Lender to acquire such remaining Commitment. Upon any such purchase of the Commitment of the Affected Lender, the Affected Lender’s interest in the Obligations and its rights hereunder and under the Loan Documents shall terminate at the date of purchase, and the Affected Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest. The purchase price for the Affected Lender’s Commitment shall equal any and all amounts outstanding and owed by the Borrower to the Affected Lender including principal, prepayment premium or fee, and all accrued and unpaid interest or fees.

§5.	COLLATERAL SECURITY; GUARANTORS.

§5.1 Collateral . The Obligations shall be secured by a perfected first priority lien and security interest to be held by the Agent for the benefit of the Lenders on the Collateral, pursuant to the terms of the Security Documents.

§5.2 Appraisal .

(a) [Intentionally Omitted.]

(b) The Agent may obtain new Appraisals or an update to existing Appraisals with respect to the Borrowing Base Properties, or any of them, as the Agent shall determine (i) at any time that the regulatory requirements of any Lender generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Lender shall require more frequent Appraisals, (ii) at any time following an Event of Default, or (iii) if the Agent reasonably believes that there has been a material adverse change or deterioration with respect to any Borrowing Base Property, including, without limitation, a material change in the market in which any Borrowing Base Property is located. The expense of such Appraisals and/or updates performed pursuant to this §5.2(b) shall be borne by the Borrower and payable to the Agent within ten (10) days of demand; provided the Borrower shall not be obligated to pay for an Appraisal of a Borrowing Base Property obtained pursuant to this §5.2(b) more often than once in any period of twelve (12) months if no Event of Default exists.

(c) The Borrower acknowledges that the Agent has the right to approve any Appraisal performed pursuant to this Agreement. The Borrower further agrees that the Lenders and the Agent do not make any representations or warranties with respect to any such Appraisal and shall have no liability as a result of or in connection with any such Appraisal for statements contained in such Appraisal, including without limitation, the accuracy and completeness of information, estimates, conclusions and opinions contained in such Appraisal, or variance of such Appraisal from the fair value of such property that is the subject of such Appraisal given by the local tax assessor’s office, or the Borrower’s idea of the value of such property.

§5.3 Addition of Borrowing Base Assets . Provided no Default or Event of Default exists, the Borrower shall have the right, subject to the consent of the Agent and the Required Lenders (which consent may be withheld in their sole and absolute discretion) and the satisfaction by the Borrower of the conditions set forth in this §5.3, to add Potential Collateral to the Borrowing Base Availability. In the event the Borrower desires to add additional Potential Collateral to the Borrowing Base Availability as aforesaid, the Borrower shall provide written notice to the Agent of such request. No Potential Collateral shall be included in the calculation of the Borrowing Base Availability unless and until the following conditions precedent shall have been satisfied as determined by Agent (or as required by this Agreement, the Required Lenders):

(a) if such Potential Collateral is to be a Borrowing Base Property, such Potential Collateral shall be Eligible Real Estate;

(b) if such Potential Collateral is to be a Borrowing Base Loan, such Borrowing Base Loan shall be secured by Eligible Real Estate and Borrower or a Wholly-Owned Subsidiary of Borrower shall own all right, title and interest in such loan;

(c) if such Potential Collateral is owned by a Wholly-Owned Subsidiary of the Borrower, said Wholly-Owned Subsidiary shall have executed a Joinder Agreement and satisfied the conditions of §5.5;

(d) prior to or contemporaneously with such addition, the Borrower shall have submitted to the Agent a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under §6.4 or §7.4 and a Borrowing Base Certificate, both prepared on a pro forma basis and adjusted to give effect to such addition, and shall certify that after giving effect to such addition, no Default or Event of Default shall exist;

(e) the Borrower or the Wholly-Owned Subsidiary which is the owner of the Potential Collateral shall have executed and delivered to the Agent all applicable Eligible Real Estate Qualification Documents, all of which instruments, documents or agreements shall be in form and substance reasonably satisfactory to the Agent;

(f) after giving effect to the inclusion of such Potential Collateral, each of the representations and warranties made by or on behalf of the Borrower or the Guarantors or any of their respective Subsidiaries contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true in all material respects both as of the date as of which it was made and shall also be true as of the time of the addition of a Borrowing Base Asset in the calculation of the Borrowing Base Availability, with the same effect as if made at and as of that time, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date), and no Default or Event of Default shall have occurred and be continuing (including, without limitation, any Default under §9.1, §9.6, §9.7, §9.8, §9.9, §9.10 or §9.11), and the Agent shall have received a certificate of the Borrower to such effect; and

(g) the Agent and the Required Lenders, as required above, shall have consented to the inclusion of such Real Estate or Borrowing Base Loan as a Borrowing Base Asset, which consent may be granted in the Agent’s and Lenders’ sole and absolute discretion.

§5.4 Release of Borrowing Base Assets . Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this §5.4) (other than a Default or Event of Default that would be cured by effectuating such release as provided in §12.2(b)), the Agent shall release a Borrowing Base Asset from the lien or security title of the Security Documents encumbering the same (and if such Borrowing Base Asset is a Borrowing Base Property, such release shall include the Equity Interests in the applicable Subsidiary Guarantor) upon the request of the Borrower in connection with a sale or other permanent disposition or refinancing of such Borrowing Base Asset subject to and upon the following terms and conditions:

(a) the Borrower shall deliver to the Agent written notice of its desire to obtain such release no later than ten (10) days prior to the date on which such release is to be effected;

(b) the Borrower shall submit to the Agent with such request a Compliance Certificate and Borrowing Base Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under §6.4 or §7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release;

(c) all release documents to be executed by the Agent shall be in form and substance reasonably satisfactory to the Agent;

(d) the Borrower shall pay all reasonable out-of-pocket costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney’s fees;

(e) the Borrower shall pay to the Agent for the account of the Lenders a release price, which payment shall be applied to reduce the outstanding principal balance of the Loans as provided in §3.4, in an amount equal to the amount necessary to reduce the outstanding principal balance of the Loans so that no violation of the covenants set forth in §§3.2 or 9.1 shall occur;

(f) without limiting or affecting any other provision hereof, any release of a Borrowing Base Asset will not cause the Borrower to be in violation of the restrictions set forth in the definition of Borrowing Base Availability or the covenants set forth in this Agreement; and

(g) unless and until the IPO Conditions Satisfaction Date has occurred as provided in this Agreement, the Agent and the Required Lenders shall have consented to the release of such Borrowing Base Asset from the Collateral, which consent may be withheld in the Agent’s and Required Lender’s sole and absolute discretion.

§5.5 Additional Guarantors . In the event that the Borrower shall request that certain Real Estate or a Borrowing Base Loan of a Wholly-Owned Subsidiary of the Borrower be included as a Borrowing Base Asset as contemplated by §5.3 and such Real Estate or a Borrowing Base Loan is included as a Borrowing Base Asset in accordance with the terms hereof, the Borrower shall, as a condition to such Real Estate or a Borrowing Base Loan being included as a Borrowing Base Asset, cause each such Wholly-Owned Subsidiary, and any other Subsidiary of Borrower which owns an interest in such Wholly-Owned Subsidiary, to execute and deliver to the Agent a Joinder Agreement, and such Subsidiary or Subsidiaries, as applicable, shall become a Guarantor hereunder and thereunder. In addition, in the event any Subsidiary of the Borrower shall constitute a Material Subsidiary, the Borrower shall promptly cause such Subsidiary to execute and deliver to Agent a Joinder Agreement, and such Subsidiary shall become a Guarantor hereunder and thereunder. Each such Subsidiary shall be specifically authorized, in accordance with its respective organizational documents, to be a Guarantor hereunder and thereunder and to execute the Contribution Agreement and such Security Documents as the Agent may require. The Borrower shall further cause all representations, covenants and agreements in the Loan Documents with respect to the Guarantors to be true and correct with respect to each such Subsidiary. In connection with the delivery of such Joinder Agreement, the Borrower shall deliver to the Agent such organizational agreements, resolutions, consents, opinions and other documents and instruments as the Agent may reasonably require.

§5.6 Release of Certain Guarantors .

(a) In the event that all Borrowing Base Loans owned by a Subsidiary Guarantor shall have been released as Collateral for the Obligations and Hedge Obligations in accordance with the terms of this Agreement and all Borrowing Base Properties owned by such Subsidiary Guarantor have been removed from the calculation of Borrowing Base Availability and the lien and security interest in the Equity Interests in such Subsidiary Guarantor have been released as Collateral for the Obligations and Hedge Obligations in accordance with the terms of this Agreement, then such Subsidiary Guarantor shall be released by Agent from liability under this Agreement.

(b) The Borrower may request in writing that the Agent release, and upon receipt of such request the Agent shall release (subject to the terms hereof), a Subsidiary Guarantor that is a Guarantor solely by virtue of being a Material Subsidiary from the Guaranty so long as: (i) no Default or Event of Default shall then be in existence or would occur as a result of such release; (ii) the Agent shall have received such written request at least five (5) Business Days prior to the requested date of release; (iii) such Subsidiary Guarantor is not the direct or indirect owner or lessee of a Borrowing Base Property or of a Borrowing Base Loan; (iv) the Borrower shall deliver to Agent evidence reasonably satisfactory to Agent that (A) the Borrower has disposed of or simultaneously with such release will dispose of its entire interest in such Guarantor or that all of the assets of such Guarantor will be disposed of in compliance with the terms of this Agreement, and if such transaction involves the disposition by such Guarantor of all of its assets, the net cash proceeds, if any, from such disposition are being distributed to the Borrower in connection with such disposition, or (B) such Guarantor will be the borrower with respect to Secured Debt that is not prohibited under this Agreement, which Indebtedness will be secured by a Lien on the assets of such Guarantor, or (C) the Borrower has contributed or simultaneously with such release will contribute its entire direct or indirect interest in such

Guarantor to an Unconsolidated Affiliate or a Subsidiary which is not a Wholly Owned Subsidiary or that such Guarantor will be contributing all of its assets to an Unconsolidated Affiliate or a Subsidiary which is not a Wholly Owned Subsidiary in compliance with the terms of this Agreement, or (D) such Guarantor is an Excluded Subsidiary; and (v) the IPO Conditions Satisfaction Date shall have occurred. Delivery by the Borrower to the Agent of any such request for a release shall constitute a representation by the Borrower that the matters set forth in the preceding sentence (both as of the date of the giving of such request and as of the date of the effectiveness of such request) are true and correct with respect to such request.

§5.7 Additional Collateral .

(a) In the event that the REIT or any of its Subsidiaries acquires any asset that is not a Borrowing Base Asset, then contemporaneously with such acquisition if proceeds of the Loan are used to acquire such asset, or otherwise within thirty (30) days of such acquisition, Borrower shall cause REIT or such Subsidiary to execute and deliver to the Agent on behalf of the Lenders a first-priority perfected collateral assignment of all of such Person’s right, title and interest in such asset. If such asset is a Medical Property, such pledge shall be substantially in the form of the Assignment of Interests, with such other changes thereto as may be reasonably required by the Agent, and the Person owning such asset shall provide an Acknowledgement. In the event that such asset is a loan, such pledge shall be a first-priority perfected collateral assignment of all of such Person’s right, title and interest in and to the loan documents and other rights and privileges relating thereto, such assignment to be substantially in the form of the Assignment of Documents, with such other changes thereto as may be reasonably required by the Agent. In the event that such asset is any other type of asset, Borrower shall cause to be executed and delivered to Agent simultaneously with such acquisition, a first-priority perfected collateral assignment of such assets pursuant to such documents as Agent may reasonably require. Borrower shall further cause to be delivered to Agent such diligence items, searches, certificates, resolutions, financing statements, opinions, and other items as Agent may require.

(b) In the event that the IPO Conditions Satisfaction Date shall not have occurred on or before December 31, 2015 (or such later date if extended in accordance with this Agreement), Borrower shall, within fifteen (15) days of request of Agent, transfer to KeyBank all operating, deposit and collection accounts of Borrower and its Subsidiaries and grant to Agent for the benefit of the Lenders a first-priority perfected lien and security interest in all such accounts pursuant to such documentation as Agent may reasonably require, which security agreement shall provide that such funds shall be released to Borrower provided that there is no Event of Default.

(c) In the event that the IPO Conditions Satisfaction Date shall have occurred, and provided no Default or Event of Default exists, Agent shall release the Collateral pledged pursuant to this §5.7 from the lien and security interest of the Security Documents.

§5.8 Release of Collateral . Upon the refinancing or repayment of the Obligations in full and termination of the obligation to provide additional Loans or issue Letters of Credit to

Borrower, then the Agent shall release the Collateral from the lien and security interest of the Security Documents and to release the Borrower and Guarantors (other than with respect to obligations that survive termination of this Agreement), provided that Agent has not received a written notice from the Representative or the holder of the Hedge Obligations that any Hedge Obligation is then due and payable to the holder thereof.

§6.	REPRESENTATIONS AND WARRANTIES.

The Borrower represents and warrants to the Agent and the Lenders as follows.

§6.1 Corporate Authority, Etc.

(a) Incorporation; Good Standing . REIT is a Maryland corporation duly organized pursuant to Articles of incorporation filed with the Maryland Secretary of State, and is validly existing and in good standing under the laws of Maryland. REIT conducts its business in a manner which enables it to qualify as a real estate investment trust under, and to be entitled to the benefits of, Section 856 of the Code, and has elected to be treated as and is entitled to the benefits of a real estate investment trust thereunder. The Borrower is a Delaware limited partnership duly organized pursuant to its certificate of limited partnership filed with the Delaware Secretary of State, and is validly existing and in good standing under the laws of Delaware. The Borrower (i) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated, and (ii) is in good standing and is duly authorized to do business in the jurisdiction of its organization and where a Borrowing Base Property owned by it or the property subject to a Borrowing Base Loan owned by it is located (to the extent required by Applicable Law) and in each other jurisdiction where a failure to be so qualified in such other jurisdiction could have a Material Adverse Effect.

(b) Subsidiaries . Each of the Guarantors and each of the Subsidiaries of the Borrower and the Guarantors (i) is a corporation, limited partnership, general partnership, limited liability company or trust duly organized under the laws of its State of organization and is validly existing and in good standing under the laws thereof, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing and is duly authorized to do business in each jurisdiction where it is organized and where a Borrowing Base Property owned by it or the property subject to a Borrowing Base Loan owned by it is located (to the extent required by Applicable Law) and in each other jurisdiction where a failure to be so qualified could reasonably be expected to have a Material Adverse Effect.

(c) Authorization . The execution, delivery and performance of this Agreement and the other Loan Documents to which any of the Borrower or any Guarantor is a party and the transactions contemplated hereby and thereby (i) are within the authority of such Person, (ii) have been duly authorized by all necessary proceedings on the part of such Person, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which such Person is subject or any judgment, order, writ, injunction, license or permit applicable to such Person, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the partnership agreement, articles of incorporation or other charter documents or

bylaws of, or any agreement or other instrument binding upon, such Person or any of its properties, (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of such Person other than the liens and encumbrances in favor of the Agent contemplated by this Agreement and the other Loan Documents, and (vi) do not require the approval or consent of any Person other than those already obtained and delivered to the Agent.

(d) Enforceability . The execution and delivery of this Agreement and the other Loan Documents to which any of the Borrower or any Guarantor is a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and general principles of equity.

§6.2 Governmental Approvals . The execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower or any Guarantor is a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing or registration with, or the giving of any notice to, any court, department, board, governmental agency or authority other than those already obtained, the filing of the Security Documents in the appropriate records office with respect thereto, and filings after the date hereof of disclosures with the SEC.

§6.3 Title to Properties . Except as indicated on Schedule 6.3 hereto, REIT and its Subsidiaries own or lease all of the assets reflected in the consolidated balance sheet of the REIT as of the Balance Sheet Date or acquired or leased since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date) subject to no rights of others, including any mortgages, leases pursuant to which REIT or any of its Subsidiaries or any of their respective Affiliates is the lessee, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens.

§6.4 Financial Statements . The Borrower has furnished to the Agent: (a) the consolidated balance sheet of REIT and its Subsidiaries as of the Balance Sheet Date and the related consolidated statement of income and cash flow as of the Balance Sheet Date certified by the chief financial officer of REIT, (b) an unaudited statement of Net Operating Income for the period ending March 31, 2015, reasonably satisfactory in form to the Agent and certified by the chief financial officer of REIT as fairly presenting the Net Operating Income for such periods, and (c) certain other financial information relating to the Borrower, the Guarantors and the Collateral, including, without limitation, the Borrowing Base Assets. The balance sheet and statements referred to in clauses (a) and (b) above have been prepared in accordance with generally accepted accounting principles and fairly present the consolidated financial condition of REIT and its Subsidiaries as of such dates and the consolidated results of the operations of REIT and its Subsidiaries for such periods. There are no liabilities, contingent or otherwise, of REIT or any of its Subsidiaries involving material amounts not disclosed in said financial statements and the related notes thereto.

§6.5 No Material Changes . Since the Balance Sheet Date or the date of the most recent financial statements delivered pursuant to §7.4, as applicable, there has occurred no materially

adverse change in the financial condition, prospects, operations or business of REIT and its Subsidiaries taken as a whole as shown on or reflected in the consolidated balance sheet of REIT as of the Balance Sheet Date, or its consolidated statement of income or cash flows as of the Balance Sheet Date, other than changes in the ordinary course of business that have not and could not reasonably be expected to have a Material Adverse Effect. As of the date hereof, except as set forth on Schedule 6.5 hereto, there has occurred no materially adverse change in the financial condition, prospects, operations or business activities of REIT, its Subsidiaries or any of the Borrowing Base Assets from the condition shown on the statements of income delivered to the Agent pursuant to §6.4 other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business, prospects, operations or financial condition of REIT and its Subsidiaries, considered as a whole, or of any of the Borrowing Base Assets.

§6.6 Franchises, Patents, Copyrights, Etc. The Borrower, the Guarantors and their respective Subsidiaries possess all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others. Except as set forth on Schedule 6.6 hereto, none of the Borrowing Base Assets is owned or operated by the Borrower or its Subsidiaries under or by reference to any trademark, trade name, service mark or logo, and none of the trademarks, tradenames, service marks or logos are registered or subject to any license or provision of law limiting their assignability or use except as specifically set forth on Schedule 6.6 .

§6.7 Litigation . Except as stated on Schedule 6.7 , there are no actions, suits, proceedings or investigations of any kind pending or to the knowledge of the Borrower threatened against the Borrower, any Guarantor or any of their respective Subsidiaries before any court, tribunal, arbitrator, mediator or administrative agency or board which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto, the Collateral or any lien, security title or security interest created or intended to be created pursuant hereto or thereto, or which if adversely determined could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 6.7 , as of the Closing Date there are no judgments, final orders or awards outstanding against or affecting the Borrower, any Guarantor, any of their respective Subsidiaries or any Collateral. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. As of the Closing Date, none of the Borrower, any Guarantor, any of their respective Subsidiaries or, to Borrower’s knowledge, any Operator of any Medical Property, is the subject of an audit by a Governmental Authority or, to the Borrower’s or any Guarantor’s knowledge, any investigation or review by a Governmental Authority concerning the violation or possible violation of any Requirement of Law, including any Healthcare Law.

§6.8 No Material Adverse Contracts, Etc. None of the Borrower, any Guarantor or any of their respective Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a Material Adverse Effect. None of the Borrower, any Guarantor or any of their respective Subsidiaries is a party to any contract or agreement that has or could reasonably be expected to have a Material Adverse Effect.

§6.9 Compliance with Other Instruments, Laws, Etc. None of the Borrower, any Guarantor or any of their respective Subsidiaries is in violation of any provision of its charter or other organizational documents, bylaws, or any agreement or instrument to which it is subject or by which it or any of its properties is bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that has had or could reasonably be expected to have a Material Adverse Effect.

§6.10 Tax Status . Each of the Borrower, the Guarantors and their respective Subsidiaries (a) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject or has obtained an extension for filing, (b) has paid prior to delinquency all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. Except as set forth on Schedule 6.10 , there are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers or partners of such Person know of no basis for any such claim. Except as set forth on Schedule 6.10 , there are no audits pending or to the knowledge of the Borrower threatened with respect to any tax returns filed by the Borrower, any Guarantor or their respective Subsidiaries. The taxpayer identification number for REIT is 46-5477146, the taxpayer identification number for General Partner is 47-1206477, and the taxpayer identification number for the Borrower is 47-1208487.

§6.11 No Event of Default . No Default or Event of Default has occurred and is continuing under this Agreement or, as of the date of this Agreement, the Original Credit Agreement.

§6.12 Investment Company Act . None of the Borrower, the Guarantors or any of their respective Subsidiaries is an “investment company”, or an “affiliated company” or a “principal underwriter” of an “investment company”, as such terms are defined in the Investment Company Act of 1940.

§6.13 Setoff, Etc. The Collateral and the rights of the Agent and the Lenders with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses by the Borrower or any of their Subsidiaries or, to the actual knowledge of the Borrower, any other Person.

§6.14 Certain Transactions . Except as disclosed on Schedule 6.14 hereto, none of the partners, officers, trustees, managers, members, directors, or employees of the Borrower, any Guarantor or any of their respective Subsidiaries is, nor shall any such Person become, a party to any transaction with the Borrower, any Guarantor or any of their respective Subsidiaries or Affiliates (other than for services as partners, managers, members, employees, officers and directors), including any agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any partner, officer, trustee, director or such employee or, to the knowledge

of the Borrower, any corporation, partnership, trust or other entity in which any partner, officer, trustee, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, which are on terms less favorable to the Borrower, a Guarantor or any of their respective Subsidiaries than those that would be obtained in a comparable arms-length transaction.

§6.15 Employee Benefit Plans . The Borrower, each Guarantor and each ERISA Affiliate has fulfilled its obligation, if any, under the minimum funding standards of ERISA and the Code with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. Neither the Borrower, any Guarantor nor any ERISA Affiliate has (a) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, (b) failed to make any contribution or payment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, or made any amendment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code, or (c) incurred any material liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. None of the assets of REIT or any of its Subsidiaries, including, without limitation, any Borrowing Base Asset, constitutes a “plan asset” of any Employee Plan, Multiemployer Plan or Guaranteed Pension Plan.

§6.16 Disclosure . All of the representations and warranties made by or on behalf of the Borrower, the Guarantors and their respective Subsidiaries in this Agreement and the other Loan Documents or any document or instrument delivered to the Agent or the Lenders pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and neither the Borrower nor any Guarantor has failed to disclose such information as is necessary to make such representations and warranties not misleading. All information contained in this Agreement, the other Loan Documents or prepared by or on behalf of the Borrower, any Subsidiary or any Guarantor and otherwise furnished to or made available to the Agent or the Lenders by or on behalf of the Borrower, any Subsidiary or any Guarantor, as supplemented to date, is and, when delivered, will be true and correct in all material respects and, as supplemented to date, does not, and when delivered will not, contain any untrue statement of a material fact or omit to state a material fact known to Borrower or any Guarantor necessary to make the statements contained therein not misleading. The written information, reports and other papers and data with respect to the Borrower, any Subsidiary, any Guarantor or the Collateral, including, without limitation, the Borrowing Base Assets (other than projections and estimates) prepared by or on behalf of the Borrower, a Subsidiary or a Guarantor and furnished to the Agent or the Lenders in connection with this Agreement or the obtaining of the Commitments of the Lenders hereunder was, at the time so furnished, complete and correct in all material respects, or has been subsequently supplemented by other written information, reports or other papers or data, to the extent necessary to give in all material respects a true and accurate knowledge of the subject matter in all material respects; provided that such representation shall not apply to (a) the accuracy of any appraisal, title commitment, survey, or engineering and environmental reports prepared by third parties or legal conclusions or analysis provided by the Borrower’s or the Guarantors’ counsel (although the Borrower and the Guarantors have no

reason to believe that the Agent and the Lenders may not rely on the accuracy thereof) or (b) budgets, projections and other forward-looking speculative information prepared in good faith by the Borrower (except to the extent the related assumptions were when made manifestly unreasonable).

§6.17 Trade Name; Place of Business . Neither the Borrower nor any Guarantor uses any trade name and conducts business under any name other than its actual name set forth in the Loan Documents. The principal place of business of the Borrower is 3100 West End Avenue, Suite 1000, Nashville, Tennessee 37203.

§6.18 Regulations T, U and X . No portion of any Loan is to be used for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224. Neither the Borrower nor any Guarantor is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224.

§6.19 Environmental Compliance . The Borrower has obtained and provided to the Agent, or in the case of Borrowing Base Properties acquired after the date hereof will obtain and provide to the Agent, written environmental site assessment reports of the Environmental Engineer (collectively, the “ Environmental Reports ”). Except as set forth in the Environmental Reports with respect to Borrowing Base Properties or as disclosed on Schedule 6.19 attached hereto, the Borrower makes the following representations and warranties:

(a) None of the Borrower, the Guarantors or their respective Subsidiaries nor, to the best knowledge of the Borrower, any operator of the Real Estate, nor any tenant or operations thereon, is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under any Environmental Law, which violation (i) involves Real Estate (other than the Borrowing Base Properties) and has had or could reasonably be expected to have a Material Adverse Effect or (ii) involves a Borrowing Base Property.

(b) None of the Borrower, any Guarantor nor any of their respective Subsidiaries has received notice from any third party including, without limitation, any Governmental Authority, (i) that it has been identified by the United States Environmental Protection Agency (“ EPA ”) as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any Hazardous Substance(s) which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower, any Guarantor or any of their respective Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances, which in any case (i) involves Real Estate (other than the Borrowing Base Properties) and has had or could reasonably be expected to have a Material Adverse Effect or (ii) involves a Borrowing Base Property.

(c) (i) Since the date of acquisition of title to the Real Estate by the Borrower, the Guarantors or their respective Subsidiaries, and to the best knowledge of the Borrower, prior to the date of acquisition, no portion of the Real Estate has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws, and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate except those which are being operated and maintained in compliance with Environmental Laws; (ii) in the course of any activities conducted by the Borrower, the Guarantors, their respective Subsidiaries or, to the best knowledge of Borrower, the tenants and operators of their properties, no Hazardous Substances have been generated or are being used on the Real Estate except in the ordinary course of the Borrower’s, the Guarantors’ and their respective Subsidiaries’, or the tenants’ or operators’ of the Real Estate, respective businesses and in accordance with applicable Environmental Laws; (iii) since the date of acquisition of title to the Real Estate by the Borrower, the Guarantors or their respective Subsidiaries, and to the best knowledge of the Borrower, prior to the date of acquisition, there has been no past or present Release or threatened Release of Hazardous Substances on, upon, into or from the Real Estate; (iv) to the best knowledge of Borrower, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on the Real Estate; and (v) since the date of acquisition of title to the Real Estate by the Borrower, the Guarantors or their respective Subsidiaries, and to the best knowledge of the Borrower, prior to the date of acquisition, any Hazardous Substances that have been generated on any of the Real Estate have been transported off-site in accordance with all applicable Environmental Laws (except with respect to the foregoing in this §6.19(c) as to any Real Estate (other than the Borrowing Base Properties) where the foregoing has not had or could not reasonably be expected to have a Material Adverse Effect).

(d) None of the Borrower, the Guarantors, their respective Subsidiaries nor the Real Estate is subject to any applicable Environmental Law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement in each case by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the effectiveness of any other transactions contemplated hereby, except for such matters with which the Borrower, the Guarantors, their respective Subsidiaries shall have complied with as of the Closing Date.

(e) There are no existing or closed sanitary landfills, solid waste disposal sites, or hazardous waste treatment, storage or disposal facilities (i) on or affecting the Real Estate (other than the Borrowing Base Properties) except where such existence has not had or could not be reasonably be expected to have a Material Adverse Effect, or (ii) on or affecting a Borrowing Base Property.

(f) There has been no written claim against the Borrower, the Guarantors or their respective Subsidiaries or to the knowledge of Borrower, against any other Person, by any party that any use, operation, or condition of the Real Estate has caused any nuisance or any other liability or adverse condition on any other property, nor is there any basis for such a claim.

§6.20 Subsidiaries; Organizational Structure . Schedule 6.20(a) sets forth, as of the date hereof, all of the Subsidiaries of REIT, the form and jurisdiction of organization of each of the Subsidiaries, and REIT’s direct and indirect ownership interests therein. Schedule 6.20(b) sets forth, as of the date hereof, all of the Unconsolidated Affiliates of the REIT and its Subsidiaries, the form and jurisdiction of organization of each of the Unconsolidated Affiliates, REIT’s or its Subsidiary’s ownership interest therein and the other owners of the applicable Unconsolidated Affiliate. No Person owns any legal, equitable or beneficial interest in any of the Persons set forth on Schedules 6.20(a) and 6.20(b) except as set forth on such Schedules.

§6.21 Leases . The Borrower has delivered to the Agent true copies of the Leases and any amendments thereto relating to each Borrowing Base Property required to be delivered as a part of the Eligible Real Estate Qualification Documents, and with respect to each Borrowing Base Property as of the date hereof, such Leases remain the sole Leases with respect to such Borrowing Base Properties and have not been amended except in accordance with the Original Credit Agreement. An accurate and complete Rent Roll as of the date of inclusion of each Borrowing Base Property in Borrowing Base Availability with respect to all Leases of any portion of the Borrowing Base Property has been provided to the Agent (except with respect to each Borrowing Base Property that is leased to a single tenant under a triple-net lease, the lease has been provided to Agent in lieu of a Rent Roll). The Leases reflected on such Rent Roll constitute as of the date thereof the sole agreements relating to leasing or licensing of space at such Borrowing Base Property and in the Building relating thereto. Except as reflected on such Rent Roll or on Schedule 6.21 no tenant under any Lease is entitled to any free rent, partial rent, rebate of rent payments, credit, offset or deduction in rent, including, without limitation, lease support payments, lease buy-outs or abatements or credits. Except as set forth in Schedule 6.21 , the Leases reflected therein are, as of the date of inclusion of the applicable Borrowing Base Property in Borrowing Base Availability or with respect to each Borrowing Base Property as of the date of this Agreement, as of the date of this Agreement, in full force and effect in accordance with their respective terms, without any payment default or any other material default thereunder, nor are there any defenses, counterclaims, offsets, concessions or rebates available to any tenant thereunder, and, except as reflected in Schedule 6.21 , neither the Borrower nor any Guarantor has given or made, any notice of any payment or other material default, or any claim, which remains uncured or unsatisfied, with respect to any of the Leases, and to the best of the knowledge and belief of the Borrower, there is no basis for any such claim or notice of default by any tenant. Except as reflected in Schedule 6.21 , no property, other than the Borrowing Base Property which is the subject of the applicable Lease, is necessary to comply with the requirements (including, without limitation, parking requirements) contained in such Lease.

§6.22 Property . Except as set forth on Schedule 6.22 and the property condition reports for the initial Borrowing Base Properties delivered to the Agent on or before the Closing Date, (i) all of the Borrowing Base Properties, and all major building systems located thereon, are structurally sound, in good condition and working order and free from material defects, subject to ordinary wear and tear, (ii) all of the other Real Estate of the Borrower, the Guarantors and their respective Subsidiaries is structurally sound, in good condition and working order, subject to ordinary wear and tear, except where such defects have not had and could not reasonably be

expected to have a Material Adverse Effect, (iii) the Real Estate, and the use and operation thereof, is in material compliance with all applicable federal and state law and governmental regulations and any local ordinances, orders or regulations, including without limitation, laws, regulations and ordinances relating to zoning, building codes, subdivision, fire protection, health, safety, handicapped access, historic preservation and protection, wetlands and tidelands (but excluding for purposes of this §6.22, Environmental Laws) except where a failure to so comply as to Real Estate other than the Borrowing Base Properties has not and could not reasonably be expected to have a Material Adverse Effect, (iv) all utilities necessary for the use and operation of the Borrowing Base Properties are installed to the property lines of the Borrowing Base Properties through dedicated public rights of way or through perpetual private easements approved by the Agent and, except in the case of drainage facilities, are connected to the Building located thereon with valid permits and are adequate to service the Building in compliance with Applicable Law, (v) the streets abutting the Borrowing Base Properties are dedicated and accepted public roads, to which the Borrowing Base Properties have direct access (or indirect access via recorded easements that are insured without exception pursuant to the related Title Policy) by motor vehicles and by foot, or are perpetual private ways (with direct access by motor vehicles and by foot to public roads) to which the Borrowing Base Properties have direct access approved by the Agent (or indirect access via recorded easements that are insured without exception pursuant to the related Title Policy), (vi) there are no unpaid or outstanding real estate or other taxes or assessments on or against any of the Real Estate which are payable by the Borrower, any Guarantor or any of their respective Subsidiaries (except only real estate or other taxes or assessments, that are not yet delinquent or are being protested as permitted by this Agreement), (viii) each Real Estate asset is separately assessed for purposes of real estate tax assessment and payment, (ix) there are no unpaid or outstanding real estate or other taxes or assessments on or against any other property of the Borrower, the Guarantors or any of their respective Subsidiaries which are payable by any of such Persons in any material amount (except only real estate or other taxes or assessments, that are not yet delinquent or are being protested as permitted by this Agreement), (x) as of the date of inclusion of any Real Estate as a Borrowing Base Property, there are no pending, or to the knowledge of the Borrower, threatened or contemplated, eminent domain proceedings against any Borrowing Base Asset or any material portion of any other Real Estate, (xi) none of the Borrowing Base Properties or any material portion of any other Real Estate is now damaged as a result of any fire, explosion, accident, flood or other casualty, (xii) none of the Borrower, the Guarantors or any of their respective Subsidiaries has received any outstanding notice from any insurer or its agent requiring performance of any work with respect to any of the Real Estate or canceling or threatening to cancel any policy of insurance, and each of the Real Estate assets complies with the material requirements of all of the Borrower’s, Guarantors’ and their respective Subsidiaries’ insurance carriers, (xiii) no person or entity has any right or option to acquire any Real Estate or any Building thereon or any portion thereof or interest therein, except for certain tenants of such Real Estate not constituting Borrowing Base Properties pursuant to the terms of their Leases or, with respect to Borrowing Base Properties, as disclosed to Agent in writing prior to acceptance of such Real Estate as a Borrowing Base Property, (xiv) neither the Borrower nor any Guarantor is a party to any Management Agreements or Operating Agreements for any of the Borrowing Base Properties except as has been delivered to the Agent, (xv) there are no material defaults or material claims or any bases for material defaults or material claims in respect of any Borrowing Base Property or its operation by any party to any service agreement or Management Agreement

or Operating Agreement, and (xvi) there are no material agreements not otherwise terminable upon thirty (30) days’ notice pertaining to any Borrowing Base Property, any Building thereon or the operation or maintenance of either thereof other than as described in this Agreement (including the Schedules hereto) or, as applicable, the Title Policies.

§6.23 Brokers . None of REIT nor any of its Subsidiaries has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder.

§6.24 Other Debt . As of the date of this Agreement, (a) none of the Borrower, any Guarantor nor any of their respective Subsidiaries is in default of (i) the payment of any Indebtedness, the performance of any related agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of them is a party, and (b) no Indebtedness of the Borrower, any Guarantor or any of their respective Subsidiaries has been accelerated. Neither the Borrower nor any Guarantor is a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time or payment of any of the Obligations to any other indebtedness or obligation of the Borrower or any Guarantor. Schedule 6.24 hereto sets forth all agreements, mortgages, deeds of trust, financing agreements or other material agreements binding upon the Borrower and each Guarantor or their respective properties and entered into by the Borrower and/or such Guarantor as of the date of this Agreement with respect to any Indebtedness of the Borrower or any Guarantor in an amount greater than $1,000,000.00, and the Borrower has provided the Agent with such true, correct and complete copies thereof.

§6.25 Solvency . After giving effect to the transactions contemplated by this Agreement and the other Loan Documents, including all Loans made or to be made hereunder, neither the Borrower nor any Guarantor is insolvent on a balance sheet basis such that the sum of such Person’s assets exceeds the sum of such Person’s liabilities, the Borrower and each Guarantor is able to pay its debts as they become due, and the Borrower and each Guarantor has sufficient capital to carry on its business.

§6.26 No Bankruptcy Filing . Neither the Borrower nor any Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or for the liquidation of its assets or property, and the Borrower has no knowledge of any Person contemplating the filing of any such petition against it or any Guarantor.

§6.27 No Fraudulent Intent . Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by the Borrower, any Guarantor or any of their respective Subsidiaries with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted.

§6.28 Transaction in Best Interests of the Borrower and Guarantors; Consideration . The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of the Borrower, each Guarantor and their respective Subsidiaries. The Borrower and the Guarantors are engaged in common business enterprises related to those of the Borrower and each Guarantor will derive substantial direct and indirect benefit from the effectiveness and

existence of this Agreement. The direct and indirect benefits to inure to the Borrower, each Guarantor and their respective Subsidiaries pursuant to this Agreement and the other Loan Documents constitute substantially more than “reasonably equivalent value” (as such term is used in Section 548 of the Bankruptcy Code) and “valuable consideration,” “fair value,” and “fair consideration” (as such terms are used in any applicable state fraudulent conveyance law), in exchange for the benefits to be provided by the Borrower, the Guarantors and their respective Subsidiaries pursuant to this Agreement and the other Loan Documents, and but for the willingness of each Guarantor to guaranty the Loan, the Borrower would be unable to obtain the financing contemplated hereunder which financing will enable the Borrower, each Guarantor and their respective Subsidiaries to have available financing to conduct and expand their business.

§6.29 Contribution Agreement . The Borrower and the Guarantors have executed and delivered the Contribution Agreement, and the Contribution Agreement constitutes the valid and legally binding obligations of such parties enforceable against them in accordance with the terms and provisions thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

§6.30 Representations and Warranties of Guarantors . The Borrower has no knowledge that any of the representations or warranties of any Guarantor contained in any Loan Document to which such Guarantor is a party are untrue or inaccurate in any material respect.

§6.31 OFAC . None of the Borrower or the Guarantors (i) is (or will be) a person with whom any Lender is restricted from doing business under OFAC (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action or (ii) is engaged (or will engage) in any dealings or transactions or otherwise be associated with such persons (any such Person, a “Designated Person”). In addition, the Borrower hereby agrees to provide to the Lenders any additional information that a Lender reasonably deems necessary from time to time in order to ensure compliance with all Applicable Laws concerning money laundering and similar activities. Neither Borrower, any Guarantor, nor any Subsidiary, director or officer of Borrower or Guarantor or, to the knowledge of Borrower, any Affiliate, agent or employee of Borrower or any Guarantor, has engaged in any activity or conduct which would violate any applicable anti-bribery, anti-corruption or anti-money laundering laws or regulations in any applicable jurisdiction, including without limitation, any Sanctions Laws and Regulations.

§6.32 Healthcare Representations .

(a) Each Borrowing Base Property (excluding any Borrowing Base Property that is an MOB or LPC) (i) is in material conformance with all insurance, reimbursement and cost reporting requirements, (ii) for those Borrowing Base Properties where Operator is required by Applicable Laws to maintain a provider agreement pursuant to Medicare and/or Medicaid, said provider agreement is in full force and effect under Medicare and Medicaid, and (iii) is in

material compliance with all other Applicable Laws including, without limitation, (A) Healthcare Laws, (B) licensure requirements, (C) staffing requirements, (D) health and fire safety codes, including quality and safety standards, (E) those relating to the prevention of fraud and abuse, (F) Third Party Payor program requirements and disclosure of ownership and related information requirements, (G) requirements of applicable Governmental Authorities, including those relating to such Borrowing Base Properties’ physical structure, environment, quality and adequacy of medical care and licensing, and (H) those related to reimbursement for the type of care or services provided by Operators with respect to such Borrowing Base Properties. There is no existing, pending or, to the Borrower’s knowledge, threatened in writing, revocation, suspension, termination, probation, restriction, limitation, or nonrenewal proceeding by any third-party payor under a Third-Party Payor Program, other than those which have been disclosed to the Agent, if any.

(b) All Primary Licenses and Permits necessary for using and operating the Borrowing Base Properties (excluding any Borrowing Base Property that is an MOB or LPC) are held by the Borrower, the applicable Subsidiary Guarantor, or the applicable Operator, as required under Applicable Law, and are in full force and effect.

(c) Except as set forth on Schedule 6.32 hereof, with respect to any of the Borrowing Base Properties (excluding any Borrowing Base Property that is an MOB or LPC), there are no Healthcare Investigations or any other inquiries, investigations, probes, audits, reviews or proceedings by any Governmental Authority or any Third Party Payor Program or notices thereof, or any other third party or any patient, employee or resident (including, but not limited to, whistleblower suits, or suits brought pursuant to federal or state “false claims acts” and Medicaid, Medicare or state fraud and/or abuse laws) that are reasonably likely directly or indirectly, or with the passage of time (i) to have a material adverse impact on Operators’ ability to accept and/or retain patients or residents or operate such Borrowing Base Property for its current use or result in the imposition of a fine, a sanction, a lower rate certification or a lower reimbursement rate for services rendered to eligible patients or residents, (ii) to modify, limit or result in the transfer, suspension, revocation or imposition of probationary use of any of the Primary Licenses, (iii) to affect any Operator’s continued participation in the Medicaid or Medicare programs or any other Third-Party Payor Programs, or any successor programs thereto, at then current rate certifications, or (iv) to result in any material civil or criminal penalty or remedy, or (v) to result in the appointment of a receiver.

(d) With respect to any Borrowing Base Property (excluding any Borrowing Base Property that is an MOB or LPC), except as set forth on Schedule 6.32 , (i) there are no presently existing circumstances that would result or likely would result in a material violation of any Healthcare Law, (ii) no such Borrowing Base Property has received a notice of violation at a level that under Applicable Law requires the filing of a plan of correction, and no statement of charges or deficiencies has been made or penalty enforcement action has been undertaken against any such Borrowing Base Property, (iii) no Operator currently has any violation imposed, and no statement of charges or deficiencies has been made or penalty enforcement action has been undertaken, in each case, that remains outstanding against any such Borrowing Base Property, any Operator or against any officer, director, partner, member or stockholder of any Operator, by any Governmental Authority or Third Party Payor Program, and (iv) there have been no violations threatened in writing against any Borrowing Base Property’s, or to the

Borrower’s knowledge, any Operator’s, certification for participation in Medicare, Medicaid or any other Third-Party Payor Programs that remain open or unanswered that are, in each case of clauses (i) through (iv), reasonably likely to result in a Material Adverse Effect.

(e) With respect to any Borrowing Base Property, there are no current, pending or outstanding Governmental Authority or Third-Party Payor Program reimbursement audits, appeals, reviews, suspensions or recoupment efforts actually pending at any Borrowing Base Property that would result in a Material Adverse Effect, and there are no years that are subject to an open audit in respect of any Third-Party Payor Program that would, in each case, have a Material Adverse Effect on the Borrower, any Guarantor or Operator, other than customary audit rights pursuant to Medicare/Medicaid/TRICARE programs or other Third Party Payor Programs.

The representations and warranties set forth in this §6.32, with respect to Operators that are not affiliated with the Borrower and Borrowing Base Properties which are operated by Operators that are not affiliated with the Borrower, are made to the best of the Borrower’s knowledge.

§6.33 Ground Lease .

(a) Each Ground Lease contains the entire agreement of the Subsidiary Guarantors and the applicable owner of the fee interest in such Borrowing Base Property (the “ Fee Owner ”), pertaining to the Borrowing Base Property covered thereby. The Subsidiary Guarantors have no estate, right, title or interest in or to the Borrowing Base Property except under and pursuant to the Ground Lease. The Borrower has delivered a true and correct copy of the Ground Lease to the Agent and the Ground Lease has not been modified, amended or assigned, with the exception of written instruments that have been recorded in the applicable real estate records and referenced in the Title Policy for such Borrowing Base Property.

(b) The applicable Fee Owner is the exclusive fee simple owner of the Borrowing Base Property, subject only to the Ground Lease and all Liens and other matters disclosed in the applicable Title Policy for such Borrowing Base Property subject to the Ground Lease, and the applicable Fee Owner is the sole owner of the lessor’s interest in the Ground Lease.

(c) Except as set forth on Schedule 6.33 , there are no rights to terminate the Ground Lease other than the applicable Fee Owner’s right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the Ground Lease.

(d) Each Ground Lease is in full force and effect and no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under any Ground Lease (a “Ground Lease Default”) exists or has occurred on the part of a Subsidiary Guarantor or, to the knowledge of Borrower, on the part of a Fee Owner under any Ground Lease. All base rent and additional rent, if any, due and payable under each Ground Lease has been paid through the date of acceptance of such Real Estate as a Borrowing Base Property and, except as set forth on Schedule 6.33 , no Subsidiary Guarantor is required to pay any deferred or accrued rent after the date of acceptance of such Real Estate as a Borrowing Base Property under

any Ground Lease. Neither Borrower nor a Subsidiary Guarantor has received any written notice that a Ground Lease Default has occurred or exists, or that any Fee Owner or any third party alleges the same to have occurred or exist.

(e) The applicable Subsidiary Guarantor is the exclusive owner of the ground lessee’s interest under and pursuant to each Ground Lease and has not assigned, transferred or encumbered its interest in, to, or under the Ground Lease.

§7.	AFFIRMATIVE COVENANTS.

The Borrower covenants and agrees that, so long as any Loan, Note or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or issue Letters of Credit:

§7.1 Punctual Payment . The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes, as well as all other sums owing pursuant to the Loan Documents.

§7.2 Maintenance of Office . The Borrower and each Guarantor will maintain their respective chief executive office at 3100 West End Avenue, Suite 1000, Nashville, Tennessee 37203, or at such other place in the United States of America as the Borrower or any Guarantor shall designate upon thirty (30) days prior written notice to the Agent and the Lenders, where notices, presentations and demands to or upon the Borrower or such Guarantor in respect of the Loan Documents may be given or made.

§7.3 Records and Accounts . The Borrower and each Guarantor will (a) keep, and cause each of their respective Subsidiaries to keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with GAAP and (b) maintain adequate accounts and reserves for all taxes, depreciation and amortization of its properties and the properties of their respective Subsidiaries, contingencies and other reserves. Neither the Borrower, any Guarantor nor any of their respective Subsidiaries shall, without the prior written consent of the Agent which shall not be unreasonably withheld, conditioned or delayed, (x) make any material change to the accounting policies/principles used by such Person in preparing the financial statements and other information described in §6.4 or §7.4, or (y) change its fiscal year. The Agent and the Lenders acknowledge that REIT’s fiscal year is a calendar year.

§7.4 Financial Statements, Certificates and Information . The Borrower will deliver or cause to be delivered to the Agent, in form and substance satisfactory to the Agent:

(a) within ten (10) days of the filing of REIT’s Form 10-K with the SEC, if applicable, but in any event not later than ninety (90) days after the end of each calendar year, the audited consolidated balance sheet of REIT and its Subsidiaries at the end of such year, and the related audited consolidated statements of income, shareholders’ equity, changes in capital and cash flows for such year, setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with GAAP, together with a certification by the chief financial officer of the REIT, that the information contained in such financial statements fairly presents the financial position of REIT and its

Subsidiaries, and accompanied by an auditor’s report prepared without qualification as to the scope of the audit by a nationally recognized accounting firm reasonably approved by the Agent and who shall have authorized REIT to deliver such financial statements and certifications thereof to the Agent; provided, however, that following an IPO Event, the Form 10-K filed with or furnished to the SEC by the Borrower (and which is available online at the website of the SEC at http://www.sec.gov) shall be deemed to have been provided by the Borrower under this reporting requirement;

(b) within ten (10) days of the filing of REIT’s Form 10-Q with the SEC, if applicable, but in any event not later than forty-five (45) days after the end of each of the first three (3) calendar quarters of each year, copies of the unaudited consolidated balance sheet of REIT and its Subsidiaries, at the end of such quarter, and the related unaudited consolidated statements of income, unaudited consolidated balance sheet and cash flows for the portion of REIT’s fiscal year then elapsed, all in reasonable detail and prepared in accordance with GAAP, together with a certification by the chief financial officer of REIT that the information contained in such financial statements fairly presents the financial position of REIT and its Subsidiaries on the date thereof (subject to year-end adjustments); provided, however, that following an IPO Event, the Form 10-Q filed with or furnished to the SEC by the Borrower (and which is available online at the website of the SEC at http://www.sec.gov) shall be deemed to have been provided by the Borrower under this reporting requirement;

(c) simultaneously with the delivery of the financial statements referred to in §§7.4(a) and 7.4(b), (i) a statement (a “ Compliance Certificate ”) certified by the chief financial officer of REIT in the form of Exhibit H hereto (or in such other form as the Agent may reasonably approve from time to time) setting forth in reasonable detail computations evidencing compliance or non-compliance (as the case may be) with the covenants contained in §9 and the other covenants described in such certificate and (if applicable) setting forth reconciliations to reflect changes in GAAP since the Balance Sheet Date, and (ii) a statement of Cash Available for Distribution for the relevant period. The Borrower shall submit with the Compliance Certificate a Borrowing Base Certificate in the form of Exhibit G attached hereto (a “ Borrowing Base Certificate ”) pursuant to which the Borrower shall calculate the amount of the Borrowing Base Mortgage Loan Amount, Debt Yield and the Borrowing Base Availability as of the end of the immediately preceding calendar quarter, and (iii) a calculation of the component of Adjusted Net Operating Income described in clause (b) of the definition thereof and whether the applicable property is an EBITDAR Stabilized Property or a Newly-Built Property, together with such supporting information as Agent may request (including financial statements of the applicable tenant or Operator). All income, expense and value associated with Real Estate or other Investments acquired or disposed of during any quarter will be adjusted, where applicable. Such Borrowing Base Certificate shall specify whether there are any monetary or other defaults under Major Leases at a Borrowing Base Asset or defaults under Borrowing Base Loans;

(d) simultaneously with the delivery of the financial statements referred to in §§7.4(a) and 7.4(b), (i) a Rent Roll for each of the Borrowing Base Properties as of the end of each calendar quarter (including the fourth calendar quarter in each year), together with a listing of each tenant that has taken occupancy of each such Borrowing Base Property during each calendar quarter (including the fourth calendar quarter in each year), (ii) an operating statement (including payor mix statistics) for each of the Borrowing Base Properties for each such calendar

quarter and year to date and a consolidated operating statement for the Borrowing Base Properties for each such calendar quarter and year to date (such statements and reports to be in form reasonably satisfactory to the Agent), (iii) a copy of each Lease or amendment to any Lease entered into with respect to a Borrowing Base Property during such calendar quarter (including the fourth calendar quarter in each year), (iv) financial information from each tenant of a Borrowing Base Property reasonably required by the Agent to determine compliance with the covenants contained in §9 and the other covenants described in such certificate, and (v) other evidence reasonably required by the Agent to determine compliance with the covenants contained in §9 and the other covenants described in such certificate;

(e) simultaneously with the delivery of the financial statements referred to in §§7.4(a) and 7.4(b) above, a statement (i) listing the Real Estate owned by REIT and its Subsidiaries (or in which REIT or any of its Subsidiaries owns an interest) and stating the location thereof, the date acquired and the acquisition cost, and whether such Real Estate constitutes a Land Asset or a Development Property, (ii) listing the Indebtedness of REIT and its Subsidiaries (excluding Indebtedness of the type described in §§8.1(a), 8.1(c), 8.1(d) and 8.1(f)), which statement shall include, without limitation, a statement of the original principal amount of such Indebtedness and the current amount outstanding, the holder thereof, the maturity date and any extension options, the interest rate, the collateral provided for such Indebtedness and whether such Indebtedness is Recourse Indebtedness or Non-Recourse Indebtedness, and (iii) performance data with respect to the Borrowing Base Loans and associated collateral, including, without limitation, outstanding principal balances, any outstanding delinquencies or defaults, and prepayments in whole or in part, and status of leasing or occupancy;

(f) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature, reports, proxy statements and all other information sent to the owners of the Borrower or REIT; provided, however, that following an IPO Event, the reports and other information filed with or furnished to the SEC by the Borrower (and which are available online at the website of the SEC at http://www.sec.gov) shall be deemed to have been provided by the Borrower under this reporting requirement;

(g) promptly following the Agent’s request, after they are filed with the Internal Revenue Service, copies of all annual federal income tax returns and amendments thereto of the Borrower and REIT;

(h) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly, monthly, special (8-K) or other reports or information that REIT or any of its Subsidiaries shall file with the SEC; provided, however, that following an IPO Event the reports and statements filed with or furnished to the SEC by the Borrower (and which is available online at the website of the SEC at http://www.sec.gov) shall be deemed to have been provided by the Borrower under this reporting requirement;

(i) notice of any audits pending or threatened in writing with respect to any tax returns filed by REIT or any of its Subsidiaries promptly following notice of such audit;

(j) upon the Agent’s request, evidence reasonably satisfactory to the Agent of the timely payment of all real estate taxes for the Borrowing Base Assets;

(k) [Reserved];

(l) within five (5) Business Days of receipt, copies of any written claim made with respect to any Non-Recourse Exclusion;

(m) upon the request of Agent, updated title and UCC searches with respect to the Borrowing Base Properties; and

(n) from time to time, such other financial data and information in the possession of REIT or its Subsidiaries (including without limitation auditors’ management letters, status of litigation or investigations against REIT or any of its Subsidiaries and any settlement discussions relating thereto, property inspection and environmental reports and information as to zoning and other legal and regulatory changes affecting REIT or any of its Subsidiaries) as the Agent may reasonably request.

The Agent shall promptly distribute to the Lenders materials received under §7.4(a)-(e). Any material to be delivered pursuant to this §7.4 may be delivered electronically directly to the Agent and the Lenders, provided that such material is in a format reasonably acceptable to the Agent, and such material shall be deemed to have been delivered to the Agent and the Lenders upon the Agent’s receipt thereof. Upon the request of the Agent, the Borrower shall deliver paper copies thereof to the Agent. The Borrower authorizes the Agent and the Arranger to disseminate any such materials through the use of Intralinks, SyndTrak or any other electronic information dissemination system, and the Borrower releases the Agent and the Lenders from any liability in connection therewith.

§7.5 Notices .

(a) Defaults . The Borrower will promptly upon becoming aware of same notify the Agent in writing of the occurrence of any Default or Event of Default, which notice shall describe such occurrence with reasonable specificity and shall state that such notice is a “notice of default”. If any Person shall give any notice of the existence of a claimed default or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or under any note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower, any Guarantor or any of their respective Subsidiaries is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof, which acceleration would either cause a Default or have a Material Adverse Effect, the Borrower shall forthwith give written notice thereof to the Agent and each of the Lenders, describing the notice or action and the nature of the claimed default.

(b) Environmental Events . The Borrower will give notice to the Agent within five (5) Business Days of becoming aware of (i) any potential or known Release, or threat of Release, of any Hazardous Substances in violation of any applicable Environmental Law; (ii) any violation of any Environmental Law that the Borrower, any Guarantor or any of their respective Subsidiaries reports in writing or is reportable by such Person in writing (or for which any

written report supplemental to any oral report is made) to any federal, state or local environmental agency or (iii) any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that in any case involves (A) a Borrowing Base Asset, (B) any other Real Estate and could reasonably be expected to have a Material Adverse Effect or (C) the Agent’s liens or security title on the Collateral pursuant to the Security Documents.

(c) Notification of Claims Against Collateral . The Borrower will give notice to the Agent in writing within five (5) Business Days of becoming aware of any material setoff, claims in excess of $250,000.00 (including, with respect to any Borrowing Base Asset, environmental claims), withholdings or other defenses to which any of the Collateral, or the rights of the Agent or the Lenders with respect to the Collateral, are subject.

(d) Notice of Litigation and Judgments . The Borrower will give notice to the Agent in writing within five (5) Business Days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower, any Guarantor or any of their respective Subsidiaries or to which the Borrower, any Guarantor or any of their respective Subsidiaries is or is to become a party involving an uninsured claim against the Borrower, any Guarantor or any of their respective Subsidiaries that could either reasonably be expected to cause a Default or could reasonably be expected to have a Material Adverse Effect and stating the nature and status of such litigation or proceedings. The Borrower will give notice to the Agent, in writing, in form and detail reasonably satisfactory to the Agent and each of the Lenders, within ten (10) days of any judgment not covered by insurance, whether final or otherwise, against the REIT or any of its Subsidiaries in an amount in excess of $500,000.00.

(e) Ground Lease . The Borrower will promptly notify the Agent in writing of any default by a Fee Owner in the performance or observance of any of the terms, covenants and conditions on the part of a Fee Owner to be performed or observed under a Ground Lease. The Borrower will promptly deliver to the Agent copies of all material notices, certificates, requests, demands and other instruments received from or given by a Fee Owner to the Borrower or a Subsidiary Guarantor under a Ground Lease.

(f) ERISA . The Borrower will give notice to the Agent within ten (10) Business Days after REIT or any ERISA Affiliate (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Guaranteed Pension Plan, Multiemployer Plan or Employee Benefit Plan, or knows that the plan administrator of any such plan has given or is required to give notice of any such reportable event; (ii) gives a copy of any notice of complete or partial withdrawal liability under Title IV of ERISA; or (iii) receives any notice from the PBGC under Title IV or ERISA of an intent to terminate or appoint a trustee to administer any such plan.

(g) Notices of Default Under Leases . The Borrower will give notice to the Agent in writing within five (5) Business Days after the Borrower or any Guarantor (i) receives notice from a tenant under a Lease of a Borrowing Base Asset of a default by the landlord under such Lease, or (ii) delivers a notice to any Major Tenant under a Lease of a Borrowing Base Asset of a default by such tenant under its Lease.

(h) Governmental Authority Notices . The Borrower will give notice to the Agent within five (5) Business Days of receiving any documents, correspondence or notice from any Governmental Authority that regulates the operation of any Borrowing Base Asset where such document, correspondence or notice relates to threatened or actual change or development that would be materially adverse or otherwise have a material adverse effect on any Borrowing Base Asset, the Borrower, any Guarantor or any Operator of any Borrowing Base Asset.

(i) Notification of Lenders . Within five (5) Business Days after receiving any notice under this §7.5, the Agent will forward a copy thereof to each of the Lenders, together with copies of any certificates or other written information that accompanied such notice.

§7.6 Existence; Maintenance of Properties .

(a) Except as permitted under §§8.4 and 8.8, the Borrower and each Guarantor will (i) preserve and keep in full force and effect their legal existence in the jurisdiction of its incorporation or formation and (ii) will cause each of their respective Subsidiaries that are not Guarantors to preserve and keep in full force and effect their legal existence in the jurisdiction of its incorporation or formation except where such failure has not had and could not reasonably be expected to have a Material Adverse Effect. The Borrower and each Guarantor will preserve and keep in full force all of their rights and franchises and those of their respective Subsidiaries, the preservation of which is necessary to the conduct of their business (except with respect to Subsidiaries of the Borrower that are not Guarantors, where such failure has not had and could not reasonably be expected to have a Material Adverse Effect). The Borrower shall cause REIT to at all times comply with all requirements and Applicable Laws and regulations necessary to maintain REIT Status and continue to receive REIT Status. The Borrower shall continue to own directly or indirectly one hundred percent (100%) of the Subsidiary Guarantors. The REIT may list the common stock of REIT for trading in the New York Stock Exchange or another nationally recognized exchange in connection with the IPO Event, and the common stock of REIT shall at all times after the effective date of such IPO Event and during the term of this Agreement be listed for trading and be traded on such exchange.

(b) The Borrower and each Guarantor (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, in each case the failure of which involving a property that is not a Borrowing Base Property would result in a Material Adverse Effect.

§7.7 Insurance; Condemnation .

(a) The Borrower and each Subsidiary Guarantor will, at its expense, procure and maintain, or cause to be procured and maintained, for the benefit of the Borrower, each such Subsidiary Guarantor and the Agent, insurance policies issued by such insurance companies, in such amounts, in such form and substance, and with such coverages, endorsements, deductibles and expiration dates as are acceptable to the Agent, providing the following types of insurance

covering each Borrowing Base Property (except as may be otherwise approved by Agent with respect to a Borrowing Base Property which is entirely leased to a single tenant pursuant to a triple-net lease):

(i) “All Risks” or “Special Form” or the current equivalent form property insurance (including coverage from loss or damage arising from acts of terrorism) on each Building and the contents therein of the Borrower and each Subsidiary Guarantor in an amount not less than one hundred percent (100%) of the full replacement cost of each Building and the contents therein of the Borrower and each Subsidiary Guarantor or such other amount as the Agent may approve, with deductibles not to exceed $100,000.00 for any one occurrence, with a replacement cost coverage endorsement, an agreed amount endorsement, and, if requested by the Agent, ordinance or law coverage in such amounts as the Agent may reasonably require. Full replacement cost as used herein means the cost of replacing the Building (exclusive of the cost of excavations, foundations and footings below the lowest basement floor) and the contents therein of the Borrower and each Subsidiary Guarantor without deduction for physical depreciation thereof;

(ii) During the course of construction or repair of any Building, the insurance required by clause (i) above shall be written on a builders risk, completed value, non-reporting form, meeting all of the terms required by clause (i) above, covering the total value of work performed, materials, equipment, machinery and supplies furnished, existing structures, and temporary structures being erected on or near the Borrowing Base Property, including coverage against collapse and damage during transit or while being stored off-site, and containing a soft costs (including loss of rents) coverage endorsement and a permission to occupy endorsement;

(iii) Flood insurance if at any time any Building is located in any federally designated “special hazard area” (including any area having special flood, mudslide and/or flood-related erosion hazards, and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map published by the Federal Emergency Management Agency as Zone A, AO, Al-30, AE, A99, AH, VO, V1-30, VE, V, M or E) and the flood coverage required by clause (i) above is not available, in an amount equal to the full replacement cost or the maximum amount then available under the National Flood Insurance Program;

(iv) Rent loss insurance in an amount sufficient to recover at least the total estimated gross receipts from all sources of income, including without limitation, rental income, for the Borrowing Base Property for a twelve (12) month period;

(v) Commercial general liability insurance against claims for personal injury (to include bodily injury and personal and advertising injury) and property damage liability, all on an occurrence basis, if commercially available, with such coverages as the Agent may reasonably request (including, without limitation, contractual liability coverage, completed operations coverage on the Borrowing Base Property, and coverages equivalent to an ISO broad form endorsement), with a general aggregate limit of not less than $2,000,000.00, a completed operations aggregate limit of not less than $2,000,000.00, and a combined single “per occurrence” limit of not less than $1,000,000.00 for bodily injury and property damage, medical professional liability insurance with limits of not less than $1,000,000.00;

(vi) During the course of construction or repair of any improvements on the Borrowing Base Property, the general contractor selected to oversee such improvements shall provide commercial general liability insurance (including completed operations coverage) naming Borrower as an additional insured, or in lieu thereof, may provide for such coverage by way of an owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the insurance required by clause (v) above;

(vii) Employer’s liability insurance with respect to the Borrower’s employees (or if the Borrower have no employees, with respect to the employees of the managers under the Management Agreements);

(viii) Umbrella or excess liability insurance with limits of not less than $1,000,000.00 to be in excess of the limits of the insurance required by clauses (v), (vi) and (vii) above, with coverage at least as broad as the primary coverages of the insurance required by clauses (v), (vi) and (vii) above, with any excess liability insurance to be at least as broad as the coverages of the lead umbrella policy. All such policies shall be endorsed to provide defense coverage obligations;

(ix) Workers’ compensation insurance for all employees of the Borrower or each Subsidiary Guarantor engaged on or with respect to the Borrowing Base Property with limits as required by Applicable Law (or if Borrower have no employees, for all employees of the managers under the Management Agreements); and

(x) Such other insurance in such form and in such amounts as may from time to time be reasonably required by the Agent against other insurable hazards and casualties which at the time are commonly insured against in the case of properties of similar character and location to the Borrowing Base Property.

The Borrower or Borrower’s designee shall pay all premiums on insurance policies. The insurance policies with respect to all Borrowing Base Property provided for in clauses (v), (vi) and (viii) above shall name the Agent and each Lender as an additional insured and shall contain a cross liability/severability endorsement. The Borrower shall deliver certificates of insurance evidencing all such policies to the Agent, and the Borrower shall promptly furnish to the Agent all renewal notices and evidence that all premiums or portions thereof then due and payable have been paid. Borrower shall provide to Agent a duplicate original or certified copy of the insurance policies required hereunder promptly after the original policy is received by Borrower. Not less than ten (10) days prior to the expiration date of the policies, as the same may be reduced by Agent, the Borrower shall deliver to the Agent evidence of continued coverage, as may be satisfactory to the Agent, and within five (5) Business Days after the renewal date of such policies, the Borrower shall deliver a certificate of insurance to Agent, in form and substance satisfactory to the Agent.

(b) All policies of insurance required by this Agreement shall contain clauses or endorsements to the effect that (i) the insurer waives any right of set off, counterclaim, subrogation, or any deduction in respect of any liability of the Borrower or any Subsidiary and the Agent, (ii) such policies shall not be modified so as to reduce or in any way negatively affect insurance coverage on any Borrowing Base Property, canceled or terminated prior to the

scheduled expiration date thereof without the insurer thereunder giving at least thirty (30) days prior written notice to the Borrower by certified or registered mail; provided, however, that only ten (10) days prior written notice to Borrower shall be required if such cancellation or termination is due to non-payment of any insurance premium (provided further that Borrower shall within two (2) Business Days provide to Agent a copy of any notice received by Borrower pursuant to this clause (ii)), and (iii) that the Agent or the Lenders shall not be liable for any premiums thereon or subject to any assessments thereunder, and shall in all events be in amounts sufficient to avoid any coinsurance liability.

(c) The insurance required by this Agreement may be effected through a blanket policy or policies covering additional locations and property of the Borrower and other Persons not included in the Borrowing Base Property, provided that such blanket policy or policies comply with all of the terms and provisions of this §7.7, including, without limitation, the Agent’s determination based on a review of the schedule of locations and values that the amount of such coverage is sufficient in light of the other risks and properties insured under the blanket policy.

(d) All policies of insurance required by this Agreement shall be issued by companies authorized to do business in the State where the policy is issued and also in the States where the Borrowing Base Property is located and shall be issued by companies having a rating in Best’s Key Rating Guide of at least “A-” and a financial size category of at least “VIII”.

(e) Neither the Borrower nor any Subsidiary Guarantor shall carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement unless such insurance complies with the terms and provisions of this §7.7.

(f) In the event of any loss or damage to or Taking of any Borrowing Base Property, the Borrower or the applicable Guarantor shall give prompt written notice to the insurance carrier and the Agent. Each of the Borrower and the Guarantors hereby irrevocably authorizes and empowers the Agent, at the Agent’s option and in the Agent’s sole discretion or at the request of the Required Lenders in their sole discretion, as its attorney in fact, to make proof of such loss, to adjust and compromise any claim under insurance policies or as a result of a Taking, to appear in and prosecute any action arising from such insurance policies or as a result of a Taking, to collect and receive Insurance Proceeds and Condemnation Proceeds, and to deduct therefrom the Agent’s reasonable out-of-pocket expenses incurred in the collection of such Insurance Proceeds and Condemnation Proceeds; provided, however, that so long as no Default or Event of Default has occurred and is continuing and so long as the Borrower or any Guarantor shall in good faith diligently pursue such claim, the Borrower or such Guarantor may make proof of loss and appear in any proceedings or negotiations with respect to the adjustment of such claim, except that the Borrower or such Guarantor may not settle, adjust or compromise any such claim without the prior written consent of the Agent, which consent shall not be unreasonably withheld or delayed; provided, further, that the Borrower or such Guarantor may make proof of loss and adjust and compromise any claim under casualty insurance policies which is in an amount less than five percent (5%) of the Appraised Value of the affected Borrowing Base Property so long as no Default or Event of Default has occurred and is continuing and so long as the Borrower or such Guarantor shall in good faith diligently pursue

such claim. Except as provided in the immediately preceding sentence with respect to claims under casualty insurance policies of less than five percent (5%) of the Appraised Value of the affected Borrowing Base Property, Borrower or the applicable Guarantor shall pay to Agent any Insurance Proceeds and Condemnation Proceeds for Agent to hold and apply as provided in this §7.7. The Borrower and each Guarantor further authorize the Agent, at the Agent’s option, subject to clause (g) below, to (i) apply the balance of such Insurance Proceeds and Condemnation Proceeds to the payment of the Obligations whether or not then due, or (ii) if the Agent shall require the reconstruction or repair of the Borrowing Base Property, to hold the balance of such proceeds as trustee to be used to pay taxes, charges, sewer use fees, water rates and assessments which may be imposed on the Borrowing Base Property and the Obligations as they become due during the course of reconstruction or repair of the Borrowing Base Property and to reimburse the Borrower or such Guarantor, in accordance with such terms and conditions as the Agent may prescribe, for, or to pay directly, the costs of reconstruction or repair of the Borrowing Base Property, and upon completion of such reconstruction or repair to pay any excess Insurance Proceeds to the Borrower, provided that (i) upon completion of such reconstruction or repair, such Borrowing Base Property is in compliance with all applicable state, federal and local laws, ordinances and regulations, including, without limitation, all building and zoning laws, ordinances and regulations and (ii) no Defaults or Events of Default exist or are continuing under this Agreement on the date of such payment to the Borrower.

(g) Notwithstanding the foregoing, the Agent shall make net Insurance Proceeds and Condemnation Proceeds available to the Borrower or such Guarantor to reconstruct and repair the Borrowing Base Property, in accordance with such terms and conditions as the Agent may prescribe in the Agent’s discretion for the disbursement of the proceeds, provided that (i) the cost of such reconstruction or repair is not estimated by the Agent to exceed twenty-five percent (25%) of the replacement cost of the damaged Building (as reasonably estimated by the Agent), (ii) no Default or Event of Default shall have occurred and be continuing, (iii) the Borrower or such Guarantor shall have provided to the Agent additional cash security in an amount equal to the amount reasonably estimated by the Agent to be the amount in excess of such proceeds which will be required to complete such repair or restoration, (iv) the Agent shall have approved the plans and specifications, construction budget, construction contracts, and construction schedule for such repair or restoration and reasonably determined that the repaired or restored Borrowing Base Property will provide the Agent with adequate security for the Obligations (provided that the Agent shall not disapprove such plans and specifications if the Building is to be restored to substantially its condition immediately prior to such damage), (v) the Borrower or such Guarantor shall have delivered to the Agent written agreements binding upon the Major Tenants and not less than eighty-five percent (85%) of the remaining tenants or other parties having present or future rights to possession of any portion of the affected Borrowing Base Property or having any right to require repair, restoration or completion of the Borrowing Base Property or any portion thereof (determined by reference to those tenants or other occupants that are not Major Tenants, that in the aggregate occupy or have rights to occupy not less than eighty-five percent (85%) of the Net Rentable Area of the Building), agreeing upon a date for delivery of possession of the Borrowing Base Property or their respective portions thereof, to permit time which is sufficient in the reasonable judgment of the Agent for such repair or restoration and approving the plans and specifications for such repair or restoration, or other evidence reasonably satisfactory to the Agent that none of such tenants or other parties may terminate their Leases as a result of such casualty or as a result of having a right to approve the

plans and specifications for such repair or restoration and prior to the exhaustion of expiration of any rental loss insurance coverage, (vi) the Agent shall reasonably determine that such repair or reconstruction can be completed prior to the Maturity Date, (vii) the Agent shall receive evidence reasonably satisfactory to it that any such restoration, repair or rebuilding complies in all material respects with any and all applicable state, federal and local laws, ordinances and regulations, including without limitation, zoning laws, ordinances and regulations, and that all required permits, licenses and approvals relative thereto have been or will be issued in a manner so as not to materially impede the progress of restoration, (viii) the Agent shall receive evidence reasonably satisfactory to it that the insurer under such policies of fire or other casualty insurance does not assert any defense to payment under such policies against the Borrower, any Guarantor or the Agent, and (ix) with respect to any Taking, (a) the value of the land taken under such condemnation is less than $500,000.00; (b) less than five percent (5%) of the land is taken; (c) the land that is taken is located along the perimeter or periphery of the land; (d) access to the Borrowing Base Property is not affected in any way by the Taking; (e) no portion of the improvements are taken, and (x) the Agent shall receive evidence reasonably satisfactory to it that once the Borrowing Base Property has been reconstructed or repaired, and each of the other conditions set forth in this clause (g) have been satisfied, the Borrower will be in compliance, on a pro forma basis, with the covenants set forth in §9.1, §9.6, §9.7, §9.8, §9.9, §9.10 and §9.11. Any excess Insurance Proceeds shall be paid to the Borrower, or if a Default or Event of Default has occurred and is continuing, such proceeds shall be applied to the payment of the Obligations, unless in either case by the terms of the applicable insurance policy the excess proceeds are required to be returned to such insurer. Any excess Condemnation Proceeds shall be applied to the payment of the Obligations. In no event shall the provisions of this Section be construed to extend the Maturity Date or to limit in any way any right or remedy of the Agent upon the occurrence of an Event of Default hereunder. If the Borrowing Base Property is sold or the Borrowing Base Property is acquired by the Agent, all right, title and interest of the Borrower and any Guarantor in and to any insurance policies to the extent that they relate to Borrowing Base Properties and unearned premiums thereon and in and to the proceeds thereof resulting from loss or damage to the Borrowing Base Property prior to the sale or acquisition shall pass to the Agent or any other successor in interest to the Borrower or purchaser of the Borrowing Base Property.

(h) The Borrower, the Guarantors and their respective Subsidiaries (as applicable) will, at their expense, procure and maintain insurance covering the Borrower, the Guarantors and their respective Subsidiaries (as applicable) and the Real Estate other than the Borrowing Base Property in such amounts and against such risks and casualties as are customary for properties of similar character and location, due regard being given to the type of improvements thereon, their construction, location, use and occupancy.

§7.8 Taxes; Liens . The Borrower and the Guarantors will, and will cause their respective Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become delinquent, all taxes, assessments and other governmental charges imposed upon them or upon the Borrowing Base Assets or the other Real Estate, sales and activities, or any part thereof, or upon the income or profits therefrom as well as all claims for labor, materials or supplies that if unpaid might by law become a lien or charge upon any of its property or other Liens affecting any of the Collateral or other property of the Borrower, the Guarantors or their respective Subsidiaries and all non-governmental assessments, levies, maintenance and other

charges, whether resulting from covenants, conditions and restrictions or otherwise, water and sewer rents and charges assessments on any water stock, utility charges and assessments and owner association dues, fees and levies, provided that any such tax, assessment, charge or levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings which shall suspend the collection thereof with respect to such property and the Borrower or applicable Guarantor shall not be subject to any fine, suspension or loss of privileges or rights by reason of such proceeding, neither such property nor any portion thereof or interest therein would be in any danger of sale, forfeiture, loss or suspension of operation by reason of such proceeding and the Borrower, such Guarantor or any such Subsidiary shall have set aside on its books adequate reserves in accordance with GAAP (or if such aggregate amount so contested relates to a Borrowing Base Property and equals or exceeds $100,000, then Borrower shall have deposited with Agent as additional Collateral adequate reserves as reasonably determined by Agent); and provided , further , that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the Borrower, such Guarantor or any such Subsidiary either (i) will provide a bond issued by a surety reasonably acceptable to the Agent and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge or levy. Borrower shall deliver to the Agent evidence of payment of taxes, other assessments, levies and charges described in this §7.8 with respect to the Borrowing Base Properties promptly following payment thereof unless the same are being contested in accordance with the terms hereof and the other Loan Documents.

§7.9 Inspection of Properties and Books . The Borrower and the Guarantors will, and will cause their respective Subsidiaries to, permit the Agent and the Lenders, at the Borrower’s expense and upon reasonable prior notice, to visit and inspect any of the properties of the Borrower, each Guarantor or any of their respective Subsidiaries (subject to the rights of tenants under their Leases), to examine the books of account of the Borrower, any Guarantor and their respective Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower, any Guarantor and their respective Subsidiaries with, and to be advised as to the same by, their respective officers, partners or members, all at such reasonable times and intervals as the Agent or any Lender may reasonably request, provided that so long as no Default or Event of Default shall have occurred and be continuing, the Borrower shall not be required to pay for such visits and inspections more often than once in any twelve (12) month period. The Lenders shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the normal business operations of such Persons.

§7.10 Compliance with Laws, Contracts, Licenses, and Permits . The Borrower and the Guarantors will, and will cause each of their respective Subsidiaries to, comply in all respects with (a) all Applicable Laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (b) the provisions of its corporate charter, partnership agreement, limited liability company agreement or declaration of trust, as the case may be, and other charter documents and bylaws, (c) all agreements and instruments to which it is a party or by which it or any of its properties may be bound, (d) all applicable decrees, orders, and judgments, and (e) all licenses and permits required by Applicable Laws and regulations for the conduct of its business or the ownership, use or operation of its properties, except where failure to so comply with clauses (a), (c) or (e) would not result in the material non-compliance

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with the items described in such clauses. To the extent permitted by the terms of the Leases, the Borrower and the Guarantors will use commercially reasonable efforts to cause each Operator of the Borrowing Base Assets that is not affiliated with Borrower to comply in all respects with (a) all Applicable Laws and regulations now or hereafter in effect with respect to such Borrowing Base Assets or the business conducted thereon, including all Environmental Laws, (b) all applicable decrees, orders, and judgments relating to such Borrowing Base Assets, and (c) all licenses and permits required by Applicable Laws and regulations for the conduct of its business or the ownership, use or operation of its properties, except where failure to so comply with clauses (a), (b) or (c) would not result in the material non-compliance with the items described in such clauses. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower, any Guarantor or their respective Subsidiaries may fulfill any of its obligations hereunder, the Borrower, such Guarantor or such Subsidiary will promptly take or cause to be taken all steps reasonably necessary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Lenders with evidence thereof. The Borrower shall develop and implement such programs, policies and procedures as are necessary to comply with the Patriot Act and shall promptly advise the Agent in writing in the event that the Borrower shall determine that any investors in the Borrower are in violation of such act.

§7.11 Further Assurances . The Borrower and each Guarantor will and will cause each of their respective Subsidiaries to, cooperate with the Agent and the Lenders and execute such further instruments and documents as the Lenders or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents.

§7.12 Management . The Borrower shall not and shall not permit any Subsidiary Guarantor to enter into any Management Agreement for any Borrowing Base Property without the prior written consent of the Agent (which shall not be unreasonably withheld), and after such approval, no such Management Agreement shall be modified in any material respect or terminated without the Agent’s prior written approval, such approval not to be unreasonably withheld. The Agent may condition any approval of a new manager engaged by the Borrower or a Subsidiary Guarantor or a new Management Agreement with respect to a Borrowing Base Property upon the execution and delivery to the Agent of a Subordination of Management Agreement. The Borrower shall not and shall not permit any Subsidiary Guarantor or any other Subsidiary to increase any management fee payable under a Management Agreement after the date the applicable Real Estate becomes a Borrowing Base Property without the prior written consent of the Agent, which consent shall not be unreasonably withheld.

§7.13 Leases of the Property . The Borrower and each Subsidiary Guarantor will give notice to the Agent of any proposed new Lease that would be with a Major Tenant at any Borrowing Base Property for the lease of space therein and shall provide to the Agent a copy of the proposed Lease and any and all agreements or documents related thereto, current financial information for the proposed tenant and any guarantor of the proposed Lease and such other information as the Agent may reasonably request. Neither the Borrower nor any Subsidiary Guarantor will (a) lease all or any portion of a Borrowing Base Property or amend, supplement or otherwise modify or grant any concessions to or waive the performance of any obligations of any Major Tenant under, any now existing or future Lease at any Borrowing Base Property, or

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(b) terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of any new existing or future Lease at any Borrowing Base Property with any Major Tenant, without the prior written consent of the Agent, which consent shall not be unreasonably withheld, delayed or conditioned. Except for security deposits, there has been no anticipation or prepayment of any of the rents, income, issues, profits or revenues from the Borrowing Base Properties for more than one (1) month prior to the due dates of such revenues, and the Borrower will not permit any Guarantor to collect or accept payment of any such revenues more than one (1) month prior to the due dates of such revenues.

§7.14 Business Operations . REIT and its Subsidiaries shall operate their respective businesses in substantially the same manner and in substantially the same fields and lines of business as such business is now conducted and such other lines of business that are reasonably related or incidental thereto and in compliance with the terms and conditions of this Agreement and the Loan Documents. Neither REIT nor the Borrower will, or permit any of their respective Subsidiaries to, directly or indirectly, engage in any line of business other than the ownership, operation and development of Medical Properties.

§7.15 Healthcare Laws and Covenants .

(a) Without limiting the generality of any other provision of this Agreement, the Borrower and each Subsidiary Guarantor, and their employees and contractors (other than contracted agencies) in the exercise of their duties on behalf of the Borrower or the Subsidiary Guarantors (with respect to its operation of the Borrowing Base Properties), shall be in compliance in all material respects with all applicable Healthcare Laws and accreditation and registration standards and requirements of the applicable state department of health or other applicable state regulatory agency (each, a “State Regulator”), in each case, as are now in effect and which may be imposed upon the Borrower, any Subsidiary Guarantor, any Operator affiliated with Borrower, or the maintenance, use or operation of the Borrowing Base Properties or the provision of services to the occupants of the Borrowing Base Properties. The Borrower and each Subsidiary Guarantor have maintained and shall continue to maintain in all material respects all records required to be maintained by any Governmental Authority or Third Party Payor Program or otherwise under the Healthcare Laws and there are no presently existing circumstances which would result or likely would result in material violations of the Healthcare Laws. The Borrower, the Subsidiary Guarantors and Operators have and will maintain all Primary Licenses and Permits necessary under Applicable Laws to own and/or operate the Borrowing Base Properties, as applicable (including such Primary Licenses and Permits as are required under such Healthcare Laws).

(b) The Borrower represents that none of the Borrower or any Subsidiary Guarantor is (i) a “covered entity” or “business associate” within the meaning of HIPAA or submits claims or reimbursement requests to Third-Party Payor Programs “electronically” (within the meaning of HIPAA) or (ii) is subject to the “Administrative Simplification” provisions of HIPAA. If the Borrower or any Subsidiary Guarantor at any time becomes a “covered entity”, “business associate” or subject to the “Administrative Simplification” provisions of HIPAA, then such Persons (x) will promptly undertake all necessary surveys, audits, inventories, reviews, analyses and/or assessments (including any necessary risk assessments) of all areas of its business and operations required by HIPAA and/or that could be

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adversely affected by the failure of such Person(s) to be HIPAA Compliant (as defined below); (y) will promptly develop a detailed plan and time line for becoming HIPAA Compliant (a “ HIPAA Compliance Plan ”); and (z) will implement those provisions of such HIPAA Compliance Plan in all material respects necessary to ensure that such Person(s) are or become HIPAA Compliant. For purposes hereof, “ HIPAA Compliant ” shall mean that the Borrower and each Subsidiary Guarantor, as applicable (A) are or will be in material compliance with each of the applicable requirements of the so-called “Administrative Simplification” provisions of HIPAA on and as of each date that any party thereof, or any final rule or regulation thereunder, becomes effective in accordance with its or their terms, as the case may be (each such date, a “ HIPAA Compliance Date ”), if and to the extent the Borrower or any Subsidiary Guarantor are subjected to such provisions, rules or regulations, and (B) are not and could not reasonably be expected to become, as of any date following any such HIPAA Compliance Date, the subject of any civil or criminal penalty, process, claim, action or proceeding, or any administrative or other regulatory review, survey, process or proceeding (other than routine surveys or reviews conducted by any government health plan or other accreditation entity) that could result in any of the foregoing or that could reasonably be expected to adversely affect the Borrower’s or any Subsidiary Guarantor’s business, operations, assets, properties or condition (financial or otherwise), in connection with any actual or potential violation by the Borrower or any Subsidiary Guarantor of the then effective provisions of HIPAA.

(c) The Borrower shall not, nor shall the Borrower permit any Subsidiary Guarantor to, do (or suffer to be done) any of the following with respect to any Borrowing Base Property:

(i) Transfer any Primary Licenses relating to such Borrowing Base Property to any other location;

(ii) Amend the Primary Licenses in such a manner that results in a material adverse effect on the rates charged, or otherwise diminish or impair the nature, tenor or scope of the Primary Licenses without the Agent’s consent;

(iii) Transfer all or any part of any Borrowing Base Property’s units or beds to another site or location; or

(iv) Voluntarily transfer or encourage the transfer of any resident of any Borrowing Base Property to any other facility (other than to another Borrowing Base Property), unless such transfer is (A) at the request of the resident, (B) for reasons relating to the health, required level of medical care or safety of the resident to be transferred or the residents remaining at such Borrowing Base Property or (C) as a result of the disruptive behavior of the transferred resident that is detrimental to the Borrowing Base Property.

(d) If and when the Borrower or a Subsidiary Guarantor participates in any Medicare, Medicaid or other Third-Party Payor Programs with respect to the Borrowing Base Properties, the Borrowing Base Properties will remain in compliance with all requirements necessary for participation in Medicare, Medicaid and such other Third-Party Payor Programs. If and when an Operator participates in any Medicare, Medicaid or other Third-Party Payor Programs with respect to the Borrowing Base Properties, where expressly empowered by the

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applicable Lease or Operating Agreement, the Borrower or such Subsidiary Guarantor, as applicable, shall enforce the express obligation of such Operator (if any) to cause its Borrowing Base Property to remain in compliance with all requirements necessary for participation in the Medicare, Medicaid and such other Third-Party Payor Programs. Where expressly empowered by the applicable Lease or Operating Agreement, the Borrower or such Subsidiary Guarantor, as applicable, shall enforce the obligations of the Operator thereunder (if any) to cause its Borrowing Base Property to remain in conformance in all material respects with all Healthcare Laws, as well as all insurance, reimbursement and cost reporting requirements, and, if applicable, to have such Operator maintain its current provider agreement(s) in full force and effect with Medicare, Medicaid and any other Third Party Payor Programs in which it participates.

(e) If the Borrower or any Subsidiary Guarantor receives written notice of any Healthcare Investigation after the Closing Date, the Borrower will promptly obtain and provide to the Agent the following information with respect thereto: (i) number of records requested, (ii) dates of service, (iii) dollars at risk, (iv) date records submitted, (v) determinations, findings, results and denials (including number, percentage and dollar amount of claims denied, (vi) additional remedies proposed or imposed, (vii) status update, including appeals, and (viii) any other pertinent information related thereto.

§7.16 Registered Servicemark . Without prior written notice to the Agent, except with respect to the trademarks, tradenames, servicemarks or logos listed on Schedule 6.6 hereto, none of the Borrowing Base Properties shall be owned or operated by the Borrower or any Guarantor under any trademark, tradename, servicemark or logo. In the event any of the Borrowing Base Properties shall be owned or operated under any tradename, trademark, servicemark or logo, not listed on Schedule 6.6 , the Borrower or the applicable Guarantor shall enter into such agreements with the Agent in form and substance reasonably satisfactory to the Agent, as the Agent may reasonably require to grant the Agent a perfected first priority security interest therein and to grant to the Agent or any successful bidder at a foreclosure sale of such Borrowing Base Property the right and/or license to continue operating such Borrowing Base Property under such tradename, trademark, servicemark or logo as determined by the Agent.

§7.17 Ownership of Real Estate . Without the prior written consent of the Agent, all Real Estate and all interests (whether direct or indirect) of REIT, General Partner or the Borrower in any Real Estate assets now owned or leased or acquired or leased after the date hereof shall be owned or leased directly by the Borrower or a Wholly-Owned Subsidiary of the Borrower; provided , however that the Borrower shall be permitted to own or lease interests in Real Estate through non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates of the Borrower as permitted by §8.3(l).

§7.18 Distributions of Income to the Borrower . The Borrower shall cause all of its Subsidiaries (subject to the terms of any loan documents under which such Subsidiary is the borrower) to promptly distribute to the Borrower (but not less frequently than once each calendar quarter, unless otherwise approved by the Agent), whether in the form of dividends, distributions or otherwise, all profits, proceeds or other income relating to or arising from its Subsidiaries’ use, operation, financing, refinancing, sale or other disposition of their respective assets and properties after (a) the payment by each Subsidiary of its debt service, operating expenses, capital improvements and leasing commissions for such quarter and (b) the establishment of

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reasonable reserves for the payment of operating expenses not paid on at least a quarterly basis and capital improvements and tenant improvements to be made to such Subsidiary’s assets and properties approved by such Subsidiary in the course of its business consistent with its past practices.

§7.19 Plan Assets . The Borrower, the Guarantors and each of their respective Subsidiaries will do, or cause to be done, all things necessary to ensure that none of its Real Estate will be deemed to be Plan Assets at any time.

§7.20 Borrowing Base Assets .

(a) The Eligible Real Estate and Borrowing Base Loans included in the calculation of the Borrowing Base Availability shall at all times satisfy all of the following conditions:

(i) the Eligible Real Estate shall be owned one hundred percent (100%) in fee simple, or leased under a Ground Lease, by a Wholly Owned Subsidiary of Borrower that is a Subsidiary Guarantor, in each case free and clear of all Liens other than the Liens permitted in §8.2(i) and (ix), and other Liens approved in writing by Agent, and such Eligible Real Estate shall not have applicable to it any restriction on the sale, pledge, transfer, mortgage or assignment of such property (including any restrictions contained in any applicable organizational documents);

(ii) none of the Eligible Real Estate shall have any material title, survey, environmental, structural or other defects except as reasonably approved by the Agent and the Required Lenders;

(iii) if such Eligible Real Estate is held by a Subsidiary Guarantor, the only asset of such Subsidiary Guarantor shall be Eligible Real Estate included in the calculation of the Borrowing Base Availability;

(iv) each Operator’s Agreement and Lease with a Major Tenant for a Borrowing Base Property shall obligate the Operator or tenant to provide to Borrower or the applicable Subsidiary Guarantor sufficient and timely financial information, separate for the specific location at the Borrowing Base Property, to permit calculation of clause (b) of the definition of Adjusted Net Operating Income and determine whether such property is an EBITDAR Stabilized Property or a Newly-Built Property;

(v) [Intentionally Omitted];

(vi) no tenant or group of Affiliates thereof which leases ninety percent (90%) or more of the Net Rentable Area of such Real Estate (A) is in default of base rent or other material payment obligations under its respective Lease for more than seventy-five (75) days beyond the date upon which such payment obligations were due, or (B) is subject to any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or similar debtor relief proceeding;

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(vii) the Primary License of such Eligible Real Estate shall not have been revoked or the subject of any revocation proceeding, no event or circumstance shall have occurred or exist which would result in the Operator thereof no longer being entitled to reimbursement under Medicare or Medicaid and the Operator shall be in compliance in all material respects with all applicable Healthcare Laws and accreditation and registration standards and requirements of the applicable State Regulator, in each case, as are now in effect and which may be imposed upon such Operator or the maintenance, use or operation of the Borrowing Base Properties or the provision of services to the occupants of the Borrowing Base Properties;

(viii) there shall have been at no time any change in any Major Tenant of a Borrowing Base Property (whether by assignment, substitution or otherwise) from the Major Tenants of such Borrowing Base Property as of the date of acceptance of such Real Estate as a Borrowing Base Property unless approved by Agent in writing; and

(ix) if such Borrowing Base Asset is a Borrowing Base Loan, such Borrowing Base Loan shall at all times satisfy all of the following conditions:

(A) such Borrowing Base Loan is secured by real estate that satisfies the requirements of clauses (b), (c), (d), (f), (g), (h) and (i) of the definition of Eligible Real Estate;

(B) the real estate subject to the Borrowing Base Loan shall be owned one hundred percent (100%) in fee simple or leased under a Ground Lease by the Collateral Borrower, free and clear of all Liens other than the Liens securing the Borrowing Base Loans and other Liens approved in writing by Agent;

(C) none of the real estate securing the Borrowing Base Loan shall have any material environmental, structural, title or other defects, and not be subject to any condemnation proceeding, that in any event would give rise to a materially adverse effect as to the value, use of, operation of or ability to sell or finance such property;

(D) Borrower’s or the applicable Subsidiary Guarantor’s entire interest in the Borrowing Base Loan shall have been assigned to Agent pursuant to the Security Documents and Agent shall have a perfected first priority security interest therein. Without limiting the foregoing, no interest in any Borrowing Base Loan Document shall have been pledged or assigned to any Person other than the pledge to Agent;

(E) the Borrowing Base Loan Documents shall be owned one hundred percent (100%) by the Borrower or a Subsidiary Guarantor free and clear of all Liens, other than the Lien in favor of Agent for the benefit of the Lenders and the Lender Hedge Providers, and of any claims or rights of participation of any other Person, and free of any restrictions on transfer, assignment or pledge thereof;

(F) for any Borrowing Base Loans added after the date of this Agreement, the maturity date (inclusive of any extension options) of the Borrowing Base Loan must be not later than November 7, 2020, and the Borrowing Base Loan Documents for Borrowing Base Loans shall otherwise be in form and substance satisfactory to Agent;

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(G) the Borrowing Base Loan shall not be a Defaulted Loan or a Delinquent Loan;

(H) except as approved by Agent, the Collateral Borrower shall have no Indebtedness other than the Borrowing Base Loan and other Indebtedness applicable to the real estate and of the type permitted under §8.1(c) or (d);

(I) the Borrowing Base Loan and Borrowing Base Loan Documents shall satisfy each other condition in this Agreement and the other Loan Documents applicable thereto; and

(J) commencing when any Borrowing Base Loan is added as a Borrowing Base Asset, when aggregated with the Initial Borrowing Base Loans, not more than twenty percent (20%) of the Borrowing Base Availability shall at any time be attributable to Borrowing Base Loans.

(b) In the event that all or any material portion of any Eligible Real Estate included in the calculation of the Borrowing Base Availability shall be damaged in any material respect or taken by condemnation, then such property shall no longer be included in the calculation of the Borrowing Base Availability unless and until (i) any damage to such real estate is repaired or restored, such real estate becomes fully operational and the Agent shall receive evidence satisfactory to the Agent of the value of such real estate following such repair or restoration (both at such time and prospectively) or (ii) the Agent shall receive evidence satisfactory to the Agent (which evidence may include the availability of rent loss and other insurance) that the value of such real estate (both at such time and prospectively) shall not be materially adversely affected by such damage or condemnation. In the event that such damage or condemnation only partially affects such Eligible Real Estate included in the calculation of the Borrowing Base Availability, then the Required Lenders may in good faith reduce the Borrowing Base Availability attributable thereto based on such damage until such time as the Required Lenders receive evidence satisfactory to the Required Lenders that the value of such real estate (both at such time and prospectively) shall no longer be materially adversely affected by such damage or condemnation.

(c) Upon any asset ceasing to qualify to be included in the calculation of the Borrowing Base Availability, such asset shall no longer be included in the calculation of the Borrowing Base Availability unless otherwise approved in writing by the Required Lenders. Within five (5) Business Days after becoming aware of any such disqualification, the Borrower shall deliver to the Agent a certificate reflecting such disqualification, together with the identity of the disqualified asset, a statement as to whether any Default or Event of Default arises as a result of such disqualification, and a calculation of the Borrowing Base Availability attributable to such asset. Simultaneously with the delivery of the items required pursuant above, the Borrower shall deliver to the Agent an updated Borrowing Base Certificate demonstrating, after giving effect to such removal or disqualification, compliance with the conditions and covenants contained in §§5.4, 7.20, 9.1, 9.6, 9.7, 9.8, 9.9 and 9.10.

§7.21 Operators’ Agreements . Borrower and each Guarantor shall, (a) promptly perform and/or observe all of the material covenants and agreements required to be performed

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and observed by it under each Operators’ Agreement to which it is a party, and do all things necessary to preserve and to keep unimpaired its rights thereunder, (b) promptly notify Agent in writing of the giving of any notice of any default by any party under any Operators’ Agreement and (c) promptly enforce the performance and observance of all of the material covenants and agreements required to be performed and/or observed by the other party under each Operators’ Agreement to which it is a party in a commercially reasonable manner. None of the Borrower or the Guarantors shall without Agent’s prior written reasonable consent: (w) enter into, surrender or terminate any Operators’ Agreement to which it is a party, (x) increase or consent to the increase of the amount of any charges under any Operators’ Agreement to which it is a party; (y) transfer, assign or encumber any Operators’ Agreement except to Agent pursuant to the Loan Documents; or (z) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under any Operators’ Agreement to which it is a party in any material respect.

§7.22 IPO Event . As a condition to the occurrence of the IPO Event, Borrower agrees as follows:

(a) all matters relating to the IPO Event, including, without limitation, the organizational structure and management of REIT, General Partner, Borrower, and their Subsidiaries following the occurrence of the IPO Event, shall be subject to the Agent’s approval, which approval shall not be unreasonably withheld, conditioned or delayed;

(b) all of the formation and other material agreements related to the IPO Event shall be in form and substance reasonably acceptable to Agent;

(c) the structure of the IPO Event shall be such that following the IPO Event the financial results of Borrower and its Subsidiaries shall continue to be Consolidated with the accounts of REIT;

(d) After giving effect to the IPO Event, no Change of Control or other Default or Event of Default shall occur; and

(e) the Borrowers, Guarantors and the Agent shall enter into such amendments to the Loan Documents or other agreements as the Agent may reasonably require to reflect the IPO Event.

§7.23 Assignment of Interest Rate Protection . In the event that the Borrower shall enter into an interest rate cap, swap, collar or other interest rate protection agreement with a Lender Hedge Provider (the “Interest Hedge”), then as a condition to the obligations of Borrower with respect thereto constituting Hedge Obligations for the purposes of the Loan Documents, Borrower shall execute and deliver to Agent the Assignment of Hedge, such legal opinions as to Borrower, and consents to and acknowledgments of such pledge by the provider of the Interest Hedge as Agent may reasonably require. For the avoidance of doubt, unless the provisions of this §7.23 are complied with, no Lender Hedge Provider shall have any right or benefit under or from the Loan Documents or the Collateral.

§7.24 Sanctions Laws and Regulations . The Borrower shall not, directly or indirectly, use the proceeds of the Loans or any Letter of Credit or lend, contribute or otherwise make

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available such proceeds to any Subsidiary, Unconsolidated Affiliate or other Person (i) to fund any activities or business of or with any Designated Person, or in any country or territory, that at the time of such funding is itself the subject of territorial sanctions under applicable Sanctions Laws and Regulations, (ii) in any manner that would result in a violation of applicable Sanctions Laws and Regulations by any party to this Agreement, or (iii) in any manner that would cause the Borrower or any of its Subsidiaries to violate the United States Foreign Corrupt Practices Act. None of the funds or assets of the Borrower that are used to pay any amount due pursuant to this Agreement shall constitute funds obtained from transactions with or relating to Designated Persons or countries which are themselves the subject of territorial sanctions under applicable Sanctions Laws and Regulations. Borrower shall maintain policies and procedures designed to promote and achieve compliance with Sanctions Laws and Regulations.

§8.	NEGATIVE COVENANTS.

The Borrower covenants and agrees that, so long as any Loan, Note or Letter of Credit is outstanding or any of the Lenders has any obligation to make any Loans or issue any Letter of Credit:

§8.1 Restrictions on Indebtedness . The Borrower will not, and will not permit any Guarantor or their respective Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than:

(a) Indebtedness to the Lenders arising under any of the Loan Documents;

(b) Indebtedness to the Lender Hedge Providers in respect of any Hedge Obligations;

(c) current liabilities of the Borrower, the Guarantors or their respective Subsidiaries incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;

(d) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of §7.8;

(e) Indebtedness in respect of judgments only to the extent, for the period and for an amount not resulting in a Default;

(f) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;

(g) subject to the provisions of §9, and provided that the IPO Conditions Satisfaction Date has occurred, Indebtedness that is Recourse Indebtedness (including, without limitation, any completion or other guarantees, whether incurred directly, indirectly or through an Unconsolidated Affiliate) (excluding the Obligations), provided that the aggregate amount of such Indebtedness shall not at any time exceed ten percent (10%) of Gross Asset Value. For avoidance of doubt, no Recourse Indebtedness other than the Obligations shall be permitted unless the IPO Conditions Satisfaction Date has occurred; and

(h) subject to the provisions of §8.1 and §9, provided that the IPO Conditions Satisfaction Date has occurred, Secured Debt (excluding the Obligations, but including Non-Recourse Indebtedness), provided that the aggregate amount of such Secured Debt shall not exceed thirty-five percent (35.0%) of Gross Asset Value at any time. For the avoidance of doubt, no Secured Indebtedness other than the Obligations shall be permitted unless the IPO Conditions Satisfaction Date has occurred.

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Notwithstanding anything in this Agreement to the contrary, (i) none of the Indebtedness described in §8.1(g) or (h) above shall have any of the Borrowing Base Assets or any interest therein or any direct or indirect ownership interest in the Borrower or any Subsidiary Guarantor as collateral, a borrowing base, asset pool or any similar form of credit support for such Indebtedness, and (ii) none of the Subsidiary Guarantors shall create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness (including, without limitation, pursuant to any conditional or limited guaranty or indemnity agreement creating liability with respect to usual and customary exclusions from the non recourse limitations governing the Non-Recourse Indebtedness of any Person, or otherwise) other than Indebtedness described in §§8.1(a), 8.1(b), 8.1(c), 8.1(d), 8.1(e) and 8.1(f).

§8.2 Restrictions on Liens, Etc. The Borrower will not, and will not permit any Guarantor or their respective Subsidiaries to (a) create or incur or suffer to be created or incurred or to exist any lien, security title, encumbrance, mortgage, deed of trust, security deed, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of their respective property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of their property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement (or any financing lease having substantially the same economic effect as any of the foregoing); (d) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against any of them that if unpaid could by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over any of their general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; (f) in the case of securities, create or incur or suffer to be created or incurred any purchase option, call or similar right with respect to such securities; or (g) incur or maintain any obligation to any holder of Indebtedness of any of such Persons which prohibits the creation or maintenance of any lien securing the Obligations (collectively, “ Liens ”); provided that notwithstanding anything to the contrary contained herein, the Borrower, any Guarantor or any such Subsidiary may create or incur or suffer to be created or incurred or to exist:

(i) Liens on properties to secure taxes, assessments and other governmental charges (excluding any Lien imposed pursuant to any of the provisions of ERISA or pursuant to any Environmental Laws) or claims for labor, material or supplies incurred in the ordinary course of business in respect of obligations not then delinquent or which are being contested as permitted under this Agreement;

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(ii) Liens on assets other than (A) the Collateral, (B) the Borrowing Base Properties, or (C) any direct or indirect interest of the Borrower, any Guarantor or any Subsidiary of the Borrower in any Guarantor, in respect of judgments permitted by §8.1(e);

(iii) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance, old age pensions or other social security obligations;

(iv) encumbrances on properties other than Borrowing Base Properties consisting of easements, rights of way, zoning restrictions, leases and other occupancy agreements, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens under leases to which the Borrower or a Subsidiary of such Person is a party, and other minor non-monetary liens or encumbrances none of which interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower or any such Subsidiary, which defects do not individually or in the aggregate have a Material Adverse Effect;

(v) liens on properties or interests therein (but excluding (A) the Collateral, (B) the Borrowing Base Properties, or (C) any direct or indirect interest of the Borrower, any Subsidiary Guarantor or any Subsidiary of the Borrower or any Subsidiary Guarantor) to secure Indebtedness of Subsidiaries of the Borrower that are not Subsidiary Guarantors permitted by §8.1(h);

(vi) rights of setoff or bankers’ liens upon deposits of cash in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such deposit accounts in the ordinary course of business;

(vii) Liens of Capitalized Leases;

(viii) Liens in favor of the Agent and the Lenders under the Loan Documents to secure the Obligations and the Hedge Obligations;

(ix) Leases, liens and encumbrances on a Borrowing Base Property reflected in the Title Policy approved by Agent;

(x) Liens securing the performance of bids, trade contracts (other than borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; and

(xi) Liens against the ownership interest of Borrower or any Guarantor in an Unconsolidated Affiliate created pursuant to the terms of the applicable organizational agreements.

Notwithstanding anything in this Agreement to the contrary, (A) no Guarantor shall create or incur or suffer to be created or incurred or to exist any Lien other than Liens

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contemplated in (i) with respect to any Subsidiary Guarantor that directly or indirectly owns a Borrowing Base Asset, §§8.2(i), 8.2(vi), 8.2(viii), and 8.2(ix), and (ii) with respect to REIT, General Partner and TRS, §§8.2(i) and 8.2(vi), and (B) Borrower shall not create or incur or suffer to be created or to occur or to exist any Lien (except in favor of Agent) in its direct or indirect interest in MRT Lakeway RealCo until the occurrence of the IPO Conditions Satisfaction Date.

§8.3 Restrictions on Investments . Neither the Borrower will, nor will it permit any Guarantor or any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in:

(a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the REIT or its Subsidiary;

(b) marketable direct obligations of any of the following: Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or any other agency or instrumentality of the United States of America;

(c) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; provided , however , that the aggregate amount at any time so invested with any single bank having total assets of less than $1,000,000,000 will not exceed $200,000;

(d) commercial paper assigned the highest rating by two (2) or more national credit rating agencies and maturing not more than ninety (90) days from the date of creation thereof;

(e) bonds or other obligations having a short term unsecured debt rating of not less than A-1+ by S&P and P-1+ by Moody’s and having a long term debt rating of not less than A by S&P and A1 by Moody’s issued by or by authority of any state of the United States, any territory or possession of the United States, including the Commonwealth of Puerto Rico and agencies thereof, or any political subdivision of any of the foregoing;

(f) repurchase agreements having a term not greater than ninety (90) days and fully secured by securities described in the foregoing §§8.3(a), 8.3(b) or 8.3(c) with banks described in the foregoing §8.3(c) or with financial institutions or other corporations having total assets in excess of $500,000,000; and

(g) shares of so-called “money market funds” registered with the SEC under the Investment Company Act of 1940 which maintain a level per-share value, invest principally in investments described in the foregoing §§8.3(a) through 8.3(f) and have total assets in excess of $50,000,000.

(h) the acquisition of fee or leasehold interests by the Borrower or its Subsidiaries in (i) Real Estate which is utilized for Medical Properties located in the continental

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United States or the District of Columbia and businesses and investments incidental thereto, and (ii) subject to the restrictions set forth in this §8.3, the acquisition of Land Assets to be developed for the foregoing purpose;

(i) Investments by the Borrower in Subsidiaries that are directly or indirectly one hundred percent (100%) owned by the Borrower, which in turn own Investments permitted by this §8.3;

(j) Investments in Land Assets;

(k) Investments in Mortgage Note Receivables secured by properties of the type described in §8.3(h)(i);

(l) Investments in non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates, which in turn own Investments permitted by this §8.3; and

(m) Investments in Development Properties for properties of the type described in §8.3(h)(i), provided that the aggregate construction and development budget for Development Properties (including land) shall not exceed five percent (5%) of Gross Asset Value.

Notwithstanding the foregoing, in no event shall the aggregate value of the holdings of the Borrower, any Guarantor and their Subsidiaries in the Investments described in §8.3(j), (k), (l) and (m) exceed twenty-five percent (25%) of Gross Asset Value at any time on or after January 31, 2016.

For the purposes of this §8.3, the Investment of REIT or any of its Subsidiaries in any non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates will equal (without duplication) the sum of (i) such Person’s Equity Percentage of their non-Wholly-Owned Subsidiaries and Unconsolidated Affiliates’ Investments valued in the manner set forth for the determination of Gross Asset Value, or if not included therein, at the GAAP book value.

§8.4 Merger, Consolidation . Other than with respect to or in connection with any disposition permitted under §8.8, the Borrower will not, nor will it permit the Guarantors or any of their respective Subsidiaries to, become a party to any dissolution, liquidation, disposition of all or substantially all of its assets or business, merger, reorganization, consolidation or other business combination or agree to effect any asset acquisition, stock acquisition or other acquisition individually or in a series of transactions which may have a similar effect as any of the foregoing, in each case without the prior written consent of the Required Lenders. Notwithstanding the foregoing, so long as no Default or Event of Default has occurred and is continuing immediately before and after giving effect thereto, the following shall be permitted without the consent of the Agent or any Lender: (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower (other than any Subsidiary that is a Guarantor) with and into the Borrower (it being understood and agreed that in any such event the Borrower will be the surviving Person), (ii) the merger or consolidation of two or more Subsidiaries of the Borrower; provided that no such merger or consolidation shall involve any Subsidiary that is a Guarantor unless such Guarantor will be the surviving Person, and (iii) the liquidation or dissolution of any Subsidiary of the Borrower that does not own any assets so long as such Subsidiary is not a

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Guarantor (or if such Subsidiary is a Guarantor, so long as the Borrower and such Subsidiary comply with the provisions of §5.5 and §5.6). Nothing in this §8.4 shall prohibit the dissolution of a Subsidiary which has disposed of its assets in accordance with this Agreement. A Subsidiary of the Borrower may sell all of its assets (and may effectuate such sale by merger or consolidation with another Person, with such other Person being the surviving entity) subject to compliance with the terms of this Agreement (including, without limitation, §§5.4 and 8.8), and after any such permitted sale, may dissolve.

§8.5 Sale and Leaseback . The Borrower will not, and will not permit its Subsidiaries, to enter into any arrangement, directly or indirectly, whereby the Borrower or any such Subsidiary shall sell or transfer any Real Estate owned by it in order that then or thereafter the Borrower or any such Subsidiary shall lease back such Real Estate without the prior written consent of the Agent, such consent not to be unreasonably withheld.

§8.6 Compliance with Environmental Laws . None of the Borrower nor any Guarantor will, nor will any of them permit any of their respective Subsidiaries or any other Person to, do any of the following: (a) use any of the Real Estate or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Substances, except for quantities of Hazardous Substances used in the ordinary course of operating Medical Properties as permitted under this Agreement and in material compliance with all applicable Environmental Laws, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances except in compliance with Environmental Laws, (c) generate any Hazardous Substances on any of the Real Estate except in compliance with Environmental Laws, (d) conduct any activity at any Real Estate or use any Real Estate in any manner that could reasonably be contemplated to cause a Release of Hazardous Substances on, upon or into the Real Estate or any surrounding properties or any threatened Release of Hazardous Substances which could reasonably be expected to give rise to liability under CERCLA or any other Environmental Law, or (e) directly or indirectly transport or arrange for the transport of any Hazardous Substances (except in compliance with all Environmental Laws), except, with respect to any Real Estate that is not a Borrowing Base Property, where any such use, generation, conduct or other activity has not had and could not reasonably be expected to have a Material Adverse Effect.

The Borrower and the Guarantors shall, and shall cause their respective Subsidiaries to:

(i) in the event of any change in Environmental Laws after the date of this Agreement governing the assessment, release or removal of Hazardous Substances, take all reasonable action (including, without limitation, the conducting of engineering tests at the sole expense of the Borrower) to confirm that no Hazardous Substances are or ever were Released or disposed of on the Borrowing Base Properties in violation of applicable Environmental Laws; and

(ii) if any Release or disposal of Hazardous Substances which any Person may be legally obligated to contain, correct or otherwise remediate or which may otherwise expose it to liability shall occur or shall have occurred on the Borrowing Base Properties (including, without limitation, any such Release or disposal occurring prior to the acquisition or leasing of such Borrowing Base Property by the Borrower or any Guarantor), the Borrower shall, after

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obtaining knowledge thereof, cause the prompt containment and removal of such Hazardous Substances and remediation of the Borrowing Base Properties in full compliance with all applicable Environmental Laws; provided , that each of the Borrower and a Guarantor shall be deemed to be in compliance with Environmental Laws for the purpose of this clause (ii) so long as it or a responsible third party with sufficient financial resources is taking reasonable action to remediate or manage any event of noncompliance to the reasonable satisfaction of the Agent and no action shall have been commenced or filed by any enforcement agency. The Agent may engage its own Environmental Engineer to review the environmental assessments and the compliance with the covenants contained herein.

(iii) At any time after an Event of Default shall have occurred hereunder, the Agent may at its election (and will at the request of the Required Lenders) obtain such environmental assessments of any or all of the Borrowing Base Properties prepared by an Environmental Engineer as may be necessary or advisable for the purpose of evaluating or confirming (A) whether any Hazardous Substances are present in the soil or water at or adjacent to any such Borrowing Base Property and (B) whether the use and operation of any such Borrowing Base Property complies with all Environmental Laws to the extent required by the Loan Documents. Additionally, at any time that the Agent or the Required Lenders shall have reasonable grounds to believe that a Release or threatened Release of Hazardous Substances which any Person may be legally obligated to contain, correct or otherwise remediate or which otherwise may expose such Person to liability may have occurred, relating to any Borrowing Base Property, or that any of the Borrowing Base Properties is not in compliance with Environmental Laws to the extent required by the Loan Documents, the Borrower shall promptly upon the request of the Agent obtain and deliver to the Agent such environmental assessments of such Borrowing Base Property prepared by an Environmental Engineer as may be necessary or advisable for the purpose of evaluating or confirming (A) whether any Hazardous Substances are present in the soil or water at or adjacent to such Borrowing Base Property and (B) whether the use and operation of such Borrowing Base Property comply with all Environmental Laws to the extent required by the Loan Documents. Environmental assessments may include detailed visual inspections of such Borrowing Base Property including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, as well as such other investigations or analyses as are reasonably necessary or appropriate for a complete determination of the compliance of such Borrowing Base Property and the use and operation thereof with all applicable Environmental Laws. All environmental assessments contemplated by this §8.6 shall be at the sole cost and expense of the Borrower.

§8.7 Distributions .

(a) During any calendar-year period, the Borrower shall not pay any Distribution to the partners, members or other owners of the Borrower, and General Partner and REIT shall not pay any Distribution to their partners, members or other owners, in an aggregate amount that exceeds the Applicable Tax Percentage of Taxable Net Income for such calendar year (the “Distribution Cap”). Notwithstanding the immediately preceding sentence but subject to the other terms of the §8.7(a), Borrower, General Partner and REIT shall be permitted to make Distributions during the course of each calendar year notwithstanding that Borrower may not, at such time, know the actual amount of the Distribution Cap for such calendar year provided that Borrower reasonably and in good faith believes, at the time it makes any such Distribution, that

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such Distribution will not cause the Distribution Cap for such calendar year to be exceeded based upon Borrower’s reasonable and good faith estimates of the Taxable Net Income for such calendar year (taking into account calculations of the Taxable Net Income for such calendar year through the date of the applicable Distribution). Borrower shall provide to the Agent supporting calculations of the Applicable Tax Percentage, the Taxable Net Income (or if not yet determined, Borrower’s good faith estimate thereof), the Distribution Cap (or if not yet determined, Borrower’s good faith estimate thereof) and Distributions made pursuant to this §8.7(a) in each Compliance Certificate delivered to Agent. Upon Borrower determining the actual Taxable Net Income for a calendar year (which shall in no event be later than April 15 of the following calendar year, but which determination shall not require filing of Borrower’s federal Form 1120-REIT with the Internal Revenue Service), Borrower shall (i) calculate the amount of the Distribution Cap and determine whether the Distributions made during such calendar year exceed the Distribution Cap (any such excess amount, with respect to a calendar year, is referred to herein as an “Excess Distribution Amount”) and (ii) provide such report to Agent. In the event that, for a calendar year, there shall be any Excess Distribution Amount, then (A) Borrower shall notify Agent in writing thereof as provided above and shall provide to Agent a written calculation of the Excess Distribution Amount and (B) the amount of the Distribution Cap and the permitted Distributions for the immediately following calendar year shall be deemed reduced by an amount equal to such Excess Distribution Amount. As used herein, the term “Applicable Tax Percentage” shall mean, as of the applicable date or time period, the percentage equal to the sum of the highest percentage Federal income tax rate then in effect applicable to REIT (provided that Borrower has first provided to Agent evidence satisfactory to Agent of such rate). Notwithstanding the foregoing, in the event that the IPO Conditions Satisfaction Date shall have occurred, the provisions of this §8.7(a) limiting Distributions based on Taxable Net Income shall no longer be applicable; provided that Borrower shall remain obligated to report and demonstrate compliance with this §8.7(a) as provided herein but only for any period for which this §8.7(a) is applicable.

(b) In the event that the IPO Conditions Satisfaction Date shall have occurred, then from the IPO Conditions Satisfaction Date and continuing thereafter, the Borrower shall not pay any Distribution to the partners, members or other owners of the Borrower, and General Partner and REIT shall not pay any Distribution to their partners, members or other owners, to the extent that the aggregate amount of such Distributions paid, when added to the aggregate amount of all other Distributions paid in any period of four (4) consecutive calendar quarters, exceeds ninety-five percent (95%) of such Person’s Funds from Operations for such period (provided that for the first calendar quarter ending after the IPO Conditions Satisfaction Date as provided in §8.7(b), the period of measurement shall commence with such quarter and thereafter such test in this §8.7(b) shall be tested by annualizing the results from such quarter until four (4) consecutive calendar quarters thereafter have elapsed); provided that the limitations contained in this §8.7(b) shall not preclude Distributions in an amount equal to the minimum distributions required under the Code to maintain the REIT Status of REIT, as evidenced by a certification of the principal financial or accounting officer of REIT containing calculations in detail reasonably satisfactory in form and substance to the Agent.

(c) If a Default or Event of Default shall have occurred and be continuing, the Borrower, General Partner and REIT shall make no Distributions to their respective partners, members or other owners, other than if, and only to the extent that the provisions of §8.7(b)

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shall then be applicable, Distributions in an amount equal to the minimum distributions required under the Code to maintain the REIT Status of the REIT, as evidenced by a certification of the principal financial or accounting officer of the REIT containing calculations in detail reasonably satisfactory in form and substance to the Agent.

(d) Notwithstanding the foregoing, at any time when an Event of Default under §§12.1(a) or 12.1(b) shall have occurred, an Event of Default under §§12.1(g), 12.1(h) or 12.1(i) shall have occurred, or the maturity of the Obligations has been accelerated, neither the Borrower, General Partner nor REIT shall make any Distributions whatsoever, directly or indirectly.

§8.8 Asset Sales . The Borrower will not, and will not permit the Guarantors or their respective Subsidiaries to, sell, transfer or otherwise dispose of (a) all or substantially all of their assets or (b) any material asset other than pursuant to a bona fide arm’s length transaction.

§8.9 Restriction on Prepayment of Indebtedness . The Borrower and the Guarantors will not, and will not permit their respective Subsidiaries to, (a) during the existence of any Default or Event of Default, prepay, redeem, defease, purchase or otherwise retire the principal amount, in whole or in part, of any Indebtedness other than the Obligations; provided , that the foregoing shall not prohibit (x) the prepayment of Indebtedness which is financed solely from the proceeds of a new loan which would otherwise be permitted by the terms of §8.1, and (y) the prepayment, redemption, defeasance or other retirement of the principal of Indebtedness secured by Real Estate which is satisfied solely from the proceeds of a sale of the Real Estate securing such Indebtedness; or (b) modify any document evidencing any Indebtedness (other than the Obligations) to accelerate the maturity date or required payments of principal of such Indebtedness during the existence of an Event of Default.

§8.10 Zoning and Contract Changes and Compliance . Neither the Borrower nor any Guarantor shall (a) initiate or consent to any zoning reclassification of any of its Borrowing Base Property or seek any variance under any existing zoning ordinance or use or permit the use of any Borrowing Base Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation or (b) initiate any change in any laws, requirements of governmental authorities or obligations created by private contracts and Leases which now or hereafter may materially adversely affect the ownership, occupancy, use or operation of any Borrowing Base Property.

§8.11 Derivatives Contracts . Neither the Borrower, the Guarantors nor any of their respective Subsidiaries shall contract, create, incur, assume or suffer to exist any Derivatives Contracts except for Hedge Obligations and interest rate swap, collar, cap or similar agreements providing interest rate protection and currency swaps and currency options made in the ordinary course of business and permitted pursuant to §8.1.

§8.12 Transactions with Affiliates . The Borrower shall not, and shall not permit any Guarantor or Subsidiary of any of them to, permit to exist or enter into, any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (but not including the Borrower or any Guarantor), except (i) transactions set forth on Schedule 6.14 attached hereto and (ii) transactions in the ordinary course of business

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pursuant to the reasonable requirements of the business of such Person and upon fair and reasonable terms which are no less favorable to such Person than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate.

§8.13 Equity Pledges . Notwithstanding anything in this Agreement to the contrary, neither the Borrower, the General Partner nor the REIT will create or incur or suffer to be created or incurred any Lien on any legal, equitable or beneficial interest of the REIT in the General Partner or the Borrower, of General Partner in the Borrower or, except pursuant to the Assignment of Interests, of Borrower in any Subsidiary Guarantor, including, without limitation, any Distributions or rights to Distributions on account thereof.

§8.14 Management Fees . The Borrower shall not pay, and shall not permit any Guarantor to pay, any management fees or other payments under any Management Agreement for any Borrowing Base Asset to the Borrower, any other manager that is an Affiliate of the Borrower or any other manager, in the event that a Default or an Event of Default shall have occurred and be continuing.

§8.15 Future Funding Obligation . Without limiting the terms of §8.1, none of the Borrower, the Guarantors nor any of their respective Subsidiaries shall incur any liabilities or funding obligations, whether or not constituting Indebtedness (including without limitation, obligations to fund development, tenant improvements or capital expenditures); provided that the terms of this §8.15 shall no longer be applicable upon the occurrence of the IPO Conditions Satisfaction Date. Notwithstanding the foregoing, the capital expenditures and tenant improvements in the aggregate amount of up to $3,390,247.00 with respect to the Borrowing Base Properties commonly known as Mountain’s Edge and Kentfield (after giving effect to a disbursement of $1,475,144.00 with respect to Mountain’s Edge to occur on July 31, 2015) are approved. The provisions of this §8.15 shall not limit the Borrower, the Guarantors or their Subsidiaries performing normal and customary repair and maintenance work as landlord under leases at MOBs.

§9.	FINANCIAL COVENANTS.

The Borrower covenants and agrees that, so long as any Loan, Note or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or issue any Letter of Credit:

§9.1 Borrowing Base Availability . The Borrower shall not at any time permit the outstanding principal balance of the Revolving Credit Loans, Swing Loans and the Letter of Credit Liabilities to be greater than the Borrowing Base Availability.

§9.2 Consolidated Total Indebtedness to Gross Asset Value . The Borrower will not at any time permit the ratio of Consolidated Total Indebtedness to Gross Asset Value (expressed as a percentage) to exceed fifty-five percent (55%).

§9.3 Adjusted Consolidated EBITDA to Consolidated Fixed Charges . Commencing with the calendar quarter beginning October 1, 2014 and continuing thereafter, the Borrower will not at any time permit the ratio of Adjusted Consolidated EBITDA determined for the most recently ended two (2) calendar quarters, annualized to Consolidated Fixed Charges for the most recently ended two (2) calendar quarters, annualized to be less than 1.75 to 1. Notwithstanding

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the foregoing, until the REIT and its Subsidiaries have two (2) consecutive calendar quarters of operating results, Adjusted Consolidated EBITDA and Consolidated Fixed Charges shall be determined for the actual periods of operations, annualized in a manner satisfactory to Agent.

§9.4 Minimum Consolidated Tangible Net Worth . The Borrower will not at any time permit Consolidated Tangible Net Worth to be less than (a) prior to the occurrence of the IPO Event, the sum of (i) $214,000,000.00, plus (ii) seventy-five percent (75%) of the sum of any additional Net Offering Proceeds after the date of this Agreement, and (b) from and after the occurrence of the IPO Event, the sum of $350,000,000.00 plus (ii) seventy-five percent (75%) of the sum of any additional Net Offering Proceeds after the date of the IPO Event.

§9.5 Liquidity . The Borrower shall have Liquidity at all times of not less than Five Million and No/100 Dollars ($5,000,000.00) provided, however, that the covenant in this §9.5 shall no longer be applicable upon the occurrence of the IPO Conditions Satisfaction Date.

§9.6 Aggregate Occupancy Rate . The Borrower will not at any time permit the Aggregate Occupancy Rate for the Borrowing Base Properties (excluding Borrowing Base Properties that are Newly-Built Properties) to be less than eighty-five percent (85%).

§9.7 Remaining Lease Term . As of the end of each calendar quarter, the Borrowing Base Properties included in the calculation of Borrowing Base Availability shall maintain on a collective basis a minimum weighted average remaining initial lease term of Leases of not less than seven (7) years remaining (for each multi-tenant Borrowing Base Property included in the calculation of Borrowing Base Availability, a weighted average lease term taking into account all Leases with Major Tenants within such Borrowing Base Property shall be used for the calculation required by this §9.7).

§9.8 Minimum Actual Debt Service Coverage Ratio . The Borrower will not at any time permit the Actual Debt Service Coverage Ratio to be less than or equal to 2.00 to 1.00.

§9.9 Minimum Property Requirement . The Borrowing Base Assets shall at all times consist of not less than seven (7) Borrowing Base Properties with an aggregate Appraised Value of not less than $220,000,000.00; provided that from and after the IPO Event, the Borrowing Base Assets shall at all times consist of not less than ten (10) Borrowing Base Properties with an aggregate Appraised Value of not less than $300,000,000.00.

§9.10 Concentration Limits .

(a) Commencing on the date of the IPO Event and continuing thereafter, aggregate rent and other payments under a Lease or Leases to any single tenant or any group of Affiliates thereof shall not account for more than thirty-five percent (35%) of Adjusted Net Operating Income from the Borrowing Base Properties (the “Single Tenant Limitation”); provided that a failure to satisfy the requirements of this §9.10(a) shall not result in any Real Estate not being included as a Borrowing Base Property, but any such rent and other payments accounting for more than the Single Tenant Limitation shall be excluded for purposes of calculating Adjusted Net Operating Income, Debt Yield and Borrowing Base Availability.

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(b) Commencing on the date of the IPO Event and continuing thereafter, no more than thirty-five percent (35%) of the Borrowing Base Availability shall be attributable to any single Borrowing Base Property; provided that a failure to satisfy the requirements of this §9.10(b) shall not result in any Real Estate not being included as a Borrowing Base Property, but any Borrowing Base Availability in excess of such limitation shall be excluded.

(c) Commencing on the date hereof and continuing until the date that is six (6) months after the occurrence of the IPO Event, no more than thirty-five percent (35%) of the total Adjusted Net Operating Income or the aggregate Appraised Value of the Borrowing Base Properties shall be attributable to Newly-Built Properties, and commencing on the date that is six (6) months after the occurrence of the IPO Event and continuing thereafter, no more than twenty-five percent (25%) of the total Adjusted Net Operating Income or the aggregate Appraised Value of the Borrowing Base Properties shall be attributable to Newly-Built Properties, provided that a failure to satisfy the requirements of this §9.10(c) shall not result in any Real Estate not being included as a Borrowing Base Property but any such Adjusted Net Operating Income or Appraised Value in excess of such limitation shall be excluded for purposes of calculating Adjusted Net Operating Income, Debt Yield and Borrowing Base Availability.

§9.11 Debt Yield . The Borrower will not at any time permit the Debt Yield to be less than twelve percent (12.0%), provided that the covenant in this §9.11 shall no longer be applicable upon the occurrence of the IPO Conditions Satisfaction Date.

§10.	CLOSING CONDITIONS.

The obligation of the Lenders to make the Loans or issue the Letter(s) of Credit shall be subject to the satisfaction of the following conditions precedent:

§10.1 Loan Documents . Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto and shall be in full force and effect. The Agent shall have received a fully executed counterpart of each such document, except that each Lender shall have received the fully-executed original of its Note.

§10.2 Certified Copies of Organizational Documents . The Agent shall have received from the Borrower and each Guarantor a copy, certified as of a recent date by the appropriate officer of each State in which such Person is organized and (with respect to any Guarantor that owns a Borrowing Base Property) in which such Borrowing Base Property is located and a duly authorized officer, partner or member of such Person, as applicable, to be true and complete, of the partnership agreement, corporate charter or operating agreement and/or other organizational agreements of the Borrower and each such Guarantor, as applicable (or with respect to partnership agreements and operating agreements previously delivered to Agent pursuant to the Original Credit Agreement, a certification that there have been no changes to such agreements and that they remain in full force and effect) and its qualification to do business, as applicable, as in effect on such date of certification.

§10.3 Resolutions . All action on the part of the Borrower and each Guarantor, as applicable, necessary for the valid execution, delivery and performance by such Person of this Agreement and the other Loan Documents to which such Person is or is to become a party shall have been duly and effectively taken, and evidence thereof reasonably satisfactory to the Agent shall have been provided to the Agent.

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§10.4 Incumbency Certificate; Authorized Signers . The Agent shall have received from the Borrower and each Guarantor an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of such Person and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, each of the Loan Documents to which such Person is or is to become a party.

§10.5 Opinion of Counsel . The Agent shall have received an opinion addressed to the Lenders and the Agent and dated as of the Closing Date from counsel to the Borrower and each Guarantor in form and substance reasonably satisfactory to the Agent.

§10.6 Payment of Fees . The Borrower shall have paid to the Agent the fees payable pursuant to §4.2.

§10.7 Performance; No Default . The Borrower and each Guarantor shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default.

§10.8 Representations and Warranties . The representations and warranties made by the Borrower and each Guarantor in the Loan Documents or otherwise made by or on behalf of the Borrower, the Guarantors and their respective Subsidiaries in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date.

§10.9 Proceedings and Documents . All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agent’s counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions, assurances, consents, approvals or documents as the Agent and the Agent’s counsel may reasonably require.

§10.10 Eligible Real Estate Qualification Documents . The Eligible Real Estate Qualification Documents for each Borrowing Base Asset included in the calculation of the Borrowing Base Availability as of the Closing Date shall have been delivered to the Agent at the Borrower’s expense and shall be in form and substance reasonably satisfactory to the Agent.

§10.11 Compliance Certificate and Borrowing Base Certificate . The Agent shall have received a Compliance Certificate and a Borrowing Base Certificate dated as of the date of the Closing Date demonstrating compliance with each of the covenants calculated therein as of the most recent calendar quarter for which the Borrower has provided financial statements under §6.4.

§10.12 Appraised Values . The Agent shall have determined an Appraised Value for any Borrowing Base Properties.

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§10.13 Consents . The Agent shall have received evidence reasonably satisfactory to the Agent that all necessary stockholder, partner, member or other consents required in connection with the consummation of the transactions contemplated by this Agreement and the other Loan Documents have been obtained.

§10.14 Contribution Agreement . The Agent shall have received an executed counterpart of the Contribution Agreement.

§10.15 Subordination of Management Agreement . The Agent shall have received an executed counterpart of a Subordination of Management Agreement with respect to each Management Agreement.

§10.16 Good Standing . The Agent shall have received evidence reasonably satisfactory to it that Borrower remains in good standing with the Delaware Secretary of State.

§10.17 Insurance . The Agent shall have received certificates of insurance as required by this Agreement or the other Loan Documents.

§10.18 Other . The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agent’s Special Counsel may reasonably have requested.

§11.	CONDITIONS TO ALL BORROWINGS.

The obligations of the Lenders to make any Loan or issue any Letter of Credit, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent:

§11.1 Prior Conditions Satisfied . All conditions set forth in §10 shall continue to be satisfied as of the date upon which any Loan is to be made or any Letter of Credit is to be issued.

§11.2 Representations True; No Default . Each of the representations and warranties made by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true and correct in all material respects both as of the date as of which they were made and shall also be true and correct in all material respects as of the time of the making of such Loan or the issuance of such Letter of Credit, with the same effect as if made at and as of that time, except to the extent of changes resulting from transactions or other events permitted by the Loan Documents (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date), and no Default or Event of Default shall have occurred and be continuing.

§11.3 Borrowing Documents . The Agent shall have received a fully completed Loan Request for such Loan and the other documents and information as required by §2.7, or a fully completed Letter of Credit Request required by §2.10, as applicable.

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§12.	EVENTS OF DEFAULT; ACCELERATION; ETC.

§12.1 Events of Default and Acceleration . If any of the following events (“ Events of Default ” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “ Defaults ”) shall occur:

(a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;

(b) the Borrower shall fail to pay any interest on the Loans, any reimbursement obligations with respect to the Letters of Credit or any fees or other sums due hereunder or under any of the other Loan Documents when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;

(c) the Borrower shall fail to perform any term, covenant or agreement contained in §9, and with respect to a failure to comply with §9.1 or §9.11 only, such failure shall continue for five (5) Business Days after such occurrence;

(d) any of the Borrower, the Guarantors or any of their respective Subsidiaries shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents which they are required to perform (other than those specified in the other subsections or clauses of this §12 or in the other Loan Documents);

(e) any representation or warranty made by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries in this Agreement or any other Loan Document, or any report, certificate, financial statement, request for a Loan, Letter of Credit Request, or in any other document or instrument prepared by or on behalf of the Borrower or a Guarantor and delivered pursuant to or in connection with this Agreement, any advance of a Loan, the issuance of any Letter of Credit or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated;

(f) the Borrower, any Guarantor or any of their Subsidiaries shall fail pay when due (including, without limitation, at maturity), or within any applicable period of grace, any obligation for borrowed money or credit received or other Indebtedness (including under any Derivatives Contract), or shall fail to observe or perform any term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any obligation for borrowed money or credit received or other Indebtedness (including under any Derivatives Contract) for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof or require the prepayment, redemption, purchase, termination or other settlement thereof; provided , however , that the events described in this §12.1(f) shall not constitute an Event of Default unless such failure to perform, together with other failures to perform as described in §12.1(f), involves singly or in the aggregate obligations for Indebtedness totaling in excess of (i) prior to the occurrence of the IPO Event, $1,000,000.00, or (ii) from and after the occurrence of the IPO Event, $5,000,000.00;

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(g) any of the Borrower, the Guarantors, or any of their respective Subsidiaries, (i) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver for it or any substantial part of its assets, (ii) shall commence any case or other proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (iii) shall take any action to authorize or in furtherance of any of the foregoing;

(h) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of any of the Borrower, the Guarantors, or any of their respective Subsidiaries or any substantial part of the assets of any thereof, or a case or other proceeding shall be commenced against any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and any such Person shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within sixty (60) days following the filing or commencement thereof;

(i) a decree or order is entered appointing a trustee, custodian, liquidator or receiver for any of the Borrower, the Guarantors, or any of their respective Subsidiaries or adjudicating any such Person, bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any such Person in an involuntary case under federal bankruptcy laws as now or hereafter constituted;

(j) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, one (1) or more uninsured or unbonded final judgments against the Borrower, any Guarantor or any of their respective Subsidiaries that, either individually or in the aggregate, exceed $1,000,000.00 per occurrence or during any twelve (12) month period prior to the occurrence of the IPO Event, or $5,000,000.00 per occurrence or during any twelve (12) month period from and after the occurrence of the IPO Event;

(k) any of the Loan Documents or the Contribution Agreement shall be disavowed, canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or the express prior written agreement, consent or approval of the Lenders, or any action at law, suit in equity or other legal proceeding to disavow, cancel, revoke, rescind or challenge or content the validity or enforceability of any of the Loan Documents or the Contribution Agreement shall be commenced by or on behalf of the Borrower or any Guarantor, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination, or issue a judgment, order, decree or ruling, to the effect that any one or more of the Loan Documents or the Contribution Agreement is illegal, invalid or unenforceable in accordance with the terms thereof;

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(l) any dissolution, termination, partial or complete liquidation, merger or consolidation of the Borrower, any Guarantor or any of their respective Subsidiaries shall occur or any sale, transfer or other disposition of the assets of the Borrower, any Guarantor or any of their respective Subsidiaries shall occur, in each case, other than as permitted under the terms of this Agreement or the other Loan Documents;

(m) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Required Lenders shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Borrower, the Guarantors or any of their respective Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000.00 prior to the occurrence of the IPO Event, or $5,000,000.00 from and after the occurrence of the IPO Event and (x) such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or (y) a trustee shall have been appointed by the United States District Court to administer such Plan; or (z) the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan;

(n) the forfeiture to the United States of America of (i) any assets of the Borrower, any Guarantor or any of their respective Subsidiaries which in the good faith judgment of the Required Lenders could reasonably be expected to have a Material Adverse Effect, or (ii) the Collateral;

(o) any Guarantor denies that it has any liability or obligation under the Guaranty or any other Loan Document, or shall notify the Agent or any of the Lenders of such Guarantor’s intention to attempt to cancel or terminate the Guaranty or any other Loan Document, or shall fail to observe or comply with any term, covenant, condition or agreement under any Guaranty or any other Loan Document;

(p) any Change of Control shall occur without the consent of the Required Lenders; or

(q) an Event of Default under any of the other Loan Documents shall occur;

then, and in any such event, the Agent may, and, upon the request of the Required Lenders, shall by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes, the Letters of Credit and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in §§12.1(g), 12.1(h) or 12.1(i), all such amounts shall become immediately due and payable automatically and without any requirement of presentment, demand, protest or other notice of any kind from any of the Lenders or the Agent, the Borrower hereby expressly waiving any right to notice of intent to accelerate and notice of acceleration. Upon demand by the Agent or the Required Lenders in their absolute and sole discretion after the occurrence and during the continuance of an Event of Default, and regardless of whether the conditions precedent in this Agreement for a Revolving Credit Loan have been satisfied, the Lenders will cause a Revolving Credit Loan to be made in the undrawn amount of

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all Letters of Credit. The proceeds of any such Revolving Credit Loan will be pledged to and held by the Agent as security for any amounts that become payable under the Letters of Credit and all other Obligations and Hedge Obligations. In the alternative, if demanded by the Agent in its absolute and sole discretion after the occurrence and during the continuance of an Event of Default, the Borrower will deposit into the Collateral Account and pledge to the Agent cash in an amount equal to the amount of all undrawn Letters of Credit. Such amounts will be pledged to and held by the Agent for the benefit of the Lenders as security for any amounts that become payable under the Letters of Credit and all other Obligations and Hedge Obligations. Upon any draws under Letters of Credit, at the Agent’s sole discretion, the Agent may apply any such amounts to the repayment of amounts drawn thereunder and upon the expiration of the Letters of Credit any remaining amounts will be applied to the payment of all other Obligations and Hedge Obligations or if there are no outstanding Obligations and Hedge Obligations and the Lenders have no further obligation to make Revolving Credit Loans or issue Letters of Credit or if such excess no longer exists, such proceeds deposited by the Borrower will be released to the Borrower.

§12.2 Certain Cure Periods; Limitation of Cure Periods .

(a) Notwithstanding anything contained in §12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the occurrence of any failure described in §12.1(b) in the event that the Borrower cures such Default within five (5) Business Days after the date such payment is due (or, with respect to any payments other than interest on the Loans, any reimbursement obligations with respect to the Letters of Credit or any fees due under the Loan Documents, within five (5) Business Days after written notice thereof shall have been given to the Borrower by the Agent), provided , however , that the Borrower shall not be entitled to receive more than two (2) grace or cure periods in the aggregate pursuant to this clause (i) in any period of 365 days ending on the date of any such occurrence of Default, and provided further , that no such cure period shall apply to any payments due upon the maturity of the Notes, and (ii) no Event of Default shall exist hereunder upon the occurrence of any failure described in §12.1(d) in the event that the Borrower cures (or causes to be cured) such Default within thirty (30) days following receipt of written notice of such default, provided that the provisions of this clause (ii) shall not pertain to defaults consisting of a failure to provide insurance as required by §7.7, to any default (whether of the Borrower, any Guarantor or any Subsidiary thereof) consisting of a failure to comply with §§5.7, 7.4(c), 7.14, 7.15, 7.18, 7.19, 7.20, 7.21, 7.22, 8.1, 8.2, 8.3, 8.4, 8.7, 8.8, 8.13 or 8.15 or to any Default excluded from any provision of cure of defaults contained in any other of the Loan Documents.

(b) Notwithstanding any of the foregoing provisions of this §12.2 to the contrary, in the event that there shall occur any Default or Event of Default that affects only certain Borrowing Base Assets or the owner(s) or Operator(s) thereof, then the Borrower may elect to cure such Default or Event of Default (so long as no other Default or Event of Default would arise as a result) by electing to have the Agent remove such Borrowing Base Assets from the calculation of the Borrowing Base Availability and by reducing the outstanding Loans and Letters of Credit so that no Default exists under this Agreement, in which event such removal and reduction shall be completed within ten (10) Business Days after receipt of notice of such Default from the Agent or the Required Lenders; provided, however, that until the occurrence of the IPO Conditions Satisfaction Date, such Borrowing Base Asset shall not be released from the lien and security interest of the Security Documents.

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§12.3 Termination of Commitments . If any one or more Events of Default specified in §12.1(g), 12.1(h) or 12.1(i) shall occur, then immediately and without any action on the part of the Agent or any Lender any unused portion of the credit hereunder shall terminate and the Lenders shall be relieved of all obligations to make Loans or issue Letters of Credit to the Borrower. If any other Event of Default shall have occurred, the Agent may, and upon the election of the Required Lenders, shall, by notice to the Borrower terminate the obligation to make Revolving Credit Loans to and issue Letters of Credit for the Borrower. No termination under this §12.3 shall relieve the Borrower or the Guarantors of their obligations to the Lenders arising under this Agreement or the other Loan Documents.

§12.4 Remedies . In case any one or more Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to §12.1, the Agent, on behalf of the Lenders may, and upon the direction of the Required Lenders, shall proceed to protect and enforce their rights and remedies under this Agreement, the Notes and/or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, including to the full extent permitted by Applicable Law the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents, the obtaining of the ex parte appointment of a receiver, requiring the establishment of a hard lockbox and cash management system with Agent, and, if any amount shall have become due, by declaration or otherwise, the enforcement of the payment thereof. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. Notwithstanding the provisions of this Agreement providing that the Loans may be evidenced by multiple Notes in favor of the Lenders, the Lenders acknowledge and agree that only the Agent may exercise any remedies arising by reason of a Default or Event of Default. If the Borrower or any Guarantor fails to perform any agreement or covenant contained in this Agreement or any of the other Loan Documents beyond any applicable period for notice and cure, the Agent may itself perform, or cause to be performed, any agreement or covenant of such Person contained in this Agreement or any of the other Loan Documents which such Person shall fail to perform, and the out-of-pocket costs of such performance, together with any reasonable expenses, including reasonable attorneys’ fees actually incurred (including attorneys’ fees incurred in any appeal) by the Agent in connection therewith, shall be payable by the Borrower upon demand and shall constitute a part of the Obligations and shall if not paid within five (5) Business Days after demand bear interest at the Default Rate. In the event that all or any portion of the Obligations is collected by or through an attorney-at-law, the Borrower shall pay all costs of collection including, but not limited to, reasonable attorney’s fees.

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§12.5 Distribution of Collateral Proceeds . In the event that, following the occurrence and during the continuance of any Event of Default, any monies are received in connection with the enforcement of any of the Loan Documents, or otherwise with respect to the realization upon any of the Collateral or other assets of the Borrower or the Guarantors, such monies shall be distributed for application as follows:

(a) First, to the payment of, or (as the case may be) the reimbursement of the Agent for or in respect of, all reasonable out-of-pocket costs, expenses, disbursements and losses which shall have been paid or incurred or sustained by the Agent to protect or preserve the Collateral or in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent or the Lenders under this Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent or the Lenders to such monies;

(b) Second, to all other Obligations and Hedge Obligations (including any interest, expenses or other obligations incurred after the commencement of a bankruptcy) in such order or preference as the Required Lenders shall determine; provided , that (i) Swing Loans shall be repaid first, (ii) distributions in respect of such other Obligations shall include, on a pari passu basis, any Agent’s fee payable pursuant to §4.2, (iii) in the event that any Lender is a Defaulting Lender, payments to such Lender shall be governed by §2.13, and (iv) except as otherwise provided in clause (iii), Obligations owing to the Lenders with respect to each type of Obligation such as interest, principal, fees and expenses and Hedge Obligations (but excluding the Swing Loans) shall be made among the Lenders and Lender Hedge Providers, pro rata; and provided , further that the Required Lenders may in their discretion make proper allowance to take into account any Obligations not then due and payable; and

§12.6 Collateral Account .

(a) As collateral security for the prompt payment in full when due of all Letter of Credit Liabilities, Swing Loans and the other Obligations and Hedge Obligations, the Borrower hereby pledges and grants to the Agent, for the ratable benefit of the Agent and the Lenders as provided herein, a security interest in all of its right, title and interest in and to the Collateral Account and the balances from time to time in the Collateral Account (including any interest provided for below). The balances from time to time in the Collateral Account shall not constitute payment of any Letter of Credit Liabilities or Swing Loans until applied by the Agent as provided herein. Anything in this Agreement to the contrary notwithstanding, funds held in the Collateral Account shall be subject to withdrawal only as provided in this §12.6.

(b) Amounts on deposit in the Collateral Account shall not be invested by the Agent, and will earn interest at a rate paid by Agent with respect to similar accounts, and shall be held in the name of and be under the sole dominion and control of the Agent for the ratable benefit of the Lenders. The Agent shall exercise reasonable care in the custody and preservation of any funds held in the Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Agent accords other funds deposited with the Agent, it being understood that the Agent shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any funds held in the Collateral Account.

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(c) If a drawing pursuant to any Letter of Credit occurs on or prior to the expiration date of such Letter of Credit, the Borrower and the Lenders authorize the Agent to use the monies deposited in the Collateral Account to make payment to the beneficiary with respect to such drawing or the payee with respect to such presentment. If a Swing Loan is not refinanced as a Base Rate Loan as provided in §2.5 above, then the Agent is authorized to use monies deposited in the Collateral Account to make payment to the Swing Loan Lender with respect to any participation not funded by a Defaulting Lender.

(d) If an Event of Default exists, the Required Lenders may, in their discretion, at any time and from time to time, instruct the Agent to liquidate or withdraw any amounts in the Collateral Account and apply proceeds thereof to the Obligations and Hedge Obligations in accordance with §12.5.

(e) So long as no Default or Event of Default exists, and to the extent amounts on deposit in the Collateral Account exceed the aggregate amount of the Letter of Credit Liabilities then due and owing and the pro rata share of any Letter of Credit Obligations and Swing Loans of any Defaulting Lender after giving effect to §2.13(c), the Agent shall, from time to time, at the request of the Borrower, deliver to the Borrower within ten (10) Business Days after the Agent’s receipt of such request from the Borrower, against receipt but without any recourse, warranty or representation whatsoever, such of the balances in the Collateral Account as exceed the aggregate amount of the Letter of Credit Liabilities and Swing Loans at such time.

(f) The Borrower shall pay to the Agent from time to time within ten (10) Business Days following written request therefor such fees as the Agent normally charges for similar services in connection with the Agent’s administration of the Collateral Account. The Borrower authorizes the Agent to file such financing statements as the Agent may reasonably require in order to perfect the Agent’s security interest in the Collateral Account, and the Borrower shall promptly upon demand execute and deliver to the Agent such other documents as the Agent may reasonably request to evidence its security interest in the Collateral Account.

§13.

SETOFF.

Regardless of the adequacy of any Collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch where such deposits are held) or other sums credited by or due from any Lender to the Borrower or the Guarantors and any securities or other property of the Borrower or the Guarantors in the possession of such Lender may, without notice to the Borrower or any Guarantor (any such notice being expressly waived by the Borrower and each Guarantor) but with the prior written approval of the Agent, be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or the Guarantors to such Lender under the Loan Documents. Each of the Lenders agree with each other Lender that if such Lender shall receive from the Borrower or the Guarantors, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Lender (but excluding the Swing Loan Note) any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by all of the Lenders, such Lender will make such disposition and

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arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. In the event that any Defaulting Lender shall exercise any such right of setoff, (a) all amounts so set off shall be paid over immediately to the Agent for further application in accordance with the provisions of this Agreement and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Agent and the Lenders, and (b) such Defaulting Lender shall provide promptly to the Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.

§14.	THE AGENT.

§14.1 Authorization . The Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of the Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Lender or to create an agency or fiduciary relationship. The Agent shall act as the contractual representative of the Lenders hereunder, and notwithstanding the use of the term “Agent”, it is understood and agreed that the Agent shall not have any fiduciary duties or responsibilities to any Lender by reason of this Agreement or any other Loan Document and is acting as an independent contractor, the duties and responsibilities of which are limited to those expressly set forth in this Agreement and the other Loan Documents. The Borrower and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Lenders pursuant to this Agreement and the other Loan Documents.

§14.2 Employees and Agents . The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower.

§14.3 No Liability . Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable for (a) any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, shall be liable for losses due to its willful misconduct or gross negligence as finally determined by a court of competent jurisdiction after the expiration of all applicable appeal

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periods or (b) any action taken or not taken by the Agent with the consent or at the request of the Required Lenders, the Super-Majority Lenders, all of the Lenders or all affected Lenders, as applicable. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Agent has received notice from a Lender or the Borrower referring to the Loan Documents and describing with reasonable specificity such Default or Event of Default and stating that such notice is a “notice of default”.

§14.4 No Representations . The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein, or any agreement, instrument or certificate delivered in connection therewith or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any of the other Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower, the Guarantors or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the creditworthiness or financial condition of the Borrower, the Guarantors or any of their respective Subsidiaries, or the value of the Collateral or any other assets of the Borrower, any Guarantor or any of their respective Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. The Agent’s Special Counsel has only represented the Agent and KeyBank in connection with the Loan Documents and the only attorney client relationship or duty of care is between the Agent’s Special Counsel and the Agent or KeyBank. Each Lender has been independently represented by separate counsel on all matters regarding the Loan Documents and the granting and perfecting of liens in the Collateral.

§14.5 Payments .

(a) A payment by the Borrower or any Guarantor to the Agent hereunder or under any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Agent agrees to distribute to each Lender not later than one (1) Business Day after the Agent’s receipt of good funds, determined in accordance with the Agent’s customary practices, such Lender’s pro rata share of payments received by the Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, each payment by the Borrower hereunder shall be applied in accordance with §2.13(d).

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(b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making such distribution until its right to make such distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. In the event that the Agent shall refrain from making any distribution of any amount received by it as provided in this §14.5(b), the Agent shall endeavor to hold such amounts in an interest bearing account and at such time as such amounts may be distributed to the Lenders, the Agent shall distribute to each Lender, based on their respective Commitment Percentages, its pro rata share of the interest or other earnings from such deposited amount.

§14.6 Holders of Notes . Subject to the terms of §18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee.

§14.7 Indemnity . The Lenders ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by §15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent’s actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent’s willful misconduct or gross negligence as finally determined by a court of competent jurisdiction after the expiration of all applicable appeal periods. The agreements in this §14.7 shall survive the payment of all amounts payable under the Loan Documents.

§14.8 The Agent as Lender . In its individual capacity, KeyBank shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent.

§14.9 Resignation . The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower. Any such resignation may at the Agent’s option also constitute the Agent’s resignation as the Issuing Lender and the Swing Loan Lender. Upon any such resignation, the Required Lenders, subject to the terms of §18.1, shall have the right to appoint as a successor Agent and, if applicable, Issuing Lender and Swing Loan Lender, any Lender or any bank whose senior debt obligations are rated not less than “A” or its equivalent by Moody’s or not less than “A” or its equivalent by S&P and which has a net worth of not less than $500,000,000.00. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent and, if applicable, Issuing Lender and Swing Loan Lender, shall be

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reasonably acceptable to the Borrower. If no successor Agent shall have been appointed and shall have accepted such appointment within ten (10) days after the retiring Agent’s giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be any Lender or any bank whose senior debt obligations are rated not less than “A2” or its equivalent by Moody’s or not less than “A” or its equivalent by S&P and which has a net worth of not less than $500,000,000.00. Upon the acceptance of any appointment as the Agent and, if applicable, the Issuing Lender and the Swing Loan Lender, hereunder by a successor Agent and, if applicable, Issuing Lender and Swing Loan Lender, such successor Agent and, if applicable, Issuing Lender and Swing Loan Lender, shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and, if applicable, Issuing Lender and Swing Loan Lender, and the retiring Agent and, if applicable, Issuing Lender and Swing Loan Lender, shall be discharged from its duties and obligations hereunder as the Agent and, if applicable, the Issuing Lender and the Swing Loan Lender. After any retiring Agent’s resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent, the Issuing Lender and the Swing Loan Lender. If the resigning Agent shall also resign as the Issuing Lender, such successor Agent shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or shall make other arrangements satisfactory to the current Issuing Lender, in either case, to assume effectively the obligations of the current Agent with respect to such Letters of Credit. Upon any change in the Agent under this Agreement, the resigning Agent shall execute such assignments of and amendments to the Loan Documents as may be necessary to substitute the successor Agent for the resigning Agent.

§14.10 Duties in the Case of Enforcement . In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent may and, if (a) so requested by the Required Lenders and (b) the Lenders have provided to the Agent such additional indemnities and assurances in accordance with their respective Commitment Percentages against expenses and liabilities as the Agent may reasonably request, shall proceed to exercise all or any legal and equitable and other rights or remedies as it may have; provided , however , that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem to be in the best interests of the Lenders. Without limiting the generality of the foregoing, if the Agent reasonably determines payment is in the best interest of all the Lenders, the Agent may without the approval of the Lenders pay taxes and insurance premiums and spend money for maintenance, repairs or other expenses which may be necessary to be incurred, and the Agent shall promptly thereafter notify the Lenders of such action. Each Lender shall, within thirty (30) days of request therefor, pay to the Agent its Commitment Percentage of the reasonable costs incurred by the Agent in taking any such actions hereunder to the extent that such costs shall not be promptly reimbursed to the Agent by the Borrower or the Guarantors or out of the Collateral within such period. The Required Lenders may direct the Agent in writing as to the method and the extent of any such exercise, the Lenders hereby agreeing to indemnify and hold the Agent harmless in accordance with their respective Commitment Percentages from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent’s compliance with such direction to be unlawful in any applicable jurisdiction or commercially unreasonable under the UCC as enacted in any applicable jurisdiction.

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§14.11 Request for Agent Action . The Agent and the Lenders acknowledge that in the ordinary course of business of the Borrower, (a) a Borrowing Base Property may be subject to a Taking, or (b) the Borrower or any Subsidiary Guarantor may desire to enter into easements or other agreements affecting the Borrowing Base Properties, or take other actions or enter into other agreements in the ordinary course of business (including, without limitation, Leases) which similarly require the consent, approval or agreement of the Agent. In connection with the foregoing, the Lenders hereby expressly authorize the Agent to execute consents in form and substance satisfactory to the Agent in connection with any easements or agreements affecting the Borrowing Base Property, or execute consents, approvals, or other agreements in form and substance satisfactory to the Agent in connection with such other actions or agreements as may be necessary in the ordinary course of the Borrower’s business.

§14.12 Bankruptcy . In the event a bankruptcy or other insolvency proceeding is commenced by or against the Borrower or any Guarantor with respect to the Obligations, the Agent shall have the sole and exclusive right to file and pursue a joint proof claim on behalf of all Lenders. Any votes with respect to such claims or otherwise with respect to such proceedings shall be subject to the vote of the Required Lenders or all of the Lenders as required by this Agreement. Each Lender irrevocably waives its right to file or pursue a separate proof of claim in any such proceedings unless the Agent fails to file such claim within thirty (30) days after receipt of written notice from the Lenders requesting that the Agent file such proof of claim.

§14.13 Reliance by the Agent . The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by an Authorized Officer. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, the Agent may presume that such condition is satisfactory to such Lender unless the Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

§14.14 Approvals . If consent is required for some action under this Agreement, or except as otherwise provided herein an approval of the Lenders, the Required Lenders or the Super-Majority Lenders is required or permitted under this Agreement, each Lender agrees to give the Agent, within ten (10) days of receipt of the request for action from the Agent together with all reasonably requested information related thereto (or such lesser period of time required by the terms of the Loan Documents), notice in writing of approval or disapproval (collectively, “ Directions ”) in respect of any action requested or proposed in writing pursuant to the terms hereof. To the extent that any Lender does not approve any recommendation of the Agent, such

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Lender shall in such notice to the Agent describe the actions that would be acceptable to such Lender. If consent is required for the requested action, any Lender’s failure to respond to a request for Directions within the required time period shall be deemed to constitute a Direction to take such requested action. In the event that any recommendation is not approved by the requisite number of Lenders and a subsequent approval on the same subject matter is requested by the Agent, then for the purposes of this paragraph each Lender shall be required to respond to a request for Directions within five (5) Business Days of receipt of such request. The Agent and each Lender shall be entitled to assume that any officer of the other Lenders delivering any notice, consent, certificate or other writing is authorized to give such notice, consent, certificate or other writing unless the Agent and such other Lenders have otherwise been notified in writing.

§14.15 The Borrower Not Beneficiary . Except for the provisions of §14.9 relating to the appointment of a successor Agent, the provisions of this §14 are solely for the benefit of the Agent and the Lenders, may not be enforced by the Borrower or any Guarantor, and except for the provisions of §14.9, may be modified or waived without the approval or consent of the Borrower.

§14.16 Reliance on Hedge Provider . For purposes of applying payments received in accordance with §§12.1, 12.5, 12.6 or any other provision of the Loan Documents, the Agent shall be entitled to rely upon the trustee, paying agent or other similar representative (each, a “ Representative ”) or, in the absence of such a Representative, upon the holder of the Hedge Obligations for a determination (which each holder of the Hedge Obligations agrees (or shall agree) to provide upon request of the Agent) of the outstanding Hedge Obligations owed to the holder thereof. Unless it has actual knowledge (including by way of written notice from such holder) to the contrary, the Agent, in acting hereunder, shall be entitled to assume that no Hedge Obligations are outstanding.

§15.

EXPENSES.

The Borrower agrees to pay (a) the reasonable out-of-pocket costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any Indemnified Taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Lenders, including any recording, mortgage, documentary or intangibles taxes in connection with the Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Lenders after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and each Lender with respect thereto), (c) all title insurance premiums, if any, reasonable engineer’s fees, reasonable environmental reviews and reasonable fees, expenses and disbursements of the counsel to the Agent and KBCM and any local counsel to the Agent incurred in connection with the preparation, administration, or interpretation of the Loan Documents and other instruments mentioned herein, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the out-of-pocket fees, costs, expenses and disbursements of the Agent and KBCM incurred in connection with the initial syndication and/or participation (by KeyBank) of the Loans, (e) all other reasonable out-of-pocket fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation or interpretation of the Loan Documents and other instruments mentioned herein, the addition or substitution of additional Collateral, the review of Leases and related documents, the making of

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each advance hereunder, the issuance of Letters of Credit, and the syndication of the Commitments pursuant to §18 (without duplication of those items addressed in clause (d) above), (f) all out-of-pocket expenses (including attorneys’ fees and costs, and fees and costs of appraisers, engineers, investment bankers or other experts retained by the Agent) incurred by any Lender or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the Guarantors or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent’s, or any of the Lenders’ relationship with the Borrower or the Guarantors, (g) all reasonable fees, expenses and disbursements of the Agent incurred in connection with UCC searches, UCC filings, title rundowns or title searches, (h) all reasonable out-of-pocket fees, expenses and disbursements (including reasonable attorneys’ fees and costs) which may be incurred by KeyBank in connection with the execution and delivery of this Agreement and the other Loan Documents (without duplication of any of the items listed above), and (i) all expenses relating to the use of Intralinks, SyndTrak or any other similar system for the dissemination and sharing of documents and information in connection with the Loans. The covenants of this §15 shall survive the repayment of the Loans and the termination of the obligations of the Lenders hereunder.

§16.	INDEMNIFICATION.

The Borrower agrees to indemnify and hold harmless the Agent, the Lenders and the Arranger and each director, officer, employee, agent, Attorney and Affiliate thereof and Person who controls the Agent, or any Lender or the Arranger against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any and all claims for brokerage, leasing, finders or similar fees which may be made relating to the Borrowing Base Assets, other Real Estate or the Loans, (b) any condition of the Borrowing Base Assets or other Real Estate, (c) any actual or proposed use by the Borrower of the proceeds of any of the Loans or Letters of Credit, (d) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower, any Guarantor or any of their respective Subsidiaries, (e) the Borrower and the Guarantors entering into or performing this Agreement or any of the other Loan Documents, (f) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, permit or license relating to the Borrowing Base Assets or any other Real Estate, (g) with respect to the Borrower, the Guarantors and their respective Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury, nuisance or damage to property), and (h) any use of Intralinks, SyndTrak or any other system for the dissemination and sharing of documents and information, in each case including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding; provided , however , that the Borrower shall not be obligated under this §16 to indemnify any Person for liabilities arising from such Person’s own gross negligence or willful misconduct as determined by a court of competent jurisdiction after the exhaustion of all applicable appeal periods. In litigation, or the preparation therefor, the Lenders and the Agent

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shall be entitled to select a single law firm as their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this §16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under Applicable Law. The provisions of this §16 shall survive the repayment of the Loans and the termination of the obligations of the Lenders hereunder.

§17.	SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or the Guarantors or any of their respective Subsidiaries pursuant hereto or thereto shall be deemed to have been relied upon by the Lenders and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Letters of Credit remain outstanding or any Lender has any obligation to make any Loans or issue any Letters of Credit. The indemnification obligations of the Borrower provided herein and in the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Lenders hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate delivered to any Lender or the Agent at any time by or on behalf of the Borrower, any Guarantor or any of their respective Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder.

§18.	ASSIGNMENT AND PARTICIPATION.

§18.1 Conditions to Assignment by Lenders . Except as provided herein, each Lender may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it and the Notes held by it); provided that (a) the Agent, the Issuing Lender and, so long as no Default or Event of Default exists hereunder, the Borrower shall have each given its prior written consent to such assignment, which consent shall not be unreasonably withheld or delayed, and if the Borrower does not respond to any such request for consent within five (5) Business Days, the Borrower shall be deemed to have consented (provided that such consent shall not be required for any assignment to another Lender, to a Related Fund, to a lender or an Affiliate of a Lender which controls, is controlled by or is under common control with the assigning Lender or to a wholly-owned Subsidiary of such Lender), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender’s rights and obligations under this Agreement with respect to the Commitment, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined) an assignment and acceptance agreement in the form of Exhibit I attached hereto (an “Assignment and Acceptance Agreement”), together with any Notes subject to such assignment, (d) in no event shall any assignment be to any Person controlling, controlled by or under common control with, or which

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is not otherwise free from influence or control by the Borrower or any Guarantor or be to a Defaulting Lender or an Affiliate of a Defaulting Lender, (e) such assignee of a portion of the Revolving Credit Loans shall have a net worth or unfunded commitment as of the date of such assignment of not less than $100,000,000.00 (unless otherwise approved by the Agent and, so long as no Default or Event of Default exists hereunder, the Borrower), (f) such assignee shall acquire an interest in the Loans of not less than $5,000,000.00 and integral multiples of $1,000,000.00 in excess thereof (or if less, the remaining Loans of the assignor), unless waived by the Agent, and so long as no Default or Event of Default exists hereunder, the Borrower and (g) if such assignment is less than the assigning Lender’s entire Commitment, the assigning Lender shall retain an interest in the Loans of not less than $5,000,000.00. Upon execution, delivery, acceptance and recording of such Assignment and Acceptance Agreement, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Lenders and, to the extent provided in such Assignment and Acceptance Agreement, have the rights and obligations of a Lender hereunder, (ii) the assigning Lender shall, upon payment to the Agent of the registration fee referred to in §18.2, be released from its obligations under this Agreement arising after the effective date of such assignment with respect to the assigned portion of its interests, rights and obligations under this Agreement, and (iii) the Agent shall amend Schedule 1.1 in its own records to reflect such assignment. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Lender as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrower and/or any Guarantor and whether such assignee is a Defaulting Lender or an Affiliate of a Defaulting Lender. In connection with any assignment of rights and obligations of any Defaulting Lender, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or actions, including funding, with the consent of the Borrower and the Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Loans in accordance with its Commitment Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under Applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

§18.2 Register . The Agent shall maintain on behalf of the Borrower a copy of each assignment delivered to it and a register or similar list (the “ Register ”) for the recordation of the names and addresses of the Lenders and the Commitment Percentages of and principal amount of the Loans owing to the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Guarantors, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Lender agrees to pay to the Agent a registration fee in the sum of $3,500.00.

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§18.3 New Notes . Upon its receipt of an Assignment and Acceptance Agreement executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall record the information contained therein in the Register. Within five (5) Business Days after receipt of notice of such assignment from the Agent, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assigned to such assignee pursuant to such Assignment and Acceptance Agreement and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance Agreement and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower.

§18.4 Participations . Each Lender may sell participations to one or more Lenders or other entities in all or a portion of such Lender’s rights and obligations under this Agreement and the other Loan Documents; provided that (a) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder, (b) such participation shall not entitle such participant to any rights or privileges under this Agreement or any Loan Documents, including without limitation, rights granted to the Lenders under §§4.8, 4.9, 4.10 and 13, (c) such participation shall not entitle the participant to the right to approve waivers, amendments or modifications, (d) such participant shall have no direct rights against the Borrower, (e) such sale is effected in accordance with all Applicable Laws, and (f) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by the Borrower and/or any Guarantor and shall not be a Defaulting Lender or an Affiliate of a Defaulting Lender; provided , however , such Lender may agree with the participant that it will not, without the consent of the participant, agree to (i) increase, or extend the term or extend the time or waive any requirement for the reduction or termination of, such Lender’s Commitment, (ii) extend the date fixed for the payment of principal of or interest on the Loans or portions thereof owing to such Lender (other than pursuant to an extension of the Maturity Date pursuant to §2.12), (iii) reduce the amount of any such payment of principal, (iv) reduce the rate at which interest is payable thereon or (v) release any Guarantor or any material Collateral (except as otherwise permitted under this Agreement). Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any Commitments, Loans, or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan, or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each

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Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.

§18.5 Pledge by Lender . Any Lender may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. §341 or to such other Person as the Agent may approve to secure obligations of such Lender. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents.

§18.6 No Assignment by the Borrower . The Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each of the Lenders.

§18.7 Disclosure . The Borrower agrees to promptly cooperate with any Lender in connection with any proposed assignment or participation of all or any portion of its Commitment. Each of the Agent, the Lenders and the Issuing Lender agree to use commercially reasonable efforts to maintain the confidentiality of the Information (as defined below), it being understood and agreed that, notwithstanding the foregoing, a Lender may make (a) disclosures to its directors, officers, employees, Affiliates, accountants, appraisers, legal counsel and other professional advisors of such Lender (provided that such Persons who are not employees of such Lender are advised of the provision of this §18.7), (b) disclosures customarily provided or reasonably required by any potential or actual bona fide assignee, transferee or participant or their respective directors, officers, employees, Affiliates, accountants, appraisers, legal counsel and other professional advisors in connection with a potential or actual assignment or transfer by such Lender of any Loans or any participations therein (provided such Persons are advised of the provisions of this §18.7), (c) disclosures to bank regulatory authorities or self-regulatory bodies with jurisdiction over such Lender, or (d) disclosures required or requested by any other Governmental Authority or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by Applicable Law or court order, each Lender shall notify the Borrower of any request by any Governmental Authority or representative thereof prior to disclosure (other than any such request in connection with any examination of such Lender by such Governmental Authority) for disclosure of any such non-public information prior to disclosure of such information. In addition, each Lender may make disclosure of such information to any contractual counterparty in swap agreements or such contractual counterparty’s professional advisors (so long as such contractual counterparty or professional advisors agree to be bound by the provisions of this §18.7). Nothing herein shall prohibit the disclosure of non-public information to the extent necessary to enforce the Loan Documents. For purposes of this Section, “Information” means all information received from the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information which is or subsequently becomes publicly available other than as a result of a disclosure of such information by a Lender, or prior to the delivery to such Lender is within the possession of such Lender if such information is not known by such Lender to be subject to another confidentiality agreement with or other obligations of secrecy to the Borrower or the Guarantors, is disclosed with the prior approval of the Borrower or the Guarantors, or is made available to such Lender

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by a third party not known by such Lender to be subject to a confidentiality agreement, or is independently developed by such Lender; provided that, in the case of information received from the Borrower or any of its Subsidiaries, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

§18.8 Mandatory Assignment . In the event the Borrower requests that certain amendments, modifications or waivers be made to this Agreement or any of the other Loan Documents which request requires approval of the Required Lenders, the Super-Majority Lenders, all of the Lenders or all of the Lenders directly affected thereby but is not approved by one or more of the Lenders (any such non-consenting Lender shall hereafter be referred to as the “ Non-Consenting Lender ”), then, within thirty (30) days after the Borrower’s receipt of notice of such disapproval by such Non-Consenting Lender, the Borrower shall have the right as to such Non-Consenting Lender, to be exercised by delivery of written notice delivered to the Agent and the Non-Consenting Lender within thirty (30) days of receipt of such notice, to elect to cause the Non-Consenting Lender to transfer its Commitment. The Agent shall promptly notify the remaining Lenders that each of such Lenders shall have the right, but not the obligation, to acquire a portion of the Commitment, pro rata based upon their relevant Commitment Percentages, of the Non-Consenting Lender (or if any of such Lenders does not elect to purchase its pro rata share, then to such remaining Lenders in such proportion as approved by the Agent). In the event that the Lenders do not elect to acquire all of the Non-Consenting Lender’s Commitment, then the Agent shall endeavor to find a new Lender or Lenders to acquire such remaining Commitment. Upon any such purchase of the Commitment of the Non-Consenting Lender, the Non-Consenting Lender’s interests in the Obligations and its rights hereunder and under the Loan Documents shall terminate at the date of purchase, and the Non-Consenting Lender shall promptly execute and deliver any and all documents reasonably requested by the Agent to surrender and transfer such interest, including, without limitation, an Assignment and Acceptance Agreement and such Non-Consenting Lender’s original Note. The purchase price for the Non-Consenting Lender’s Commitment shall equal any and all amounts outstanding and owed by the Borrower to the Non-Consenting Lender, including principal and all accrued and unpaid interest or fees, plus any applicable amounts payable pursuant to §4.7 which would be owed to such Non-Consenting Lender if the Loans were to be repaid in full on the date of such purchase of the Non-Consenting Lender’s Commitment ( provided that the Borrower may pay to such Non-Consenting Lender any interest, fees or other amounts (other than principal) owing to such Non-Consenting Lender).

§18.9 Amendments to Loan Documents . Upon any such assignment described in the foregoing §18.1 or §18.8, the Borrower and the Guarantors shall, upon the request of the Agent, enter into such documents as may be reasonably required by the Agent to modify the Loan Documents to reflect such assignment.

§18.10 Titled Agents . The Titled Agents shall not have any additional rights or obligations under the Loan Documents, except for those rights, if any, as a Lender.

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§19.

NOTICES.

Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this §19 referred to as “ Notice ”), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telecopy and addressed as follows:

If to the Agent or KeyBank:

KeyBank National Association

4910 Tiedeman Road, 3 ^rd Floor

Brooklyn, Ohio 44144

Attn: Amy MacLearie

Telecopy No.: (216) 357-6383

With a copy to:

KeyBank National Association

4200 W. Cypress Street

Suite 490

Tampa, Florida 33607

Attn: Grant Saunders

Telecopy No.: (813) 313-5555

and

KeyBank National Association

1200 Abernathy Road, N.E., Suite 1550

Atlanta, Georgia 30328

Attn: Daniel Stegemoeller

Telecopy No.: (770) 510-2195

and

Dentons US LLP

Suite 5300

303 Peachtree Street, N.E.

Atlanta, Georgia 30308

Attn: William F. Timmons, Esq.

Telecopy No.: (404) 527-4198

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If to the Borrower:

MedEquities Realty Operating Partnership, LP

3100 West End Avenue

Suite 1000

Nashville, Tennessee 37203

Attn: Jeffery C. Walraven

Telecopy No.:

With a copy to:

Morrison & Foerster LLP

707 Wilshire Blvd., Suite 6000

Los Angeles, CA 90017

Attn: Marc D. Young, Esq.

Telecopy No.: (213) 892-5454

to any other Lender which is a party hereto, at the address for such Lender set forth on its signature page hereto, and to any Lender which may hereafter become a party to this Agreement, at such address as may be designated by such Lender. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid, or if transmitted by telecopy is permitted, upon being sent and confirmation of receipt. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Lender or the Agent shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.

§20.	RELATIONSHIP.

Neither the Agent nor any Lender has any fiduciary relationship with or fiduciary duty to the Borrower, any Guarantor or their respective Subsidiaries arising out of or in connection with this Agreement or the other Loan Documents or the transactions contemplated hereunder and thereunder, and the relationship between each Lender and the Agent, and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower.

§21.	GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.

THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN OR THEREIN, SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401,

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BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK (INCLUDING ANY FEDERAL COURT SITTING THEREIN). THE BORROWER FURTHER ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY RELATED APPELLATE COURT AND IRREVOCABLY (a) AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY WITH RESPECT TO THIS AGREEMENT AND ANY OF THE OTHER LOAN DOCUMENTS AND (b) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH A COURT IS AN INCONVENIENT FORUM. THE BORROWER FURTHER AGREES THAT SERVICE OF PROCESS IN ANY SUCH SUIT MAY BE MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN §19. IN ADDITION TO THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN, THE AGENT OR ANY LENDER MAY BRING ACTION(S) FOR ENFORCEMENT ON A NONEXCLUSIVE BASIS WHERE ANY COLLATERAL OR OTHER ASSETS OF THE BORROWER AND THE GUARANTORS EXIST AND THE BORROWER CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN §19.

§22.

HEADINGS.

The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.

§23.	COUNTERPARTS.

This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

§24.	ENTIRE AGREEMENT, ETC.

This Agreement and the Loan Documents is intended by the parties as the final, complete and exclusive statement of the transactions evidenced by this Agreement and the Loan Documents. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superseded by this Agreement and the Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in this Agreement and the Loan Documents. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in §27.

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§25.	WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.

EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, PUNITIVE OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS §25. THE BORROWER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS §25 WITH LEGAL COUNSEL AND THAT THE BORROWER AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT.

§26.	DEALINGS WITH THE BORROWER.

The Agent, the Lenders and their Affiliates may accept deposits from, extend credit to, invest in, act as trustee under indentures of, serve as financial advisor of, and generally engage in any kind of banking, trust or other business with the Borrower, the Guarantors and their respective Subsidiaries or any of their Affiliates regardless of the capacity of the Agent or the Lender hereunder. The Lenders acknowledge that, pursuant to such activities, KeyBank or its Affiliates may receive information regarding such Persons (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Agent shall be under no obligation to provide such information to them.

§27.	CONSENTS, AMENDMENTS, WAIVERS, ETC.

Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or the Guarantors of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Required Lenders. Notwithstanding the foregoing, none of the following may occur without the written consent of each Lender directly affected thereby: (a) a reduction in the rate of interest on the Notes (other than a reduction or waiver of default interest); (b) an increase in the amount of the Commitments of the Lenders (except as provided in §2.11

145

and §18.1); (c) a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon (other than a reduction or waiver of default interest) or fee payable under the Loan Documents; (d) a change in the amount of any fee payable to a Lender hereunder; (e) the postponement of any date fixed for any payment of principal of or interest on the Loan; (f) an extension of the Maturity Date (except as provided in §2.12); (g) a change in the manner of distribution of any payments to the Lenders or the Agent; (h) the release of the Borrower, any Guarantor or any Collateral except as otherwise provided in this Agreement; (i) an amendment of the definition of Required Lenders or of any requirement for consent by all of the Lenders or all affected Lenders; (j) any modification to require a Lender to fund a pro rata share of a request for an advance of the Revolving Credit Loan made by the Borrower other than based on its Commitment Percentage; (k) an amendment to this §27; or (l) an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Lenders or the Required Lenders to require a lesser number of Lenders to approve such action. Notwithstanding the foregoing, no amendment of the definition of Super-Majority Lenders or any provision of this Agreement which requires the approval of the Super-Majority Lenders to require a lesser number of Lenders to approve such action may occur without the written consent of the Super-Majority Lenders. The provisions of §14 may not be amended without the written consent of the Agent. There shall be no amendment, modification or waiver of any provision in the Loan Documents with respect to Swing Loans without the consent of the Swing Loan Lender, nor any amendment, modification or waiver of any provision in the Loan Documents with respect to Letters of Credit without the consent of the Issuing Lender. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders, except that (x) the Commitment of any Defaulting Lender may not be increased without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender. The Borrower agrees to enter into such modifications or amendments of this Agreement or the other Loan Documents as reasonably may be requested by KeyBank and KBCM in connection with the syndication of the Loan, provided that no such amendment or modification materially affects or increases any of the obligations of the Borrower hereunder. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances.

§28.	SEVERABILITY.

The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.

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§29.	TIME OF THE ESSENCE.

Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower and the Guarantors under this Agreement and the other Loan Documents.

§30.	NO UNWRITTEN AGREEMENTS.

THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ANY ADDITIONAL TERMS OF THE AGREEMENT BETWEEN THE PARTIES ARE SET FORTH BELOW.

§31.	REPLACEMENT NOTES.

Upon receipt of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of any Note, and in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to the Borrower or, in the case of any such mutilation, upon surrender and cancellation of the applicable Note, the Borrower will execute and deliver, in lieu thereof, a replacement Note, identical in form and substance to the applicable Note and dated as of the date of the applicable Note and upon such execution and delivery all references in the Loan Documents to such Note shall be deemed to refer to such replacement Note.

§32.	NO THIRD PARTIES BENEFITED.

This Agreement and the other Loan Documents are made and entered into for the sole protection and legal benefit of the Borrower, the Guarantors, the Lenders, the Agent, the Arranger and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. All conditions to the performance of the obligations of the Agent and the Lenders under this Agreement, including the obligation to make Loans and issue Letters of Credit, are imposed solely and exclusively for the benefit of the Agent and the Lenders and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that the Agent and the Lenders will refuse to make Loans or issue Letters of Credit in the absence of strict compliance with any or all thereof and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by the Agent and the Lenders at any time if in their sole discretion they deem it desirable to do so. In particular, the Agent and the Lenders make no representations and assume no obligations as to third parties concerning the quality of any construction by the Borrower or any of its Subsidiaries of any development or the absence therefrom of defects.

§33.	PATRIOT ACT.

Each Lender and the Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that, pursuant to the requirements of the Patriot Act, it is required to obtain, verify

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and record information that identifies the Borrower, which information includes names and addresses and other information that will allow such Lender or the Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.

§34.	WAIVER OF CLAIMS.

Borrower and Guarantors acknowledge, represent and agree that Borrower and Guarantors as of the date hereof have no defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever with respect to the “Loan Documents” (as defined in the Original Credit Agreement and this Agreement), the administration or funding of the “Loans” (as defined in the Original Credit Agreement and this Agreement), or with respect to any acts or omissions of Agent or any past or present directors, officers, agents or employees of Agent or any of the Lenders, whether under the Original Credit Agreement or this Agreement or the Loan Documents, and each of Borrower and Guarantors does hereby expressly waive, release and relinquish any and all such defenses, setoffs, claims, counterclaims and causes of action, if any.

[Remainder of page intentionally left blank.]

148

IN WITNESS WHEREOF , each of the undersigned have caused this Agreement to be executed by its duly authorized representatives as of the date first set forth above.


BORROWER :

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:	MedEquities OP GP, LLC, a Delaware limited liability company,
	its general partner

	By:	/s/ Jeffery C. Walraven
	Name:	Jeffery C. Walraven
	Title:	Executive Vice President, Chief
		Financial Officer, Secretary and
		Treasurer

		(SEAL)

[Signatures Continued on Next Page]


AGENT AND LENDERS :

KEYBANK NATIONAL ASSOCIATION , individually as a Lender and as the Agent

By:		/s/ Grant Sanders
Name:		Grant Sanders
Title:		Senior VP

[Signatures Continued on Next Page]


JPMORGAN CHASE BANK, N.A. ,
individually and as Co-Syndication Agent

By:		/s/ Brendan Poe
Name:		Brendan Poe
Title:		Executive Director

[Signatures Continued on Next Page]


CITIBANK, N.A. , individually and as Co-Syndication Agent

By:		/s/ Michael Chlopak
Name:		Michael Chlopak
Title:		Vice President

[Signatures Continued on Next Page]


FIFTH THIRD BANK , an Ohio banking corporation, individually as a Lender and as the Documentation Agent

By:		/s/ William Priester
Name:		William Priester
Title:		Senior Vice President

By:		/s/ Vera B. McEvoy
Name:		Vera B. McEvoy
Title:		Vice President

[Signatures Continued on Next Page]


CAPITAL ONE, NATIONAL ASSOCIATION

By:		/s/ Todd Gordon
Name:		Todd Gordon
Title:		Managing Director

[Signatures Continued on Next Page]


CADENCE BANK, N.A.

By:		/s/ Drew Healy
Name:		Drew Healy
Title:		Senior Vice President

[Signatures Continued on Next Page]


CITIZENS BANK, N.A.

By:		/s/ Craig Aframe
Name:		Craig Aframe
Title:		Vice President

[Signatures Continued on Next Page]


ROYAL BANK OF CANADA

By:		/s/ Joshua Freedman
Name:		Joshua Freedman
Title:		Authorized Signatory

[Signatures Continued on Next Page]


RAYMOND JAMES BANK, N.A.

By:		/s/ Thomas F. Macina
Name:		Thomas F. Macina
Title:		Executive Vice President

[Signatures Continued on Next Page]


PINNACLE BANK

By:		/s/ Allison H. Jones
Name:		Allison H. Jones
Title:		Senior Vice President

[Signatures Continued on Next Page]


RENASANT BANK

By:		/s/ Craig Gardella
Name:		Craig Gardella
Title:		EVP

EXHIBIT A

FORM OF JOINDER AGREEMENT

THIS JOINDER AGREEMENT (“Joinder Agreement”) is executed as of , 20 , by , a (“Joining Party”), and delivered to KeyBank National Association, as Agent, pursuant to §5.5 of that certain First Amended and Restated Credit Agreement dated as of July 30, 2015, as from time to time in effect (the “Credit Agreement”), by and among MedEquities Realty Operating Partnership, LP (the “Borrower”), KeyBank National Association, for itself and as the Agent, and the other Lenders from time to time party thereto. Terms used but not defined in this Joinder Agreement shall have the meanings defined for those terms in the Credit Agreement.

RECITALS

A. Joining Party is required, pursuant to §5.5 of the Credit Agreement, to become an additional Guarantor under the Guaranty, the Indemnity Agreement and the Contribution Agreement.

B. Joining Party expects to realize direct and indirect benefits as a result of the availability to the Borrower of the credit facilities under the Credit Agreement.

NOW, THEREFORE, Joining Party agrees as follows:

AGREEMENT

1. Joinder . By this Joinder Agreement, Joining Party hereby becomes a “Subsidiary Guarantor” and a “Guarantor” under the Credit Agreement, the Guaranty, the Indemnity Agreement and the other Loan Documents with respect to all the Obligations of the Borrower now or hereafter incurred under the Credit Agreement and the other Loan Documents, a “Guarantor” under the Contribution Agreement [and an Assignor under the Cash Collateral Agreement] . Joining Party agrees that Joining Party is and shall be bound by, and hereby assumes, all representations, warranties, covenants, terms, conditions, duties and waivers applicable to a “Subsidiary Guarantor” and a “Guarantor” under the Credit Agreement, the Guaranty, the Indemnity Agreement, the other Loan Documents and the Contribution Agreement [and an Assignor under the Cash Collateral Agreement] .

2. Representations and Warranties of Joining Party . Joining Party represents and warrants to Agent that, as of the Effective Date (as defined below), the representations and warranties contained in the Credit Agreement and the other Loan Documents applicable to a “Subsidiary Guarantor” or “Guarantor” [or an Assignor under the Cash Collateral Agreement] are true and correct in all material respects as applied to Joining Party as a Subsidiary Guarantor and a Guarantor on and as of the Effective Date as though made on that date. As of the Effective Date, all covenants and agreements in the Loan Documents and the Contribution Agreement of the Guarantors [or an Assignor under the Cash Collateral Agreement] apply to Joining Party and no Default or Event of Default shall exist or might exist upon the Effective Date in the event that Joining Party becomes a Guarantor.

A-1

3. Joint and Several . Joining Party hereby agrees that, as of the Effective Date, the Guaranty, the Contribution Agreement, the Indemnity Agreement [and the Cash Collateral Agreement] heretofore delivered to the Agent and the Lenders shall be a joint and several obligation of Joining Party to the same extent as if executed and delivered by Joining Party, and upon request by the Agent, will promptly become a party to the Guaranty, the Contribution Agreement, the Indemnity Agreement [and the Cash Collateral Agreement] to confirm such obligation.

4. Further Assurances . Joining Party agrees to execute and deliver such other instruments and documents and take such other action, as the Agent may reasonably request, in connection with the transactions contemplated by this Joinder Agreement.

5. GOVERNING LAW . THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

6. Counterparts . This Joinder Agreement may be executed in any number of counterparts which shall together constitute but one and the same agreement.

7. The effective date (the “Effective Date”) of this Joinder Agreement is , 201 .

IN WITNESS WHEREOF, Joining Party has executed this Joinder Agreement under seal as of the day and year first above written.


“JOINING PARTY”

				, a


By:
Name:
Title:

[SEAL]


ACKNOWLEDGED:

KEYBANK NATIONAL ASSOCIATION, as Agent

By:

Its:

A-2

EXHIBIT B

FORM OF REVOLVING CREDIT NOTE


$		, 201

FOR VALUE RECEIVED, the undersigned (“Maker”), hereby promises to pay to (“Payee”), or order, in accordance with the terms of that certain First Amended and Restated Credit Agreement dated as of July 30, 2015, as from time to time in effect, by and among Maker, KeyBank National Association, for itself and as Agent, and such other Lenders as may be from time to time named therein (the “Credit Agreement”), to the extent not sooner paid, on or before the Maturity Date, the principal sum of ($ ), or such amount as may be advanced by the Payee under the Credit Agreement as a Revolving Credit Loan with daily interest from the date thereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by Applicable Law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

Payments hereunder shall be made to the Agent for the Payee at 127 Public Square, Cleveland, Ohio 44114-1306, or at such other address as Agent may designate from time to time.

This Note is one of one or more Revolving Credit Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the Maturity Date and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement.

Notwithstanding anything in this Note to the contrary, all agreements between the undersigned Maker and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under Applicable Law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under Applicable Law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by Applicable Law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations of the undersigned Maker and to the payment of interest or, if such excessive interest exceeds the unpaid balance of

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principal of the Obligations of the undersigned Maker, such excess shall be refunded to the undersigned Maker. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations of the undersigned Maker (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by Applicable Law. This paragraph shall control all agreements between the undersigned Maker and the Lenders and the Agent.

In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement.

This Note shall, pursuant to New York General Obligations Law Section 5-1401, be governed by the laws of the State of New York.

The undersigned Maker and all guarantors and endorsers hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice.

This Note is issued in replacement of that certain Revolving Credit Note dated November 7, 2014, made by the undersigned maker to the order of the Payee and issued pursuant to the Original Credit Agreement (the “Prior Note”), and shall supersede and replace the Prior Note in all respects. The execution and delivery by the undersigned of this Note shall not, in any manner or circumstance, be deemed to be a payment of, a novation of or to have terminated, extinguished or discharged any of the undersigned’s indebtedness evidenced by the Prior Note, all of which indebtedness shall continue under, and shall hereinafter be evidenced and governed by, this Note.

IN WITNESS WHEREOF, the undersigned has by its duly authorized officer executed this Note on the day and year first above written.


MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:		MedEquities OP GP, LLC, a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

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EXHIBIT C

FORM OF SWING LOAN NOTE


$20,000,000.00		, 2015

FOR VALUE RECEIVED, the undersigned (“Maker”), hereby promises to pay to (“Payee”), or order, in accordance with the terms of that certain First Amended and Restated Credit Agreement dated as of July 30, 2015, as from time to time in effect, by and among Maker, KeyBank National Association, for itself and as Agent, and such other Lenders as may be from time to time named therein (the “Credit Agreement”), to the extent not sooner paid, on or before the Maturity Date, the principal sum of Twenty Million and No/100 Dollars ($20,000,000.00), or such amount as may be advanced by the Payee under the Credit Agreement as a Swing Loan with daily interest from the date thereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by Applicable Law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

Payments hereunder shall be made to the Agent for the Payee at 127 Public Square, Cleveland, Ohio 44114-1306, or at such other address as Agent may designate from time to time.

This Note is the Swing Loan Note evidencing borrowings of Swing Loans under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the Maturity Date and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement.

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In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement.

This Note shall, pursuant to New York General Obligations Law Section 5-1401, be governed by the laws of the State of New York.

This Note is issued in replacement of that certain Swing Loan Note dated November 7, 2014, made by the undersigned maker to the order of KeyBank National Association and issued pursuant to the Original Credit Agreement (the “Prior Note”), and shall supersede and replace the Prior Note in all respects. The execution and delivery by the undersigned of this Note shall not, in any manner or circumstance, be deemed to be a payment of, a novation of or to have terminated, extinguished or discharged any of the undersigned’s indebtedness evidenced by the Prior Note, all of which indebtedness shall continue under, and shall hereinafter be evidenced and governed by, this Note.

IN WITNESS WHEREOF, the undersigned has by its duly authorized officer executed this Note on the day and year first above written.


MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:		MedEquities OP GP, LLC, a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

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EXHIBIT D

FORM OF REQUEST FOR REVOLVING CREDIT LOAN

KeyBank National Association, as Agent

4200 W. Cypress Street, Suite 490

Tampa, Florida 33607

Attn: Sarah Belmont

KeyBank National Association, as Agent

4910 Tiedeman Road, 3 ^rd Floor

Brooklyn, Ohio 44144

Attn: Marc Drummond

Ladies and Gentlemen:

Pursuant to the provisions of §2.7 of that certain First Amended and Restated Credit Agreement dated as of July 30, 2015 (as the same may hereafter be amended, the “Credit Agreement”), by and among MedEquities Realty Operating Partnership, LP (the “Borrower”), KeyBank National Association for itself and as Agent, and the other Lenders from time to time party thereto, the Borrower hereby requests and certifies as follows:

1. Revolving Credit Loan . The Borrower hereby requests a [Revolving Credit Loan under §2.1] [Swing Loan under §2.5] of the Credit Agreement:

Principal Amount: $

Type (LIBOR Rate, Base Rate):

Drawdown Date:

Interest Period for LIBOR Rate Loans:

by credit to the general account of the Borrower with the Agent at the Agent’s Head Office.

[If the requested Loan is a Swing Loan and the Borrower desires for such Loan to be a LIBOR Rate Loan following its conversion as provided in §2.5(d), specify the Interest Period following conversion: ]

2. Use of Proceeds . Such Loan shall be used for purposes permitted by §2.9 of the Credit Agreement.

3. No Default . Borrower certifies that the Borrower and the Guarantors are and will be in compliance with all covenants under the Loan Documents after giving effect to the making of the Loan requested hereby and no Default or Event of Default has occurred and is continuing. No condemnation proceedings are pending or, to the undersigned’s knowledge, threatened against any Borrowing Base Asset, except as disclosed in writing to Agent.

4. Representations True . Borrower certifies, represents and agrees that each of the representations and warranties made by or on behalf of the Borrower, the Guarantors or their

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respective Subsidiaries, contained in the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true in all material respects as of the date on which it was made and, is true in all material respects as of the date hereof and shall also be true in all material respects at and as of the Drawdown Date for the Loan requested hereby, with the same effect as if made at and as of such Drawdown Date, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date).

5. Other Conditions . The undersigned chief executive officer, president or chief financial officer of the Borrower certifies, represents and agrees that all other conditions to the making of the Loan requested hereby set forth in the Credit Agreement have been satisfied or waived in writing.

6. Definitions . Terms defined in the Credit Agreement are used herein with the meanings so defined.

IN WITNESS WHEREOF, the undersigned has duly executed this request this day of , 201 .


MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:		MedEquities OP GP, LLC, a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

D-2

EXHIBIT E

FORM OF LETTER OF CREDIT REQUEST

[DATE]

KeyBank National Association, as Agent

4910 Tiedeman Road, 3 ^rd Floor

Brooklyn, Ohio 44144

Attn: Amy MacLearie

KeyBank National Association, as Agent

4910 Tiedeman Road, 3 ^rd Floor

Brooklyn, Ohio 44144

Attn: Marc Drummond

Re:

Letter of Credit Request under Credit Agreement

Ladies and Gentlemen:

Pursuant to §2.10 of that certain First Amended and Restated Credit Agreement dated as of July 30, 2015, by and among you, certain other Lenders and MedEquities Realty Operating Partnership, LP (the “Borrower”), as amended from time to time (the “Credit Agreement”), we hereby request that you issue a Letter of Credit as follows:

(i) Name and address of beneficiary:

(ii) Face amount: $

(iii) Proposed Issuance Date:

(iv) Proposed Expiration Date:

(v) Other terms and conditions as set forth in the proposed form of Letter of Credit attached hereto.

(vi) Purpose of Letter of Credit:

This Letter of Credit Request is submitted pursuant to, and shall be governed by, and subject to satisfaction of, the terms, conditions and provisions set forth in §2.10 of the Credit Agreement.

The Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the issuance of the Letter of Credit requested hereby and no Default or Event of Default has occurred and is continuing. No condemnation proceedings are pending or, to the undersigned’s knowledge, threatened against any Borrowing Base Asset, except as disclosed in writing to Agent.

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We also understand that if you grant this request this request obligates us to accept the requested Letter of Credit and pay the issuance fee and Letter of Credit fee as required by §2.10(e). All capitalized terms defined in the Credit Agreement and used herein without definition shall have the meanings set forth in §1.1 of the Credit Agreement.

The Borrower certifies, represents and agrees that each of the representations and warranties made by or on behalf of the Borrower, the Guarantors or their respective Subsidiaries, contained in the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true in all material respects as of the date on which it was made, is true in all material respects as of the date hereof and shall also be true in all material respects at and as of the proposed issuance date of the Letter of Credit requested hereby, with the same effect as if made at and as of the proposed issuance date, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date).


Very truly yours,

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:		MedEquities OP GP, LLC, a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

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EXHIBIT F

FORM OF LETTER OF CREDIT APPLICATION

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EXHIBIT G

FORM OF BORROWING BASE CERTIFICATE

KeyBank National Association, as Agent

4200 W. Cypress Street, Suite 490

Tampa, Florida 33607

Attn: Sarah Belmont

Ladies and Gentlemen:

Reference is made to that certain First Amended and Restated Credit Agreement dated as of July 30, 2015 (as the same may hereafter be amended, the “Credit Agreement”), by and among MedEquities Realty Operating Partnership, LP (the “Borrower”), KeyBank National Association for itself and as Agent, and the other Lenders from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement.

Pursuant to the Credit Agreement, the Borrower is furnishing to you herewith the Borrowing Base Certificate. This certificate is submitted in compliance with requirements of the Credit Agreement.

The undersigned is providing the attached information to demonstrate compliance as of the date hereof with the covenants of the Credit Agreement relating hereto.

IN WITNESS WHEREOF, the undersigned have duly executed this Borrowing Base Certificate this day of , 201 .


MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:		MedEquities OP GP, LLC, a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

G-1

EXHIBIT H

FORM OF COMPLIANCE CERTIFICATE

KeyBank National Association, as Agent

4200 W. Cypress Street, Suite 490

Tampa, Florida 33607

Attn: Sarah Belmont

Ladies and Gentlemen:

Reference is made to that certain First Amended and Restated Credit Agreement dated as of July 30, 2015 (as the same may hereafter be amended, the “Credit Agreement”) by and among MedEquities Realty Operating Partnership, LP (the “Borrower”), KeyBank National Association for itself and as Agent, and the other Lenders from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement.

Pursuant to the Credit Agreement, the Borrower (or REIT, on the Borrower’s behalf) is furnishing to you herewith (or has most recently furnished to you) the consolidated financial statements of REIT for the fiscal period ended (the “Balance Sheet Date”). Such financial statements have been prepared in accordance with GAAP and present fairly the consolidated financial position of REIT at the date thereof and the results of its operations for the periods covered thereby.

This certificate is submitted in compliance with requirements of §2.11(d), 5.3(d), 5.4(b), 7.4(c) or 10.11 of the Credit Agreement, as applicable. If this certificate is provided under a provision other than §7.4(c), the calculations provided below are made using the consolidated financial statements of REIT as of the Balance Sheet Date adjusted in the best good faith estimate of REIT to give effect to the making of a Loan, issuance of a Letter of Credit, acquisition or disposition of property or other event that occasions the preparation of this certificate; and the nature of such event and the estimate of REIT of its effects are set forth in reasonable detail in an attachment hereto. The undersigned officer is the chief financial officer of the Borrower (or REIT, if this certificate is delivered by REIT on the Borrower’s behalf).

The undersigned representative has caused the provisions of the Loan Documents to be reviewed and has no knowledge of any Default or Event of Default. (Note: If the signer does have knowledge of any Default or Event of Default, the form of certificate should be revised to specify the Default or Event of Default, the nature thereof and the actions taken, being taken or proposed to be taken by the Borrower with respect thereto.)

The undersigned is providing the attached information to demonstrate compliance as of the date hereof with the covenants described in the attachment hereto.

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IN WITNESS WHEREOF, the undersigned has duly executed this Compliance Certificate this day of , 201 .


MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:		MedEquities OP GP, LLC, a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

H-2

APPENDIX TO COMPLIANCE CERTIFICATE

H-3

EXHIBIT I

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Agreement”) dated , by and between (“Assignor”), and (“Assignee”).

W I T N E S S E T H:

WHEREAS , Assignor is a party to that certain First Amended and Restated Credit Agreement dated as of July 30, 2015, as, by and among MedEquities Realty Operating Partnership, LP, a Delaware limited partnership (the “Borrower”), the other lenders that are or may become a party thereto, and KEYBANK NATIONAL ASSOCIATION , individually and as Agent (as amended from time to time, the “Credit Agreement”); and

WHEREAS , Assignor desires to transfer to Assignee [Describe assigned Commitment] under the Credit Agreement and its rights with respect to the Commitment assigned and its Outstanding Loans with respect thereto;

NOW, THEREFORE , for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:

1. Definitions . Terms defined in the Credit Agreement and used herein without definition shall have the respective meanings assigned to such terms in the Credit Agreement.

2. Assignment .

(a) Subject to the terms and conditions of this Agreement and in consideration of the payment to be made by Assignee to Assignor pursuant to Paragraph 5 of this Agreement, effective as of the “Assignment Date” (as defined in Paragraph 7 below), Assignor hereby irrevocably sells, transfers and assigns to Assignee, without recourse, a portion of its Revolving Credit Note in the amount of $ representing a $ Commitment, and a percent ( %) Commitment Percentage, and a corresponding interest in and to all of the other rights and obligations under the Credit Agreement and the other Loan Documents relating thereto (the assigned interests being hereinafter referred to as the “Assigned Interests”), including Assignor’s share of all outstanding Revolving Credit Loans with respect to the Assigned Interests and the right to receive interest and principal on and all other fees and amounts with respect to the Assigned Interests, all from and after the Assignment Date, all as if Assignee were an original Lender under and signatory to the Credit Agreement having a Commitment Percentage equal to the amount of the respective Assigned Interests.

(b) Assignee, subject to the terms and conditions hereof, hereby assumes all obligations of Assignor with respect to the Assigned Interests from and after the Assignment Date as if Assignee were an original Lender under and signatory to the Credit Agreement, which

I-1

obligations shall include, but shall not be limited to, the obligation to make Revolving Credit Loans to the Borrower with respect to the Assigned Interests and to indemnify the Agent as provided therein (such obligations, together with all other obligations set forth in the Credit Agreement and the other Loan Documents are hereinafter collectively referred to as the “Assigned Obligations”). Assignor shall have no further duties or obligations with respect to, and shall have no further interest in, the Assigned Obligations or the Assigned Interests.

3. Representations and Requests of Assignor .

(a) Assignor represents and warrants to Assignee (i) that it is legally authorized to, and has full power and authority to, enter into this Agreement and perform its obligations under this Agreement; (ii) that as of the date hereof, before giving effect to the assignment contemplated hereby the principal face amount of Assignor’s Revolving Credit Note is $ and the aggregate outstanding principal balance of the Revolving Credit Loans made by it equals $ , and (iii) that it has forwarded to the Agent the Revolving Credit Note held by Assignor. Assignor makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness or sufficiency of any Loan Document or any other instrument or document furnished pursuant thereto or in connection with the Loan, the collectability of the Loans, the continued solvency of the Borrower or the Guarantors or the continued existence, sufficiency or value of the Collateral or any assets of the Borrower or the Guarantors which may be realized upon for the repayment of the Loans, or the performance or observance by the Borrower or the Guarantors of any of their obligations under the Loan Documents to which it is a party or any other instrument or document delivered or executed pursuant thereto or in connection with the Loan; other than that it is the legal and beneficial owner of, or has the right to assign, the interests being assigned by it hereunder and that such interests are free and clear of any adverse claim.

(b) Assignor requests that the Agent obtain replacement notes for each of Assignor and Assignee as provided in the Credit Agreement.

4. Representations of Assignee . Assignee makes and confirms to the Agent, Assignor and the other Lenders all of the representations, warranties and covenants of a Lender under Articles 14 and 18 of the Credit Agreement. Without limiting the foregoing, Assignee (a) represents and warrants that it is legally authorized to, and has full power and authority to, enter into this Agreement and perform its obligations under this Agreement; (b) confirms that it has received copies of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (c) agrees that it has and will, independently and without reliance upon Assignor, any other Lender or the Agent and based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in evaluating the Loans, the Loan Documents, the creditworthiness of the Borrower and the Guarantors and the value of the assets of the Borrower and the Guarantors, and taking or not taking action under the Loan Documents; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers as are reasonably incidental thereto pursuant to the terms of the Loan Documents; (e) agrees that, by this Assignment, Assignee has become a party to and will perform in accordance with their terms all the

I-2

obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; (f) represents and warrants that Assignee does not control, is not controlled by, is not under common control with and is otherwise free from influence or control by, the Borrower or any Guarantor and is not a Defaulting Lender or Affiliate of a Defaulting Lender, (g) represents and warrants that if Assignee is not incorporated under the laws of the United States of America or any State, it has on or prior to the date hereof delivered to the Borrower and the Agent certification as to its exemption (or lack thereof) from deduction or withholding of any United States federal income taxes and (h) if Assignee is an assignee of any portion of the Revolving Credit Notes, Assignee has a net worth or unfunded commitments as of the date hereof of not less than $100,000,000.00 unless waived in writing by the Borrower and the Agent as required by the Credit Agreement. Assignee agrees that the Borrower may rely on the representation contained in Section 4(h).

5. Payments to Assignor . In consideration of the assignment made pursuant to Paragraph 1 of this Agreement, Assignee agrees to pay to Assignor on the Assignment Date, an amount equal to $ representing the aggregate principal amount outstanding of the Revolving Credit Loans owing to Assignor under the Loan Agreement and the other Loan Documents with respect to the Assigned Interests.

6. Payments by Assignor . Assignor agrees to pay the Agent on the Assignment Date the registration fee required by §18.2 of the Credit Agreement.

7. Effectiveness .

(a) The effective date for this Agreement shall be (the “Assignment Date”). Following the execution of this Agreement, each party hereto shall deliver its duly executed counterpart hereof to the Agent for acceptance and recording in the Register by the Agent.

(b) Upon such acceptance and recording and from and after the Assignment Date, (i) Assignee shall be a party to the Credit Agreement and, to the extent of the Assigned Interests, have the rights and obligations of a Lender thereunder, and (ii) Assignor shall, with respect to the Assigned Interests, relinquish its rights and be released from its obligations under the Credit Agreement.

(c) Upon such acceptance and recording and from and after the Assignment Date, the Agent shall make all payments in respect of the rights and interests assigned hereby accruing after the Assignment Date (including payments of principal, interest, fees and other amounts) to Assignee.

(d) All outstanding LIBOR Rate Loans shall continue in effect for the remainder of their applicable Interest Periods and Assignee shall accept the currently effective interest rates on its Assigned Interest of each LIBOR Rate Loan.

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8. Notices . Assignee specifies as its address for notices and its Lending Office for all assigned Loans, the offices set forth below:


Notice Address:



		Attn:
		Facsimile:

Domestic Lending Office:		Same as above

Eurodollar Lending Office:		Same as above

9. Payment Instructions . All payments to Assignee under the Credit Agreement shall be made as provided in the Credit Agreement in accordance with the separate instructions delivered to the Agent.

10. GOVERNING LAW . THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

11. Counterparts . This Agreement may be executed in any number of counterparts which shall together constitute but one and the same agreement.

12. Amendments . This Agreement may not be amended, modified or terminated except by an agreement in writing signed by Assignor and Assignee, and consented to by the Agent.

13. Successors . This Agreement shall inure to the benefit of the parties hereto and their respective successors and assigns as permitted by the terms of Credit Agreement.

[signatures on following page]

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IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, as of the date first above written.


ASSIGNEE:

By:
		Title:

ASSIGNOR:

By:
		Title:


RECEIPT ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO BY:

KEYBANK NATIONAL ASSOCIATION, as Agent

By:
		Title:

CONSENTED TO BY:

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP, a Delaware limited partnership

By:		MedEquities OP GP, LLC,
		a Delaware limited liability company,
		its general partner

		By:
		Name:
		Title:

		(SEAL)

I-5

EXHIBIT J

FORM OF COLLATERAL ASSIGNMENT OF DOCUMENTS

THIS COLLATERAL ASSIGNMENT OF DOCUMENTS (hereinafter referred to as this “Assignment”), made as of the day of , 201 , by , a limited liability company (“Assignor”), to KEYBANK NATIONAL ASSOCIATION , a national banking association (“KeyBank”), as Agent for itself and the other Lenders from time to time party to the “Credit Agreement” (as hereinafter defined) (KeyBank, in its capacity as Agent, is hereinafter referred to as “Agent”).

W I T N E S S E T H :

WHEREAS , MedEquities Realty Operating Partnership, LP (“Borrower”), KeyBank, individually and as Agent, and the other Persons now or hereafter a party thereto have entered into that certain First Amended and Restated Credit Agreement dated as of July 30, 2015, as the same may be varied, extended, supplemented, consolidated, amended, replaced, increased, renewed or modified or restated (the “Credit Agreement”); and

WHEREAS , pursuant to the Credit Agreement, the Lenders may make loans to Borrower as provided in the Credit Agreement (collectively, the “Loans”), which Loans are evidenced by the Credit Agreement, the Notes, this Assignment and any of the other Loan Documents evidencing the obligations of Borrower;

WHEREAS , as a condition to the execution of the Credit Agreement, the Lenders and Agent have required that Assignor execute this Assignment;

NOW, THEREFORE , for and in consideration of the sum of Ten and No/100 Dollars ($10.00), the mutual covenants and promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Agent do hereby covenant and agree as follows:

ARTICLE ONE

LOAN DEFINITIONS

1.01 Terms . Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Credit Agreement. In addition to such other terms as are elsewhere defined herein, the following terms shall have the following meanings, as used in this Assignment and in any exhibits attached hereto, unless the context requires otherwise:

“ Collateral ” shall mean collectively,

(a) The notes, loan agreements, deeds of trust, mortgages, deeds to secure debt, assignments of leases and rents, guaranties, assignments, security agreements, financing statements, pledges, participation agreements, participation certificates, securities, contracts, agreements and other documents, instruments and options (x) described on Exhibit “A” attached hereto and made a part hereof or (y) evidencing any investment, loan or other asset acquired by

J-1

Assignor, pursuant to the exercise by Assignor of any purchase option or otherwise, pursuant to the terms of the contracts, agreements and other documents and instruments described on said Exhibit “A” , together with any and all amendments, modifications, consolidations, replacements, renewals, restatements or supplements thereto (including without limitation any assets, instruments, stock, warrants or other securities distributed to Assignor or issued to Assignor in replacement or payment thereof); and

(b) All security for the indebtedness and obligations of the respective payors evidenced by the documents and instruments described in Section 1.01(a) above, including without limitation the Property, and all liens, security interests and title of Assignor, if any, with respect thereto; and

(c) All documents evidencing the documents and instruments described in Section 1.01(a) above or any security therefor or guaranties thereof, all title insurance (whether evidenced by policies, commitments or otherwise) issued with respect to the Property and to any other security for the documents and instruments described in Section 1.01(a) above, all accounts, funds, participation interests, leases, books, files, records, programs, ledger books, computer tapes arising from or created in connection with such documents and instruments, lockboxes, and all other instruments, documents and agreements now or hereafter executed by or in favor of or for the benefit of Assignor in connection with any of the foregoing, and all other documents now or hereafter delivered or to be delivered to or on behalf of Assignor under the documents and instruments described in Section 1.01(a) above (all of said documents (including specifically, but without limitation, the Collateral Notes and the Collateral Mortgages), policies, instruments and agreements, and any and all additions, renewals, extensions, amendments, modifications, consolidations, restatements or supplements thereto of any of the foregoing, being hereinafter referred to collectively as the “Collateral Documents”); and

(d) All other rights and remedies of Assignor in connection with the Collateral Documents, whether provided by contract or otherwise available under applicable law or in equity, including without limitation all rights and remedies provided under any loan agreements, security agreements, indemnities, letters of credit, title insurance policies, fire and casualty insurance policies, escrow accounts, certificates of deposit, proceeds, claims (including proofs of claim), demands, causes of action and judgments in favor of Assignor relating to the Collateral Documents or the indebtedness or other amounts payable thereunder or other instruments or documents made, issued or delivered to or in favor of Assignor in connection with the Collateral Documents or the indebtedness or other obligations evidenced thereby;

(e) All payments of any kind or nature whatsoever, now or hereafter due and to become due under the Collateral Documents, all collections thereon and all other amounts paid thereunder, including without limitation all income, all prepayments under the Collateral Documents, and all other cash and non-cash proceeds of the Collateral Documents or of any other collateral for the obligations of Maker under the Collateral Documents and on account of any claim, rights or choses in action against Maker or otherwise pursuant to the Collateral Documents; and

(f) All claims, rights and privileges obtained by Assignor in connection with the indebtedness and other obligations of the applicable Maker evidenced by the Collateral Documents, and all property described in the Collateral Documents, together with the Property, and all the powers, options, privileges, immunities, claims, actions and causes of action, contained in or arising from any of the foregoing; and

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(g) All present and future accounts, deposit accounts, securities accounts (including all securities entitlements to financial assets now or hereafter carried in or credited to any securities account) contract rights, chattel paper (whether tangible or electronic), documents, general intangibles (including, without limitation, payment intangibles and software), instruments (including, without limitation, promissory notes), investment property, letter of credit rights, letters of credit, money or supporting obligations, arising out of or with respect to any of the foregoing, or established pursuant to or in accordance with the Collateral Documents; and

(h) Any and all renewals and extensions of any of the foregoing and any and all replacements or substitutions for any of the foregoing; and

(i) All proceeds and products of the foregoing of every type.

“ Collateral Mortgages ” shall mean collectively any deeds of trust, mortgages, deeds to secure debt, assignments, pledges, security agreements or other security instruments which secure any of the Collateral Notes, as the same may now or hereafter be modified, amended, extended, renewed, consolidated, restated or supplemented.

“ Collateral Notes ” shall mean collectively the promissory notes, securities and other instruments or documents, if any, described on Exhibit “A” attached hereto and made a part hereof as the same may now or hereafter be modified, amended, extended, renewed, consolidated, restated or supplemented.

“ Default ” shall mean any event which, with the giving of notice or the lapse of time, or both, would become an Event of Default.

“ Event of Default ” shall mean (a) any default in the payment or performance of the obligations of Assignor hereunder which is not cured in any applicable time period provided under Section 12.1 of the Credit Agreement (it being acknowledged by Assignor that no such cure period is provided with respect to any default under Sections 3.04 and 3.10 or any default excluded from any provision for a grace period or cure of defaults contained in the Credit Agreement or any other agreement evidencing or securing the Obligations), or (b) any Event of Default under the Loan Documents, or (c) any amendment to or termination of a financing statement naming Assignor as debtor and Agent as secured party, or any correction statement with respect thereto, is filed in any jurisdiction, or such filing is caused by, or at the instance of, Assignor or is filed by, or such filing is caused by, or at instance of, any principal, member, general partner, shareholder or officer of Assignor without the prior written consent of Agent and the effect of such filing is not completely nullified to the reasonable satisfaction of Agent within ten (10) days after notice to Assignor thereof.

“ Maker ” shall mean individually and collectively each respective obligor, guarantor or payor under or with respect to the Collateral Notes and the other Collateral Documents.

“ Material Modification ” shall mean any of the following: (i) any forgiveness, reduction, waiver or forbearance from collection of any principal under any of the Collateral Documents, or

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any interest thereon or fee payable with respect thereto (or any amounts attributable thereto); (ii) any reduction in, waiver of or forbearance from collection of the rate of interest payable under any Collateral Document; (iii) any extension of a maturity date or postponement or extension of any date fixed for any payment of principal or interest, other than any extension expressly contemplated under the Collateral Documents; (iv) any release of any obligor with respect to a Collateral Document or of any real property or other collateral encumbered by a Collateral Document, other than any releases expressly contemplated under the Collateral Documents; (v) the modification of or forbearance from exercising rights under any release provisions contained in any of the Collateral Documents; (vi) the consent to the transfer or encumbrance of any Property, or to a transfer or encumbrance of any direct or indirect ownership interest in any obligor under the Collateral Documents or waiver of or forbearance from exercising rights under any provision restricting transfer or encumbrance of any Property, any direct or indirect interest in any obligor thereunder; (vii) any modification of, waiver of, or forbearance from exercising rights with respect to defaults, events of defaults, grace periods, cure periods, or any financial covenants contained in any of the Collateral Documents other than a Permitted Waiver or Forbearance; (viii) any waiver of or forbearance from exercising rights with respect to a monetary default involving an amount due under any of the Collateral Documents or event of default or failure to comply with a financial covenant; (ix) any material modifications to the Property; (x) any consent or approval of any modification, waiver, termination, cancellation, acceptance of surrender or assignment of a lease, management agreement or operator’s agreement, or (xi) any other modification, amendment, waiver, forbearance, approval or consent that may materially increase the obligations of the holder of such Collateral Documents, materially reduce the rights or benefits afforded to such holder thereby, or affect or have an adverse impact on the Collateral or the rights and benefits afforded to the Agent and the Lenders pursuant to the Loan Documents, or have an adverse impact on the business, properties or operations of Assignor.

“ Obligations ” shall mean:

(a) The Obligations, as defined in the Credit Agreement;

(b) The full and prompt payment and performance by Borrower of all of the provisions, agreements, covenants and obligations contained in the Credit Agreement;

(c) The full and prompt payment and performance of all of the provisions, agreements, covenants and obligations herein contained and contained in any other of the Loan Documents, and the payment of all other sums therein covenanted to be paid, including, without limitation, the fees set forth in the Agreement Regarding Fees;

(d) Any and all additional advances made by Agent to protect or preserve the Collateral or the security interest created hereby; and

(e) The Hedge Obligations (but excluding the Excluded Hedge Obligation).

“ Prohibited Modification ” shall mean any attempt by Assignor to abandon, alter, amend, cancel, modify, release, relinquish, supplement, terminate or waive, or Assignor’s entering into or giving any agreement, approval or consent with respect to, any of the Collateral Documents, any of the Collateral or any part thereof or any interest therein or any collateral for the obligations evidenced by the Collateral Documents without the prior written consent of Agent;

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provided that it shall not be a Prohibited Modification if Assignor enters into an amendment, modification, waiver or supplement of or to any of the Collateral Documents solely for purposes of (a) clarification of the terms and provisions thereof, correction of mistakes or omissions, or addressing matters that are of an administrative nature, (b) approving requests for advances under any escrows or reserves established under the Collateral Documents and fund such items in accordance with the terms of the applicable Collateral Documents and prudent lending practices, (c) entering into or consenting to modifications of the Collateral Documents that are entered into in the ordinary course of business consistent with prudent lending practices, provided that such modifications are not Material Modifications, and (d) granting waivers or forbearing from exercising its rights under the Collateral Documents in the ordinary course of business consistent with prudent lending practices, provided that such waivers or forbearances do not constitute a waiver of recurring future compliance with a provision of the Collateral Documents or are not tantamount to an amendment of the Collateral Documents (except to the extent permitted in clause (c) above) and such waiver or forbearance would not affect or have an adverse impact on the Collateral or the rights and benefits afforded to the Agent and the Lenders pursuant to the Loan Documents or affect or have an adverse impact on the business, properties or operations of the Borrower (each such waiver or forbearance pursuant to this clause (d) a “Permitted Waiver or Forbearance”).

“ Property ” shall mean any and all real and personal property now or hereafter encumbered by the Collateral Documents.

ARTICLE TWO

ASSIGNMENT

2.01 Assignment of, and Grant of Security Interest in, the Collateral . As security for the full and prompt payment and performance by Assignor of the duties, obligations and responsibilities under this Assignment and the payment and performance by Assignor and Borrower of the Obligations, Assignor hereby transfers, assigns, pledges, conveys to, grants a security interest in, and deposits with the Agent for the benefit of the Lenders, the Collateral and all of the Assignor’s right, title, and interest in and to the Collateral. It is the intention of the parties hereto that Agent shall have a continuing, general lien upon, pledge of, and security interest in the Collateral.

2.02 Terms of Assignment . It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Collateral and that this Assignment constitutes a present, absolute and current assignment of all the Collateral and is effective upon the execution and delivery hereof. Payments under or with respect to the Collateral shall be made as follows:

(a) Assignor shall have no right to receive payments made under or with respect to the Collateral, and all such payments shall be delivered directly by the applicable Maker to Agent for application by Agent in accordance with the provisions of the Loan Documents.

(b) If Assignor shall receive any payments made under or with respect to the Collateral, Assignor shall hold all such payments in trust for Agent, will not commingle such payments with other funds of such Assignor, and will immediately pay and deliver in kind all

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such payments directly to Agent (with such endorsements and assignments as may be necessary to transfer title to Agent) for application by Agent in accordance with the provisions of the Loan Documents.

(c) Assignor hereby agrees for the benefit of Maker that all payments actually received by Agent hereunder or pursuant hereto shall be deemed payments to Assignor by the applicable Maker. Agent shall apply any and all such payments actually received by Agent in accordance with the provisions of the Loan Documents.

(d) In furtherance of the foregoing, Assignor does hereby notify and direct Maker that all payments under or with respect to the Collateral shall be made directly to Agent at the address of Agent set forth in the Credit Agreement, provided that Agent shall not request any Maker to make such payments directly to Agent until the occurrence of an Event of Default.

Notwithstanding anything in this Section 2.02 to the contrary, so long as no Event of Default has occurred, Assignor shall have a license (revocable upon the occurrence of an Event of Default) to collect all amounts payable to be applied as current interest under the Collateral Documents as and when the same become due but not prior to such time; it being understood and agreed that such license shall not extend to other amounts payable under the Collateral Notes or other Collateral Documents, including, without limitation, any amounts paid thereunder which are voluntary or involuntary payments of principal, or amounts to be applied against or attributable to principal, except as otherwise specifically set forth in the Loan Documents.

ARTICLE THREE

COVENANTS, REPRESENTATIONS AND WARRANTIES

Assignor hereby warrants and represents to, and covenants and agrees with, Agent as follows:

3.01 Delivery of Collateral . The original of the Collateral Notes, endorsed by Assignor, and the copies of each of the Collateral Mortgages and other Collateral Documents have been delivered to Agent. All actions required under the Collateral Notes or any other Collateral Document and applicable law have been duly taken in order to constitute Assignor the holder of the Collateral Notes and the other Collateral Documents and to constitute Agent the holder of a first-priority perfected security interest in each Collateral Note and each of the other Collateral Documents. None of the Collateral Notes, the Collateral Mortgages or the other Collateral Documents has been amended, modified, consolidated, supplemented or replaced except (i) as expressly described on Exhibit “ A ” attached hereto, (ii) as consented to in writing by Agent as required by the terms of this Agreement, or (iii) to the extent occurring after the date hereof under the Collateral Documents with the consent of Agent thereto not required.

3.02 Enforceability of this Assignment . This Assignment constitutes the legal, valid and binding obligation of Assignor enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws generally affecting the rights of creditors.

3.03 Right to Execute This Assignment . There are no restrictions on the transfer of the Collateral to Agent, and Assignor has full right, power and authority to enter into, deliver and

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execute this Assignment. The execution and delivery of this Assignment, and the consummation of the transactions contemplated herein, and the fulfillment of, and the compliance with, the terms and conditions of this Assignment do not and will not violate or conflict with any of the terms or provisions of the Collateral.

3.04 No Amendment of Collateral . Assignor shall not make any additional loans or advances which would be secured by any of the Collateral Mortgages except for protective advances thereunder and shall not enter into a Prohibited Modification, it being agreed that any attempt to do so without the prior written consent of Agent shall be void and ineffective. Assignor shall promptly notify Agent in writing of any actions, amendments, modifications or waivers requested by any agent, trustee, servicer, special servicer or collateral manager, or of which Assignor has otherwise become aware, under the Collateral Documents, and provide Agent with copies of such requested amendments, modifications or waivers.

3.05 Pending Litigation . To the knowledge of Assignor, there are no actions, suits, proceedings or investigations pending or threatened against or affecting any Maker, or, as applicable, any Property, at law or in equity, or before or by any Governmental Authority, which would materially impair the ability of any Maker to make any and all payments on the applicable Collateral Documents.

3.06 No Defenses . The assignment of the Collateral pursuant to this Assignment creates no defense to the payment thereof and is effective to convey to Agent all rights of Assignor to collect the Collateral.

3.07 Information About Collateral . The names, amounts owing, due dates and other facts furnished to Agent with respect to any of the Collateral have been, and with respect to information hereafter given to Agent will be, correctly stated. Assignor shall, promptly upon reasonable request by Agent, execute and deliver to Agent a certificate from an authorized officer setting forth in detail any and all amounts or payments received by or on behalf of Assignor subsequent to the date hereof with respect to the Collateral or any portion thereof during any period specified by Agent. Assignor shall promptly forward to Agent copies of all financial or property information, budgets, leases, leasing reports, rent rolls, insurance certificates and policies, default notices, acceleration notices and all other material communications or information received by Assignor or any agent or servicer acting for Assignor from Maker or from any other party, or sent by Assignor or any agent or servicer acting for Assignor, relating to the Collateral and/or Maker and/or the Property. Assignor shall also promptly deliver to Agent any other information regarding the Collateral reasonably requested by Agent from time to time. All records of Assignor relative to the Collateral are and will be kept at the office of Assignor located in Nashville County, Tennessee. Assignor shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in Assignor’s name and any proposed change in the location of the Collateral or of such records. Nothing contained in this subparagraph shall be construed so as to prevent Assignor from keeping copies or material abstracted from the books and records described herein at any of their offices as necessity or convenience dictates.

3.08 Good Title . Assignor is and shall remain the sole, lawful and beneficial owner of the Collateral free and clear of all liens, restrictions, claims, pledges and encumbrances whatsoever other than the lien in favor of Agent granted hereunder and has the full and complete right, power and authority to assign and pledge, and create a security interest in, the Collateral in

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favor of Agent in accordance with the terms and provisions of this Assignment. The security interest in the Collateral created hereunder constitutes and will at all times continue to constitute a valid and enforceable first-priority perfected security interest in the Collateral in favor of Agent for the benefit of the Lenders, free and clear of all liens, claims, encumbrances and rights of others, except for those in favor of the Agent hereunder or under the Loan Documents. The lien of the related Mortgage is insured by an ALTA lender’s title insurance policy (“Title Policy”), or its equivalent as adopted in the applicable jurisdiction, issued by a nationally recognized title insurance company, insuring the originator of the Borrowing Base Loan, its successors and assigns, as to the first priority lien of such Collateral Mortgage in the original principal amount of the Borrowing Base Loan after all advances of principal, subject only to Permitted Exceptions (or, if a title insurance policy has not yet been issued in respect of the Borrowing Base Loan, a policy meeting the foregoing description is evidenced by a commitment for title insurance “marked up” (or by “pro-forma” otherwise agreed to in a closing instruction letter countersigned by the title company) as of the closing date of the Borrowing Base Loan). Each Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no material claims have been made thereunder and no claims have been paid thereunder. Neither the Assignor nor the related Maker has, by act or omission, done anything that would materially impair the coverage under such Title Policy. Upon any transfer and assignment of the Borrowing Base Loan to Agent (whether by foreclosure or otherwise), such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) will inure to the benefit of Agent without the consent of or notice to the insurer. Assignor has not made any contract or arrangement of any kind or type whatsoever (whether oral or written, formal or informal), the performance of which by the other party thereto could give rise to a lien on the Collateral. Assignor will defend the Collateral and its proceeds against the claims and demands of all third persons.

3.09 Status of the Collateral . All duties, obligations and responsibilities required to be performed by Assignor under any of the Collateral Documents have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under any of the Collateral Documents. The Collateral is valid and enforceable in accordance with its terms, subject to insolvency, bankruptcy, moratorium and other laws affecting creditors’ rights generally, and is in compliance with all applicable laws. The Collateral Documents create a valid, enforceable and perfected first-priority lien and security interest in all the Property, subject to the exceptions permitted by the Credit Agreement, and Assignor shall take such actions as are necessary (including, without limitation, the filing of continuation statements) to cause the Collateral Documents to remain a valid, enforceable and perfected first-priority lien and security interest therein, subject to the exceptions permitted by the Credit Agreement.

3.10 No Future Encumbrance or Transfer . Assignor shall not encumber, pledge, anticipate, borrow against, or create any right of offset against the Collateral, and shall not transfer, assign, sell, or convey all or any portion of the Collateral except in accordance with the terms of the Credit Agreement.

3.11 Consents . Any and all consents required to be obtained in connection with the execution, delivery and performance of this Assignment have been obtained and delivered to Agent. Without limiting the generality of the foregoing, the execution, delivery and performance of all obligations under this Assignment do not and will not require any authorization, consent, approval, order, license or permit from, or filing, registration, or qualification with, or exemption from any of the foregoing from, any governmental agency or other person.

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3.12 Perfection of Security Interest .

(a) (i) Assignor’s correct legal name (including, without limitation, punctuation and spacing) indicated in the public record of Assignor’s jurisdiction, mailing address, identity or corporate structure, residence or chief executive office, jurisdiction of organization, organizational identification number, and federal tax identification number, are as set forth on Schedule 1 attached hereto and by this reference made a part hereof, (ii) Assignor has been using or operating under said name, identity or corporate structure without change for the time period set forth on Schedule 1 attached hereto, and (iii) in order to perfect the pledge and security interests granted herein against Assignor, UCC Financing Statements must be filed with the Delaware Secretary of State (to the extent the same can be perfected by the filing of a financing statement). Assignor covenants and agrees that it shall not change any of the matters addressed by clauses (i), (ii), or (iii) of this paragraph unless it has given Agent at least thirty (30) days prior written notice of any such change and executed at the request of Agent or authorized the execution by Agent or Agent’s counsel of such additional financing statements or other instruments to be filed in such jurisdictions as Agent may deem necessary or advisable in its sole discretion to prevent any filed financing statement from becoming misleading or losing its perfected status.

(b) Schedule 1 correctly sets forth all names and tradenames that Assignor has used within the last five years.

(c) Assignor shall, at any time and from time to time, take such steps as Agent may reasonably request for Agent (i) to obtain an acknowledgment, in form and substance reasonably satisfactory to Agent, of any bailee having possession of any of the Collateral, stating that the bailee holds possession of such Collateral on behalf of Agent, (ii) to obtain “control” of any investment property, deposit accounts, securities accounts, letter-of-credit rights, or electronic chattel paper (as such terms are defined in the UCC with corresponding provisions thereof defining what constitutes “control” for such items of collateral) in each case in which such items are included as Collateral, with any agreements establishing control to be in form and substance reasonably satisfactory to Agent, and (iii) otherwise to insure the continued perfection and priority of the Agent’s security interest in any of the Collateral and of the preservation of its rights therein. If Assignor shall at any time acquire a “commercial tort claim” (as such term is defined in the UCC with respect to the Collateral or any portion thereof), Assignor shall promptly notify Agent thereof in writing, providing a reasonable description and summary thereof, and shall execute a supplement to this Assignment in form and substance acceptable to Agent granting a security interest in such commercial tort claim to Agent.

(d) Assignor hereby authorizes Agent, its counsel or its representative, at any time and from time to time, to file financing statements, amendments and continuations that describe or relate to the Collateral or any portion thereof in such jurisdictions as Agent may deem necessary or desirable in order to perfect the security interests granted by Assignor under this Assignment or any other Loan Document, and such financing statements may contain, among other items as Agent may deem advisable to include therein, the federal tax identification number and organizational number of Assignor. Agent shall upon request provide Assignor with copies of any and all such filings made by Agent.

(e) Assignor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Assignment without the prior written consent of Agent, subject to such Assignor’s rights under Section 9-509(d)(2) of the UCC.

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3.13 Collateral Compliance and Defense . Assignor shall remain liable and comply with all obligations of Assignor under the Collateral and all other contracts, agreements and instruments related thereto to the extent set forth therein and to the same extent as if this Assignment had not been executed. Assignor, at its sole cost and expense, shall defend any claims against the Collateral or any action that might affect the Collateral or any interest therein. The exercise by Agent of any of its rights hereunder shall not release any Maker from any of its duties or obligations under the Collateral or contracts, agreements and instruments related thereto.

3.14 Protecting Collateral . Assignor will, but only with the prior written approval of Agent, diligently and in good faith do all things and take all actions, including, without limitation, bringing appropriate actions against any Maker which are necessary or desirable to enforce the obligations of such Maker to make all payments under the Collateral Documents to which it is a party, and Assignor shall give written notice to Agent of such actions as are taken by Assignor, and, with the prior written approval of Agent which shall not be unreasonably withheld, conditioned or delayed, to protect and preserve the interest of Agent under this Assignment and the value of the Collateral, provided that Assignor shall not without the prior written approval of Agent, such approval not to be unreasonably withheld, conditioned or delayed, take any action to demand, accelerate, bring suit or institute a foreclosure or other enforcement action. Assignor shall pay all taxes and other charges against the Collateral, shall not use the Collateral or the Property illegally, and shall take all reasonable precautions to prevent any loss, theft, damage or destruction of the Collateral or the Property or levy, seizure or attachment of the Collateral or the Property. At the request of Agent, Assignor shall take such actions as Agent may reasonably require to enforce the terms of the Collateral Documents or any other contract, agreement or instrument included in, giving rise to, creating, establishing, evidencing or relating to the Collateral or to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder.

3.15 Assignor’s Conduct . Assignor has not done any act or omitted to do any act which might prevent Agent from, or limit Agent in, acting under any of the provisions herein.

3.16 No Offset . The Collateral Notes evidence bona fide indebtedness or obligations owing to Assignor by each Maker, and no Maker has any rights to set off, counterclaim or defenses with respect to the payment or performance of any obligations under the Collateral Documents.

3.17 [Reserved] .

3.18 Custody of Collateral . Agent’s duty with reference to the Collateral shall be solely to use reasonable care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against other parties. Agent will have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any payments thereunder.

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3.19 Related Documents . There are no documents or agreements to which Assignor is a party or beneficiary which conflict with or vary the terms of the Collateral Documents, and Assignor has delivered to Agent copies of all Collateral Documents.

3.20 No Maker Default . Each Maker is the sole obligor and grantor under the Collateral Note and other Collateral Documents to which it is a party. As of the date of acceptance by Agent of such Collateral Documents as collateral for the Obligations, no Maker is in default under any of the terms, covenants or conditions of the Collateral (nor has any event or circumstance occurred, which with lapse of time or giving of notice, or both, might constitute a default thereunder). The Collateral does not constitute a Delinquent Loan or a Defaulted Loan. Assignor shall promptly deliver to Agent copies of any written notice of any default under the Collateral Documents delivered to Maker, which notice shall specify in reasonable detail the nature of such default.

3.21 Waiver of Defaults; Defenses . Assignor has not waived any material default, breach, violation or event of acceleration existing under the related Collateral Mortgage (if applicable), related Collateral Note or other related Collateral Documents. To Assignor’s knowledge, the related Maker has not waived any material default, breach, violation or event of acceleration by any tenant existing under any Lease or Operators’ Agreement related to the Property securing the Borrowing Base Loan.

3.22 No Prepayment . No prepayment with respect to the Collateral has been collected or received by Assignor prior to the date hereof except as disclosed in writing to Agent, or subsequent to the date hereof except where the proceeds of which have been paid to Agent in accordance with the prepayment requirements in the Credit Agreement. Except to the extent permitted under the terms of the Collateral and paid to the Agent in accordance with the prepayment requirements in the Credit Agreement, no prepayment of the indebtedness evidenced by the Collateral Documents will be collected or received by Assignor without the prior written consent of Agent, which consent may be withheld by Agent in its reasonable discretion.

3.23 Collateral Indebtedness . As of the date set forth thereon, the unpaid principal balances of or outstanding amounts owing with respect to the Collateral Notes are as set forth on Exhibit “ B ” attached hereto and accrued and unpaid interest and other charges thereon are as set forth on said Exhibit “ B ”.

3.24 Escrows . Upon the occurrence of any Event of Default any amounts deposited by or on behalf of any Maker as escrows or deposits pursuant to the Collateral Documents to be held by or on behalf of Assignor (including, without limitation, escrows for taxes and insurance), shall, immediately, upon Agent’s demand be deposited with Agent and shall be used for the purposes permitted in the Collateral Documents. Assignor agrees that any such escrow or deposit amounts shall be used only for the purposes permitted in the Collateral Documents.

3.25 Additions; Substitutions . If Assignor shall at any time be entitled to receive or shall receive any cash, certificate or other property, option or right, upon, in respect of, as an addition, to, or in substitution or exchange for any of the Collateral as a result of the exercise of any rights or remedies under the Collateral Documents, whether for value paid by Assignor or otherwise, Assignor agrees that the same shall be deemed to be part of the Collateral and shall be delivered directly to Agent in each case accompanied by proper instruments of encumbrance or assignment as reasonably required by Agent duly executed by Assignor in such a form as may be

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reasonably required by Agent to be held by Agent subject to the terms hereof, as further security for the Obligations (unless any such cash received represents a payment of the indebtedness evidenced by the Collateral Documents, in which case such amount shall be applied to the Obligations in accordance with the Credit Agreement). If Assignor receives any of the foregoing directly, Assignor agrees to hold such cash or other property in trust for the benefit of Agent, and to promptly surrender such cash or other property to Agent.

3.26 Delivery of Notes . Assignor shall promptly deliver to Agent any note or other document or instrument entered into after the date hereof which evidences, constitutes, guaranties or secures any of the Collateral or any right to receive Collateral, which notes or other documents and instruments shall be accompanied by such endorsements or assignments as Agent may reasonably require to transfer title to Agent or perfect the security interest of Agent in such Collateral.

3.27 Merger . Except as consented to by Agent, Assignor, for itself and its successors, successors-in-interest and assigns, acknowledges and agrees that the interests created in the holder of the Collateral Documents shall not be merged with the interests of any Maker, Assignor or any other Person in the Property, and that such interests shall remain separate and distinct. The indebtedness, liens and security interests created by the Collateral Documents shall be preserved in favor of the holder thereof and Agent, and shall not be affected or impaired by any common ownership of the Collateral Documents and the Property, or any commonality between the direct or indirect owners of the Property and of the Collateral Documents.

3.28 Securities Laws . The pledge of the security interest contemplated by this Assignment does not violate and does not require that any filing, registration or other act be taken with respect to any and all laws pertaining to the registration or transfer of securities, including without limitation the Securities Act of 1933, the Securities and Exchange Act of 1934, and any and all rules and regulations promulgated thereunder or any similar federal, state or local law, rule, regulation or orders hereafter enacted or analogous in effect, as the same are amended and in effect from time to time (hereinafter referred to collectively as the “Securities Laws”). Assignor shall at all times comply with the Securities Laws as the same pertain to all or any portion of the Collateral or any of the transactions contemplated by this Assignment.

3.29 Usury Laws . All Borrowing Base Loans complied with all applicable usury laws in effect at its date or origination.

3.30 Disbursement . The proceeds of all Borrowing Base Loan have been fully-disbursed and there is no requirement for future advances thereunder.

3.31 Participation . Each Borrowing Base Loan is a whole loan and not a participation interest.

3.32 Servicing . The origination, servicing and collection practices Assignor used with respect to the Borrowing Base Loan have complied with applicable law in all material respects and are consistent and in accordance with the terms of the related Collateral Loan Documents and in accordance with customary servicing standards applicable to similarly situated loans.

3.33 Practical Realization . The related Collateral Mortgage or related Collateral Note, together with applicable state law, contains customary and enforceable provisions (subject to any

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non-recourse provisions contained in any of the Collateral Documents and any applicable state anti-deficiency legislation) such as to render the rights and remedies of the holders thereof adequate for the practical realization against the Property securing the Borrowing Base Loan of the principal benefits of the security intended to be provided thereby, including the right of foreclosure under the laws of the state in which the Property securing the Borrowing Base Loan is located governing foreclosures of mortgages, deeds of trust and deeds to secure debt under power of sale.

3.34 Maker Bankruptcy . No Maker nor any related tenant is a debtor in any state or federal bankruptcy or insolvency proceeding.

3.35 Leases . As of the date of acceptance by Agent of such Collateral Documents as collateral for the Obligations, to Assignor’s knowledge, each related lease for the related Property was not delinquent (giving effect to any applicable grace period) in the payment of any monthly lease payments and no other default has occurred since the date of the related loan origination date, and has not been thirty (30) days or more delinquent in respect of any monthly lease payment required thereunder

ARTICLE FOUR

ACTION BY AGENT

4.01 Action by Agent . Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral with notice to Assignor:

(a) Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay reasonable attorney’s fees.

(b) Agent shall be under no duty or obligation to (i) preserve, process, develop, maintain or protect the Collateral or any of Assignor’s rights or interests therein, or (ii) make or give any notices of default, presentments, demands for performance, notices of nonperformance or dishonor, protests, notices of protests or notices of any other nature whatsoever in connection with the Collateral on behalf of Assignor or any other Person having any interest therein; and Agent does not assume and shall not be obligated to perform the obligations of Assignor with respect to the Collateral. Agent may, at any time and from time to time, without notice or demand and at the expense of Assignor, make requests for information concerning the Collateral from any obligor thereon or any servicer, agent or manager acting on behalf of Assignor.

(c) Agent may, at its sole option, make advances to protect the Collateral and its security title or interest therein, or for any reason for which Assignor is permitted under the terms of the Collateral Documents to make advances, and any such advances made by Agent shall be deemed advanced under the Collateral Documents, increasing the indebtedness evidenced and secured thereby, and also shall be deemed advances under the Loan Documents, increasing the Obligations.

(d) Agent may at any time compromise, transfer and assign its interest in the Collateral or any portion thereof and this Assignment in accordance with the Credit Agreement or at any time after the occurrence and during the continuance of any Event of Default.

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4.02 Attorney In Fact . ASSIGNOR HEREBY NOMINATES AND IRREVOCABLY DESIGNATES AND APPOINTS AGENT ITS TRUE AND LAWFUL AGENT AND ATTORNEY IN FACT (WITH FULL POWER OF SUBSTITUTION), WHICH APPOINTMENT IS COUPLED WITH AN INTEREST, EITHER IN THE NAME OF AGENT OR IN THE NAME OF ASSIGNOR, AS THE CASE MAY BE, AT ASSIGNOR’S SOLE COST AND EXPENSE, TO TAKE ANY OF THE FOLLOWING ACTIONS:

(a) To do all acts and things and execute all documents which Agent may deem necessary or advisable to perfect and continue perfected the security interest created by this Assignment and to preserve, process, develop, maintain and protect the Collateral and the value thereof and Agent’s interest therein, including, without limitation, preparing, signing, filing and recording, for Assignor in Assignor’s name, or for Assignor on behalf of any Maker or other Person liable with respect to such obligations, any financing statement covering or constituting the Collateral, or any portion thereof;

(b) To do any and every act which Assignor is obligated to do under this Assignment;

(c) Whether before or after the occurrence of an Event of Default, to ask for, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all sums owing or which may become due with respect to the Collateral; to endorse, in the name of Assignor, all checks, notes, drafts, money orders, evidences of payment, or other instruments received in payment of, or on account of, the Collateral or any portion thereof; and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing or taking any acts on behalf of Assignor which are otherwise required of Assignor under the terms of the Collateral or any portion thereof as conditions precedent to the payment of the obligations evidenced by, or to the exercise of, the Collateral or any portion thereof; and to exercise any rights and remedies available under the Collateral Documents and to execute any document or instrument which Agent may deem necessary or desirable in connection therewith, including pleadings, consent orders, stipulations, and other documents and instruments which Agent may deem necessary or desirable in connection with judicial or nonjudicial foreclosure of any deed of trust, mortgage, deed to secure debt, assignment, pledge or other security agreement included within the Collateral Documents or other legal actions or proceedings with respect to the Collateral or the Maker. IN ADDITION, ASSIGNOR HEREBY IRREVOCABLY DESIGNATES AND APPOINTS AGENT ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH FULL POWER OF SUBSTITUTION EITHER IN THE NAME OF AGENT OR ASSIGNOR WHICH POWER IS COUPLED WITH AN INTEREST TO (I) SIGN ASSIGNOR’S NAME ON ANY COLLATERAL, DRAFTS AGAINST ACCOUNT DEBTORS, ASSIGNMENTS, ANY PROOF OF CLAIM IN ANY BANKRUPTCY OR OTHER INSOLVENCY PROCEEDING INVOLVING ANY ACCOUNT DEBTOR, ANY NOTICE OF LIEN, CLAIM OF LIEN OR ASSIGNMENT OR SATISFACTION OF LIEN, OR ON ANY FINANCING STATEMENT OR CONTINUATION STATEMENT UNDER THE UNIFORM COMMERCIAL CODE; (II) SEND VERIFICATIONS OF ACCOUNTS RECEIVABLE TO ANY ACCOUNT DEBTOR; AND

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(III) IN CONNECTION WITH A TRANSFER OF THE COLLATERAL AS DESCRIBED ABOVE SIGN IN ASSIGNOR’S NAME ANY DOCUMENTS NECESSARY TO TRANSFER TITLE TO THE COLLATERAL TO AGENT OR ANY THIRD PARTY;

(d) Compromise the Collateral or any portion thereof; and

(e) To endorse and transfer the Collateral upon foreclosure;

provided, however, that Agent shall be under no obligation whatsoever to take any of the foregoing actions or to exercise any of the foregoing authority or power, and Agent shall have no liability or responsibility for any act or omission taken with respect thereto. All of said rights and powers may be exercised by Agent at any time, whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral. THE FOREGOING APPOINTMENT OF THE AGENT AS ASSIGNOR’S ATTORNEY-IN-FACT IS IRREVOCABLE, COUPLED WITH AN INTEREST, WITH FULL POWER OF SUBSTITUTION AND CANNOT BE REVOKED BY INSOLVENCY, REORGANIZATION, MERGER, CONSOLIDATION OR OTHERWISE. ALL ACTS OF SAID POWER OF ATTORNEY ARE HEREBY RATIFIED AND APPROVED AND AGENT SHALL NOT BE LIABLE FOR ANY MISTAKE OF LAW OR FACT MADE IN CONNECTION THEREWITH.

4.03 Necessity for Agent Action or Consent . So long as this Assignment shall be held by Agent as security for the Obligations, (a) no approval, consent, election, waiver, vote or other matter which is given or required or permitted to be given or which inures to the benefit of Assignor under the Collateral Documents shall be deemed to have been given unless and until given by Agent; (b) no Prohibited Modification may be entered into without the consent of Agent and any such attempted modification, amendment or waiver without such consent shall be null and void; (c) except to the extent that the Collateral has been paid in full, or it is otherwise required by the terms of the Collateral, no Collateral may be released without the execution of the documentation of release by Agent, and any attempt to release without such execution by Agent shall be null and void; and (d) any exercise of discretion by Assignor, any requirements imposed or to be imposed, or permitted to be imposed, by Assignor hereunder, shall be deemed to have been exercised or imposed only when so exercised or imposed by Agent. The rights of Agent under this section may be exercised by Agent solely at the option of Agent, and Agent shall have no obligation to give any consent or take any other action whatsoever contemplated hereby, but may instead defer in writing to Assignor or require the written concurrence of Assignor before giving any such consent or taking any such other actions. Without implying any limitation upon the scope of Section 7.01 hereof, it is specifically noted that the provisions of Section 7.01 hereof apply, without limitation, to any action or failure to act on the part of Agent with respect to the matters contemplated by this Section 4.03.

ARTICLE FIVE

ENFORCEMENT OF COLLATERAL DOCUMENTS

Assignor acknowledges and agrees that Agent at all times, whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral (unless otherwise provided in this Assignment), shall have the right, but not the obligation, to exercise and enforce, in its own name or in Assignor’s name, any or all rights and remedies of Assignor under the Collateral Documents to the exclusion of Assignor, including but not limited to the

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right to inspect the Property, to receive information and documents, to declare due the indebtedness secured by the Collateral Documents upon the occurrence of a default thereunder, to grant or withhold approvals, and to exercise discretion with respect to any matter. Assignor shall not exercise or attempt to exercise any such right or remedy except at the written request of Agent and only in strict accordance with the instructions of Agent. Agent may, at its option, enforce or conduct any action for foreclosure under the Collateral Documents in its own name or in the name of Assignor, and Assignor specifically consents to any foreclosure (including nonjudicial foreclosure) under any or all of the Collateral Documents or any other action taken by Agent even though such action may release any person from personal liability on any of the Collateral Documents. Assignor agrees that upon the exercise by Agent of any such remedies, any amount bid by Agent at any sale of any of the Property or any other collateral for any Collateral Note or other Collateral Document may, at the option of Agent, be deemed to be a credit bid by Agent of the indebtedness evidenced by or the obligations payable with respect to the applicable Collateral Note or other Collateral Document and the Obligations, or any of them; Agent shall be entitled to set off the amount of any such bid against any such indebtedness, all at the election of Agent, in its sole discretion; and any or all proceeds of any Collateral Note or other Collateral Document may be applied against the Obligations in accordance with the Credit Agreement and Agent shall hold any property obtained by Agent at any such sale free and clear of any interest or claims of Assignor regardless of whether Agent shall have exercised any remedy under this Assignment with respect to any of the Collateral Documents, or shall have sold any of the Collateral Documents or obtained absolute title thereto pursuant to its rights and remedies under the Uniform Commercial Code of the State of New York (the “UCC”), or otherwise. Assignor hereby agrees to pay to Agent, immediately upon demand, all costs and expenses, including without limitation reasonable attorney’s fees, incurred by Agent in connection with the enforcement or foreclosure of any Collateral Documents, with interest from the date of expenditure at the Default Rate specified in the Credit Agreement, to the extent permitted by applicable laws.

ARTICLE SIX

REMEDIES

6.01 Remedies . Upon the occurrence and during the continuance of any Event of Default, without prejudice to the rights of Agent to enforce its claims against Assignor for damages for failure to fulfill any of its obligations under any of the Loan Documents, Agent shall have, in addition to all other rights and remedies that Agent may have under this Assignment and by law, all of the rights and remedies hereinafter set forth, and it may exercise without further notice to Assignor, except as may be specifically required herein or in the other Loan Documents, any one, more, or all of such remedies, in its sole discretion, without thereby waiving any of the others:

(a) Agent shall have the right immediately to exercise all of its rights and remedies provided under this Assignment, the Notes, and any of the other Loan Documents.

(b) Agent shall have the right to collect and to continue to collect all payments on the Collateral; to renew, extend, modify, amend, accelerate, accept partial payments on, make allowances and adjustments and issue credits with respect to, release, settle, compromise, compound, collect or otherwise liquidate, on terms acceptable to Agent, in whole or in part, the

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Collateral and any amounts owing thereon or any guaranty or security therefor; to enter into any other agreement relating to or affecting the Collateral; to give all consents, waivers and ratifications in respect of the Collateral and exercise all other rights, powers and remedies and otherwise act with respect thereto as if it were the owner thereof; and to enforce payments and prosecute any action or proceeding with respect to any and all of the Collateral and take or bring, in Agent’s name or in the name of Assignor, all steps, actions, suits or proceedings deemed by Agent necessary or desirable to affect collection of or to realize upon the Collateral.

(c) Agent shall have all of the rights and remedies of a secured party under the UCC as in effect at that time, including, without limitation, the right to take possession of any of the Collateral, and to sell or otherwise dispose of the same.

(d) Agent shall have the right to foreclose the liens and security interests created under this Assignment or under any other agreement relating to the Collateral by any available judicial procedure or without judicial process; and to sell, assign, lease or otherwise dispose of the Collateral or any part thereof, either at public or private sale, in lots or in bulk, for cash, on credit or for future delivery, or otherwise, with or without representations or warranties, and upon such terms as shall be acceptable to Agent.

(e) Agent shall have the right to the appointment of a receiver for the Collateral, and Assignor hereby consents to such rights and such appointment and hereby waives any objection Assignor may have thereto or the right to have a bond or other security posted by Agent.

(f) Agent shall have all other rights and remedies available under applicable law.

6.02 Sale of Collateral . In the event Agent shall determine to sell the Collateral or any portion thereof, any such sale shall be held at such time or times and at such place or places as Agent may determine in the exercise of its sole discretion. Agent may bid (which bid may be, in whole or in part, in the form of cancellation of Obligations) for and purchase for the account of Agent or any nominee of Agent the whole or any part of the Collateral. In the event that Agent is the successful bidder at any public or private sale of the Collateral or any portion thereof, the amount bid by Agent may be credited against the Obligations as provided in Section 6.03. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Assignor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to Assignor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the UCC. Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Upon consummation of any sale of the Collateral, Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from any claim or

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right on the part of Assignor, and Assignor hereby waives to the extent permitted by law all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Assignor agrees that: (a) if Agent shall, pursuant to the terms of this Assignment, sell or cause the Collateral or any portion thereof to be sold at a private sale, Agent shall have the right to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best manner in which to offer the Collateral or any portion thereof for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) such reliance shall be conclusive evidence that Agent has handled the disposition in a commercially reasonable manner.

6.03 Application of Net Proceeds . The net cash proceeds resulting from the collection, liquidation, sale, lease or other disposition of the Collateral shall be applied to the payment and satisfaction of the Obligations in accordance with the terms of the Credit Agreement.

6.04 No Limitation of Remedies . No remedy conferred upon or reserved to Agent herein or in the Notes or in any of the other Loan Documents or in the Collateral Documents is intended to be exclusive of any other remedy conferred upon or reserved to Agent under such instruments or under any applicable laws. Each such remedy shall be cumulative and concurrent and shall be in addition to each and every other remedy now or hereafter existing under such instruments or at law or in equity. No delay or omission by Agent to exercise any right, power or remedy provided in this Assignment, the Notes, or the other Loan Documents or otherwise accruing upon any Event of Default shall impair in any manner any such right, power or remedy, or shall be construed to be a waiver of any such default or acquiescence therein, and each and every right, power and remedy of Agent may be exercised from time as often as may be deemed expedient by Agent. Assignor hereby waives to the extent permitted by law all rights which Assignor has or may have under and by virtue of the UCC and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Assignor to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Assignor hereby waives and renounces for itself, its heirs, successors and assigns, presentment, demand, protest, advertisement or notice of any kind (except for any notice required by law or the Loan Documents) and all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Assignment and the collection of any of the Obligations. Without limiting the foregoing, Agent shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, Assignor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Agent’s rights and remedies under this Assignment or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Assignor hereby irrevocably waives the benefits of all such laws.

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6.05 Rights Independent; Adequacy of Collateral . The security interest created hereunder is independent of any other security for the Obligations or the obligations of any other party or any guarantor, and upon the occurrence and during the continuance of an Event of Default, Agent may proceed in the enforcement hereof independently of any other right or remedy that Agent may at any time hold with respect to the Obligations or any other security or guaranty therefor. Upon the occurrence and during the continuance of an Event of Default, Agent may file a separate action or actions against Assignor hereunder, whether action is brought and prosecuted with respect to any other security or against any other party or any guarantor, or whether any other party or any guarantor is joined in any such action or actions.

6.06 Performance of Assignor’s Obligations . If Assignor fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Assignor contained in this Assignment which Assignor shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys’ fees actually incurred (including attorneys’ fees incurred in any appeal) by Agent in connection therewith, shall be payable by Assignor upon demand and shall constitute a part of the Obligations and shall bear interest at the Default Rate set forth in the Credit Agreement.

6.07 Disposition of Collateral . In view of the position of Assignor in relation to the Collateral owned by it, or because of other current or future circumstances, a question may arise under the Collateral Documents or applicable laws with respect to any disposition of the Collateral permitted hereunder. Assignor recognizes that the Collateral Documents or related agreements may strictly limit transfers of the Collateral and the admission of substitute lenders, holders or owners under the Collateral Documents. Assignor understands that compliance with the Collateral Documents, related agreements or applicable laws might very strictly limit the course of conduct of Agent if Agent were to attempt to dispose of all or any part of the Collateral in accordance with the terms hereof, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to dispose of all or part of the Collateral in accordance with the terms hereof under applicable laws. Assignor recognizes that in light of the foregoing restrictions and limitations Agent may, with respect to any sale of the Collateral, limit the purchasers to those who are able to satisfy any conditions or requirements set forth in the Collateral Documents, related agreements or applicable laws and Agent may sell the Collateral in parcels and at such time as Agent may reasonably determine is necessary to comply with such conditions or requirements. Assignor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Agent in its sole and absolute discretion may, in accordance with the Collateral Documents (a) restrict such sale to one or more eligible purchasers who have satisfied all applicable requirements, (b) approach and negotiate with a single potential purchaser to effect such sale or sales, and (c) sell the Collateral in parcels and at such time as Agent may reasonably determine is necessary to comply with such conditions or requirements. Assignor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller if such sale were a public sale without restrictions. In the event of any such sale, Agent shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that Agent, in its sole and absolute

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discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale was to other than an eligible purchaser who satisfied all applicable requirements, if more than a single purchaser were approached or if all of the Collateral were sold at a single sale. Assignor further agrees that any sale or sales by Agent of the Collateral made as provided in this Section 6.07 shall be commercially reasonable. The provisions of this paragraph will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells.

ARTICLE SEVEN

GENERAL CONDITIONS

7.01 Indemnification . IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT THIS ASSIGNMENT SHALL NOT OPERATE TO PLACE ANY RESPONSIBILITY OR OBLIGATION WHATSOEVER UPON AGENT OR ANY LENDER, AND THAT IN ACCEPTING THIS ASSIGNMENT, AGENT AND THE LENDERS NEITHER ASSUME NOR AGREE TO PERFORM AT ANY TIME WHATSOEVER ANY OBLIGATION OR DUTY OF ASSIGNOR WITH RESPECT TO THE COLLATERAL, ALL OF WHICH OBLIGATIONS AND DUTIES SHALL BE AND REMAIN WITH AND UPON ASSIGNOR. ASSIGNOR AGREES TO RELEASE, INDEMNIFY, DEFEND AND TO HOLD HARMLESS, AND DOES HEREBY RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS, AGENT, THE LENDERS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS AND AGENTS (EACH AN “INDEMNIFIED PERSON”) FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES, PENALTIES, CAUSES OF ACTION, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS FEES AND EXPENSES) IMPOSED UPON OR INCURRED BY ANY INDEMNIFIED PERSON BY REASON OF THIS ASSIGNMENT AND ANY CLAIM AND DEMAND WHATSOEVER WHICH MAY BE ASSERTED AGAINST ANY INDEMNIFIED PERSON BY REASON OF ANY ALLEGED OBLIGATION OR UNDERTAKING TO BE PERFORMED OR DISCHARGED BY AGENT OR ANY LENDER UNDER OR BY REASON OF THIS ASSIGNMENT, EXCEPT FOR ANY LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES, PENALTIES, CAUSES OF ACTION, COSTS AND EXPENSES ARISING AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AGENT OR SUCH LENDER. IN THE EVENT ANY INDEMNIFIED PERSON INCURS ANY SUCH LIABILITY, OBLIGATION, CLAIM, DAMAGE, PENALTY, COSTS OR EXPENSES UNDER OR BY REASON OF THIS ASSIGNMENT, OR IN THE DEFENSE OF ANY CLAIMS OR DEMANDS ARISING OUT OF OR IN CONNECTION WITH THIS ASSIGNMENT, THE AMOUNT OF SUCH LIABILITY, OBLIGATION, CLAIM, DAMAGE, PENALTY, COST OR EXPENSE SHALL BE ADDED TO THE OBLIGATIONS, SHALL BEAR INTEREST AT THE DEFAULT RATE SPECIFIED IN THE CREDIT AGREEMENT FROM THE DATE INCURRED UNTIL PAID AND SHALL BE DUE AND PAYABLE IMMEDIATELY UPON DEMAND BY AGENT OR A LENDER.

7.02 Further Assurances . Assignor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements, documents and instruments as Agent may at any time request in connection with the administration or

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enforcement of this Assignment or related to the Collateral or any part thereof or in order to better assure and confirm unto Agent its rights, powers and remedies hereunder. Without limiting the generality of the foregoing, at any time and from time to time, upon request by Agent, Assignor will make, execute and deliver, or cause to be made, executed and delivered, to Agent and, where appropriate, cause to be recorded and/or filed and from time to time thereafter to be re-recorded and/or refiled at such time and in such offices and places as shall be deemed desirable by Agent, any and all such other and further assignments, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments of further assurance, certificates and other documents as may, in the opinion of Agent, be necessary or desirable in order to effectuate, complete, or perfect, or to continue and preserve (a) the obligations of Assignor under this Assignment and (b) the security interest created by this Assignment as a first and prior security interest upon the Collateral. Without limiting Agent’s rights under Section 3.12(d) hereof, upon any failure by Assignor so to do, Agent may make, execute, record, file, re-record and/or refile any and all such assignments, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments, certificates, and documents for and in the name of Assignor, and Assignor hereby irrevocably appoints Agent the agent and attorney in fact of Assignor so to do. This power is coupled with an interest.

7.03 Expenses and Costs of Agent . Assignor agrees to pay to Agent all advances, charges, costs and expenses, including all reasonable attorney’s fees, incurred or paid by Agent in exercising any right, power or remedy conferred by this Assignment, or in the enforcement thereof, whether or not an action is filed hereon, together with interest from the date of the expenditure at the Default Rate specified in the Credit Agreement, to the extent permitted by applicable law, it being specifically understood and agreed by Assignor that all such advances, charges, costs and expenses shall constitute Obligations.

7.04 Release of Collateral and Termination . As provided in Section [5.4] [5.7] of the Credit Agreement or subject to the terms of Section 5.8 of the Credit Agreement, upon the payment and satisfaction in full of the Obligations and the termination of the obligations of the Lenders to make additional Loans or issue Letters of Credit, Agent, upon receipt of written request therefor from Assignor, shall execute and deliver to Assignor such documents as may be necessary to release the liens and interests on the Collateral created by this Assignment, and shall return any originals of the Collateral Documents to Assignor without recourse or warranty.

7.05 Survival of Certain Agreements . Notwithstanding the repayment of the Obligations, the termination of the obligations of the Lenders to make additional Loans or issue Letters of Credit and the cancellation or transfer of the Loan Documents, or any foreclosure of or other realization upon the Collateral, the agreement of Assignor contained herein or in any of the other Loan Documents to pay the costs and expenses of Agent in connection with the Loan and all agreements of Assignor contained herein or in any of the other Loan Documents to indemnify and/or hold harmless the Indemnified Persons shall continue in full force and effect so long as there exists any possibility of expense or liability on the part of the Indemnified Persons.

7.06 Law Governing . THIS ASSIGNMENT SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK INCLUDING THE CHOICE OF LAW RULES UNDER THE NEW YORK UCC.

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7.07 Security Interest Absolute . All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of:

(a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto;

(b) Any change in the time (including the extension of the maturity date of the Notes), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents;

(c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or

(d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Assignor or any third party for the Obligations or any part thereof.

7.08 Notices . Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement shall be given to Assignor in the manner prescribed in the [Guaranty] [Credit Agreement] .

7.09 Consents, Amendments, Waivers, Etc . Except as otherwise expressly provided in this Assignment, any consent or approval required or permitted by this Assignment may be given, and any term of this Assignment or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by Assignor of any terms of this Assignment or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) as provided in the Credit Agreement. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No amendment of any provision of this Assignment shall in any event be effective unless the same shall be in writing and signed by Agent and Assignor. No course of dealing or delay or omission on the part of Agent in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon Assignor shall entitle Assignor to other or further notice or demand in similar or other circumstances.

7.10 Severability . The provisions of this Assignment are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Assignment in any jurisdiction.

7.11 No Unwritten Agreements . THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

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7.12 Waiver of Jury Trial and Certain Damage Claims . EACH OF ASSIGNOR AND AGENT HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS ASSIGNMENT, OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. ASSIGNOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, PUNITIVE OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. ASSIGNOR (A) CERTIFIES THAT NO REPRESENTATIVE OR ATTORNEY OF AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS ASSIGNMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH. ASSIGNOR ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS PARAGRAPH WITH LEGAL COUNSEL AND THAT ASSIGNOR AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT. ASSIGNOR HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY FOR ITSELF AND IN RESPECT OF ITS PROPERTY TO THE NON-EXCLUSIVE JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK (INCLUDING ANY FEDERAL COURT SITTING THEREIN), AND TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE COURT OR ANY UNITED STATES FEDERAL COURT SITTING IN THE STATE IN WHICH ANY OF THE PROPERTY IS LOCATED, OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSIGNMENT OR THE OBLIGATIONS. ASSIGNOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT ASSIGNOR MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. ASSIGNOR HEREBY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO ASSIGNOR AT THE ADDRESS STATED IN THE GUARANTY, OR AT A SUBSEQUENT ADDRESS OF ASSIGNOR OF WHICH AGENT RECEIVED ACTUAL NOTICE FROM ASSIGNOR IN ACCORDANCE WITH THE GUARANTY, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED. NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF AGENT TO BRING PROCEEDINGS AGAINST ASSIGNOR IN ANY OTHER COURT OR JURISDICTIO N.

7.13 Time of the Essence . Time is of the essence with respect to each and every covenant, agreement and obligation of Assignor under this Assignment.

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IN WITNESS WHEREOF, Assignor have executed this Assignment, as of the day and year first above written.


ASSIGNOR :

				,
a limited liability company

By:
Name:
Title:

(SEAL)

AGENT :

KEYBANK NATIONAL ASSOCIATION, a national banking association, as Agent

By:
Name:
Title:

J-24

EXHIBIT “A”

COLLATERAL

J-A-1

EXHIBIT “B”

OUTSTANDING BALANCES

J-B-1

SCHEDULE 1

DESCRIPTION OF ASSIGNOR

, a limited liability company, has been using or operating under said name and identity or corporate structure without change since .

Names and Tradenames used within the last five years:

Mailing address:

Organizational Identification Number:

Federal Tax Identification Number:

J-S-1

EXHIBIT K-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to that certain First Amended and Restated Credit Agreement dated as of July 30, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) by and among MedEquities Realty Operating Partnership, LP (the “Borrower”), the financial institutions party thereto and their assignees under §18.1 thereof (the “Lenders”), KeyBank National Association, as Agent (the “Agent”) and the other parties thereto.

Pursuant to the provisions of §4.3 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.



[NAME OF LENDER]

By:
Name:
Title:

Date:		, 20

K-1

EXHIBIT K-2

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of §4.3 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.


[NAME OF PARTICIPANT]

By:
Name:
Title:

Date:		, 20

K-2

EXHIBIT K-3

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of §4.3 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.



[NAME OF PARTICIPANT]

By:
Name:
Title:

Date:		, 20

K-3

EXHIBIT K-4

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of §4.3 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.



[NAME OF LENDER]

By:
Name:
Title:

Date:		, 20

K-4

EXHIBIT L

FORM OF ASSIGNMENT OF HEDGE AGREEMENT

THIS ASSIGNMENT OF HEDGE AGREEMENT (this “Assignment”), made as of the day of , 201 , by MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership (the “Assignor”), to KEYBANK NATIONAL ASSOCIATION , a national banking association (“KeyBank”), as Agent for itself and each other lender (collectively, the “Lenders”) which is or may hereafter become a party to the Credit Agreement (as hereinafter defined) (KeyBank, in its capacity as Agent, is hereinafter referred to as “Agent”).

W I T N E S S E T H:

WHEREAS, Assignor, KeyBank, individually and as agent, and the other lenders which are now or hereafter a party thereto have entered into that certain First Amended and Restated Credit Agreement dated as of July 30, 2015 (as the same may be varied, extended, supplemented, consolidated, amended, replaced, increased, renewed or modified or restated, the “Credit Agreement”), pursuant to which the Lenders have agreed to provide to Assignor a revolving credit loan facility as provided in the Credit Agreement; and

WHEREAS , the Agent and the Lenders have required, as a condition to entering into the Credit Agreement, that Assignor execute this Assignment in order to secure the prompt and complete payment, as and when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all indebtedness, liabilities, duties, responsibilities and obligations, whether such indebtedness, liabilities, duties, responsibilities and obligations are now existing or are hereafter created or arising, under the Credit Agreement, the Notes and/or the other Loan Documents, including, without limitation, the payment, observance and performance of, among other things, (a) the obligations of Assignor arising from this Assignment and the other Loan Documents to which it is a party, (b) all other Obligations (including, in the case of each of clauses (a) and (b), any interest, fees and other charges in respect of the Credit Agreement and the other Loan Documents that would accrue but for the filing of a petition initiating any bankruptcy, insolvency, receivership or other similar case or proceeding under federal or state law, whether or not such interest, fees and other charges accrue or are recoverable against Assignor after the filing of such petition for purposes of the Bankruptcy Code or are an allowed claim in such proceeding), and (c) the Hedge Obligations (but excluding any Excluded Hedge Obligations), plus reasonable attorneys’ fees and expenses if the obligations represented under this Assignment, the Credit Agreement and the other Loan Documents are collected by law, through an attorney-at-law, or under advice therefrom (all such indebtedness, liabilities, duties, responsibilities and obligations being hereinafter referred to as the “Secured Obligations”);

NOW, THEREFORE , for and in consideration of the sum of Ten and No/100 Dollars ($10.00), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby covenant and agree as follows:

1. Definitions . Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Credit Agreement. In addition, the following terms shall have the following meanings:

Collateral . See Paragraph 2 hereof.

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Counterparty . Individually, any Person other than Assignor that is a party to the Hedge Agreement, and collectively all of such Persons.

Event of Default . See Paragraph 7 hereof.

Hedge Agreement . The [ISDA Master Agreement] dated as of , 201 between Assignor and , the Schedule attached thereto and the confirmation of interest rate swap, dated on or near the date thereof, from to Assignor.

Secured Obligations . See the Recitals.

2. Grant of Security Interest . As security for the Secured Obligations, Assignor does hereby transfer, assign, pledge, convey and grant to Agent, and does hereby grant a security interest to Agent in, all of Assignor’s right, title and interest in and to the following:

(a) All right, title, interest, claims or rights of Assignor now or hereafter in or to the Hedge Agreement; and

(b) Any and all profits, proceeds, accounts, income, distributions and payments of any kind or nature whatsoever, in each case now or hereafter distributable or payable to Assignor pursuant to or by reason of the Hedge Agreement, and all claims, choses in action, or things in action or rights as a creditor now or hereafter arising against Counterparty; and

(c) All accounts, contract rights, security entitlements, securities accounts, investment property and general intangibles now or hereafter evidencing, arising from or relating to any of the foregoing; and

(d) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and

(e) All right of Assignor to collect and enforce payments distributable or payable to Assignor pursuant to the terms of the Hedge Agreement; and

(f) All documents, writings, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or used in connection with any of the foregoing; and

(g) All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and

(h) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and

(i) All products and proceeds of any of the foregoing and all cash, security or other property distributed on account of, or in exchange or substitution of, any of the foregoing.

(j) All of the foregoing described in this Paragraph 2 are hereinafter referred to collectively as the “Collateral.”

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3. Obligations Secured . This Assignment is made by Assignor and the security interest in the Collateral is granted by Assignor to secure the payment and performance by Assignor of the Secured Obligations.

4. Collection of Collateral .

(a) It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Collateral and that this Assignment constitutes a present, absolute and current assignment of all the Collateral and is effective upon the execution and delivery hereof. Payments under or with respect to the Collateral shall be made as follows:

(i) Assignor shall not have any right to receive any Collateral, and all such payments shall be delivered directly by the Counterparty to Agent for application by Agent in satisfaction of the Secured Obligations in accordance with the Loan Documents.

(ii) If Assignor shall receive any Collateral, Assignor shall hold all such payments in trust for Agent, will not commingle such payments with other funds of Assignor, and will immediately pay and deliver in kind, all such payments directly to Agent (with such endorsements and assignments as may be necessary to transfer title to Agent) for application by Agent in satisfaction of the Secured Obligations in accordance with the Loan Documents.

(iii) Assignor hereby agrees for the benefit of Counterparty that all payments actually received by Agent hereunder or pursuant hereto shall be deemed payments to Assignor by Counterparty. Agent shall apply any and all such payments actually received by Agent in satisfaction of the Secured Obligations in accordance with the Loan Documents.

(iv) In furtherance of the foregoing, Assignor does hereby notify and direct Counterparty that all payments under or with respect to the Collateral shall be made directly to Agent at the address of Agent set forth in the Credit Agreement.

(b) Effective only upon the occurrence and during the continuance of an Event of Default, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact, which appointment is coupled with an interest and is irrevocable, either in the name of Agent, or in the name of Assignor, at Assignor’s sole cost and expense, and to take any or all of the following actions:

(i) to ask, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all Collateral and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing and taking any actions on behalf of Assignor which are otherwise required of Assignor under the terms of any agreement as conditions precedent to the payment of the Collateral, and the right and power to receive, endorse, assign and deliver, in the name of Assignor, any checks, notes, drafts, instruments or other evidences of payment received in payment of or on account of all or any portion of the Collateral, and Assignor hereby waives presentment, demand, protest and notice of demand, protest and non-payment of any instrument so endorsed; and

(ii) to institute one or more actions against Counterparty in connection with the collection of the Collateral, to prosecute to judgment, settle or dismiss any such actions,

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and to make any compromise or settlement deemed desirable, in Agent’s sole and absolute discretion, with respect to such Collateral, to extend the time of payment, arrange for payment in installments or otherwise modify the terms of the Hedge Agreement or release Counterparty from its obligations to make such payments, without incurring responsibility to, or affecting any liability of, Assignor under the Hedge Agreement;

it being specifically understood and agreed, however, that Agent shall not be obligated in any manner whatsoever to give any notices of default (except as may be specifically required herein or in the Credit Agreement) or to exercise any such power or authority or be in any way responsible for the preservation, maintenance, collection of or realizing upon the Collateral, or any portion thereof, or any of Assignor’s rights therein. The foregoing appointment is irrevocable and continuing and any such rights, powers and privileges shall be exclusive in Agent, its successors and assigns until this Assignment terminates as provided in Paragraph 13, below.

(c) Notwithstanding anything contained in this Paragraph 4 to the contrary, provided no Event of Default has occurred and is continuing or would occur as a result thereof, Assignor shall have a license (revocable upon the occurrence of and during the continuance of an Event of Default) to receive and retain the Collateral attributable to payments made to Assignor by Counterparty except as a result of a default, event of default, termination event or similar occurrence under the Hedge Agreement.

5. Warranties and Covenants . Assignor does hereby warrant and represent to, and covenants and agrees with, Agent as follows:

(a) Power and Authority . Assignor has, and shall maintain throughout the term of this Assignment, all necessary power, authority and legal right to execute and deliver this Assignment, to own and grant a security interest in the Collateral, to assign to Agent the security interest granted hereby.

(b) Performance . All duties, obligations and responsibilities required to be performed by Assignor as of the date hereof under the Hedge Agreement have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under the Hedge Agreement.

(c) Hedge Agreement . Except for the Loan Documents, Assignor is not a party to, nor is Assignor bound by or subject to, any indenture, contract or other agreement which purports to prohibit, restrict, limit, or control the transfer or pledge of the Collateral. The Hedge Agreement has been duly authorized, executed and delivered by Assignor and is in full force and effect. Assignor has paid to Counterparty all fees or other amounts at any time payable with respect to the Hedge Agreement. A true, correct and complete copy of the Hedge Agreement, together with any amendments thereto, is attached hereto as Exhibit “A” and made a part hereof, and there are no other agreements or understandings which modify, alter or supplement the terms thereof. So long as this Assignment remains in effect, Assignor shall not modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender, termination of, the Hedge Agreement, or cause or permit the occurrence of a “Termination Event” (as such term is defined in the Hedge Agreement), without the prior written consent of Agent.

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(d) Title . Assignor is and shall remain the sole, lawful, beneficial and record owner of the Collateral, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges or rights of third parties and rights of set-off or recoupment whatsoever (other than those in favor of Agent hereunder), and Assignor has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent, in accordance with the terms and provisions of this Assignment. No Person has any option, right of first refusal, right of first offer or other right to acquire all or any portion of the Collateral.

(e) Priority . This Assignment, together with the UCC financing statements, creates a valid and binding first priority security interest in the Collateral securing the payment and performance of the Secured Obligations, and all filings and other actions necessary to perfect and protect such security interests have been duly made and taken. Assignor has not performed, and Assignor will not perform or, to the extent Assignor has the legal right, whether by contract, at law or in equity, to prevent such action, permit any other Person to perform, any acts which might prevent Agent from enforcing any of the terms and conditions of this Assignment or which would limit Agent in any such enforcement.

(f) Note . All original notes and other documents or instruments (if any) evidencing, constituting, guaranteeing or securing any of the Collateral or any right to receive the Collateral have been endorsed to and delivered to Agent.

(g) Perfection of Security Interest .

(i) (1) Assignor’s correct legal name (including, without limitation, punctuation and spacing) indicated on the public record of Assignor’s jurisdiction, mailing address, identity or corporate structure, principal residence or chief executive office, jurisdiction of organization, organizational identification number, and federal tax identification number, are as set forth on Schedule 1 attached hereto and by this reference made a part hereof, (2) Assignor has been using or operating under said name and identity or corporate structure without change for the time period set forth on Schedule 1 attached hereto and (3) in order to perfect the pledge and security interests granted herein against Assignor, a UCC Financing Statement must be filed with the Secretary of State of the State of Delaware. Assignor covenants and agrees that Assignor shall not change any of the matters addressed by clauses (1), (2) and (3) of this paragraph unless it has given Agent thirty (30) days prior written notice of any such change and caused to be filed at the request of Agent or authorized the Agent or Agent’s counsel to file such additional financing statements or other instruments to be filed in such jurisdictions as Agent may deem necessary or advisable in its sole discretion to prevent any filed financing statement from becoming misleading or losing its perfected status.

(ii) Assignor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements, documents, endorsements, assurances and instruments as Agent may at any time reasonably request in connection with the administration or enforcement of this Assignment or related to the Collateral or any part thereof or in order to better assure and confirm unto Agent its rights, powers and remedies hereunder. Without limiting the generality of the foregoing, at any time and from time to time, Assignor shall, at the reasonable request of Agent, make, execute, acknowledge, and deliver or authorize the execution and delivery of and where appropriate, cause to be recorded and/or filed and from time to time thereafter to be re-recorded and/or refiled at such time in such offices and places as shall be deemed desirable by Agent all such other and further assignments, security agreements, financing statements, continuation statements, endorsements, assurances, certificates and other

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documents as Agent from time to time may reasonably require for the better assuring, conveying, assigning and confirming to Agent the Collateral and the rights hereby conveyed or assigned or intended now or hereafter to be conveyed or assigned, and for carrying out the intention or facilitating the performance of the terms of this Assignment. Upon any failure of Assignor to do so, Agent may make, execute, record, file, rerecord and/or refile, acknowledge and deliver any and all such further assignments, security agreements, financing statements, continuation statements, endorsements, assurances, instruments, certificates and documents for and in the name of Assignor, and Assignor hereby irrevocably appoints Agent the agent and attorney-in-fact coupled with an interest with full power of substitutions of Assignor so to do. This power is coupled with an interest and is irrevocable. Without limiting the generality of the foregoing, Assignor will obtain such acknowledgments, waivers of lien, estoppel certificates or subordination agreements as Agent may require to insure the priority of its security interest in the Collateral.

(iii) Schedule 1 correctly sets forth all names and tradenames that Assignor has used within the last five years, and also correctly sets forth the locations of all of the chief executive offices of Assignor over the last five years.

(iv) Assignor shall, at any time and from time to time, take such steps as Agent may reasonably request for Agent (1) to obtain an acknowledgment, in form and substance reasonably satisfactory to Agent, of any bailee having possession of any of the Collateral, stating that the bailee holds possession of such Collateral on behalf of Agent, (2) to obtain “control” of any investment property, deposit accounts, letter-of-credit rights, or electronic chattel paper (as such terms are defined by the Uniform Commercial Code as enacted in the State of New York (the “UCC”) with corresponding provisions thereof defining what constitutes “control” for such items of collateral) in each case in which such items are included as Collateral, with any agreements establishing control to be in form and substance reasonably satisfactory to Agent, and (3) otherwise to insure the continued perfection and priority of the Agent’s security interest in any of the Collateral and of the preservation of its rights therein. If Assignor shall at any time acquire a “commercial tort claim” (as such term is defined in the UCC) with respect to the Collateral or any portion thereof, Assignor shall promptly notify Agent thereof in writing, providing a reasonable description and summary thereof, and shall execute a supplement to this Assignment in form and substance acceptable to Agent granting a security interest in such commercial tort claim to Agent.

(v) Assignor hereby authorizes Agent, its counsel or its representative, at any time and from time to time, at Assignor’s expense, to file financing statements, amendments and continuations that describe or relate to the Collateral or any portion thereof in such jurisdictions as Agent may deem necessary or desirable in order to perfect the security interests granted by Assignor under this Assignment, and such financing statements may contain, among other items as Agent may deem advisable to include therein, the federal tax identification number and organizational number of Assignor.

(h) No Suits or Proceedings . There are no material actions, suits or proceedings pending or, to the knowledge of Assignor, threatened against or affecting the Collateral, or involving the validity or enforceability of this Assignment or the priority of the lien thereof, at law or in equity, or before any governmental or administrative agency.

6. General Covenants . Assignor covenants and agrees that, so long as this Assignment is continuing:

(a) No Further Encumbrance . Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, directly, indirectly or by operation of law, sell, transfer, assign, dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of the Collateral.

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(b) Defense of Collateral . Assignor shall at all times defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to Agent’s interest in the Collateral as granted hereunder.

(c) Performance of Duties . Assignor shall perform all of its duties, responsibilities and obligations under the Hedge Agreement and with respect to the Collateral shall diligently and in good faith protect the value of the Collateral.

(d) Payment of Taxes . Assignor shall pay all taxes and other charges against the Collateral, shall not use the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Collateral and shall not suffer to exist any levy, seizure or attachment of the Collateral.

(e) Enforcement of Hedge Agreement . Assignor, promptly upon the request of Agent, shall promptly take such actions as Agent may reasonably require to enforce or cause to be enforced the terms of the Hedge Agreement or any other contract, agreement or instrument included in, giving rise to, creating, establishing, evidencing or relating to the Collateral or to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder.

(f) [ Intentionally Omitted ].

(g) Location of Records . Except for those items of the Collateral that are delivered to Agent as provided herein, all original records of Assignor relative to the Collateral are and will be kept at the office of Assignor located in Davidson County, Nashville, Tennessee. Assignor shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in the name of Assignor and any proposed change in the location of the Collateral or of such records, and Assignor will not, without the prior written consent of Agent, move the Collateral or such records to a location outside of Davidson County, Nashville, Tennessee, or keep duplicate records with respect to the Collateral at any address outside such county.

(h) Evidence of Indebtedness . If any amounts are due from Counterparty to Assignor, including, without limitation, any amounts in respect of Collateral payable to Assignor in the future and the obligation to pay or repay such amount is to be evidenced by a separate document or instrument, then as evidence of such obligations, Assignor shall (i) cause Counterparty to issue Assignor a promissory note bearing the legend attached hereto as Exhibit “B”, which note shall provide that all payments due under such promissory note are to be paid directly to Agent as required by, and applied as provided in, this Assignment or the Loan Documents until the Secured Obligations are paid in full or this Assignment is otherwise terminated as provided herein (and Agent may hold such sums as additional collateral for Secured Obligations not yet due and payable), or (ii) execute or cause to be executed such documents, instruments or agreements as Agent may reasonably require in order to ensure that such payments are to be paid directly to Agent as required by this Assignment. No other evidence of such obligations shall be executed by Counterparty to Assignor.

L-7

(i) Delivery of Notes . Assignor shall promptly deliver to Agent any note or other document or instrument entered into after the date hereof which evidences, constitutes, guarantees or secures any of the Collateral or any right to receive Collateral, which notes or other documents and instruments shall be accompanied by such endorsements or assignments as Agent may require to transfer title to Agent.

(j) Assignor Remains Liable . Anything herein to the contrary notwithstanding, (i)Assignor shall remain liable under the Hedge Agreement and all other contracts, agreements and instruments included in, giving rise to, creating, establishing, evidencing or relating to the Collateral to the extent set forth therein to perform all of its duties and obligations (including, without limitation, the making of any payment to Counterparty) to the same extent as if this Assignment had not been executed, (ii) the exercise by Agent of any of its rights hereunder shall not release Assignor from any of its duties or obligations under the Hedge Agreement, or any such contracts, agreements and instruments, and (iii) neither Agent nor any of the Lenders shall have any obligation or liability under the Hedge Agreement or any such contract, agreement or instrument by reason of this Assignment, and Agent shall not be obligated to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder.

(k) Notices of Default . So long as this Assignment shall remain in effect, Assignor shall, immediately upon receipt, forward to Agent duplicate copies of any and all notices of default or other events permitting the acceleration or early termination of the Hedge Agreement, or of any other failure by Assignor to perform any obligation under the Hedge Agreement.

7. Events of Default . An Event of Default shall exist hereunder upon the occurrence and continuance of any of the following:

(a) Assignor shall fail to duly and fully comply with any covenant, condition or agreement in Paragraphs 5(d), 6(a), 6(h) or 6(i) of this Assignment; or

(b) Assignor shall fail to, or Assignor shall fail to cause any other Person to, duly and fully comply with any other covenant, condition or agreement of this Assignment (other than those specified in this Paragraph 7 or any default excluded from any provision of a grace period or cure of defaults contained in any other of the Loan Documents), and such failure is not cured in the applicable time period provided in the Credit Agreement;

(d) The occurrence and continuance of an “Event of Default” under the Hedge Agreement or a “Termination Event” under the Hedge Agreement without the prior written consent of the Agent; or

(e) Any amendment to or termination of a financing statement with respect to the Collateral naming Assignor as a debtor and Agent as secured party, or any correction statement with respect thereto, is filed in any jurisdiction by, or such filing is caused by, or at the instance of, Assignor or is filed by, or such filing is caused by, or at the instance of, any principal, member, partner, shareholder or officer of Assignor.

L-8

8. Remedies .

(a) Upon the occurrence of any Event of Default, Agent may take any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under this Assignment and the Loan Documents, including, without limitation, the exercise of its rights and remedies with respect to any or all of the Collateral. The remedies of Agent shall include, without limitation, all rights and remedies specified in the Loan Documents and this Assignment, all remedies of Agent under applicable general or statutory law, and the remedies of a secured party under the UCC and regardless of whether the UCC has been enacted or enacted in that form in any other jurisdiction in which such right or remedy is asserted. In addition to such other remedies as may exist from time to time, whether by way of set off, banker’s lien, consensual security interest or otherwise, upon the occurrence of an Event of Default, Agent is authorized at any time and from time to time, without notice to or demand upon Assignor (any such notice or demand being expressly waived by Assignor) to charge any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by Agent to or for the credit of or the account of Assignor against any and all of the Secured Obligations, irrespective of whether or not Agent shall have made any demand for payment and although such Secured Obligations may be unmatured. Any notice required by law, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be reasonable and properly given if given in the manner prescribed for the giving of notice herein, and, in the case of any notice of disposition, if given at least ten (10) days prior to such disposition. Agent may require Assignor to assemble the Collateral and make it available to Agent at any place to be designated by Agent which is reasonably convenient to both parties. It is expressly understood and agreed that Agent shall be entitled to dispose of the Collateral at any public or private sale or sales, without recourse to judicial proceedings and without either demand, appraisement, advertisement or notice (except such notice as is otherwise required under this Assignment) of any kind, all of which are expressly waived, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Assignor’s right to receive the Collateral, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the Secured Obligations. To the extent the Collateral consists of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Assignor. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Assignor shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Secured Obligations or the Collateral are due, and for the purpose of realizing Agent’s rights therein, Agent may receive, open and dispose of mail addressed to Assignor and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or

L-9

storage of any form of Collateral on behalf and in the name of Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact either in the name of Agent or Assignor to (i) sign Assignor’s name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the UCC; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above, sign in Assignor’s name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said attorney-in-fact are hereby ratified and approved, and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Secured Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Secured Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Secured Obligations.

(b) If Assignor fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Assignor contained in this Assignment which Assignor shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys’ fees actually incurred (including reasonable attorneys’ fees incurred in any appeal) by Agent in connection therewith, shall be payable by Assignor within ten (10) days of written demand therefor and shall constitute a part of the Secured Obligations and, if not paid within such ten (10) days of written demand, shall bear interest at the Default Rate until paid.

(c) Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the reasonable judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary out-of-pocket expenses, employ counsel and pay reasonable attorney’s fees. Any such advances made or expenses incurred by Agent shall be deemed advanced under this Assignment, shall increase the indebtedness evidenced and secured hereby, shall be payable within ten (10) days of written demand therefor and, if not paid within such ten (10) days of written demand, shall bear interest at the Default Rate until paid.

(d) Notwithstanding anything in this Assignment or any other Loan Document to the contrary, any reference in this Assignment or any other Loan Document to “the continuance of a default” or “the continuance of an Event of Default” or any similar phrase shall not create or be deemed to create any right of Assignor or any other party to cure any default following the expiration of any applicable grace or notice and cure period.

9. Duties of Agent . The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.

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Agent’s duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. Agent shall have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any of the payments received by it.

10. Indemnification .

(a) It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon Agent or the Lenders pursuant to the Hedge Agreement, and that in accepting this Assignment, Agent and the Lenders neither assume nor agree to perform at any time whatsoever any obligation or duty of Assignor relating to the Collateral or under the Hedge Agreement, all of which obligations and duties shall be and remain with and upon Assignor.

(b) Assignor agrees to indemnify, defend and hold the Agent and the Lenders harmless from and against any and all claims, expenses, losses and liabilities growing out of or resulting from this Assignment (including, without limitation, enforcement of this Assignment) or acts taken or omitted to be taken by the Agent or the Lenders hereunder or in connection therewith, except claims, expenses, losses or liabilities resulting from the Agent’s or such Lender’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction after the expiration of all applicable appeal periods.

(c) Assignor, within ten (10) days of written demand shall pay to the Agent the amount of any and all reasonable out-of-pocket expenses, including, without limitation, the reasonable fees and disbursements of counsel actually incurred (including those incurred in any appeal), and of any experts and agents, which the Agent may incur in connection with (i) the administration of this Assignment, (ii) the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder, or (iv) the failure by Assignor to perform or observe any of the provisions hereof.

11. Security Interest Absolute . All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of:

(a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto;

(b) Any change in the time (including the extension of the maturity date of the Note), manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other amendment or waiver of or any consent to any departure from this Assignment or the Loan Documents;

(c) Any exchange, release or nonperfection of any other collateral for the Secured Obligations, or any release or amendment or waiver of or consent to departure from the Loan Documents with respect to all or any part of the Secured Obligations; or

(d) Any other circumstance (other than payment of the Secured Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Assignor or any third party for the Secured Obligations or any part thereof.

L-11

12. Amendments and Waivers . No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent and Assignor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent’s rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. To the fullest extent permitted by law, Assignor hereby waives to the extent permitted by law all rights which Assignor has or may have under and by virtue of the UCC, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto, providing any right of Assignor to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Assignor hereby waives and renounces for itself, its heirs, successors and assigns, presentment, demand, protest, advertisement or notice of any kind (except for any notice required by law or the Loan Documents) and all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Assignment and the collection of any of the Secured Obligations.

13. Continuing Security Interest; Release of Collateral . This Assignment shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full in cash of the Secured Obligations and the termination of the obligation of the Lenders to provide further advances under the Credit Agreement, (b) be binding upon Assignor and its permitted successors and assigns, and (c) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and the Lenders and their respective successors, transferees and assigns. Upon the indefeasible payment in full in cash of the Secured Obligations and the termination of the obligation of the Lenders to provide further advances under the Credit Agreement and issue Letters of Credit, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Assignor. Upon any such termination, Agent will at Assignor’s expense execute and deliver to Assignor such documents as Assignor shall reasonably request to evidence such termination.

14. Modifications, Etc. Assignor hereby consents and agrees that Agent may at any time and from time to time, without notice to or further consent from Assignor, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Secured Obligations; substitute for any Collateral so held by it, other collateral of like kind; agree to modification of the terms of the Loan Documents; extend or renew the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents for any period or to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor, endorser or any other Person liable with respect to the Secured Obligations; or take or fail to take any action of any type whatsoever; and no such action which Agent shall take or fail to take in connection with the Loan Documents, or any of them, or any

L-12

security for the payment of the Secured Obligations or for the performance of any obligations or undertakings of Assignor, nor any course of dealing with Assignor or any other person, shall release Assignor’s obligations hereunder, affect this Assignment in any way or afford Assignor any recourse against Agent.

15. [Intentionally omitted].

16. Governing Law; Terms . THIS AGREEMENT SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

17. Notices . Each notice, demand, election or request provided for or permitted to be given pursuant to this Assignment shall be deemed to have been properly given or served if given to Assignor in the manner provided in the Credit Agreement.

18. No Unwritten Agreements . THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

19. Counterparts . This Assignment and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Assignment it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

20. Miscellaneous . Time is of the essence of this Assignment. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. References to a particular paragraph refer to that paragraph of this Assignment unless otherwise indicated. If, for any circumstances whatsoever, fulfillment of any provision of this Assignment shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Assignment, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Assignment shall remain operative and in full force and effect.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF , Assignor and Agent have executed this Assignment under seal on the date first above written.


AGENT :

KEYBANK NATIONAL ASSOCIATION , a national banking association, as Agent

By:
Name:
Title:
		(SEAL)

[Signatures Continued On Next Page]

L-14


ASSIGNOR :

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership

By:
Name:
Title:

L-15

EXHIBIT “A”

HEDGE AGREEMENT

L-A-1

EXHIBIT “B”

PROMISSORY NOTE LEGEND

“THIS NOTE HAS BEEN PLEDGED BY MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP, A DELAWARE LIMITED PARTNERSHIP (“ASSIGNOR”), TO KEYBANK NATIONAL ASSOCIATION, AS AGENT (“AGENT”) PURSUANT TO AN ASSIGNMENT OF HEDGE AGREEMENT DATED AS OF , 201 (AS THE SAME MAY BE MODIFIED, AMENDED OR RESTATED FROM TIME TO TIME, THE “ASSIGNMENT”). ALL AMOUNTS PAYABLE TO ASSIGNOR PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO AGENT AS REQUIRED BY THE ASSIGNMENT.”

L-B-1

SCHEDULE 1

DESCRIPTION OF ASSIGNOR

MEDEQUITIES REALTY OPERATING PARTNERSHIP, LP, a Delaware limited partnership. Debtor has been using or operating under said name and identity or corporate structure without change since April 23, 2014.

Names and Tradenames used within last five years: None.

Location of all chief executive offices over last five years: 3102 West End Avenue, Suite 400, Nashville, TN 37203 and 3100 West End Avenue, Suite 1000, Nashville, TN 37203

Organizational Number: 5507269

Federal Tax Identification Number: 47-1208487

L-S-1


§1.	DEFINITIONS AND RULES OF INTERPRETATION		1
	§1.1	Definitions	1
	§1.2	Rules of Interpretation	41
§2.	THE CREDIT FACILITY		42
	§2.1	Revolving Credit Loans	42
	§2.2	[Intentionally Omitted.]	44
	§2.3	Facility Unused Fee	44
	§2.4	Reduction and Termination of the Commitments	44
	§2.5	Swing Loan Commitment	45
	§2.6	Interest on Loans	47
	§2.7	Requests for Revolving Credit Loans	48
	§2.8	Funds for Loans	48
	§2.9	Use of Proceeds	49
	§2.10	Letters of Credit	49
	§2.11	Increase in Total Commitment	52
	§2.12	Extension of Maturity Date	55
	§2.13	Defaulting Lenders	56
§3.	REPAYMENT OF THE LOANS		59
	§3.1	Stated Maturity	59
	§3.2	Mandatory Prepayments	60
	§3.3	Optional Prepayments	60
	§3.4	Partial Prepayments	60
	§3.5	Effect of Prepayments	60
§4.	CERTAIN GENERAL PROVISIONS		61
	§4.1	Conversion Options	61
	§4.2	Fees	61
	§4.3	Funds for Payments	62
	§4.4	Computations	66
	§4.5	Suspension of LIBOR Rate Loans	66
	§4.6	Illegality	67
	§4.7	Additional Interest	67
	§4.8	Additional Costs, Etc.	67
	§4.9	Capital Adequacy	69
	§4.10	Breakage Costs	69
	§4.11	Default Interest; Late Charge	69
	§4.12	Certificate	70
	§4.13	Limitation on Interest	70
	§4.14	Certain Provisions Relating to Increased Costs	70
§5.	COLLATERAL SECURITY; GUARANTORS		71
	§5.1	Collateral	71
	§5.2	Appraisal	71
	§5.3	Addition of Borrowing Base Assets	72
	§5.4	Release of Borrowing Base Assets	73
	§5.5	Additional Guarantors	74
	§5.6	Release of Certain Guarantors	74
	§5.7	Additional Collateral	75
	§5.8	Release of Collateral	75

-i-


§6.	REPRESENTATIONS AND WARRANTIES		76
	§6.1	Corporate Authority, Etc.	76
	§6.2	Governmental Approvals	77
	§6.3	Title to Properties	77
	§6.4	Financial Statements	77
	§6.5	No Material Changes	77
	§6.6	Franchises, Patents, Copyrights, Etc.	78
	§6.7	Litigation	78
	§6.8	No Material Adverse Contracts, Etc.	78
	§6.9	Compliance with Other Instruments, Laws, Etc.	79
	§6.10	Tax Status	79
	§6.11	No Event of Default	79
	§6.12	Investment Company Act	79
	§6.13	Setoff, Etc.	79
	§6.14	Certain Transactions	79
	§6.15	Employee Benefit Plans	80
	§6.16	Disclosure	80
	§6.17	Trade Name; Place of Business	81
	§6.18	Regulations T, U and X	81
	§6.19	Environmental Compliance	81
	§6.20	Subsidiaries; Organizational Structure	83
	§6.21	Leases	83
	§6.22	Property	83
	§6.23	Brokers	85
	§6.24	Other Debt	85
	§6.25	Solvency	85
	§6.26	No Bankruptcy Filing	85
	§6.27	No Fraudulent Intent	85
	§6.28	Transaction in Best Interests of the Borrower and Guarantors; Consideration	85
	§6.29	Contribution Agreement	86
	§6.30	Representations and Warranties of Guarantors	86
	§6.31	OFAC	86
	§6.32	Healthcare Representations	86
	§6.33	Ground Lease	88
§7.	AFFIRMATIVE COVENANTS		89
	§7.1	Punctual Payment	89
	§7.2	Maintenance of Office	89
	§7.3	Records and Accounts	89
	§7.4	Financial Statements, Certificates and Information	89
	§7.5	Notices	92
	§7.6	Existence; Maintenance of Properties	94
	§7.7	Insurance; Condemnation	94
	§7.8	Taxes; Liens	99
	§7.9	Inspection of Properties and Books	100

L-B-1


	§7.10	Compliance with Laws, Contracts, Licenses, and Permits	100
	§7.11	Further Assurances	101
	§7.12	Management	101
	§7.13	Leases of the Property	101
	§7.14	Business Operations	102
	§7.15	Healthcare Laws and Covenants	102
	§7.16	Registered Servicemark	104
	§7.17	Ownership of Real Estate	104
	§7.18	Distributions of Income to the Borrower	104
	§7.19	Plan Assets	105
	§7.20	Borrowing Base Assets	105
	§7.21	Operators’ Agreements	107
	§7.22	IPO Event	108
	§7.23	Assignment of Interest Rate Protection	108
	§7.24	Sanctions Laws and Regulations	108
§8.	NEGATIVE COVENANTS		109
	§8.1	Restrictions on Indebtedness	109
	§8.2	Restrictions on Liens, Etc.	110
	§8.3	Restrictions on Investments	112
	§8.4	Merger, Consolidation	113
	§8.5	Sale and Leaseback	114
	§8.6	Compliance with Environmental Laws	114
	§8.7	Distributions	115
	§8.8	Asset Sales	117
	§8.9	Restriction on Prepayment of Indebtedness	117
	§8.10	Zoning and Contract Changes and Compliance	117
	§8.11	Derivatives Contracts	117
	§8.12	Transactions with Affiliates	117
	§8.13	Equity Pledges	118
	§8.14	Management Fees	118
	§8.15	Future Funding Obligation	118
§9.	FINANCIAL COVENANTS		118
	§9.1	Borrowing Base Availability	118
	§9.2	Consolidated Total Indebtedness to Gross Asset Value	118
	§9.3	Adjusted Consolidated EBITDA to Consolidated Fixed Charges	118
	§9.4	Minimum Consolidated Tangible Net Worth	119
	§9.5	Liquidity	119
	§9.6	Aggregate Occupancy Rate	119
	§9.7	Remaining Lease Term	119
	§9.8	Minimum Actual Debt Service Coverage Ratio	119
	§9.9	Minimum Property Requirement	119
	§9.10	Concentration Limits	119
	§9.11	Debt Yield	120
§10.	CLOSING CONDITIONS		120
	§10.1	Loan Documents	120
	§10.2	Certified Copies of Organizational Documents	120

L-B-1


	§10.3	Resolutions	120
	§10.4	Incumbency Certificate; Authorized Signers	121
	§10.5	Opinion of Counsel	121
	§10.6	Payment of Fees	121
	§10.7	Performance; No Default	121
	§10.8	Representations and Warranties	121
	§10.9	Proceedings and Documents	121
	§10.10	Eligible Real Estate Qualification Documents	121
	§10.11	Compliance Certificate and Borrowing Base Certificate	121
	§10.12	Appraised Values	121
	§10.13	Consents	122
	§10.14	Contribution Agreement	122
	§10.15	Subordination of Management Agreement	122
	§10.16	Good Standing	122
	§10.17	Insurance	122
	§10.18	Other	122
§11.	CONDITIONS TO ALL BORROWINGS		122
	§11.1	Prior Conditions Satisfied	122
	§11.2	Representations True; No Default	122
	§11.3	Borrowing Documents	122
§12.	EVENTS OF DEFAULT; ACCELERATION; ETC.		123
	§12.1	Events of Default and Acceleration	123
	§12.2	Certain Cure Periods; Limitation of Cure Periods	126
	§12.3	Termination of Commitments	127
	§12.4	Remedies	127
	§12.5	Distribution of Collateral Proceeds	128
	§12.6	Collateral Account	128
§13.	SETOFF		129
§14.	THE AGENT		130
	§14.1	Authorization	130
	§14.2	Employees and Agents	130
	§14.3	No Liability	130
	§14.4	No Representations	131
	§14.5	Payments	131
	§14.6	Holders of Notes	132
	§14.7	Indemnity	132
	§14.8	The Agent as Lender	132
	§14.9	Resignation	132
	§14.10	Duties in the Case of Enforcement	133
	§14.11	Request for Agent Action	134
	§14.12	Bankruptcy	134
	§14.13	Reliance by the Agent	134
	§14.14	Approvals	134
	§14.15	The Borrower Not Beneficiary	135
	§14.16	Reliance on Hedge Provider	135
§15.	EXPENSES		135

L-B-1


§16.	INDEMNIFICATION		136
§17.	SURVIVAL OF COVENANTS, ETC.		137
§18.	ASSIGNMENT AND PARTICIPATION		137
	§18.1	Conditions to Assignment by Lenders	137
	§18.2	Register	138
	§18.3	New Notes	139
	§18.4	Participations	139
	§18.5	Pledge by Lender	140
	§18.6	No Assignment by the Borrower	140
	§18.7	Disclosure	140
	§18.8	Mandatory Assignment	141
	§18.9	Amendments to Loan Documents	141
	§18.10	Titled Agents	141
§19.	NOTICES		142
§20.	RELATIONSHIP		143
§21.	GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE		143
§22.	HEADINGS		144
§23.	COUNTERPARTS		144
§24.	ENTIRE AGREEMENT, ETC.		144
§25.	WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS		145
§26.	DEALINGS WITH THE BORROWER		145
§27.	CONSENTS, AMENDMENTS, WAIVERS, ETC.		145
§28.	SEVERABILITY		146
§29.	TIME OF THE ESSENCE		147
§30.	NO UNWRITTEN AGREEMENTS		147
§31.	REPLACEMENT NOTES		147
§32.	NO THIRD PARTIES BENEFITED		147
§33.	PATRIOT ACT		147
§34.	WAIVER OF CLAIMS		148

L-B-1

Exhibit 10.25

BlueMountain Capital Management, LLC

280 Park Avenue, 12 ^th Floor East

New York, NY 10017

July 25, 2014

MedEquities Realty Trust, Inc.

201 Seaboard Lane, Suite 100

Franklin, Tennessee 37067

BlueMountain Rights Agreement

Ladies and Gentlemen:

Reference is made to that certain preliminary offering memorandum, dated July 1, 2014, as supplemented by the preliminary offering memorandum supplement dated the date hereof (the “ OM ”), of MedEquities Realty Trust, Inc. (the “ Company ”) describing an offering by the Company of its common stock, par value $0.01 per share, pursuant to various exemptions from registration under the Securities Act of 1933, as amended (the “Offering”). Capitalized terms used herein but not herein defined shall have the meanings given to such terms in the OM.

If BlueMountain acquires at least 20% of the shares of the Company’s common stock in the Offering, BlueMountain will be granted representation on the Company’s Board of Directors (the “Board”) and each of the Company’s risk committee (the “ Risk Committee ”) and investment committee (the “ Investment Committee ”), and such other rights, each as set forth below.

In connection therewith, the Company and BlueMountain hereby agree as follows:

Board of Directors

So long as BlueMountain maintains at least one designee on the Board, the number of members constituting the Board shall be no more than seven (7), subject to increase or decrease by the Board from time-to-time, in accordance with the Company’s charter and bylaws, provided that any such increase or decrease shall require the approval of at least one BlueMountain board designee.

Upon the closing of the Offering, the Company shall promptly cause two (2) persons (in the aggregate) designated by BlueMountain to be appointed to the Board. Following the closing of the Offering, for any meeting (or consent in lieu of a meeting) of the Company’s stockholders for the election of members of the Board, (i) so long as BlueMountain, together with its affiliates, as of the date of the mailing of the Company’s definitive proxy statement in connection with such meeting (the “ Mailing Date ”) (A) continues to own 75% or more of the number of shares purchased by it in the Offering or (B) beneficially owns at least 10% of the outstanding common stock of the Company, the Company shall include 2 persons designated by BlueMountain as members of the slate of Board nominees proposed by the Board for election by the Company’s stockholders and, subject to the Board’s duties under Maryland

law, shall recommend that the Company’s stockholders vote in favor of the election of both such nominees, (ii) so long as BlueMountain, together with its affiliates, as of the Mailing Date (X) continues to own 50% or more of the number of shares purchased by it in the Offering or (Y) beneficially owns at least 5% of the outstanding common stock of the Company, the Company shall include one person designated by BlueMountain as a member of the slate of Board nominees proposed by the Board for election by the Company’s stockholders and, subject to the Board’s duties under Maryland law, shall recommend that the Company’s stockholders vote in favor of the election of such nominee, and (iii) if BlueMountain, together with its affiliates, as of the Mailing Date (I) has sold more than 50% of its initial investment in the Company and (II) beneficially owns less than 5% of the outstanding common stock of the Company, the Company shall not be required to include any persons designated by BlueMountain as members of the slate of Board nominees.

Investment Committee

The Investment Committee will be comprised of five (5) members.

For so long as BlueMountain is entitled to two (2) nominees to the Board as provided above, two (2) of the members of the Investment Committee will be appointed by BlueMountain. So long as BlueMountain is entitled to one (1) nominee to the Board as provided above, one (1) member of the Investment Committee will be appointed by BlueMountain.

For so long as BlueMountain maintains a designee on the Investment Committee:

Other than with respect to the Kentfield Rehab & Specialty Hospital, LTACH, Mountain’s Edge Hospital, Magnolia Place of Spartanburg SNF described in the OM as part of the Company’s initial portfolio, any proposed acquisition by the Company shall be presented to the Investment Committee for approval (in addition to any approval that may be required by the Board of Directors of the Company); provided, that, BlueMountain shall complete its due diligence of any acquisitions described in the OM prior to the closing of the Offering.

Any acquisition for aggregate consideration (including any assumed indebtedness) of less than 5% of the Company’s assets on a pro forma basis giving effect to any such acquisition shall require the approval of a majority of the members of the Investment Committee.

Any acquisition for aggregate consideration (including any assumed indebtedness) of greater than 5% of the Company’s assets on a pro forma basis giving effect to any such acquisition shall require the approval of four (4) members of the Investment Committee.

Any acquisition for aggregate consideration (including any assumed indebtedness) of greater than 15% of the Company’s assets on a pro forma basis giving effect to any such acquisition shall require the unanimous approval of the Investment Committee.

Risk Committee

The Company and BlueMountain shall agree on the number of members comprising the Risk Committee.

The Risk Committee shall be chaired by the BlueMountain designee.

The Risk Committee shall be responsible for setting and reinforcing underwriting standards, surveillance policies and exposure limits (geography, operator, asset type, etc.) across acquisitions and exposures in the portfolio and also for reviewing and optimizing ALM strategy.

The Company agrees to incorporate the understandings set forth herein into any definitive policies governing the Investment Committee and Risk Committee.

Equity Offering Right

In connection with a potential initial public offering of the Company’s common stock pursuant to which the Company issues and sells, pursuant to a registration statement filed with the Securities and Exchange Commission (an “IPO”), BlueMountain shall have the option and right (but not the obligation) to purchase in a concurrent private placement in the aggregate up to BlueMountain’s Pro Rata Portion of such IPO at the same price and the same terms and conditions as offered to other investors in the IPO, without the payment by the Company of any underwriting discounts or commissions.

“ Pro Rata Portion ” means, with respect to BlueMountain at a given time with respect to the IPO, a number of shares of common stock equal to the product of (a) the number of shares of common stock proposed to be issued, sold or placed in the IPO, multiplied by (b) a fraction, the numerator of which is the aggregate number of shares of common stock beneficially owned by BlueMountain immediately prior to the IPO, and the denominator of which is the aggregate number of shares of outstanding common stock immediately prior to the IPO.

Equity Issuances

For so long as BlueMountain beneficially owns greater than 10% of the outstanding common stock of the Company, without the approval of at least one BlueMountain board designee, the Company shall not undertake any offering of common stock (other than issuances pursuant to the Company’s equity compensation plans) at a gross price per share or deemed price per share (i.e. conversion, exchange or exercise price) of common stock less than the lower of (i) the then current market price per share if the Company’s common stock is then listed for trading on a national securities exchange or (ii) $15.00 per share, in each case as may be adjusted for any stock splits, stock dividends or other similar recapitalizations.

THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.

This agreement may be executed in any number of counterparts, each of which when executed will be an original and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of a signature page of this agreement by facsimile or other electronic transmission will be as effective as delivery of a manually executed counterpart hereof.


Very truly yours,

BLUEMOUNTAIN CAPITAL MANAGEMENT, LLC

By:	/s/ Kyle Brady
	Name:	Kyle Brady
	Title:	Assistant General Counsel & Vice President

ACCEPTED AND AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE:


MEDEQUITIES REALTY TRUST, INC.

By:	/s/ William Harlan
	Name:	William Harlan
	Title:	President

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

MedEquities Realty Trust, Inc.:

We consent to the use of our reports included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

Atlanta, Georgia

August 20, 2015