UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

MARYLAND		20-0191742
(State or other jurisdiction		(I. R. S. Employer
of incorporation or organization)		Identification No.)
1000 URBAN CENTER DRIVE, SUITE 501		35242
BIRMINGHAM, AL (Address of principal executive offices)		(Zip Code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (205) 969-3755

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

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 filero		Accelerated filerþ		Non-accelerated filero		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

As of May 8, 2008, the registrant had 66,364,324 shares of common stock, par value $.001, outstanding.

 

 

MEDICAL PROPERTIES TRUST, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008

Table of Contents

		Page
PART I — FINANCIAL INFORMATION
Item 1 Financial Statements			3
Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007			3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2008 and 2007			4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007			5
Notes to Condensed Consolidated Financial Statements			6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 3 Quantitative and Qualitative Disclosures about Market Risk			17
Item 4 Controls and Procedures			18
PART II — OTHER INFORMATION
Item 1 Legal Proceedings			19
Item 1A Risk Factors			19
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			19
Item 3 Defaults Upon Senior Securities			19
Item 4 Submission of Matters to a Vote of Security Holders			19
Item 5 Other Information			19
Item 6 Exhibits			19
SIGNATURES			20
INDEX TO EXHIBITS			21
EX-10.1 FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
EX-10.2 PURCHASE AND SALE AGREEMENT
EX-10.3 FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATIONS OF THE CEO AND CFO
EX-99.1 CONSOLIDATED FINANCIAL STATEMENTS OF PRIME HEALTHCARE SERVICES, INC.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

		March 31, 2008				December 31, 2007
		(Unaudited)
Assets
Real estate assets
Land, buildings and improvements, and intangible lease assets		$	568,441,431			$	568,552,263
Mortgage loans			185,000,000				185,000,000
Real estate held for sale			80,843,153				81,411,362
Gross investment in real estate assets			834,284,584				834,963,625
Accumulated depreciation and amortization			(18,276,267	)			(14,772,109	)
Net investment in real estate assets			816,008,317				820,191,516
Cash and cash equivalents			147,001,752				94,215,134
Interest and rent receivable			10,272,697				10,234,436
Straight-line rent receivable			16,679,048				14,855,564
Other loans			84,486,130				80,758,273
Other assets of discontinued operations			13,715,297				13,227,885
Other assets			27,612,995				18,177,878
Total Assets		$	1,115,776,236			$	1,051,660,686
Liabilities and Stockholders’ Equity
Liabilities
Debt		$	415,372,109			$	480,525,166
Accounts payable and accrued expenses			23,678,440				21,091,374
Deferred revenue			19,584,007				20,839,338
Lease deposits and other obligations to tenants			16,832,033				16,006,813
Total liabilities			475,466,589				538,462,691
Minority interests			78,753				77,552
Stockholders’ equity
Preferred stock, $0.001 par value. Authorized 10,000,000 shares; no shares outstanding			—				—
Common stock, $0.001 par value. Authorized 100,000,000 shares; issued and outstanding — 64,901,616 shares at March 31, 2008, and 52,133,207 shares at December 31, 2007			64,902				52,133
Additional paid in capital			670,975,185				540,501,058
Distributions in excess of net income			(30,546,850	)			(27,170,405	)
Treasury shares, at cost			(262,343	)			(262,343	)
Total stockholders’ equity			640,230,894				513,120,443
Total Liabilities and Stockholders’ Equity		$	1,115,776,236			$	1,051,660,686

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income
(Unaudited)

		For the Three Months Ended March 31,
		2008				2007
Revenues
Rent billed		$	15,043,408			$	8,959,852
Straight-line rent			1,659,784				352,677
Interest and fee income			6,710,041				5,420,923
Total revenues			23,413,233				14,733,452
Expenses
Real estate depreciation and amortization			3,527,595				1,972,905
General and administrative			4,414,136				4,614,119
Total operating expenses			7,941,731				6,587,024
Operating income			15,471,502				8,146,428
Other income (expense)
Interest income			102,678				178,215
Interest expense			(7,119,866	)			(5,013,234	)
Net other expense			(7,017,188	)			(4,835,019	)
Income from continuing operations			8,454,314				3,311,409
Income from discontinued operations			2,779,468				6,892,543
Net income		$	11,233,782			$	10,203,952
Net income per common share — basic
Income from continuing operations		$	0.16			$	0.08
Income from discontinued operations			0.05				0.16
Net income		$	0.21			$	0.24
Weighted average shares outstanding — basic			52,933,616				42,823,619
Net income per share — diluted
Income from continuing operations		$	0.16			$	0.08
Income from discontinued operations			0.05				0.16
Net income		$	0.21			$	0.24
Weighted average shares outstanding — diluted			53,045,790				43,070,303

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(Unaudited)

		For the Three Months Ended March 31,
		2008				2007
Operating activities
Net income		$	11,233,782			$	10,203,952
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			4,011,997				2,672,133
Straight-line rent revenue			(2,238,377	)			(683,950	)
Share-based compensation			1,872,911				795,247
Gain on sale of real estate			—				(4,061,626	)
Other adjustments			(103,621	)			1,193,375
Net cash provided by operating activities			14,776,692				10,119,131
Investing activities
Real estate acquired			(124,059	)			(7,740,920	)
Principal received on loans receivable			454,811				7,730,359
Proceeds from sale of real estate			—				69,801,411
Investment in loans receivable			(1,880,103	)			(94,563,502	)
Escrow deposits paid for future acquisitions			(4,000,000	)			—
Construction in progress and other			(23,253	)			(9,579,186	)
Net cash used for investing activities			(5,572,604	)			(34,351,838	)
Financing activities
Additions to debt			78,875,000				77,700,000
Payments of debt			(144,204,757	)			(151,862,009	)
Distributions paid			(14,490,308	)			(10,894,247	)
Sale of common stock			128,601,756				136,101,634
Other financing activities			(5,199,161	)			1,081,194
Net cash provided by financing activities			43,582,530				52,126,572
Increase in cash and cash equivalents for period			52,786,618				27,893,865
Cash and cash equivalents at beginning of period			94,215,134				4,102,873
Cash and cash equivalents at end of period		$	147,001,752			$	31,996,738
Interest paid, including capitalized interest of $0 in 2008 and $967,303 in 2007		$	4,477,003			$	5,351,450
Supplemental schedule of non-cash investing activities:
Real estate converted to mortgage loan receivable			—				48,871,850
Construction in progress transferred to land and building			200,219				44,229,175
Interest and other receivables recorded as deferred revenue			12,366				—
Interest and other receivables transferred to loans receivable			90,952				—
Other non-cash investing activities			—				1,313,765
Supplemental schedule of non-cash financing activities:
Distributions declared, unpaid		$	14,597,997			$	8,411,563
Other non-cash financing activities			—				212,935

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Organization

Medical Properties Trust, Inc., a Maryland corporation (the Company), was formed on August 27, 2003 under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate. The Company’s operating partnership subsidiary, MPT Operating Partnership, L.P. (the Operating Partnership) through which it conducts all of its operations, was formed in September 2003. Through another wholly owned subsidiary, Medical Properties Trust, LLC, the Company is the sole general partner of the Operating Partnership. The Company presently owns directly substantially all of the limited partnership interests in the Operating Partnership.

The Company’s primary business strategy is to acquire and develop real estate and improvements, primarily for long term lease to providers of healthcare services such as operators of general acute care hospitals, inpatient physical rehabilitation hospitals, long-term acute care hospitals, surgery centers, centers for treatment of specific conditions such as cardiac, pulmonary, cancer, and neurological hospitals, and other healthcare-oriented facilities. The Company manages its business as a single business segment as defined in Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information.

2. Summary of Significant Accounting Policies

Use of Estimates: The preparation of financial statements in conformity 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation: Property holding entities and other subsidiaries of which the Company owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest are consolidated. All inter-company balances and transactions are eliminated. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the property if it has the direct or indirect ability to make decisions about the entities’ activities based upon the terms of the respective entities’ ownership agreements. For entities in which the Company owns less than 100% and does not have the direct or indirect ability to make decisions but does exert significant influence over the entities’ activities, the Company records its ownership in the entity using the equity method of accounting.

The Company periodically evaluates all of its transactions and investments to determine if they represent variable interests in a variable interest entity as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46 (revised December 2003) (FIN 46-R), Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. If the Company determines that it has a variable interest in a variable interest entity, the Company determines if it is the primary beneficiary of the variable interest entity. The Company consolidates each variable interest entity in which the Company, by virtue of its transactions with or investments in the entity, is considered to be the primary beneficiary. The Company re-evaluates its status as primary beneficiary when a variable interest entity or potential variable interest entity has a material change in its variable interests.

Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, including rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month ended March 31, 2008, are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2007 Annual Report on Form 10-K (as amended) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

New Accounting Pronouncements: The following is a summary of recently issued accounting pronouncements which have been issued but not adopted by the Company.

On July 25, 2007, the FASB authorized a FASB Staff Position (the “proposed FSP”) that, if issued, would affect the accounting for our exchangeable notes. If issued in the form expected, the proposed FSP would require that the initial debt proceeds from the sale of our exchangeable notes be allocated between a liability component and an equity component. The resulting debt discount would be amortized over the period the debt is expected to be outstanding as additional interest expense. The proposed FSP would be effective for fiscal years beginning after December 15, 2008, and require retroactive application. Because the proposed FSP is currently being deliberated by the FASB and therefore subject to change, the Company has not determined the effect of the proposed FSP on its financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 requires prospective application for fiscal years beginning after November 15, 2007. The Company evaluated the requirements of this statement and has determined its impact had no material effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations (“SFAS No. 141R”). SFAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed (including intangibles), and any noncontrolling interest in the acquiree. SFAS No. 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the requirements of this statement and has not yet determined its effect on the Company’s future acquisitions or consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for a parent company’s noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the requirements of this statement and has not yet determined its effect on the Company’s future consolidated financial statements.

Reclassifications: Certain reclassifications have been made to the condensed consolidated financial statements to conform to the 2007 consolidated financial statement presentation. These reclassifications have no impact on stockholders’ equity or net income.

3. Real Estate and Lending Activities

For the three months ended March 31, 2008 and 2007, revenue from Vibra Healthcare, LLC accounted for 15.2% and 22.6%, respectively, of total revenue. For the three months ended March 31, 2008 and 2007, revenue from affiliates of Prime Healthcare Services, Inc. accounted for 37.2% and 24.0%, respectively, of total revenue.

In March, 2008, the Company entered into a purchase and sale agreement pursuant to which the Company agreed to acquire a portfolio of 20 healthcare facilities in 15 states, including six acute care hospitals, three long-term acute care hospitals, five inpatient rehabilitation hospitals and six wellness centers, for an aggregate purchase price of approximately $357.2 million. The Company intends to finance these acquisitions using proceeds from its March, 2008, issuance of debt and equity (see Note 4 — Debt and Note 5 — Common Stock), from its existing revolving credit facilities and from the planned sale of real estate (see Note 7 — Discontinued Operations).

4. Debt

The following is a summary of debt:

		As of March 31,								As of December 31,
		2008								2007
		Balance				Interest Rate				Balance				Interest Rate
Revolving credit facilities		$	15,946,140				4.20	%		$	154,985,897				7.800	%
Senior unsecured notes — fixed rate through July and October, 2011, due July and October, 2016			125,000,000				7.333% - - 7.871	%			125,000,000				7.333% -7.871	%
Exchangeable senior notes due November, 2011			134,878,008				6.125	%			134,704,269				6.125	%
Exchangeable senior notes due April, 2013			73,877,961				9.25	%			—				—
Term loan			65,670,000				5.12	%			65,835,000				6.830	%
		$	415,372,109							$	480,525,166

As of March 31, 2008, maturities are as follows:

				2008		$	660,000
				2009			660,000
				2010			660,000
				2011			323,568,008
				2012			15,946,140
				Thereafter			73,877,961
				Total		$	415,372,109

In March 2008, the Company’s Operating Partnership issued and sold, in a private offering, $75.0 million of Exchangeable Senior Notes (the “Exchangeable Notes”) and received proceeds of $72.8 million. In April 2008, the Operating Partnership sold an additional $7.0 million of Exchangeable Notes (under the initial purchasers’ overallotment option) and received proceeds of $6.8 million. The Exchangeable Notes will pay interest semi-annually at a rate of 9.25% per annum and mature on April 1, 2013. The notes have an initial exchange rate of 80.8898 shares of the Company’s common stock per $1,000 principal amount of the notes, representing an exchange price of approximately $12.36 per common share. The notes are senior unsecured obligations of the Operating Partnership, guaranteed by the Company.

5. Common Stock

In March 2008, the Company sold 12,650,000 shares of common stock at a price of $10.75 per share. After deducting underwriters commissions and offering expenses, the Company realized proceeds of $128.7 million.

6. Stock Awards

The Company has adopted the Second Amended and Restated Medical Properties Trust, Inc. 2004 Equity Incentive Plan (the Equity Incentive Plan) which authorizes the issuance of options to purchase shares of common stock, restricted stock awards, restricted stock units, deferred stock units, stock appreciation rights, performance units and other stock-based awards, including profits interest in the Operating Partnership. The Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. At March 31, 2008, the Company has reserved 4,631,330 of common stock for awards under the Equity Incentive Plan.

In the first quarter of 2008, the Company awarded 401,762 shares of restricted stock to management and independent directors. The awards to management vest based on service over five years in equal annual amounts beginning in February, 2009. The awards to directors vest based on service over three years in equal annual amounts beginning in February, 2009.

7. Discontinued Operations

In the first quarter of 2008, the Company entered into a definitive agreement to sell the real estate assets of three inpatient rehabilitation facilities to Vibra Healthcare, LLC for total cash proceeds of $107.0 million. The sale was completed on May 7, 2008,

with the Company realizing a gain on the sale of approximately $9.4 million. In connection with the sale, the Company was paid $7.0 million as early lease termination fees. The Company also wrote off approximately $9.4 million in related straight-line rent upon completion of the sales. At March 31, 2008, the three Vibra properties are classified as held for sale and are reflected in the accompanying Condensed Consolidated Balance Sheets at $80.8 million and $81.4 million at March 31, 2008 and December 31, 2007, respectively.

The following table presents the results of discontinued operations for the three months ended March 31, 2008 and 2007:

		For the Three Months
		Ended March 31,
		2008				2007
Revenues		$	2,981,004			$	3,579,013
Net profit			2,779,468				6,892,543
Earnings per share — basic and diluted		$	0.05			$	0.16

8. Earnings Per Share

The following is a reconciliation of the weighted average shares used in net income per common share to the weighted average shares used in net income per common share — assuming dilution for the three months ended March 31, 2008 and 2007, respectively:

		For the Three Months
		Ended March 31,
		2008				2007
Weighted average number of shares issued and outstanding			52,887,314				42,781,098
Vested deferred stock units			46,302				42,521
Weighted average shares — basic			52,933,616				42,823,619
Common stock options and unvested restricted stock			112,174				246,684
Weighted average shares — diluted			53,045,790				43,070,303

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the consolidated financial condition and consolidated results of operations should be read together with the consolidated financial statements of Medical Properties Trust, Inc. and notes thereto contained in this Form 10-Q and the financial statements and notes thereto contained in our Annual Report on Form 10-K (as amended) for the year ended December 31, 2007.

Forward-Looking Statements.

This report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K (as amended) for the year ended December 31, 2007, filed with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934, as amended. Such factors include, among others, the following:

	•		National and local economic, business, real estate and other market conditions;
	•		The competitive environment in which the Company operates;
	•		The execution of the Company’s business plan;
	•		Financing risks;
	•		Acquisition and development risks;
	•		Potential environmental and other liabilities;
	•		Other factors affecting real estate industry generally or the healthcare real estate industry in particular;
	•		Our ability to attain and maintain our status as a REIT for federal and state income tax purposes;
	•		Our ability to attract and retain qualified personnel; and,
	•		Federal and state healthcare regulatory requirements.

Overview

We were incorporated under Maryland law on August 27, 2003 primarily for the purpose of investing in and owning net-leased healthcare facilities across the United States. We have operated as a real estate investment trust (“REIT”) since April 6, 2004, and accordingly, elected REIT status upon the filing in September 2005 of our calendar year 2004 federal income tax return. We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases. We also make mortgage loans to healthcare operators secured by their real estate assets. We also selectively make loans to certain of our operators through our taxable REIT subsidiary, the proceeds of which are used for acquisitions and working capital.

At March 31, 2008, our portfolio consisted of 28 properties: 25 facilities which we own are leased to eight tenants and the remaining assets are in the form of first mortgage loans to two operators. Our owned facilities consisted of 12 general acute care hospitals, 9 long-term acute care hospitals, and 4 inpatient rehabilitation hospitals. The non-owned facilities on which we have made mortgage loans consist of general acute care facilities. In March 2008, we agreed to purchase 20 properties from a single seller and completed the acquisition of 17 of these facilities in April 2008 and we expect to complete the acquisition of the remaining three facilities in May 2008. When completed, these 20 facilities will represent an investment of approximately $357.2 million. In May 2008, we also completed the sale of three rehabilitation facilities to Vibra Healthcare (Vibra) and realized total proceeds from the sale and related lease termination fees and loan pre-payment totaling $107.0 million. In March 2008, we entered into an agreement to purchase from an unrelated seller for approximately $12.0 million a long term acute care hospital and lease the hospital to Vibra pursuant to a long term net lease agreement.

We have 26 employees as of May 1, 2008. We believe that any adjustments to the number of our employees will have only immaterial effects on our operations and general and administrative expenses. We believe that our relations with our employees are good. None of our employees are members of any union.

Key Factors that May Affect Our Operations

Our revenues are derived from rents we earn pursuant to the lease agreements with our tenants and from interest income from loans to our tenants and other facility owners. 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. Accordingly, we monitor certain key factors, changes to which 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 the following:

• the historical and prospective operating margins (measured by a tenant’s earnings before interest, taxes, depreciation, amortization and facility rent) of each tenant or borrower and at each facility;

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

• trends in the source of our tenants’ or borrowers’ revenue, including the relative mix of Medicare, Medicaid/MediCal, managed care, commercial insurance, and private pay patients; and

• the effect of evolving healthcare regulations on our tenants’ and borrowers’ profitability.

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. These factors include:

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

• unforeseen changes in healthcare regulations that may limit the opportunities 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 and our lease rates;

• competition from other financing sources; and

• the ability of our tenants and borrowers to access funds in the credit markets.

CRITICAL ACCOUNTING POLICIES

In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, we must make estimates about certain types of transactions and account balances. We believe that our estimates of the amount and timing of lease revenues, credit losses, fair values and periodic depreciation of our real estate assets, stock compensation expense, and the effects of any derivative and hedging activities will have significant effects on our financial statements. Each of these items involves estimates that require us to make subjective judgments. We rely on our experience, collect historical data and current market data, and

develop relevant assumptions to arrive at what we believe to be reasonable estimates. Under different conditions or assumptions, materially different amounts could be reported related to the accounting policies described below. In addition, application of these accounting policies involves the exercise of judgment on the use of assumptions as to future uncertainties and, as a result, actual results could materially differ from these estimates. Our accounting estimates include the following:

Revenue Recognition. Our revenues, which are comprised largely of rental income, include rents that each tenant pays in accordance with the terms of its respective lease reported on a straight-line basis over the initial term of the lease. Since some of our leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record as an asset, and include in revenues, straight-line rent that we will only receive if the tenant makes all rent payments required through the expiration of the term of the lease.

Accordingly, our management determines, in its judgment, to what extent the straight-line rent receivable applicable to each specific tenant is collectible. We review each tenant’s straight-line rent receivable on a quarterly basis and take into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area in which the facility is located. In the event that the collectibility of straight-line rent with respect to any given tenant is in doubt, we are required to record an increase in our allowance for uncollectible accounts or record a direct write-off of the specific rent receivable, which would have an adverse effect on our net income for the period in which the reserve is increased or the direct write-off is recorded and would decrease our total assets and stockholders’ equity. At that time, we stop accruing additional straight-line rent income.

Our development projects normally allow for us to earn what we term “construction period rent”. Construction period rent accrues to us during the construction period based on the funds which we invest in the facility. During the construction period, the unfinished facility does not generate any earnings for the lessee/operator which can be used to pay us for our funds used to build the facility. In such cases, the lessee/operator pays the accumulated construction period rent over the term of the lease beginning when the lessee/operator takes physical possession of the facility. We record the accrued construction period rent as deferred revenue during the construction period, and recognize earned revenue as the construction period rent is paid to us by the lessee/operator. We make loans to our tenants and from time to time may make construction or mortgage loans to facility owners or other parties. We recognize interest income on loans as earned based upon the principal amount outstanding. These loans are generally secured by interests in real estate, receivables, the equity interests of a tenant, or corporate and individual guarantees and are usually cross-defaulted with their leases and/or other loans. As with straight-line rent receivables, our management must also periodically evaluate loans to determine what amounts may not be collectible. Accordingly, a provision for losses on loans receivable is recorded when it becomes probable that the loan will not be collected in full. The provision is an amount which reduces the loan to its estimated net receivable value based on a determination of the eventual amounts to be collected either from the debtor or from the collateral, if any. At that time, we discontinue recording interest income on the loan to the tenant.

Investments in Real Estate. We record investments in real estate at cost, and we capitalize improvements and replacements when they extend the useful life or improve the efficiency of the asset. While our tenants are generally responsible for all operating costs at a facility, to the extent that we incur costs of repairs and maintenance, we expense those costs as incurred. We compute depreciation using the straight-line method over the estimated useful life of 40 years for buildings and improvements, three to seven years for equipment and fixtures, and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

We are required to make subjective assessments as to the useful lives of our facilities for purposes of determining the amount of depreciation expense to record on an annual basis with respect to our investments in real estate improvements. These assessments have a direct impact on our net income because, if we were to shorten the expected useful lives of our investments in real estate improvements, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

We have adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144 requires that the operations related to facilities that have been sold, or that we intend to sell, be presented as discontinued operations in the statement of operations for all periods presented, and facilities we intend to sell be designated as “held for sale” on our balance sheet.

When circumstances such as adverse market conditions indicate a possible impairment of the value of a facility, we review the recoverability of the facility’s carrying value. The review of recoverability is based on our estimate of the future undiscounted cash flows, excluding interest charges, from the facility’s use and eventual disposition. Our forecast of these cash flows considers factors such as expected future operating income, market and other applicable trends, and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a facility, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the facility. We are required to make subjective assessments as to whether there are impairments in the values of our investments in real estate.

Purchase Price Allocation. We record above-market and below-market in-place lease values, if any, for the facilities we own which are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) 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. We amortize any resulting capitalized above-market lease values as a reduction of rental income over the remaining non-cancelable terms of the respective leases. We amortize any resulting capitalized below-market lease values as an increase to rental income over the initial term and any fixed-rate renewal periods in the respective leases. Because our strategy to a large degree involves the origination of long term lease arrangements at market rates at the same time we acquire the property, we do not expect the above-market and below-market in-place lease values to be significant for many of our anticipated transactions.

We measure the aggregate value of other intangible assets to be acquired based on the difference between (i) the property valued with existing leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. We also consider information obtained about each targeted facility 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. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which we expect to range primarily from three to 18 months, depending on specific local market conditions. Management also estimates costs to execute similar leases including leasing commissions, legal costs, and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets to be acquired, if any, is further allocated to in-place lease values and customer relationship intangible values based on management’s evaluation of the specific characteristics of each prospective tenant’s lease and our overall relationship with that tenant. Characteristics to be considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, including those existing under the terms of the lease agreement, among other factors.

We amortize the value of in-place leases to expense over the initial term of the respective leases, which range primarily from 10 to 15 years. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense.

Loans and Losses from Rent Receivables and Loans. We record provisions for losses on rent receivables and loans when it becomes probable that the receivable or loan will not be collected in full. The provision is an amount which reduces the rent or loan to its estimated net realizable value based on a determination of the eventual amounts to be collected either from the debtor or from the collateral, if any. The determination of when to record a provision for loss on loans and rent requires us to estimate amounts to be recovered from collateral, the ability of the tenant and/or borrower to repay, and the ability of the tenant and/or borrower to improve its operations.

Accounting for Derivative Financial Investments and Hedging Activities. We account for our derivative and hedging activities, if any, using SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and SFAS No. 149, which requires all derivative instruments to be carried at fair value on the balance sheet.

Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking each hedge transaction. We review quarterly the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges, if any, will be accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in other comprehensive income within stockholders’ equity. Amounts are reclassified from other comprehensive income to the income statement in the period or periods the hedged forecasted transaction affects earnings. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, which affect the Company primarily in the form of interest rate risk or variability of interest rates, are considered fair value hedges under SFAS No. 133. We are not currently a party to any derivatives contracts designated as cash flow hedges.

In 2006, we entered into derivative contracts as part of our offering of Exchangeable Senior Notes (the “exchangeable notes”). The contracts are generally termed “capped call” or “call spread” contracts. These contracts are financial instruments which are separate from the exchangeable notes themselves, but affect the overall potential number of shares which will be issued by us to satisfy the conversion feature in the exchangeable notes. The exchangeable notes can be exchanged into shares of our common stock when our stock price exceeds $16.50 per share, which is the equivalent of 60.6080 shares per $1,000 note. The number of shares actually issued upon conversion will be equivalent to the amount by which our stock price exceeds $16.50 times the 60.4583 conversion rate. The “capped call” transaction allows us to effectively increase that exchange price from $16.50 to $18.94. Therefore, our shareholders will not experience dilution of their shares from any settlement or conversion of the exchangeable notes until the price of our stock exceeds $18.94 per share rather than $16.50 per share. When evaluating this transaction, we have followed the guidance in Emerging Issues Task Force (EITF) No. 00-19 Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. EITF No. 00-19 requires that contracts such as this “capped call” which meet certain conditions must be accounted for as permanent adjustments to equity rather than periodically adjusted to their fair value as assets or liabilities. We have evaluated the terms of these contracts and recorded this “capped call” as a permanent adjustment to stockholders’ equity in 2006. When we sold $82.0 million face value of Exchangeable Senior Notes in March and April, 2008, we did not elect to purchase any similar call spread contracts.

The exchangeable notes which we sold in 2006 and 2008 themselves also contain the conversion feature described above. SFAS No. 133 also states that certain “embedded” derivative contracts must follow the guidance of EITF No. 00-19 and be evaluated as though they also were a “freestanding” derivative contract. Embedded derivative contracts such as the conversion feature in the notes should not be treated as a financial instrument separate from the note if it meets certain conditions in EITF No. 00-19. We have evaluated the conversion feature in the exchangeable notes and have determined that it should not be reported separately from the debt. However, the FASB is considering a new pronouncement which would require us to allocate some of the proceeds from the conversion feature to equity. While this new pronouncement would not require accounting for the embedded conversion feature as a derivative contract, it would require us to restate previously issued financial statements in future filings. The restatement would result in an increase to stockholders’ equity, a decrease to debt, and a decrease to net income. We are currently evaluating this proposed FASB pronouncement to determine the amounts of any changes to our financial statements.

Variable Interest Entities. In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. In December 2003, the FASB issued a revision to FIN 46, which is termed FIN 46(R). FIN 46(R) clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, and provides guidance on the identification of entities for which control is achieved through means other than voting rights, guidance on how to determine which business enterprise should consolidate such an entity, and guidance on when it should do so. This model for consolidation applies to an entity in which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. An entity meeting either of these two criteria is a variable interest entity, or VIE. A VIE must be consolidated by any entity which is the primary beneficiary of the VIE. If an entity is not the primary beneficiary of the VIE, the VIE is not consolidated. We periodically evaluate the terms of our relationships with our tenants and borrowers to determine whether we are the primary beneficiary and would therefore be required to consolidate any tenants or borrowers that are VIEs.

Stock-Based Compensation. Prior to 2006, we used the intrinsic value method to account for the issuance of stock options under our equity incentive plan in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) became effective for our annual and interim periods beginning January 1, 2006, but had no material effect on the results of our

operations. During the three month period ended March 31, 2008, we recorded approximately $1.9 million of expense for share-based compensation related to grants of restricted common stock, deferred stock units and other stock-based awards. In 2006, we also granted performance-based restricted share awards. Because these awards will vest based on the Company’s performance, we must evaluate and estimate the probability of achieving those performance targets. Any changes in these estimates and probabilities must be recorded in the period when they are changed. In 2007, the Compensation Committee made awards which are earned only if the Company achieves certain stock price levels, total shareholder return or other market conditions. Beginning in 2007, we began recording expense over the expected or derived vesting periods using the calculated value of the awards. We must record expense over these vesting periods even though the awards have not yet been earned and, in fact, may never be earned. In some cases, if the award is not earned, we will be required to reverse expenses recognized in earlier periods. As a result, future stock-based compensation expense may fluctuate based on the potential reversal of previously recorded expense.

LIQUIDITY AND CAPITAL RESOURCES

In the first quarter of 2008, we sold 12.65 million shares of common stock and $75 million face amount of exchangeable notes, realizing net proceeds of approximately $128.7 million and $72.8 million, respectively. In addition, we sold $7.0 million face amount of exchangeable notes in April 2008, realizing net proceeds of approximately $6.8 million. As of March 31, 2008, we had approximately $147.0 million in cash and cash equivalents and approximately $180.1 million available for borrowing under our credit facilities. During the second quarter of 2008, we expect to complete acquisitions pursuant to binding agreements outstanding as of March 31, 2008 aggregating approximately $370 million, using our cash and credit facility borrowings. In addition, in May 2008, we sold three hospital facilities to Vibra Healthcare and received sales and other proceeds of approximately $107 million in cash.

Short-term Liquidity Requirements: We believe that the liquidity available to us mentioned above is sufficient to provide the resources necessary for operations, distributions in compliance with REIT requirements and a limited amount of acquisitions in the near term. In the event that we elect to make more than a limited amount of acquisitions in the near term, we will need to access additional capital. Based on current conditions in the capital markets, we believe that while such capital may be available, there is no assurance that we could obtain acquisition capital at prices that we consider acceptable.

Long-term Liquidity Requirements: We believe that cash flow from operating activities subsequent to 2008 will be sufficient to provide adequate working capital and make required distributions to our stockholders in compliance with our requirements as a REIT. However, in order to continue acquisition and development of healthcare facilities after 2008, we will require access to more permanent external capital, including equity capital. If equity capital is not available at a price that we consider appropriate, we may increase our debt, selectively dispose of assets, utilize other forms of capital, if available, or reduce our acquisition activity.

Results of Operations

Three months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

Net income for the three months ended March 31, 2008 was $11,233,782 compared to net income of $10,203,952 for the three months ended March 31, 2007, a 10% increase. This difference, as more fully described below, is primarily the result of incremental rent and interest revenue with respect to investments we made since January 1, 2007, offset by depreciation of such investments, and interest on borrowings used to make such investments.

A comparison of revenues for the three month periods ended March 31, 2008 and 2007, is as follows, as adjusted in 2007 for discontinued operations:

																		Year over
						% of								% of				Year
		2008				Total				2007				Total				Change
Base rents		$	14,918,539				63.8	%		$	8,885,685				60.3	%			67.9	%
Straight-line rents			1,659,784				7.1	%			352,677				2.4	%			370.6	%
Percentage rents			124,869				0.5	%			74,167				0.5	%			68.4	%
Fee income			125,756				0.5	%			69,099				0.5	%			82.0	%
Interest from loans			6,584,285				28.1	%			5,351,824				36.3	%			23.0	%
Total revenue		$	23,413,233				100.0	%		$	14,733,452				100.0	%			58.9	%

Revenue of $23,413,233 in the three months ended March 31, 2008, was comprised of rents (71.4%) and interest from loans and fee income (28.6%). At March 31, 2008, we owned 25 rent producing properties compared to 20 as of January 1, 2007, which accounted for the increase in revenues. Vibra accounted for 15.2% and 22.6% of total revenues during the three months ended March 31, 2008 and 2007, respectively, and affiliates of Prime accounted for 37.2% and 24.0% of total revenue, respectively.

Depreciation and amortization during the first quarter of 2008 was $3,527,595, compared to $1,972,905 during the first quarter of 2007, a 78.8% increase. All of this increase is related to an increase in the number of rent producing properties from January 1, 2007 to March 31, 2008. We expect to complete additional acquisitions of approximately $370 million during the second quarter of 2008, and accordingly, rental revenues and depreciation expense will increase commensurately.

General and administrative expenses were relatively flat compared to the same period in 2007, decreasing approximately $200,000, or 4.3%, from $4,614,119 to $4,414,136.

Interest expense for the quarters ended March 31, 2008 and 2007 totaled $7.1 million and $5.0 million, respectively. Capitalized interest for the respective quarters, totaled $0 and $967,303, respectively. The increase in interest expense was the result of higher debt balances and the absence of any capitalized interest in 2008, partially offset by lower borrowing rates.

Discontinued Operations

In the first quarter of 2008, the Company entered into a definitive agreement to sell the real estate assets of three inpatient rehabilitation facilities to Vibra Healthcare, LLC for total cash proceeds of $107 million. The sale was completed on May 7, 2008, with the Company realizing a gain on the sale of approximately $9.4 million. In connection with the sale, the Company was paid $7.0 million as early lease termination fees and a loan prepayment of $10.0 million. The Company also wrote off approximately $9.4 million in related straight-line rent upon completion of the sales. At March 31, 2008, the three Vibra properties are classified as as held for sale and are reflected in the accompanying Condensed Consolidated Balance Sheets at $80.8 million and $81.4 million at March 31, 2008 and December 31, 2007, respectively.

Reconciliation of Non-GAAP Financial Measures

Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. While we believe net income available to common stockholders, as defined by generally accepted accounting principles (GAAP), is the most appropriate measure, our management considers FFO an appropriate supplemental measure given its wide use by and relevance to investors and analysts. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assume that the value of real estate diminishes predictably over time.

As defined by the National Association of Real Estate Investment Trusts, or NAREIT, FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of real estate, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We compute FFO in accordance with the NAREIT definition. FFO should not be viewed as a substitute measure of the Company’s operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs that could materially impact our results of operations.

The following table presents a reconciliation of FFO to net income for the three months ended March 31, 2008 and 2007:

		For the Three Months Ended
		March 31,
		2008				2007
Net income		$	11,233,782			$	10,203,952
Depreciation and amortization
Continuing operations			3,527,595				1,972,905
Discontinued operations			568,209				625,567
Gain on sale of real estate			—				(4,061,626	)
Funds from operations		$	15,329,586			$	8,740,798

Per diluted share amounts:

		For the Three Months Ended
		March 31,
		2008				2007
Net income		$	.21			$	.24
Depreciation and amortization
Continuing operations			.07				.05
Discontinued operations			.01				.01
Gain on sale of real estate			—				(.10	)
Funds from operations		$	.29			$	.20

Distribution Policy

We have elected to be taxed as a REIT commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gain, to our stockholders.

The table below is a summary of our distributions paid or declared during the two year period ended March 31, 2008:

Declaration Date		Record Date		Date of Distribution		Distribution per Share
February 28, 2008		March 13, 2008		April 11, 2008		$	.27
November 16, 2007		December 13, 2007		January 11, 2008		$	.27
August 16, 2007		September 14, 2007		October 19, 2007		$	.27
May 17, 2007		June 14, 2007		July 12, 2007		$	.27
February 15, 2007		March 29, 2007		April 12, 2007		$	.27
November 16, 2006		December 14, 2006		January 11, 2007		$	.27
August 18, 2006		September 14, 2006		October 12, 2006		$	.26
May 18, 2006		June 15, 2006		July 13, 2006		$	.25
February 16, 2006		March 15, 2006		April 12, 2006		$	.21

We intend to pay to our stockholders, within the time periods prescribed by the Code, all or substantially all of our annual taxable income, including taxable gains from the sale of real estate and recognized gains on the sale of securities. It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid corporate income and excise tax on undistributed income.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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 plan, we expect that the primary market risk to which we will be exposed is interest rate risk.

In addition to changes in interest rates, the value of our facilities will be subject to fluctuations based on changes in local and regional economic conditions and changes in the ability of our tenants to generate profits, all of which may affect our ability to refinance our debt if necessary. The changes in the value of our facilities would be reflected also by changes in “cap” rates, which is measured by the current base rent divided by the current market value of a facility.

If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $816,000 per year. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $816,000 per year. This assumes that the amount outstanding under our variable rate debt remains approximately $81.6 million, the balance at April 1, 2008.

We currently have no assets denominated in a foreign currency, nor do we have any assets located outside of the United States. We also have no exposure to derivative financial instruments.

Our 2006 exchangeable notes were initially exchangeable into 60.3346 shares of our stock for each $1,000 note. This equates to a conversion price of $16.57 per share. This conversion price adjusts based on a formula which considers increases to our dividend subsequent to the issuance of the notes in November 2006. Our dividends declared since we sold the exchangeable notes have adjusted our conversion price as of March 31, 2008, to $16.50 per share which equates to 60.6080 shares per $1,000 note. Future changes to the conversion price will depend on our level of dividends which cannot be predicted at this time. Any adjustments for dividend increases until the notes are settled in 2011 will affect the price of the notes and the number of shares for which they will eventually be settled. Our 2008 exchangeable notes have a similar conversion adjustment feature which could effect its stated exchange ratio of 80.8898 common shares per $1,000 principal amount of notes, equating to an exchange price of approximately $12.36 per common share. However, no dividends have been declared since the date of the sale of those notes in March, 2008.

At the time we issued the 2006 exchangeable notes, we also entered into a capped call or call spread transaction. The effect of this transaction was to increase the conversion price from $16.57 to $18.94. As a result, our shareholders will not experience any dilution until our share price exceeds $18.94. If our share price exceeds that price, the result would be that we would issue additional shares of common stock upon exchange. At a price of $20 per share, we would be required to issue an additional 434,000 shares. At $25 per share, we would be required to issue an additional two million shares.

Item 4. Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b), under the Securities Exchange Act of 1934, as amended, we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be disclosed by the Company in the reports that the Company files with the SEC.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1.A. Risk Factors

Other than set forth below, there have been no material changes to the Risk Factors as presented in our Annual Report on Form 10-K (as amended) for the year ended December 31, 2007 as filed with the Commission on March 14, 2008.

RISKS RELATED TO OUR BUSINESS AND GROWTH STRATEGY

We incurred additional debt in order to consummate our recent acquisition of a healthcare property portfolio which will expose us to increased risk of property losses and may have adverse consequences on our business operations and our ability to make distributions to stockholders.

We incurred additional debt in order to consummate our recent acquisition of a healthcare property portfolio, including $82.0 million in aggregate principal amount of our Operating Partnership’s exchangeable senior notes due 2013 and we borrowed under our credit facilities in order to fund a portion of the purchase price of the acquisition. As of March 31, 2008, we had total outstanding indebtedness of approximately $415.4 million and $180.1 million available to us for borrowing under our existing revolving credit facilities.

Our substantial indebtedness could have significant effects on our business. For example, it could:

		require us to use a substantial portion of our cash flow from operations to service our indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development projects and other general corporate purposes and reduce cash for distributions;
		require payments of principal and interest that may be greater than our cash flow from operations;
		force us to dispose of one or more of our properties, possibly on disadvantageous terms, to make payments on our debt;
		increase our vulnerability to general adverse economic and industry conditions;
		limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
		restrict us from making strategic acquisitions or exploiting other business opportunities;
		make it more difficult for us to satisfy our obligations;
		place us at a competitive disadvantage compared to our competitors that have less debt; and
		limit our ability to borrow additional funds or dispose of assets.

In addition, our borrowings under our loan facilities will bear interest at variable rates, in addition to the approximately $81.6 million in variable interest rate debt that we had outstanding as of March 31, 2008. If interest rates were to increase significantly, our ability to borrow additional funds may be reduced and the risk related to our substantial indebtedness would intensify.

We may not be able to refinance or extend our existing debt as our access to capital is affected by prevailing conditions in the financial and capital markets and other factors, many of which are beyond our control. If we cannot repay, refinance or extend our debt at maturity, in addition to our failure to repay our debt, we may be unable to make distributions to our stockholders at expected levels or at all.

In addition, if we are unable to restructure or refinance our obligations, we may default under our obligations. This could trigger cross-default and cross-acceleration rights under then-existing agreements. If we default on our debt obligations, the lenders may foreclose on our properties that secure those loans and any other loan that has cross-default provisions.

Even if we are able to refinance or extend our existing debt, the terms of any refinancing or extension may not be as favorable as the terms of our existing debt. If the refinancing involves a higher interest rate, it could adversely affect our cash flow and ability to make distributions to stockholders.

We may be subject to additional risks arising from our recent acquisition of a healthcare property portfolio.

In addition to the risks described in our Annual Report on Form 10-K (as amended) for the year ended December 31, 2007 relating to healthcare facilities that we may purchase from time to time, we are also subject to additional risks in connection with our recent acquisition of a healthcare property portfolio, including without limitation the following:

		we have no previous business experience with the tenants at the facilities acquired, and we may face difficulties in the integration of them;
		underperformance of the acquired facilities due to various factors, including unfavorable terms and conditions of the existing lease agreements relating to the facilities, disruptions caused by the integration of tenants with us or changes in economic conditions;
		diversion of our management’s attention away from other business concerns;
		exposure to any undisclosed or unknown potential liabilities relating to the newly acquired facilities; and
		potential underinsured losses on the newly acquired facilities.

We cannot assure you that we will be able to integrate new portfolio of properties without encountering difficulties or that any such difficulties will not have a material adverse effect on us.

In addition, some of the properties may be acquired through our acquisition of all of the ownership interests of the entity that owns such property. Such an acquisition at the entity level rather than the asset level may expose us to any additional risks and liabilities associated with the acquired entity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Previously included in our Current Report on Form 8-K filed with the Commission on March 27, 2008.

(b) Not applicable.

(c) Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits

The following exhibits are filed as a part of this report:

Exhibit
Number		Description
10.1		First Amendment to Revolving Credit and Term Loan Agreement dated March 13, 2008
10.2		Purchase and Sale Agreement among MPT Operating Partnership, L.P., HCP, Inc., FAEC Holdings, LLC, HCPI Trust, HCP Das Petersburg VA, LP, and Texas HCP Holdings, L.P. dated as of March 13, 2008
10.3		First Amendment to Purchase and Sale Agreement among MPT Operating Partnership, L.P., HCP, Inc., FAEC Holdings (BC), LLC, HCPI Trust, HCP DAS Petersburg VA, LP, and Texas HCP Holding, L.P., dated March 28, 2008
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
99.1		Consolidated Financial Statements of Prime Healthcare Services, Inc. as of September 30, 2007

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 9, 2008

INDEX TO EXHIBITS

Exhibit
Number		Description
10.1		First Amendment to Revolving Credit and Term Loan Agreement dated March 13, 2008
10.2		Purchase and Sale Agreement among MPT Operating Partnership, L.P., HCP, Inc., FAEC Holdings, LLC, HCPI Trust, HCP Das Petersburg VA, LP, and Texas HCP Holdings, L.P. dated as of March 13, 2008
10.3		First Amendment to Purchase and Sale Agreement among MPT Operating Partnership, L.P., HCP, Inc., FAEC Holdings (BC), LLC, HCPI Trust, HCP DAS Petersburg VA, LP, and Texas HCP Holding, L.P., dated March 28, 2008
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
99.1		Consolidated Financial Statements of Prime Healthcare Services, Inc. as of September 30, 2007

Exhibit 10.1

FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT

     This FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of March 13, 2008 (this “Amendment”), is by and among MEDICAL PROPERTIES TRUST, INC., a Maryland corporation (“Holdings”), MPT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Borrower”), the financial institutions listed on the signature pages hereof (the “Lenders”) and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (the “Administrative Agent”). Reference is made to that certain Revolving Credit and Term Loan Agreement, dated as of November 30, 2007 (the “Credit Agreement”), by and among Holdings, the Borrower, the Lenders referenced therein and the Administrative Agent. Capitalized terms used herein without definition shall have the same meanings as set forth in the Credit Agreement, as amended hereby.

RECITALS

     WHEREAS, the Borrower and the Lenders desire to amend the Credit Agreement to:

     (i) permit the Borrower to enter into a bridge loan facility in an aggregate principal amount of up to $300.0 million minus the aggregate principal amount of the additional exchangeable senior notes described in clause (ii) below, the proceeds of which will be used to fund, in part, the acquisition (the “Acquisition”) by Borrower of a portfolio of properties from HCP Inc., FAEC Holdings (BC), LLC, HCPI Trust, HCP Das Petersburg VA, LP and Texas HCP Holding, L.P. and to pay fees, commissions and expenses in connection with the Acquisition;

     (ii) permit Borrower to issue additional exchangeable senior notes in an aggregate principal amount of up to $143.75 million, the proceeds of which will be used to fund, in part, the Acquisition and to pay fees, commissions and expenses in connection with the Acquisition; and

     (iii) make certain other modifications as set forth below.

     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1. AMENDMENTS TO CREDIT AGREEMENT

1.1 Amendments to Section 1.1: Defined Terms.

     A. Section 1.1 of the Credit Agreement is hereby amended by adding thereto the following definitions, which shall be inserted in proper alphabetical order:

“2008 Exchangeable Senior Note Indenture”: an Indenture which may be entered into by the Borrower and Holdings in connection with the issuance of the 2008 Exchangeable Senior Notes in the principal amount of up to $172.5 million and the issuance of any additional senior exchangeable notes issued thereunder in an amount equal to the then

outstanding principal amount of the Bridge Loans, the terms of which shall be as set forth on Exhibit B to the First Amendment and shall otherwise be substantially the same as the Senior Exchangeable Note Indenture, in each case with such changes as would be permitted for an amendment to the 2008 Senior Exchangeable Note Indenture pursuant to Section 7.9 hereof, together with all instruments and other agreements entered into by Borrower or Holdings in connection therewith.

“2008 Exchangeable Senior Notes”: the exchangeable senior notes issued by Borrower pursuant to the 2008 Exchangeable Senior Note Indenture.

“Acquisition”: the acquisition by Borrower of a portfolio of properties pursuant to the Purchase Agreement.

“Bridge Loan Credit Agreement”: a Bridge Loan Credit Agreement, if entered into, providing for a bridge loan facility of up to $300.0 million minus the aggregate principal amount of the 2008 Exchangeable Senior Notes, the proceeds of which are used to fund, in part, the Acquisition and to pay fees, commissions and expenses in connection therewith, with a maturity of 9 months to 364 days from funding, secured by the same Collateral securing the Loans under this Agreement, subject to the Intercreditor Agreement, having the other terms as set forth on Exhibit C to the First Amendment and otherwise on terms acceptable to the Borrower.

“Bridge Loan Documents”: the “Loan Documents” referred to in the Bridge Loan Credit Agreement.

“Bridge Loan Lenders”: the Persons referred to as “Lenders” in the Bridge Loan Credit Agreement.

“Bridge Loans”: the loans made by the Bridge Loan Lenders pursuant to the Bridge Loan Credit Agreement.

“Consolidated Tangible Net Worth”: means the book value, without giving effect to depreciation of all assets or amortization of SFAS 141 Intangibles of Holdings and its consolidated Subsidiaries at such time; less (a) the amount, if any, of Holdings’ investment in any unconsolidated subsidiary, joint venture or other similar entity, and (b) all amounts appearing on the assets side of its consolidated balance sheet representing intangible assets under GAAP (other than SFAS 141 Intangibles).

“First Amendment”: that certain First Amendment to this Agreement, dated as of March 13, 2008.

“First Amendment Effective Date”: the date the conditions to the effectiveness of the First Amendment, set forth in Section 4 thereof, are satisfied.

“Intercreditor Agreement”: an Intercreditor Agreement, substantially in the form of Exhibit F (with such modifications thereto as may be agreed by the parties thereto), among the Administrative Agent, UBS Loan Finance LLC, as administrative agent under the Bridge Loan Documents.

“Purchase Agreement”: the Purchase and Sale Agreement and Escrow Instructions made effective as of March 13, 2008, among Borrower and HCP Inc., FAEC Holdings (BC), LLC, HCPI Trust, HCP Das Petersburg VA, LP and Texas HCP Holding, L.P., as amended or waived from time to time so long as such amendment or waiver is not adverse to the Lenders, unless consented to by the Administrative Agent (such consent not to be unreasonably withheld).

“Vibra Acquisition”: the acquisition by Borrower or any of its Subsidiaries of two inpatient rehab hospitals known as Continental Rehab Hospital of San Diego and Robert H. Ballard Rehabilitation Hospital and one long-term acute care hospital known as Kindred Hospital Detroit from Vibra Healthcare, L.L.C. for an aggregate purchase price of approximately $55.0 million.

“Vibra Sale”: the sale by Borrower of one or more Subsidiaries owning three inpatient rehab hospitals known as Southern Kentucky Rehabilitation, Marlton Rehabilitation Hospital, and San Joaquin Valley Rehabilitation to Vibra Healthcare, L.L.C. for an aggregate price of approximately $90.0 million, a prepayment penalty of $7.0 million, and a repayment of $10.0 on an existing promissory note.

     B. Subsection 1.1 of the Credit Agreement is hereby further amended by deleting the definition of the term set forth in quotation marks below and substituting therefor the following definition:

“Excluded Subsidiaries”: the Subsidiaries of the Borrower listed on Schedule ES attached hereto, as such Schedule ES may be updated by a Responsible Officer of the Borrower to include (a) any Subsidiary acquired pursuant to an acquisition permitted hereunder which is financed with secured Indebtedness incurred pursuant to Section 7.2(f) and each Subsidiary thereof that guarantees such Indebtedness (in each case to the extent that guaranteeing the Obligations or granting a security interest in support thereof is prohibited by such Indebtedness) and (b) any Subsidiary that is not wholly-owned by the Borrower, is acquired pursuant to the Acquisition, and is prohibited by its organizational documents from giving a guaranty of the Obligations; provided that each such Subsidiary shall cease to be an Excluded Subsidiary hereunder if such secured Indebtedness is repaid or becomes unsecured or if such Subsidiary ceases to guarantee such secured Indebtedness or if such Subsidiary ceases to be prohibited from giving a guaranty, as applicable.

“Lease Coverage Ratio”: (i) for any Person or property, the ratio of EBITDAR for such Person or property to the aggregate rent payable under leases with respect to such Person or property for any quarter and (ii) for any Person or property acquired as part of the Acquisition, the ratio of EBITDAR for such Person or property to the aggregate rent payable under leases with respect to such Person or property for the fiscal period for which financial information is available.

“Loan Documents”: this Agreement, the Security Documents, the Intercreditor Agreement, the Notes and any amendment, waiver, supplement or other modification to any of the foregoing.

“Net Cash Proceeds”: (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received), net of attorneys’ fees, accountants’ fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document or a Bridge Loan Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

“Reinvestment Prepayment Date”: with respect to any Reinvestment Event, the earlier of (a) the date occurring 120 days (or 180 days, in the case of the Vibra Sale) after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire new Borrowing Base Properties or Mortgage Notes to be included in the computation of Borrowing Base Value or repair or replace assets damaged by a Recovery Event, as applicable, in each case with all or any portion of the relevant Reinvestment Deferred Amount.

“Security Documents”: the collective reference to the Guarantee and Collateral Agreement and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document, which shall be subject to the terms of the Intercreditor Agreement.

“Specified Change of Control”: a “Change of Control” or “Designated Event” (or any other defined term having a similar purpose) as defined in the Senior Note Indenture, the Senior Exchangeable Note Indenture or the 2008 Senior Exchangeable Note Indenture.

“Total Asset Value”: an amount equal to the sum, without duplication, of (i) the lower of the undepreciated cost or market value of all Real Properties that are 100% fee owned or ground-leased by the Group Members, plus (ii) the pro-rata share of the lower of the undepreciated cost or market value of all Real Properties that are less than 100% fee owned or ground-leased by the Group Members, plus (iii) unrestricted cash and Cash Equivalents of the Group Members in excess of $10,000,000; provided that to the extent the 2008 Exchangeable Senior Notes are issued by the Borrower prior to the closing of the Acquisition, all of the escrowed proceeds of the 2008 Exchangeable Senior Notes shall be deemed “unrestricted cash and Cash Equivalents” for purposes of Section 7.1, plus (iv) the book value of (A) notes receivable of the Group Members which are secured by mortgage Liens on real estate and which are not more than 60 days past due or otherwise in default after giving effect to applicable cure periods (“Mortgage Notes”) and

(B) notes receivable of Group Members (1) under which the obligor (or the guarantor thereof) is the operator of a medical property for which a Group Member is the lessor or mortgagee, (2) which are cross-defaulted to the lease or Mortgage Note held by such Group Member, (3) which are not more than 60 days past due or otherwise in default after giving effect to applicable cure periods, and (4) which are set forth in a schedule provided to the Administrative Agent and have been approved by the Required Lenders (provided that not more than $50,000,000 of Total Asset Value may be attributable to notes receivable described in this clause (B)), all as determined on a consolidated basis in accordance with GAAP.

1.2 Amendment to Section 2.11: Mandatory Prepayments and Commitment Reductions.

     A. Section 2.11(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(a) If any Indebtedness shall be incurred by any Group Member (excluding (i) any Indebtedness incurred in accordance with Sections 7.2(a) through (e), (ii) any purchase money Indebtedness incurred under Section 7.2(f) in connection with an acquisition permitted by Section 7.8(g) and (iii) the proceeds of the 2008 Exchangeable Senior Notes which are used either to pay the Acquisition consideration or to repay the Bridge Loans, but including all other Indebtedness incurred in accordance with Section 7.2(f)), an amount equal to 50% of the Net Cash Proceeds thereof shall be applied on the date of such incurrence toward the prepayment of the Term Loans and Revolving Loans as set forth in Section 2.11(d).”

     B. Section 2.11(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(b) (i) If on any date any Group Member shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall have been delivered in respect thereof, 50% of such Net Cash Proceeds shall be applied within five (5) Business Days of such date toward the prepayment of the Term Loans and Revolving Loans as set forth in Section 2.11(d); provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset Sales that may be excluded from the foregoing requirement pursuant to a Reinvestment Notice (other than Net Cash Proceeds received from the Vibra Sale to the extent (A) reinvested in the Acquisition or the Vibra Acquisition or (B) used to repay the Bridge Loans in an amount not to exceed the difference between the proceeds of the Vibra Sale and the purchase price of the Vibra Acquisition) shall not exceed $25,000,000 in any fiscal year of the Borrower, (ii) if such Net Cash Proceeds are not reinvested within five (5) Business Days of the date such Net Cash Proceeds are received (other than Net Cash Proceeds received from the Vibra Sale to the extent (A) reinvested in the Acquisition or the Vibra Acquisition or (B) used to repay the Bridge Loans in an amount not to exceed the difference between the proceeds of the Vibra Sale and the purchase price of the Vibra Acquisition), the Borrower shall apply such Net Cash Proceeds within five (5) Business Days of the date of receipt to the

repayment of the Revolving Credit Loans (without any corresponding reduction of the Revolving Commitments), (iii) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans and the Revolving Loans as set forth in Section 2.11(d), and to the extent that the Borrower has applied Net Cash Proceeds to the repayment of Revolving Loans pursuant to clause (ii) above, the Borrower shall reborrow Revolving Loans in the amount of the Reinvestment Prepayment Amount and apply such proceeds to the prepayment of Term Loans and Revolving Loans as set forth in Section 2.11(d).

(ii) If on any date while any Bridge Loans are outstanding any Group Member shall receive Net Cash Proceeds from any Acquisition Asset Sale or Acquisition Recovery Event then, 25% of such Net Cash Proceeds shall be applied within five (5) Business Days of such date toward the prepayment of the Term Loans and Revolving Loans as set forth in Section 2.11(d). For purposes of this Section 2.11(b)(ii), “Acquisition Asset Sale” means any Disposition of property or series of related Dispositions of any property acquired in the Acquisition other than a Borrowing Base Property (excluding any such Disposition permitted by clause (a), (b), (c) or (d) of Section 7.5) that yields gross proceeds to any Group Member (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $500,000; and “Acquisition Recovery Event” means any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any property acquired in the Acquisition other than a Borrowing Base Property.”

1.3 Amendments to Section 4

     A. Section 4.5 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder, the issuance of the Letters of Credit and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Group Member, except for any such violation which could not reasonably be expected to have a Material Adverse Effect, and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents and the Bridge Loan Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.”

     B. Section 4.15 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“4.15 Subsidiaries. Except as disclosed to the Administrative Agent by the Borrower in writing from time to time after the Closing Date, (a) Schedule 4.15 sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the

percentage of each class of Capital Stock owned by any Loan Party and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan Documents and the Bridge Loan Documents.”

1.4 Amendments to Section 6.2: Certificates; Other Information.

     A. Section 6.2(d) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(d) no later than 5 Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Senior Note Indenture, the Senior Exchangeable Note Indenture or the 2008 Senior Exchangeable Note Indenture;”

     B. Section 6.2(f) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(f) promptly, (i) updates to Schedules 4.19(a), 4.23(a) and 4.23(b) and (ii) such additional financial and other information as any Lender may from time to time reasonably request.”

1.5 Amendment to Section 6.10(a): Additional Collateral, etc.

     Section 6.10(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(a) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary or an Excluded Subsidiary) created or acquired after the Closing Date by any Group Member (which, for the purposes of this paragraph (a), shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary or an Excluded Subsidiary), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Group Member, subject to the terms of the Intercreditor Agreement, (ii) deliver to the Administrative Agent any certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, subject to the terms of the Intercreditor Agreement, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent and (C) to deliver to the Administrative Agent a certificate of such Subsidiary, substantially in the form of Exhibit C, with

appropriate insertions and attachments, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.”

1.6 Amendments to Section 7.1: Financial Condition Covenants.

     A. Section 7.1(a) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(a) Total Leverage Ratio. Permit the ratio of Total Indebtedness to Total Asset Value (the “Total Leverage Ratio”) as at the last day of any period of four consecutive fiscal quarters of the Borrower or on the date of any incurrence of Indebtedness by the Borrower or its Subsidiaries to exceed 55%, provided that (A) such ratio may exceed 55% as of the end of or during the fiscal quarters ending March 31, 2008, June 30, 2008 and September 30, 2008 upon or following initial consummation of the Acquisition or incurrence of Indebtedness to finance the Acquisition so long as such ratio does not exceed 65%, and (B) such ratio may exceed 55% as of the end of up to 2 consecutive fiscal quarters in any other one fiscal year so long as such ratio does not exceed 60%.

     B. Section 7.1(f) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(f) Floating Rate Debt. Permit the ratio of Total Indebtedness that bears interest at a floating rate of interest to Total Asset Value as at the last day of any period of four consecutive fiscal quarters of the Borrower or on the date of any incurrence of Indebtedness by the Borrower or its Subsidiaries to exceed 30%, provided that such ratio may exceed 30% as of the end of or during the fiscal quarters ending March 31, 2008, June 30, 2008 and September 30, 2008 upon or following initial consummation of the Acquisition or incurrence of Indebtedness to finance the Acquisition so long as such ratio does not exceed 42.5%.”

1.7 Amendments to Subsection 7.2: Indebtedness.

     A. Section 7.2(a) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(a) (i) Indebtedness of any Loan Party pursuant to any Loan Document, (ii) Indebtedness of the Borrower and Guarantee Obligations of the Borrower and the Guarantors in respect of the Bridge Loan Documents in an aggregate principal amount not to exceed $300,000,000 minus the aggregate principal amount of the 2008 Exchangeable Senior Notes and (iii) any refinancings, renewals or extensions of any Indebtedness described in the foregoing clause (ii) (a “Refinancing”) or any Indebtedness incurred to refund, replace or repay any Indebtedness described in the foregoing clause (ii) (a “Replacement”); provided that (A) the principal amount thereof (excluding accrued interest and the amount of fees and expenses incurred and premiums paid in connection therewith) is not increased, (B) the weighted average life to maturity of the principal amount thereof has not decreased, nor the final maturity thereof shortened, in either case,

with respect to a period when Loans are outstanding, and (C) any Liens securing any such Indebtedness which is a Refinancing are junior to or pari passu in priority with the Liens securing the Obligations, subject to the Intercreditor Agreement, and in any case are limited to Collateral that secures the Loans, and (D) any such Indebtedness which is a Replacement shall be unsecured or shall be secured by Liens on properties which are not Borrowing Base Properties or Collateral hereunder;”

     B. Section 7.2(e) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(e) (i) Indebtedness of the Borrower in respect of the Senior Notes, the Senior Exchangeable Notes and the 2008 Senior Exchangeable Notes and (ii) Guarantee Obligations of Holdings in respect of such Indebtedness;”

     C. Section 7.2 of the Credit Agreement is hereby further amended by deleting the last proviso thereof and substituting the following therefor:

“; provided that the Borrower shall not permit any Subsidiary Guarantor that is the owner (or ground-lessee) of a Borrowing Base Property or a Mortgage Note included in the computation of Borrowing Base Value to create, incur, assume, become liable in respect of or suffer to exist any Indebtedness (other than with respect to guarantees of the Loan Documents and the Bridge Loan Documents) that is recourse to such Subsidiary Guarantor.”

1.8 Amendments to Section 7.3: Liens.

     A. Section 7.3(e) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(e) easements, rights-of-way, restrictions and other similar encumbrances that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; and any Permitted Exceptions as set forth and defined in the Purchase Agreement and its exhibits and schedules;”

     B. Section 7.3(g) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(g) Liens created pursuant to the Security Documents and Liens on the same Collateral created pursuant to the Bridge Loan Documents or any Refinancing under Section 7.2(a), subject to the Intercreditor Agreement;”

     C. Section 7.3(i) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting the following therefor:

“(i) Liens (not affecting the Collateral) securing Indebtedness constituting a Replacement under Section 7.2(a) or Indebtedness permitted by Section 7.2(f);”

     D. Section 7.3 of the Credit Agreement is hereby further amended by deleting the last proviso thereof and substituting the following therefor:

“provided that notwithstanding the foregoing, the Borrower shall not, and shall not permit any of its Subsidiaries to, grant a Lien on its Capital Stock as collateral for Indebtedness to any Person other than the Administrative Agent or the “Administrative Agent” under the Bridge Loan Documents.”

1.9 Amendment to Section 7.5: Disposition of Property.

     A. Section 7.5 of the Credit Agreement is hereby amended by renumbering subsection 7.5(e) as subsection 7.5(f), and by adding a new subsection 7.5(e) following the current subsection 7.5(d) as follows:

“(e) Dispositions of property pursuant to the Vibra Sale, so long as no Default or Event of Default has occurred and is continuing, or would occur after giving effect thereto, and the Borrower complies with Section 2.11 and Section 6.11;”

     B. Section 7.5(f) of the Credit Agreement (formerly Section 7.5(e)) is hereby amended by deleting such section in its entirety and substituting the following therefor:

“(f) the Disposition of other property having a fair market value not to exceed $50,000,000 in the aggregate for any fiscal year of the Borrower so long as no Default or Event of Default has occurred and is continuing, or would occur after giving effect thereto, and the Borrower complies with Section 2.11 and Section 6.11; provided that if the Bridge Loans are outstanding, the foregoing $50,000,000 limit shall be increased to the extent necessary to permit Dispositions for the purpose of repaying the Bridge Loans.”

1.10 Amendment to Section 7.9: Optional Payments and Modifications of Certain Debt Instruments.

     Section 7.9 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“7.9 Optional Payments and Modifications of Certain Debt Instruments. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to the Senior Notes, the Senior Exchangeable Notes or the 2008 Senior Exchangeable Notes; or (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Notes, the Senior Exchangeable Notes or the 2008 Senior Exchangeable Notes (other than any such amendment, modification, waiver or other change that would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon).”

1.11 Amendment to Section 7.12: Swap Agreements.

     Section 7.12 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“7.12 Swap Agreements. Enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Capital Stock or the Senior Notes, the Senior Exchangeable Notes or the 2008 Senior Exchangeable Notes) and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.”

1.12 Amendment to Section 7.14: Negative Pledge Clauses.

     Section 7.14 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“7.14 Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Group Member to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, other than (a) this Agreement and the other Loan Documents and the Bridge Loan Documents, (b) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby) and (c) any restrictions set forth in the organizational documents of the Subsidiaries of the Borrower listed on Schedule ES.”

1.13 Amendment to Section 7.15: Clauses Restricting Subsidiary Distributions.

     Section 7.15 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“7.15 Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or advances to, or other Investments in, the Borrower or any other Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents, the Bridge Loan Documents, the 2008 Senior Exchangeable Note Indenture, the Senior Exchangeable Note Indenture or the Senior Indenture, (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, and (iii) any restrictions set forth in the organizational documents of the Subsidiaries of the Borrower listed on Schedule ES.”

1.14 Amendment to Section 7A.

     The Credit Agreement is hereby amended by adding the following new Section 7A:

          “SECTION 7A: ADDITIONAL COVENANTS AND DEFAULTS.

     Notwithstanding anything to the contrary in this Agreement, to the extent that the Borrower enters into the Bridge Loan Documents and such Bridge Loan Documents contain any affirmative or negative covenants (other than those regarding payment terms) or events of default that are more restrictive on the Borrower or the other Loan Parties than the covenants and events of default set forth in this Agreement, then such more restrictive covenants and events of default in the Bridge Loan Documents shall automatically be incorporated herein by reference, mutatis mutandis, as if fully set forth herein for so long as the Bridge Loan Documents (and any Refinancing thereof) remain in effect, and the Loan Parties shall be bound by such covenants and events of default during such time (it being understood that after such time, without any action by the Borrower, any other Loan Party or any Lender, such covenants and events of default shall cease to be applicable hereunder). If requested by the Administrative Agent, the Borrower shall enter into an amendment to this Agreement to formally incorporate such covenants and events of default into this Agreement.”

1.15 Amendment to Section 8: Events of Default.

     Section 8(l) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(l) Holdings shall (i) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Borrower, (ii) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (w) Indebtedness incurred with respect to guarantees of the Senior Notes, the Senior Exchangeable Notes, the 2008 Senior Exchangeable Notes or the Indebtedness set forth on Schedule 7.2(d), (x) nonconsensual obligations imposed by operation of law, (y) obligations pursuant to the Loan Documents and the Bridge Loan Documents to which it is a party and (z) obligations with respect to its Capital Stock, or (iii) own, lease, manage or otherwise operate any properties or assets (including cash (other than cash received in connection with dividends made by the Borrower in accordance with Section 7.6 pending application in the manner contemplated by said Section) and cash equivalents) other than the ownership of shares of Capital Stock of the Borrower; or”

1.16 Amendment to Section 9.1: Appointment.

     Subsection 9.1 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent,

in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In addition, each of the Lenders irrevocably appoints the Administrative Agent to act as “Credit Facility Collateral Agent” under the Intercreditor Agreement and authorizes the Administrative Agent, acting as “Credit Facility Collateral Agent”, to execute the Intercreditor Agreement and each of the Lenders agree to be bound by the terms thereof. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.”

1.17 Amendment to Section 9.6: Non-Reliance on Agents and Other Lenders.

     Subsection 9.6 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“9.6 Non-Reliance on Agents and Other Lenders; Intercreditor Agreement. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. Notwithstanding anything herein to the contrary, each Lender and the Agents acknowledge that the Lien and security interest granted to the Administrative Agent pursuant to the Security Documents and the exercise of any right or remedy by the

Administrative Agent thereunder, are subject to the provisions of the Intercreditor Agreement. In the event of a conflict or any inconsistency between the terms of the Intercreditor Agreement and the Security Documents, the terms of the Intercreditor Agreement shall prevail.”

1.18 Amendment to Section 10.1: Amendment and Waivers.

     Section 10.1 of the Credit Agreement is hereby amended by inserting the following sentence at the end of such Section 10.1:

“Notwithstanding anything to the contrary set forth herein, (i) the Borrower shall have no right to consent to any amendment, supplement, modification or waiver to the Intercreditor Agreement and (ii) the Administrative Agent and the Borrower may enter into an amendment contemplated by Section 7A without the consent or approval of any Lender.”

1.19 Addition of Exhibit.

     The Credit Agreement is hereby amended by adding thereto a new Exhibit F in the form of Exhibit A to this Amendment.

1.20 Amendment to Exhibit.

     Exhibit B to the Credit Agreement is hereby deleted in its entirety and replaced by Exhibit D attached hereto.

1.21 Vibra Sale .

     The Borrower and the Lenders agree that the Borrower shall deliver the notice of the Vibra Sale required by Section 6.11 of the Credit Agreement and Section 8.15(b) of the Guarantee and Collateral Agreement not less than two (2) Business Days prior to such Disposition (instead of not less than five (5) Business Days prior to such Disposition as would otherwise be required by Section 6.11 of the Credit Agreement or not less than ten (10) Business Days prior to the proposed release of Collateral as would otherwise be required by Section 8.15(b) of the Guarantee and Collateral Agreement).

1.22 Guarantee and Collateral Agreement .

     The Borrowers and the Lenders agree that any provision in Section 3.1, Section 4.3(a) or elsewhere in the Guarantee and Collateral Agreement that requires the Administrative Agent, for the benefit of the Secured Parties, to have a first priority lien (or words of similar import) on the Collateral shall be deemed to be qualified as subject to the terms of the Intercreditor Agreement.

SECTION 2. REPRESENTATIONS AND WARRANTIES

          In order to induce Lenders and Administrative Agent to enter into this Amendment, Borrower and Holdings each represents and warrants to each Lender and Administrative Agent that the following statements are true, correct and complete:

          (i) each of Borrower and Holdings has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the “Amended Agreement”);

          (ii) the execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Borrower and Holdings;

          (iii) No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Amendment, except consents, authorizations, filings and notices which have been obtained or made and are in full force and effect;

          (iv) The execution, delivery and performance of this Amendment will not violate any Requirement of Law or any Contractual Obligation of any Group Member, except for any such violation which could not reasonably be expected to have a Material Adverse Effect, and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents or the Bridge Loan Documents).

          (v) this Amendment and the Amended Agreement have been duly executed and delivered by Borrower and Holdings and are the legally valid and binding obligations of Borrower and Holdings, enforceable against Borrower and Holdings in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability;

          (vi) the representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the date hereof and the First Amendment Effective Date to the same extent as though made on and as of such dates, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date; and

          (vii) no event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute a Default or Event of Default.

SECTION 3. ACKNOWLEDGEMENT AND CONSENT

     Each Guarantor has read this Amendment and consents to the terms hereof and further hereby confirms and agrees that, notwithstanding the effectiveness of this Amendment, the obligations of such Guarantor under, and the Liens granted by such Guarantor as collateral security for the indebtedness, obligations and liabilities evidenced by the Credit Agreement and the other Loan Documents pursuant to, each of the Loan Documents to which such Guarantor is a party shall not be impaired and each of the Loan Documents to which such Guarantor is a party

is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects.

     Each of Holdings, Borrower and the Subsidiary Guarantors hereby acknowledges and agrees that the Secured Obligations under, and as defined in, the Guarantee and Collateral Agreement dated as of November 30, 2007, by and among Holdings, Borrower, the Subsidiary Guarantors and Administrative Agent (the “Guarantee and Collateral Agreement”) will include all Obligations under, and as defined in, the Credit Agreement (as amended hereby).

     Each Guarantor acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to the Credit Agreement.

SECTION 4. CONDITIONS TO EFFECTIVENESS

     Except as set forth below, Section 1 of this Amendment shall become effective only upon the satisfaction of the following conditions precedent (the date of satisfaction of such conditions being referred to as the “First Amendment Effective Date”):

     A. The Borrower, Holdings, the other Guarantors and the Required Lenders shall have indicated their consent hereto by the execution and delivery of the signature pages hereof to the Administrative Agent.

     B. The Administrative Agent shall have received a secretary’s certificate of Holdings and the Borrower (i) either confirming that there have been no changes to its organizational documents since November 30, 2007, or if there have been changes to Holdings’ or the Borrower’s organizational documents since such date, certifying as to such changes, and (ii) certifying as to resolutions and incumbency of officers with respect to this Amendment and the transactions contemplated hereby.

     C. The Administrative Agent shall have received the legal opinion of Goodwin Procter LLP, counsel to the Borrower and its Subsidiaries, in form and substance reasonably satisfactory to the Administrative Agent, with respect to this Amendment.

     D. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel for which the Borrower agrees it is responsible pursuant to Section 10.5 of the Credit Agreement, the fees described in Section 5 below, and the fees set forth in the fee letter of even date herewith), in connection with this Amendment.

     E. The Lenders shall have received a certificate of a Responsible Officer of the Borrower certifying as to compliance with the financial covenants set forth in Section 7.1 on a pro-forma basis on the First Amendment Effective Date after giving effect to the occurrence of the Acquisition and the related incurrence of Indebtedness, which certificate shall include

calculations in reasonable detail demonstrating such compliance, including as to the calculation of Borrowing Base Value.

SECTION 5. AMENDMENT FEE

     As consideration for the Lenders’ agreement to amend the Credit Agreement by this Amendment, the Borrower agrees to pay, on the First Amendment Effective Date, to each Lender which has duly executed and delivered this Amendment on or before 9:00 a.m. (New York City time) on March 14, 2008, an amendment fee equal to 0.15% of the sum of (a) such Lender’s Revolving Commitment and (b) the outstanding principal amount of such Lender’s Term Loans under the Credit Agreement.

SECTION 6. MISCELLANEOUS

     A. Reference to and Effect on the Credit Agreement and the Other Loan Documents.

     (i) On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby.

     (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

     (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent or any Lender under the Credit Agreement or any of the other Loan Documents.

     B. Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

     C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

     D. Intercreditor Agreement. The Lenders hereby authorize the Administrative Agent to enter into the Intercreditor Agreement.

     E. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so

executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 4 hereof) shall become effective upon the execution of a counterpart hereof by Holdings, Borrower and the Requisite Lenders and receipt by Borrower and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

[Remainder of this page intentionally left blank]

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

SUBSIDIARY GUARANTORS
(FOR PURPOSES OF SECTION 3):		MPT OF REDDING, LLC
		MPT OF CHINO, LLC
		MPT OF SHERMAN OAKS, LLC
		MPT OF BUCKS COUNTY, LLC
		MPT OF VICTORVILLE, LLC
		MPT OF BLOOMINGTON, LLC
		MPT OF COVINGTON, LLC
		MPT OF DENHAM SPRINGS, LLC
		MPT OF DALLAS LTACH, LLC
		MPT OF CENTINELA, LLC
		MPT OF MONTCLAIR, LLC
		MPT OF PORTLAND, LLC
		MPT OF WARM SPRINGS, LLC
		MPT OF VICTORIA, LLC
		MPT OF LULING, LLC
		MPT OF HUNTINGTON BEACH, LLC
		MPT OF WEST ANAHEIM, LLC
		MPT OF LA PALMA, LLC
		MPT OF TWELVE OAKS, LLC
		MPT OF SHASTA, LLC
		MPT OF PARADISE VALLEY, LLC
		MPT OF SOUTHERN CALIFORNIA, LLC
		MPT OF INGLEWOOD, LLC
		8451 PEARL STREET, LLC
		4499 ACUSHNET AVENUE, LLC
		MPT OF CALIFORNIA, LLC
		92 BRICK ROAD, LLC
		1300 CAMPBELL LANE, LLC
		7173 NORTH SHARON AVENUE, LLC

		By:		MPT OPERATING PARTNERSHIP, L.P., sole member of each of the above entities
		By:		/s/ R. Steven Hamner
				Name:		R. Steven Hamner
				Title:		Chief Financial Officer

		MPT OF BUCKS COUNTY, L.P.
		By:		MPT OF BUCKS COUNTY, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF DALLAS LTACH, L.P.
		By:		MPT OF DALLAS LTACH, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF CENTINELA, L.P.
		By:		MPT OF CENTINELA, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF MONTCLAIR, L.P.
		By:		MPT OF MONTCLAIR, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF WARM SPRINGS, L.P.
		By:		MPT OF WARM SPRINGS, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF VICTORIA, L.P.
		By:		MPT OF VICTORIA, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member

		MPT OF LULING, L.P.
		By:		MPT OF LULING, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF HUNTINGTON BEACH, L.P.
		By:		MPT OF HUNTINGTON BEACH, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF WEST ANAHEIM, L.P.
		By:		MPT OF WEST ANAHEIM, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF LA PALMA, L.P.
		By:		MPT OF LA PALMA, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF TWELVE OAKS, L.P.
		By:		MPT OF TWELVE OAKS, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF SHASTA, L.P.
		By:		MPT OF SHASTA, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member

		MPT OF PARADISE VALLEY, L.P.
		By:		MPT OF PARADISE VALLEY, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF SOUTHERN CALIFORNIA, L.P.
		By:		MPT OF SOUTHERN CALIFORNIA, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		MPT OF INGLEWOOD, L.P.
		By:		MPT OF INGLEWOOD, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member
		SAN JOAQUIN HEALTH CARE ASSOCIATES, LIMITED PARTNERSHIP
				By:		MPT OF CALIFORNIA, LLC, its general partner
				By:		MPT OPERATING PARTNERSHIP, L.P., its sole member

LENDERS:

		J.P. MORGAN CHASE BANK, N.A., as Lender and as Administrative Agent
		By:		/s/ Vanessa Chiu
		Name:		Vanessa Chiu
		Title:		Vice President

		KEYBANK NATIONAL ASSOCIATION, as Syndication Agent and as a Lender
		By:		/s/ Laura Conway
		Name:		Laura Conway
		Title:		Vice President

		RAYMOND JAMES BANK, FSB, as a Lender
		By:		/s/ Thomas G. Scott
		Name:		Thomas G. Scott
		Title:		Senior Vice President

		DEUTSCHE BANK TRUST COMPANY AMERICAS, as a Lender
		By:		/s/ Erin Morrissey
		Name:		Erin Morrissey
		Title:		Vice President
		By:		/s/ Omayra Laucella
		Name:		Omayra Laucella
		Title:		Vice President

		UBS LOAN FINANCE LLC, as a Lender
		By:		/s/ David B. Julie
		Name:		David B. Julie
		Title:		Associate Director
		By:		/s/ Irja R. Otsa
		Name:		Irja R. Otsa
		Title:		Associate Director

		ROYAL BANK OF CANADA, as a Lender
		By:		/s/ Dan LePage
		Name:		Dan LePage
		Title:		Authorized Signatory

EXECUTION COPY

Exhibit 10.2

PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS

BY AND BETWEEN

THE SELLER PARTIES IDENTIFIED HEREIN
(“Seller”)

and

a Delaware limited partnership

(“Buyer”)

Dated effective as of March 13, 2008

TABLE OF CONTENTS

						Page
ARTICLE I PURCHASE AND SALE							1
		Section 1.1.		Agreement of Purchase and Sale			1
		Section 1.2.		Property Defined			3
		Section 1.3.		Purchase Price			3
		Section 1.4.		Payment of Purchase Price			4
		Section 1.5.		Opening of Escrow; Deposit			4
		Section 1.6.		Liquidated Damages			5
		Section 1.7.		Title Company			9
		Section 1.8.		Independent Contract Consideration			9
ARTICLE II TITLE AND SURVEY							9
		Section 2.1.		Title Contingency Period			9
		Section 2.2.		Title Examination			10
		Section 2.3.		Permitted Exceptions			11
		Section 2.4.		Conveyance of Title			12
ARTICLE III REVIEW OF PROPERTY							12
		Section 3.1.		Right of Inspection			12
		Section 3.2.		Environmental Reports			14
		Section 3.3.		No Financing Contingency			14
		Section 3.4.		Review of Estoppel Certificates			14
		Section 3.5.		Due Diligence; Right of Termination			16
		Section 3.6.		Rights Upon Termination			17
		Section 3.7.		Shiloh Facility and HS Properties			17
ARTICLE IV CLOSING							18
		Section 4.1.		Time and Place			18
		Section 4.2.		Seller’s Obligations at Closing			19
		Section 4.3.		Buyer’s Obligations at Closing			21
		Section 4. 4.		Title Company’s Obligations at Closing			22
		Section 4.5.		Credits and Prorations			22
		Section 4.6.		Transaction Taxes and Closing Costs			24
		Section 4.7.		Conditions Precedent to Obligation of Buyer			25
		Section 4.8.		Conditions Precedent to Obligation of Seller			27
		Section 4.9.		Pre-Emptive Rights			28
		Section 4.10.		Termination of Agreement With Respect to Certain Properties			28
		Section 4.11.		UCC Financing Statements			28
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS							29
		Section 5.1.		Representations and Warranties of Seller			29
		Section 5.2.		Survival of Seller’s Representations and Warranties			32
		Section 5.3.		Representations and Warranties of Buyer			33
		Section 5.4.		Survival of Buyer’s Representations and Warranties			35

						Page
		Section 5.5.		Covenants of Seller			35
		Section 5.6.		Covenants of Buyer			36
ARTICLE VI DEFAULT							37
		Section 6.1.		Default by Buyer			37
		Section 6.2.		Default by Seller			37
		Section 6.3.		Recoverable Damages			39
ARTICLE VII RISK OF LOSS							39
		Section 7.1.		Risk of Loss			39
ARTICLE VIII COMMISSIONS							39
		Section 8.1.		Brokerage Commissions			39
ARTICLE IX DISCLAIMERS AND WAIVERS							39
		Section 9.1.		AS IS SALE; DISCLAIMERS			39
		Section 9.2.		Survival of Disclaimers			41
ARTICLE X MISCELLANEOUS							41
		Section 10.1.		Confidentiality			41
		Section 10.2.		Public Disclosure			42
		Section 10.3.		Assignment			42
		Section 10.4.		Notices			42
		Section 10.5.		Modifications			43
		Section 10.6.		Entire Agreement			43
		Section 10.7.		Further Assurances			44
		Section 10.8.		Counterparts			44
		Section 10.9.		Electronically Transmitted Signatures			44
		Section 10.10.		Severability			44
		Section 10.11.		Applicable Law; Venue			44
		Section 10.12.		No Third-Party Beneficiary			45
		Section 10.13.		Captions			45
		Section 10.14.		Construction			45
		Section 10.15.		Recordation			45
		Section 10.16.		Attorneys’ Fees			45
		Section 10.17.		Time of the Essence			45
		Section 10.18.		Joint and Several Liability			45
		Section 10.19.		Changes to Property Entitlements			45
		Section 10.20.		Dates			46
		Section 10.21.		Waiver of Jury Trial			46
		Section 10.22.		No Waiver			46
		Section 10.23.		Legal Descriptions			46
		Section 10.24.		Matters Related to Specific States			46
ARTICLE XI MEMBERSHIP INTEREST							48
		Section 11.1.		Additional Defined Terms			48
		Section 11.2.		Purchase and Sale of the Membership Interest			49
		Section 11.3.		Additional Representations and Warranties of HCP			49
		Section 11.4.		Additional Representations of Buyer			50
		Section 11.5.		Additional Provisions Related to the Membership Interest			50

						Page
ARTICLE XII PARTNERSHIP INTEREST							51
		Section 12.1.		Additional Defined Terms			51
		Section 12.2.		Purchase and Sale of the Partnership Interests			52
		Section 12.3.		Additional Representations and Warranties of HCP			53
		Section 12.4.		Additional Representations of Buyer			54
		Section 12.5.		Additional Provisions Related to the Partnership Interests			54

EXHIBITS

A-l		—		FEE PROPERTY DESCRIPTIONS AND ADDRESSES
A-2		—		GROUND LEASE PROPERTY DESCRIPTIONS AND ADDRESSES
A-3		—		DESCRIPTION OF GROUND LEASES
B		—		LIST OF EXCLUDED PERSONAL PROPERTY
C		—		ESCROW GENERAL PROVISIONS
D		—		LIST OF PROPERTY DOCUMENTS
E		—		ENVIRONMENTAL REPORTS
F-l		—		FORM OF TENANT ESTOPPEL
F-2		—		FORM OF LANDLORD/SELLER ESTOPPEL
F-3		—		FORM OF LESSOR ESTOPPEL
F-4		—		FORM OF SELLER GROUND LEASE ESTOPPEL
G-l		—		FORM OF DEED
G-2		—		FORM OF ASSIGNMENT AND ASSUMPTION OF GROUND LEASE
H		—		FORM OF BILL OF SALE
I		—		FORM OF ASSIGNMENT AND ASSUMPTION OF LEASES
J		—		FORM OF TENANT NOTICE
K		—		FORM OF ASSIGNMENT OF ANCILLARY DOCUMENTS
L		—		FORM OF FIRPTA CERTIFICATE
M		—		FORM OF ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTEREST AGREEMENT
N		—		FORM OF RELEASE OF CLAIMS
O		—		FORM OF ASSIGNMENT AND ASSUMPTION OF PARTNERSHIP INTEREST AGREEMENT

SCHEDULES

1.1 (d)				LIST OF LEASES
1 .3				ALLOCATED PURCHASE PRICE
3.4(a)				ESTOPPEL MATTERS
5.1 (a)				DBA NAMES
5.1(f)				LITIGATION
5.l(g)				GUARANTEES AND LETTERS OF CREDIT
11.3(a)				MEMBERSHIP INTERESTS OF HCPI/IDAHO FALLS, LLC
12.3(a)				PARTNERSHIP INTERESTS

PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS

     THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this “Agreement”) is made effective as of March 13, 2008 (the “Effective Date”), by and between HCP, INC. (formerly known as Health Care Property Investors, Inc.), a Maryland corporation (“HCP”), FAEC HOLDINGS (BC), LLC, a Delaware limited liability company (“FAEC”), HCPI TRUST, a Maryland real estate trust (“HCPIT”), HCP DAS PETERSBURG VA, LP, a Delaware limited partnership (“HCPDAS”), and TEXAS HCP HOLDING, L.P., a Delaware limited partnership (“THH”, and together with HCP, HCPIT, HCPDAS and FAEC collectively, “Seller”), and MPT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Buyer”).

ARTICLE I
PURCHASE AND SALE

     Section 1.1. Agreement of Purchase and Sale. Subject to the terms and conditions hereinafter set forth, Seller agrees to sell and convey or cause to be sold and conveyed to Buyer, and Buyer agrees to purchase from Seller, all of Seller’s right, title and interest in and to the following:

     (a) (i) the fee interest in and to those certain tracts or parcels of land situated in the States of Connecticut, Massachusetts, Louisiana, Missouri, Utah, Rhode Island, Arizona, South Carolina, Texas, Arkansas, Kansas, Virginia, Florida and Idaho (subject, in the case of the Idaho Property (as such term is defined in Section 11.1 hereof), the Arkansas Property and the Kansas Property (as such terms are defined in Section 12.1 hereof), to the provisions of Article XI and Article XII hereof, as applicable) and more particularly described on Exhibit A-l attached hereto and made a part hereof, (ii) the sub-subleasehold interest in and to that certain tract or parcel of land situated in the State of West Virginia and more particularly described on Exhibit A-2 attached hereto and made a part hereof pursuant to that certain Rehab Sublease described on Exhibit A-3 attached hereto, and (iii) the leasehold interest in and to that certain tract or parcel of land situated in the State of Connecticut and more particularly described on Exhibit A-2 attached hereto and made a part hereof pursuant to that certain lease described on Exhibit A-3 attached hereto (the properties described on Exhibit A-2 being herein referred to collectively as the “Ground Lease Properties”; and the leases described on Exhibit A-3 being referred to collectively as the “Ground Leases”), in each case together with all easements, rights and appurtenances pertaining to such property, including any water rights and right, title and interest of Seller in and to adjacent streets, alleys, and rights-of-way (the property described in clause (a) of this Section 1.1 being herein referred to as the “Land”). The addresses for the parcels of Land are also set forth on Exhibit A-l and Exhibit A-2;

     (b) the commercial buildings located on the Land, and any and all other buildings, structures, fixtures and other improvements affixed to or located on the Land, excluding trade fixtures owned by tenants (but including any rights of Seller to retain such trade fixtures pursuant to the terms of the applicable Leases) (the property described in clause (b) of this Section 1.1 being herein referred to collectively as the “Improvements”);

     (c) all tangible personal property which is owned by Seller, located upon the Land or within the Improvements and used exclusively in connection with the operation of the Land and the Improvements, including, without limitation, any appliances, furniture, carpeting, draperies and curtains, tools and supplies, and other items of personal property (the “Personal Property”); provided, however, that Personal Property shall specifically exclude (i) any tangible personal property owned by tenants or other occupants of the Properties (as such term is defined in Section 1.2 hereof), and (ii) those specific items of tangible personal property listed on Exhibit B as “Excluded Personal Property”;

     (d) to the extent they are in effect on the date of the Closing (as such term is defined in Section 4.1 hereof), any and all of Seller’s right, title and interest (i) as landlord/lessor under those certain leases described on Schedule 1.1 (d) attached hereto (the “Leases”), and (ii) in and to any other leases, licenses, occupancy agreements, commitment letters, letters of intent and other rental agreements, whether written or oral, if any, including all amendments or modifications thereto or supplements thereof, that grant or will grant a possessory interest in and to any space in the Real Property (as such term is defined in Section 1.2 hereof), or that otherwise assign or convey rights with regard to all or any portion of the Real Property or the Improvements, together with all rents, fees, and other sums due or payable thereunder (the “Rents”) and any and all unapplied security and other deposits (including, without limitation, deposits for taxes, insurance, maintenance or improvements) in Seller’s possession in connection therewith (collectively, the “Security Deposits”);

     (e) to the extent they are in effect on the date of the Closing, any and all of Seller’s right, title and interest in and to any subleases, sublicenses and other rental or occupancy agreements between any tenants of the Real Properties (as such term is defined in Section 1.2 hereof), and any subtenants, sublicensees or other occupants of the Real Properties, whether written or oral, if any, including all amendments or modifications thereto or supplements thereof (the property described in clause (e) of this Section 1.1 being referred to collectively as the “Subleases”);

     (f) to the extent they are in effect on the date of the Closing, any and all of Seller’s assignable right, title and interest in and to any security agreements, guaranty agreements, indemnification agreements, assignments of rents and leases, collateral assignments, letters of credit (and any cash deposits made by tenants under Leases in lieu thereof) and such other similar agreements or instruments, including all amendments or modifications thereto or reaffirmations or supplements thereof, pursuant to which the Seller is or has been granted any security interest, lien, encumbrance or other rights to collateral, payment or performance of any kind whatsoever, which provide credit enhancements, or which otherwise secure the obligations of tenants under the Leases (the property described in clause (f) of this Section 1.1 being referred to collectively as the “Security Documents”) (provided, however, that Buyer shall pay any and all costs associated with the conveyance of Seller’s interest in the Security Documents);

     (g) to the extent they are in effect on the date of the Closing, any and all of Seller’s assignable right, title and interest in and to any asset purchase agreements, merger agreements, stock purchase agreements, development agreements, bills of sale, assignments, instruments of transfer and other similar agreements or instruments, including all amendments or modifications thereto or supplements thereof, in each case relating to the Seller’s acquisition and development

of the Properties prior to the date hereof (the property described in clause (g) of this Section 1.1 being referred to collectively as the “Acquisition Documents”);

     (h) to the extent they are in effect on the date of the Closing, any and all of Seller’s assignable right, title and interest in and to any intercreditor agreements, forbearance agreements, landlord waivers, subordination agreements and other similar agreements of Seller with creditors of the tenants and subtenants of the Real Properties or otherwise with respect to the Properties (but solely to the extent that the foregoing pertains exclusively to the Real Properties) (the property described in clause (h) of this Section 1.1 being referred to collectively as the “Intercreditor Documents”); and

     (i) all assignable existing warranties and guaranties (express or implied) issued to Seller in connection with the Improvements or the Personal Property, all assignable existing permits, licenses, approvals and authorizations issued to Seller by any governmental authority in connection with the Properties, and, subject to Section 3.1(b) hereof, all assignable right, title and interest of Seller in and to site plans, surveys, architectural drawings, plans and specifications, engineering and environmental plans, floor plans, landscape plans and other plans relating to the Properties (the property described in clause (i) of this Section 1.1. together with the Security Documents, Acquisition Documents, and Intercreditor Documents, being sometimes herein referred to collectively as the “Intangibles”).

     Notwithstanding the foregoing or any other provision of this Agreement to the contrary, Seller shall retain and reserve any and all indemnification rights that may currently exist for the benefit of Seller under the Leases, Subleases, Intangibles or other documents or agreements to the extent that the same pertain to any claims, liabilities or actions arising in connection with acts, omissions or conditions that occurred or existed prior to Closing; provided, however, that such retention and reservation shall be limited to the extent necessary to also provide Buyer with the benefit of such indemnification rights if any claim is made against Buyer arising out of or relating to those same acts, omissions or conditions.

     Section 1.2. Property Defined. The Land and the Improvements are hereinafter sometimes referred to individually as a “Real Property,” and collectively as the “Real Properties.” The Real Property, the Personal Property, the Leases, the Subleases and the Intangibles are hereinafter sometimes referred to individually as a “Property”, and collectively as the “Properties.” The term “Real Properties” and “Properties” shall be amended to reflect any Partial Termination (as defined below) with respect to any Property as provided herein.

     Section 1.3. Purchase Price. Subject to the terms and conditions hereof, Seller shall sell and Buyer shall purchase the Properties for the amount of Three Hundred Seventy Million Nine Hundred Thirty Six Thousand Seven Hundred Eighty Seven Dollars ($370,936,787) (as increased or decreased by prorations and adjustments as herein provided or as a result of any Partial Termination of this Agreement with respect to one or more Properties hereunder in accordance with the terms of this Agreement) (the “Purchase Price”). The parties hereby agree that the Purchase Price shall be allocated among each Property as set forth on Schedule 1.3 attached hereto (the “Allocated Purchase Price”). The parties agree that the Allocated Purchase Price has been arrived at by a process of arm’s-length negotiations, including, without limitation, the parties’ best judgment as to the fair market value of each respective asset, and the parties

specifically agree to the Allocated Purchase Price as final and binding, and will consistently reflect those allocations on their respective federal, state and local tax returns, including any state, county and other local transfer or sales tax declarations or forms to be filed in connection with this transaction, which obligations shall survive the Closing.

     Section 1.4. Payment of Purchase Price.

     The Purchase Price, as increased or decreased by prorations and adjustments as herein provided and less the Deposit (as hereinafter defined) previously deposited by Buyer into Escrow (as hereinafter defined), shall be payable in full at the Closing in cash by wire transfer of immediately available funds to a bank account designated by Seller in writing to Buyer prior to the Closing.

     Section 1.5. Opening of Escrow; Deposit.

     Buyer previously opened escrow (the “Escrow”) with First American Title Insurance Company, a California corporation (the “Title Company”), having its office at 5775 Glenridge Drive Suite A-240, Atlanta Georgia 30328, pursuant to that certain Escrow Agreement, dated as of February 15, 2008, by and between Buyer and Title Company (the “Escrow Agreement”). Pursuant to the Escrow Agreement, Buyer previously deposited with Title Company a sum equal to Two Million Dollars ($2,000,000) (the “First Deposit”) in good funds either by certified bank or cashier’s check or by federal wire transfer. Concurrently with the execution and delivery of this Agreement, (i) the parties hereby agree that the Escrow Agreement shall be of no further force and effect and that Escrow, the First Deposit and (if applicable) the Second Deposit described below shall be held and disbursed by Title Company in accordance with the terms and conditions set forth in this Agreement and (ii) the parties shall deposit with Title Company a fully executed original or original counterpart(s) of this Agreement. If this Agreement is not terminated or deemed terminated by Buyer prior to the expiration of the Contingency Period pursuant to Section 3.5 hereof, then within two (2) Business Days after the expiration of the Contingency Period, Buyer shall deposit with Title Company an additional sum equal to Two Million Dollars ($2,000,000) (the “Second Deposit”) in good funds either by certified bank or cashier’s check or by federal wire transfer. The First Deposit and the Second Deposit (i.e., collectively, Four Million Dollars ($4,000,000)), but excluding interest and earnings thereon, shall hereinafter be referred to collectively as the “Deposit”. The parties hereby direct Title Company to immediately invest the Deposit and the income generated thereby following Title Company’s receipt of the same, in a money market account that provides daily liquidity, or a similar interest bearing money market or bank account as shall be approved by Buyer, in its sole discretion. Title Company shall otherwise handle the Deposit and all earnings thereon in accordance with the terms and conditions of this Agreement. All interest accrued on the Deposit shall belong solely and exclusively to Buyer, and shall not be deemed part of the Deposit. Subject to Section 4.1(c) hereof, the entire Deposit (exclusive of interest or earnings accrued thereon) shall be credited to the Purchase Price upon the close of Escrow and, unless otherwise expressly instructed by Buyer, all such interest and earnings shall be paid to Buyer upon the close of Escrow. All costs and fees imposed on the Deposit account (including, without limitation, Title Company’s fees) shall be paid equally by Buyer and Seller. The failure of Buyer to timely deliver any portion of the Deposit hereunder shall constitute a material default by Buyer hereunder (unless such failure is in connection with Buyer exercising its termination rights

hereunder), and shall entitle Seller, at Seller’s sole option, to terminate this Agreement immediately, retain any portion of the Deposit previously delivered by Buyer to Escrow, and recover from Buyer the full amount of any remaining portion of the Deposit that should have been deposited into Escrow by Buyer hereunder. Except as otherwise specifically provided in this Agreement, the Deposit (excluding the accrued interest thereon) shall be nonrefundable upon expiration of the Contingency Period.

     Section 1.6. Liquidated Damages.

     (a) AFTER EXPIRATION OF THE CONTINGENCY PERIOD, IN THE EVENT THE SALE OF THE PROPERTIES AS CONTEMPLATED HEREUNDER IS NOT CONSUMMATED IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT FOR ANY REASON OTHER THAN BUYER’S MATERIAL BREACH OF THIS AGREEMENT OR FAILURE OF THE CONDITION SET FORTH IN SECTION 4.8(c) TO BE SATISFIED, TITLE COMPANY SHALL DELIVER TO BUYER THE DEPOSIT AND ALL INTEREST AND OTHER AMOUNTS EARNED FROM THE INVESTMENT THEREOF WITHIN THREE (3) BUSINESS DAYS AFTER TITLE COMPANY’S RECEIPT OF BUYER’S WRITTEN REQUEST.

     (b) AFTER EXPIRATION OF THE CONTINGENCY PERIOD, IN THE EVENT THE SALE OF THE PROPERTIES AS CONTEMPLATED HEREUNDER IS NOT CONSUMMATED IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AS A RESULT OF BUYER’S MATERIAL BREACH OF THIS AGREEMENT OR FAILURE OF THE CONDITION SET FORTH IN SECTION 4.8(c) TO BE SATISFIED, TITLE COMPANY SHALL (i) DELIVER TO SELLER THE DEPOSIT AS LIQUIDATED DAMAGES AND (ii) DELIVER TO BUYER ALL INTEREST AND OTHER AMOUNTS EARNED FROM THE INVESTMENT OF THE DEPOSIT WITHIN THREE (3) BUSINESS DAYS AFTER TITLE COMPANY’S RECEIPT OF SELLER’S WRITTEN REQUEST.

     (c) THE BUYER AND SELLER RECOGNIZE THAT SELLER’S ACTUAL DAMAGES IN THE EVENT THE SALE IS NOT CONSUMMATED AS A RESULT OF BUYER’S DEFAULT OR FAILURE OF THE CONDITION SET FORTH IN SECTION 4.8(c) TO BE SATISFIED ARE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE AT THE EFFECTIVE DATE. THEREFORE, BY SEPARATELY EXECUTING THIS SECTION 1.6 BELOW, THE PARTIES ACKNOWLEDGE THAT THE AMOUNT OF THE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF SELLER’S DAMAGES AND NOT A PENALTY, AND SHALL BE SELLER’S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER ARISING FROM A FAILURE OF THE SALE TO CLOSE AS A RESULT OF BUYER’S BREACH OF THIS AGREEMENT OR FAILURE OF THE CONDITION SET FORTH IN SECTION 4.8(c) TO BE SATISFIED.

     (d) NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL THIS SECTION 1.6 LIMIT THE DAMAGES RECOVERABLE BY EITHER PARTY AGAINST THE OTHER PARTY DUE TO THE OTHER PARTY’S OBLIGATION TO INDEMNIFY SUCH PARTY IN ACCORDANCE WITH THIS AGREEMENT OR BY REASON OF THE OTHER PARTY’S OBLIGATION TO PAY THE PREVAILING PARTY’S ATTORNEYS’

FEES AND COSTS PURSUANT TO SECTION 10.16 HEREOF. BY SEPARATELY EXECUTING THIS SECTION 1.6. BELOW, BUYER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTOOD THE ABOVE PROVISION COVERING LIQUIDATED DAMAGES, AND THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS EXECUTED.

     (e) The provisions of this Section 1.6 shall survive the termination of this Agreement.

[Signature Page Follows]

SELLER:

BUYER:

HCP, INC., a Maryland corporation

MPT OPERATING PARTNERSHIP, a

Delaware limited partnership

By:

/s/ Brian J. Maas

By:

MEDICAL PROPERTIES TRUST, LLC,

Name:

Brian J. Maas

a Delaware limited liability company,

Its:

SVP

its General Partner

By:

MEDICAL PROPERTIES TRUST,

INC., a Maryland corporation,

Its Sole Member

By:

/s/ Michael G. Stewart

Name:

MICHAEL G. STEWART

Its:

EXECUTIVE VP AND GENERAL COUNSEL

FAEC HOLDINGS (BC), LLC,

Delaware limited liability company

By:

HCP, INC., a Maryland corporation,

its Sole Member

By:

/s/ Brian J. Maas

Name:

Brian J. Maas

Its:

SVP

TEXAS HCP HOLDING, L.P.,

a Delaware limited partnership

By:

TEXAS HCP G.P., INC., a Delaware

corporation, its General Partner

By:

/s/ Brian J. Maas

Name:

Brian J. Maas

Its:

SVP