EXHIBIT 10.1


CONFIDENTIAL:  THIS  DOCUMENT IS PROVIDED FOR  SETTLEMENT  PURPOSES  ONLY AND IS
SUBJECT TO THE  PROTECTIONS  OF FEDERAL  RULE OF  EVIDENCE  408 AND ALL  SIMILAR
PROVISIONS AND SUPPORTING AUTHORITIES.



                              SETTLEMENT AGREEMENT

         THIS SETTLEMENT  AGREEMENT  (this  "Agreement") is made as of this 20th
day of March, 2000, by and among (a) SENIOR HOUSING PROPERTIES TRUST, a Maryland
real estate  investment  trust ("SNH") and its wholly-owned  subsidiary,  SPTMNR
PROPERTIES TRUST, a Maryland real estate  investment trust ("SPTMNR"),  (b) FIVE
STAR  QUALITY  CARE,  INC.,  a Delaware  corporation  (the "New  Manager"),  (c)
SHOPCO-AZ, LLC, SHOPCO-CA, LLC, SHOPCO-COLORADO, LLC and SHOPCO-WI, LLC, each of
which is a Delaware limited liability company (collectively, the "New Operators"
and,  together  with SNH,  SPTMNR and the New  Manager,  collectively,  the "SNH
Entities"),  and (d) MARINER POST-ACUTE  NETWORK,  INC., a Delaware  corporation
(f/k/a Paragon Health  Network,  Inc.)  ("Mariner"),  GRANCARE,  INC. (f/k/a New
GranCare,  Inc.), a Delaware corporation ("GranCare"),  AMS PROPERTIES,  INC., a
Delaware  corporation  ("AMS  Properties") and GCI HEALTH CARE CENTERS,  INC., a
Delaware  corporation  ("GCIHCC"  and,  together with Mariner,  GranCare and AMS
Properties, collectively, the "Mariner Entities").

                                   WITNESSETH:

         WHEREAS,  SPTMNR is the owner of all of the real  property,  buildings,
plant and equipment and certain of the personal property used in connection with
the  operation  of various  health care and health care related  facilities  (as
further defined and described herein, the "Facilities"); and

         WHEREAS, pursuant to the Master Lease (this and other capitalized terms
used and not otherwise  defined  herein shall have the meanings given such terms
in Article 1 hereof), SPTMNR leases the Facilities to AMS Properties and GCIHCC;
and

         WHEREAS,  pursuant to the Christopher East Note, AMS Properties  agreed
to pay to SPTMNR certain amounts as further described therein; and

         WHEREAS,  pursuant to the GranCare Guaranties,  GranCare guaranteed the
payment  and  performance  of each and every  obligation  and  liability  of AMS
Properties and GCIHCC (each of which is a  wholly-owned  subsidiary of GranCare)
to SPTMNR; and

         WHEREAS,  pursuant  to the Mariner  Guaranty,  Mariner  guaranteed  the
payment and  performance of each and every  obligation and liability of GranCare
(a wholly-owned subsidiary of Mariner), AMS Properties and GCIHCC to SPTMNR; and


<PAGE>

         WHEREAS,  pursuant to that certain Collateral Pledge Agreement dated as
of October 31, 1997, Mariner secured the Mariner Guaranty with $15,000,000.00 in
cash (the "Security Deposit"); and

         WHEREAS,  pursuant  to that  certain  Amended and  Restated  HRP Shares
Pledge Agreement, dated as of June 30, 1992 by AMS Properties (the "Share Pledge
Agreement"),  AMS reaffirmed its pledge of 1,000,000 common shares of beneficial
interest,   $.01  par  value,  of  HRPT  Properties   Trust  (f/k/a  Health  and
Rehabilitation  Properties  Trust),  a Maryland  real  estate  investment  trust
("HRP"),  which  pledge  also  extends to 100,000  common  shares of  beneficial
interest,  $.01 par value,  of SNH which were  distributed as a distribution  in
respect of such HRP shares (collectively,  the "Pledged Shares"),  which Pledged
Shares are  currently  held by REIT  Management  &  Research,  Inc.,  a Delaware
corporation and the successor in interest to HRPT Advisors, Inc. ("RMR") as such
pledgeholder; and

         WHEREAS,  the Mariner  Entities have filed  voluntary  petitions  under
Chapter 11 of the United States Bankruptcy Code, 11 U.S.C.ss.ss.101 et. seq., as
amended  (the  "Bankruptcy  Code") on January  18, 2000 (the  "Petition  Date"),
before the United  States  Bankruptcy  Court for the  District of Delaware  (the
"Court"), Case Nos. 00113 through 00214 (collectively, the "Cases"), which Cases
are currently pending and are being jointly administered; and

         WHEREAS,  the Mariner  Entities wish to liquidate  and terminate  their
obligations  to the SNH  Entities  under the  Existing  Documents  in an orderly
fashion, and to cease operating and/or managing the Retained Facilities, and, in
furtherance  thereof,  the Mariner  Entities have  requested  that,  among other
things,  the SNH Entities accept the surrender of the Master Lease and convey to
the Mariner Entities all of the SNH Entities'  right,  title and interest in and
to the Transferred Facilities; and

         WHEREAS,  the SNH Entities  are willing to accept the  surrender of the
Master Lease and to convey to the Mariner Entities all of their right, title and
interest in and to the Transferred  Facilities,  subject to, and upon, the terms
and conditions set forth herein.

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

                                    ARTICLE 1

                                   DEFINITIONS

         1.1 The following  capitalized  terms shall have the meanings set forth
below:

         "Agreement"  shall  mean  this  Settlement  Agreement,   including  all
Appendices,  Schedules and Exhibits thereto,  as it and they may be amended from
time to time as herein provided.



                                      -2-
<PAGE>

         "Business Day" shall mean any day other than a Saturday, Sunday, or any
other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.

         "Christopher East Note" shall mean a Promissory Note, dated as of March
28, 1992,  made by AMS  Properties,  in favor of HRP, in the original  principal
amount of $1,250,000.

         "Consumables"  shall mean, with respect to any Facility,  all inventory
and consumables, including, without limitation, food, central supplies, unopened
linens and  housekeeping  supplies and other  consumables,  customarily  used or
consumed in the day-to-day operation of such Facility.

         "Contracts" shall mean, with respect to any Facility,  each instrument,
contract and agreement to which the Mariner Operator of such Facility is a party
that directly  benefits,  relates to or affects (i) such  Facility,  or (ii) the
operation of or the provision of services in conjunction with such Facility.

         "Cross-Default/Cross-Collateralization   Agreement"   shall  mean  that
certain  Guaranty,  Cross-Default and  Cross-Collateralization  Agreement by AMS
Properties  and  GCIHCC,  dated  as of June 30,  1992,  pursuant  to  which  AMS
Properties and GCIHCC cross-defaulted,  cross-collateralized and guaranteed each
other's obligations to SPTMNR.

         "Employee  Accruals"  shall mean,  with  respect to any  Facility,  all
Employee  Benefits  which have been or would have been  earned,  accrued  and/or
payable in accordance with existing employee benefit plans, or shall be or would
be earned,  accrued and/or payable in accordance with existing  employee benefit
plans, but which remain unpaid with respect to or for any period ending prior to
the Effective Time.

         "Employee  Benefits"  shall mean,  with  respect to any  Facility,  all
wages, salary,  health insurance coverage,  disability coverage,  severance pay,
withholding,  social security or other employment taxes,  vacation and sick pay,
bonuses,   commissions,   pensions,   profit  sharing,  stock  option  or  other
arrangements or other fringe benefits or other employee benefit plans, practices
or  arrangements,  whether  written  or oral,  covering  any  present  or former
employee of such Facility as of the moment preceding the Effective Time, whether
or not yet payable.

         "Facility"  shall mean,  as the context may require,  any or all of the
Retained Facilities, the Subleased Facilities and the Transferred Facilities.

         "Fresno Facility" shall mean that certain Facility having an address of
577 South Peach Avenue, Fresno, California.

         "Fresno Sublease" shall mean a Sublease,  dated March 31, 1993, between
AMS  Properties,  as  sublandlord,  and Covenant  Care,  Inc.,  as subtenant and
successor by assignment from Pleasant Care Corporation.



                                      -3-
<PAGE>

         "Governmental Authority" shall mean all agencies, authorities,  bodies,
boards, commissions, courts, instrumentalities,  legislatures and offices of any
nature  whatsoever,  of any government  unit or political  subdivision,  whether
federal, state, county, district,  municipal, city or otherwise, and whether now
or hereafter in existence.

         "GranCare  Guaranties"  shall  mean,  collectively,   various  guaranty
agreements,  including,  without  limitation,  a certain  guaranty,  dated as of
October  31,  1997,  pursuant  to which  GranCare  guaranteed  the  payment  and
performance  of each and every  obligation  and liability of AMS  Properties and
GCIHCC (each of which is a wholly-owned subsidiary of GranCare) to SPTMNR.

         "Hazardous  Substances" shall mean any hazardous substances (as defined
by the  Comprehensive  Environmental  Response,  Compensation  and Liability Act
("CERCLA"),  as now in effect),  hazardous  wastes (as  defined by the  Resource
Conservation  and  Recovery  Act  ("RCRA"),  as now in  effect),  pollutants  or
contaminants, oils, radioactive materials, asbestos in any form or condition, or
any  pollutants  or  contaminants  or hazardous,  dangerous or toxic  chemicals,
materials  or  substances  within the meaning of any other  applicable  Federal,
state or  local  law,  regulation,  ordinance  or  requirements  relating  to or
imposing  liability or standards of conduct  concerning any hazardous,  toxic or
dangerous waste, all as now in effect.

         "Mariner Entities'  Guaranties" shall mean, as the context may require,
any or all of the Cross-Default/Cross-Collateralization  Agreement, the GranCare
Guaranties and the Mariner Guaranty.

         "Mariner  Guaranty"  shall  mean  that  certain  guaranty,  dated as of
October  31,  1997,  pursuant  to  which  Mariner  guaranteed  the  payment  and
performance  of  each  and  every   obligation  and  liability  of  GranCare  (a
wholly-owned subsidiary of Mariner), AMS Properties and GCIHCC to SPTMNR.

         "Mariner  Operator"  shall  mean,  with  respect to any  Facility,  the
Mariner  Entity  that  operates  such  Facility  and holds the  Permits for such
Facility as of the Effective Time.

         "Master  Lease" shall mean that certain  master lease to which  SPTMNR,
AMS Properties and GCIHCC are parties, which Master Lease is comprised of: (i) a
Master Lease Document General Terms and Conditions dated as of December 28, 1990
and  entered  into by and between HRP and AMS  Properties;  (ii) a Master  Lease
Document General Terms and Conditions dated as of June 30, 1992 and entered into
by and between HRP and GCIHCC; (iii) twenty-six (26) facility lease supplements,
some of which are dated as of December 28,  1990,  some of which are dated as of
March 27,  1992,  some of which are dated June 30,  1992 and others of which are
dated as of June  29,  1998,  all as  entered  into  pursuant  to the  documents
described    in    preceding    clauses    (i)   and   (ii);    and   (iv)   the
Cross-Default/Cross-Collateralization Agreement, all as amended to date.

         "Permits"  shall mean,  with  respect to any  Facility,  all  licenses,
approvals,   certificates   of  need,   determinations   of  need,   franchises,
accreditations,   certificates,  certifications,  consents,  permits  and  other
authorizations  benefiting,  relating  to or  affecting  the  operation  of such



                                      -4-
<PAGE>

Facility or the  operation of programs or  provision of services in  conjunction
with such Facility,  issued by or entered into with any Governmental  Authority,
Third Party Payor or accreditation  body  (including,  without  limitation,  the
Provider Agreements), and all renewals, replacements and substitutions therefor.

         "Permitted  Encumbrances" shall mean, with respect to any Facility, all
Permitted  Personal  Property  Encumbrances  and  all  Permitted  Real  Property
Encumbrances for such Facility.

         "Permitted Personal Property Encumbrances" shall mean, (i) with respect
to any personal  property present at or used in connection with the operation of
any  Transferred  Facility,  any and all security  interests and liens affecting
such personal  property other than those arising by,  through or under,  any SNH
Entity  (except that those  security  interests and liens arising by, through or
under,  any SNH  Entity  as a result  of a Mariner  Entity's  failure  to pay or
perform  any  obligation  required  to be paid by it as lessee  under the Master
Lease  prior  to  the  Effective  Time  shall  be  Permitted  Personal  Property
Encumbrances), and (ii) with respect to any personal property present at or used
in  connection  with the  operation of any  Retained  Facility,  those  security
interests and liens listed in Schedule 1.1.1 attached  hereto (and  specifically
excluding,  without  limitation,  any security  interests  and liens arising by,
through or under any Mariner  Entity,  or which has been granted by order of the
Court).

         "Permitted Real Property  Encumbrances" shall mean, (i) with respect to
the real property and the improvements at each Transferred Facility, any and all
liens and encumbrances  affecting such real estate and  improvements  other than
those arising by, through or under,  any SNH Entity (except that those liens and
encumbrances  arising  by,  through  or under any SNH  Entity as a result of any
Mariner Entity's failure to pay or perform any obligation required to be paid by
it as lessee  under the  Master  Lease  prior to the  Effective  Time  (such as,
without limitation,  the obligation to pay real estate taxes thereunder),  shall
be  Permitted  Real  Property  Encumbrances),  and (ii) with respect to the real
property  and  the  improvements  at any  Retained  Facility,  those  liens  and
encumbrances  affecting such real property and improvements existing at the time
the  applicable  SNH Entity  acquired  title to such Retained  Facility or those
liens and encumbrances arising by, through or under, any SNH Entity (except that
those liens and  encumbrances  arising by,  through or under any SNH Entity as a
result of any Mariner Entity's failure to pay or perform any obligation required
to be paid by it as lessee  under the Master Lease prior to the  Effective  Date
(such  as,  without  limitation,   the  obligation  to  pay  real  estate  taxes
thereunder)),  and specifically excluding,  without limitation,  those liens and
encumbrances arising by, through or under any Mariner Entity, or which have been
granted by order of the Court.

         "Person" shall mean all individuals,  corporations, general and limited
partnerships,  limited  liability  companies,  stock companies or  associations,
joint ventures,  unincorporated  associations,  companies,  trusts, banks, trust
companies,  land trusts,  business  trusts,  Governmental  Authorities and other
entities of every kind and nature.



                                      -5-
<PAGE>

         "Pre-Closing Obligations" shall mean, with respect to any Facility, all
debts, liabilities and obligations,  whether known or unknown,  absolute, mature
or not yet due, liquidated or non-liquidated, contingent, non-contingent, direct
or  indirect or  otherwise  (including,  without  limitation,  payroll,  accrued
vacation and other  employee  benefits and  obligations  and all other  accrued,
vested and unpaid obligations of any kind and all Employee Accruals) relating to
such Facility,  and/or arising under any Permits or Contracts or under any other
agreements or  instruments  (including  under  Provider  Agreements or otherwise
under Third Party Payor Programs), or relating to the management or operation of
such Facility, or arising out of the acts or omissions of any Mariner Entity, in
each case arising out of or attributable to conditions or events occurring prior
to the Effective Time  (including,  without  limitation,  those  obligations and
liabilities described in Section 10.4 hereof).

         "Provider  Agreements"  shall mean,  with respect to any Facility,  all
participation,  provider and reimbursement  agreements or arrangements in effect
for the benefit of or relating to or affecting the operation of any Facility, or
the  operation  of programs or provision  of services  therein,  relating to any
right of  payment  or other  claim  arising  out of or in  connection  with such
Facility's participation in any Third Party Payor Program.

         "Retained  Facility"  shall  mean,  collectively,  the health  care and
health care  related  facilities  described  in  Schedule  1.1.2  hereto,  which
facilities shall be retained by SPTMNR pursuant to this Agreement.

         "Settlement  Documents"  shall mean,  collectively,  this Agreement and
each agreement,  undertaking or instrument  delivered  pursuant to Article 3 and
Article 6 hereof.

         "South Dakota  Facilities"  shall mean that certain  Facility having an
address of 3600 S. Norton, Sioux Falls, South Dakota, together with that certain
Facility  located at 15th and Michigan  and/or 1251  Arizona SW in Huron,  South
Dakota.

         "South  Dakota  Subleases"  shall mean,  collectively,  (i) a Sublease,
dated as of March 31, 1994,  between GCIHCC,  as sublandlord,  and  HealthQuest,
Inc.,  as  subtenant,  and (ii) a  Sublease,  dated as of May 1,  1994,  between
GCIHCC, as sublandlord, and HealthQuest, Inc., as subtenant.

         "Subleased  Facilities" shall mean,  collectively,  the health care and
health care  related  facilities  described  in  Schedule  1.1.3  hereto,  which
facilities are currently  subleased by AMS Properties or GCIHCC  pursuant to the
Subleases.

         "Subleases"  shall mean, as the context may require,  any or all of the
Fresno Sublease and the South Dakota Subleases.

         "Subtenants"  shall  mean  (i) with  respect  to the  Fresno  Facility,
Covenant  Care,  Inc.,  and (ii) with  respect to the South  Dakota  Facilities,
HealthQuest, Inc.

         "Third Party Payor  Programs" shall mean all third party payor programs
in which any Facility  participates,  including,  without limitation,  Medicare,
Medicaid,  CHAMPUS, Blue


                                      -6-
<PAGE>

Cross and/or Blue Shield,  TriCare,  managed care plans, other private insurance
programs, workers compensation and employee assistance programs.

         "Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS, Blue Cross
and/or  Blue  Shield,  TriCare,  private  insurers  and any other  Person  which
maintains Third Party Payor Programs.

         "Transferred Facilities" shall mean, collectively,  the health care and
health care  related  facilities  described  in  Schedule  1.1.4  hereto,  which
facilities  shall be transferred by SPTMNR to the Mariner  Entities  pursuant to
this Agreement.

         1.2 The  following  terms  shall  have the  meanings  set  forth in the
sections of this Agreement referred to below:

Defined Term:                                               Defined In:
AMS Properties                                              Introduction
Account Transfer Time                                       Section 10.3
Agreed Deficiency                                           Section 4.1
Agreement                                                   Introduction
Approval Order                                              Section 2.2
Bankruptcy Code                                             Recitals
Cases                                                       Recitals
Chase                                                       Section 6.15
Court                                                       Recitals
Damages                                                     Section 10.5
Effective Time                                              Section 5.1
Exchange Act                                                Section 13.8
Existing A/R Accounts                                       Section 10.3
Existing Documents                                          Section 2.1
Existing Mariner Obligations                                Section 2.1
Facilities                                                  Recitals
GCIHCC                                                      Recitals
GranCare                                                    Introduction
HRP                                                         Recitals
Indemnitee                                                  Section 10.5
Interim Management Agreement                                Section 3.5
Interim Occupancy Agreement                                 Section 3.5
Mariner                                                     Introduction
Mariner Entities                                            Introduction
NYSE Requirements                                           Section 13.8
New A/R Accounts                                            Section 10.3
New Manager                                                 Introduction
New Operators                                               Introduction
Outside Effective Time                                      Section 5.1
Petition Date                                               Recitals



                                      -7-
<PAGE>

Pledged Shares                                              Recitals
Post-Effective A/R                                          Section 10.3
RMR                                                         Recitals
SNH                                                         Introduction
SNH Declaration                                             Section 13.10
SNH Entities                                                Introduction
SPTMNR                                                      Introduction
SPTMNR Declaration                                          Section 13.11
Security Deposit                                            Recitals
Share Pledge Agreement                                      Recitals
Title Commitments                                           Section 7.5
Transaction Approval Motion                                 Section 2.2
Transferred Facilities                                      Recitals
Transferred Real Estate                                     Section 3.6
True-Up Time                                                Section 10.2.2

                                    ARTICLE 2

                          ACKNOWLEDGMENT OF OBLIGATIONS

         2.1  Mariner   Obligations.   Each  of  the  Mariner   Entities  hereby
acknowledges  that,  subject to the  effect of the  filing of the  Cases,  it is
unconditionally  liable  to  SPTMNR  for the  full  and  immediate  payment  and
performance of each of the  obligations  under the terms of the Master Lease and
the other  documents,  instruments and agreements  listed in Schedule 2.1 hereto
(collectively,  the "Existing Documents"), plus all charges that may arise under
the various  documents  executed  or  delivered  by any of the Mariner  Entities
evidencing  or  relating  to such  obligations,  plus all  costs  of  collection
incurred  in  connection  with  such  obligations  by the SNH  Entities  and the
reasonable  fees  and  expenses  incurred  by  attorneys  for the  SNH  Entities
(hereinafter  all such  obligations  are  referred to as the  "Existing  Mariner
Obligations"),  and  that  none  of  the  Mariner  Entities  has  any  defenses,
counterclaims or set-offs with respect to the full and immediate  payment of any
or all of the Existing Mariner  Obligations other than as may arise by reason of
the filing of the Cases.

         2.2 Court Approval.  Promptly following  execution of this Agreement by
all parties and otherwise within fifteen (15) Business Days after such date, the
Mariner Entities will file a motion with the Court seeking  authority to proceed
with the  transactions  and other matters  provided for in this  Agreement  (the
"Transaction  Approval  Motion"),  together  with a proposed  form of order (the
"Approval  Order") and the Approval  Order shall be in a form,  and include such
provisions,  as the SNH Entities and the Mariner  Entities may deem  appropriate
under the circumstances.



                                      -8-
<PAGE>

                                    ARTICLE 3

                   TRANSACTIONS TO OCCUR AT THE EFFECTIVE TIME

         At the Effective  Time,  the parties  hereto shall effect the following
transactions:

         3.1 Surrender of Master Lease.  AMS Properties and GCIHCC shall assume,
assign  and  surrender  to the New  Operator  designated  by  SPTMNR  all of AMS
Properties' and GCIHCC's  right,  title and interest in, to and under the Master
Lease,  and such New  Operator  shall  accept  such  assignment  and  surrender,
whereupon all of AMS Properties' and GCIHCC's rights and obligations  thereunder
(and the  rights and  obligations  of the  Mariner  Entities  under the  Mariner
Entities'   Guaranties)  shall  terminate.   All  cure  payments   allocable  to
pre-Petition Date periods will be waived.

         3.2 Transfer of Personal  Property,  Etc. AMS Properties  and/or GCIHCC
(as  applicable)  shall,  whether by assignment or by assumption and assignment,
assign to the New Operator  designated  by SPTMNR all of their right,  title and
interest in and to any  tangible and  associated  intangible  personal  property
(including, without limitation, all furniture, furnishings,  fixtures, equipment
(not including cash and account  receivables  but including any  Consumables and
computer  equipment)  and,  subject to and upon the terms and  conditions of any
applicable  licensing  agreements with respect  thereto,  all software and other
software  licenses  used in the  normal  course of  business  operations  at the
Retained  Facilities.  The SNH Entities  acknowledge and agree that the terms of
certain site  licenses  entered into between the Mariner  Entities and Microsoft
Corporation and other software  licenses for  non-proprietary  software prohibit
the assignment  and transfer of those licenses to the SNH Entities.  The Mariner
Entities and the SNH Entities further agree to enter into licensing  agreements,
in a form and substance  reasonably  satisfactory to both parties, to permit the
SNH  Entities  to use and  operate  certain  clinical  software  which  has been
internally  developed by the Mariner  Entities to assist in the operation of the
Retained Facilities including, without limitation, those software programs which
are used to track the Minimum Data Set of Medicaid  Statistics  for each patient
in the Retained Facilities.

         3.3.  Transfer of Contracts and Permits.  AMS Properties  and/or GCIHCC
(as  applicable)  shall  assume and  assign,  set over and  transfer  to the New
Manager or New Operator all of their right, title and interest in and to (i) all
of the Subleases  (other than the right,  title and interest of GCIHCC in and to
the Tenant  Purchase and Sale Agreement  referred to in each of the South Dakota
Subleases,  or in and to any promissory note delivered by any Subtenant pursuant
thereto or otherwise  delivered in connection with any such Subleases),  (ii) to
the extent  permitted  by law,  all of the Permits  with respect to the Retained
Facilities that the New Manager or the New Operators elect to assume,  and (iii)
all of the  Contracts  with  respect  to the  Retained  Facilities  that the New
Manager or the New Operators elect to assume as provided in Section 10.7 hereof,
but specifically  excluding,  in each of the immediately  preceding clauses (i),
(ii)  and  (iii)  any  Pre-Closing  Obligations  (except,  in  the  case  of the
Contracts, as otherwise provided in Section 10.7 hereof).



                                      -9-
<PAGE>

         3.4 Transfer and Release of Certain  Collateral.  The Mariner  Entities
shall transfer and assign to SPTMNR,  all of their right,  title and interest in
and to (a) the  Security  Deposit  and (b) the Pledged  Shares and the  proceeds
thereof,  and the SNH Entities shall release to GranCare,  free and clear of all
liens, claims and encumbrances  arising by, through or under any SNH Entity, any
pledges of any stock of AMS  Properties or GCIHCC or other  collateral  securing
the Master Lease or any related guaranties,  including,  without limitation, any
interest in accounts receivable arising prior to the Effective Time.

         3.5 Interim  Management and Interim Occupancy  Agreements.  The Mariner
Operators  shall  enter  into  an  interim  management  agreement  (an  "Interim
Management  Agreement"),  substantially  in the form attached as Schedule  3.5-A
hereto,  with  respect to the  Retained  Facilities  with the New Manager  under
which,  to the  extent  and  subject to the  limitations  imposed by  applicable
licensure and certificate or determination  of need laws and  regulations,  each
Mariner Operator shall agree to perform certain  management  services  described
therein with respect to the operation of the Retained Facilities and, subject to
the control and direction of the Mariner Operators,  as current  licensees,  the
New Manager may assume  responsibility  for  certain of such  services,  pending
receipt  by the New  Manager  and/or  New  Operator,  as the case may be, of all
licenses,  certificates,  permits  and  approvals  necessary  to  assume  direct
operating  control of such Retained  Facility.  The Mariner Operators also shall
enter into an interim occupancy  agreement (an "Interim  Occupancy  Agreement"),
substantially  in the form attached at Schedule  3.5-B  hereto,  with respect to
each of the Retained  Facilities with the appropriate New Operator,  which shall
provide that during the term of such Interim Occupancy  Agreement,  such Mariner
Operator shall  continue to occupy such Retained  Facility and have such control
over such Retained Facility as is necessary to comply with applicable  licensure
and certificate of need statutes and regulations.

         3.6  Conveyance of  Transferred  Facilities.  Each SNH Entity shall (i)
convey all of its respective  right,  title and interest,  if any, in and to the
parcels  of  real  property   described  in  Schedule  3.6,  together  with  all
improvements  thereon  (collectively,  the  "Transferred  Real Estate"),  to AMS
Properties  or its designee,  and (ii) transfer and assign to AMS  Properties or
its  designee  all of its  right,  title  and  interest,  if any,  in and to all
tangible and  incorporated  intangible  personal  property  (including,  without
limitation,  all furniture,  furnishings,  fixtures and equipment) present at or
used in  connection  with the operation of the nursing  facility  located on the
Transferred  Real Estate,  in each case free and clear of all liens,  claims and
encumbrances,   except  Permitted  Encumbrances.   All  deeds,  bills  of  sale,
assignments  and other  instruments of transfer or releases  necessary to effect
such   conveyances   shall   expressly   state   that  they  are  made   without
representations  and  warranties,  express or implied,  except as expressly  set
forth in this Agreement.

         3.7 Bankruptcy Code Provisions.  Each of the transactions  provided for
in Sections 3.1,  3.2,  3.3, 3.4 and 3.5 shall be completed in  accordance  with
Sections 105, 363(b),  (f), and (m), and 365 and 1146(c) of the Bankruptcy Code,
as applicable,  and the provisions of the Approval Order,  with the SNH Entities
receiving the full benefits and  protections of such sections and the provisions
of the Approval Order.



                                      -10-
<PAGE>

                                    ARTICLE 4

                                  CONSIDERATION

         4.1  Consideration.  In  consideration  of the transfers and agreements
described  in  Article  3  hereof,  the SNH  Entities  agree,  effective  at the
Effective Time, the  obligations of the Mariner  Entities for the payment of all
amounts due and to become due under the Master Lease, the Christopher East Note,
the GranCare  Guaranties and the Mariner  Guaranty,  in each case as of the date
hereof, are reduced to $1,200,000.00 in the aggregate (such amount, as it may be
further reduced in accordance with the Interim Management Agreement, the "Agreed
Deficiency").  Except  for the  payment of the Agreed  Deficiency,  and  without
limiting the obligations of the Mariner  Entities  hereunder and under the other
Settlement  Documents,  all of the  past,  present  or  future  liabilities  and
obligations of each of the Mariner  Entities under the Existing  Documents shall
terminate.

                                    ARTICLE 5

                                     CLOSING

         5.1  Closing.  The  closing of the  transactions  contemplated  by this
Agreement  shall be held at the offices of Sullivan &  Worcester  LLP,  One Post
Office Square,  Boston,  Massachusetts  02109,  or at such other location as the
parties may agree upon in writing,  at 10:00 a.m., local time, on April 12, 2000
(the "Effective Time"); provided, however that, in the event that the conditions
set forth in Article 6 hereof shall not be satisfied as of the  Effective  Time,
the SNH  Entities  shall  have the right,  by notice in  writing to the  Mariner
Entities,  to extend the Effective Time from time to time to no later than 10:00
a.m., local time, on July 1, 2000 (the "Outside  Effective  Time"),  in order to
satisfy  such  conditions,  or in the  event  that the  conditions  set forth in
Article 7 hereof shall not be satisfied as of the  Effective  Time,  the Mariner
Entities  shall have the right,  by notice in  writing to the SNH  Entities,  to
extend  the  Effective  Time  from  time to time to no later  than  the  Outside
Effective Time in order to satisfy such conditions.

                                    ARTICLE 6

               CONDITIONS PRECEDENT TO OBLIGATIONS OF SNH ENTITIES

         The  obligation  of the SNH  Entities to  consummate  the  transactions
contemplated by this Agreement  shall be subject to the  satisfaction of each of
the conditions set forth in this Article 6. The determination that any condition
set forth in this Article 6 has been satisfied or has not been  satisfied  shall
be made by the SNH Entities in their sole discretion (unless otherwise expressly
provided herein, such as in Section 6.2 and Section 6.12 hereof).

         6.1  Trustee  Approval.  This  Agreement  and each of the  transactions
contemplated hereby shall have been approved by the Board of Trustees of SNH and
by each of the  "Independent  Trustees" of SNH. The Independent  Trustees of SNH
are those  trustees who are



                                      -11-
<PAGE>

not affiliated  with RMR. The SNH Entities shall notify the Mariner  Entities if
the Board of Trustees  or any of the  "Independent  Trustees"  do not approve of
this  Agreement and each of the  transactions  contemplated  hereby on or before
March 31, 2000.

         6.2  Documentation.  All  documentation  evidencing or implementing the
transactions  contemplated  by this  Agreement  must be in  form  and  substance
reasonably satisfactory to the SNH Entities and their counsel.

         6.3 Lien  Reports.  With  respect to each of the  Retained  Facilities,
SPTMNR shall have received a  satisfactory  lien report  showing that, as of the
Effective  Time, such Retained  Facility is not subject to any liens,  claims or
encumbrances other than the Permitted Encumbrances.

         6.4 Receipt of Certain  Permits and  Approvals.  The SNH Entities shall
have received all necessary  Permits and approvals  from all federal,  state and
local  regulatory  agencies  to enable  them to: (a) accept the  assignment  and
surrender of the Master Lease; (b) enter into the Interim  Management  Agreement
and the Interim Occupancy Agreements with the Mariner Operators; and (c) do such
other acts and enter into such other agreements as are necessary or desirable to
carry out the intents and purposes of this Agreement.

         6.5  Due  Diligence.   The  SNH  Entities  shall  have  completed  such
investigation and received such documentation and other assurances as they shall
deem necessary, in their sole discretion, to assure themselves that there are no
material  impediments  to the  receipt  by the  SNH  Entities  of all  licenses,
certificates,  permits  and  approvals  necessary  to lease and to  operate,  as
licensee,  and to  manage,  as  manager,  the  Retained  Facilities  as they are
currently   operated,   and  to  receive  Medicare  and  Medicaid   payments  or
reimbursements for services provided at each Retained Facility.

         6.6  Reports  and  Surveys.  With  respect  to  each  of  the  Retained
Facilities,  the SNH Entities  shall have  received  such  reports,  surveys and
opinions as they shall have determined are necessary or desirable, including the
following: updated title reports, licensure and Medicare/Medicaid survey reports
and  updated  appraisals;   each  such  report,  survey  and  opinion  shall  be
satisfactory to the SNH Entities in their sole discretion.

         6.7 No Litigation.  Except as disclosed on Schedule 6.7 (and other than
the Cases),  there shall be no investigation,  audit,  governmental  proceeding,
suit or other  litigation,  pending or threatened,  seeking to, or the effect of
which would be to, enjoin,  prevent or delay  consummation  of the  transactions
contemplated by this Agreement,  attach or place a lien on any of the Facilities
or any personal property or accounts receivable  associated  therewith or have a
reasonable  likelihood  of  resulting  in a material  reduction  of Third  Party
Payments thereto, by withholding, offset, recoupment or reduction of prospective
rates of payment, revoke, condition or limit any Permit or approval necessary to
the  operation   thereof,   or  which  would  otherwise   adversely  affect  the
consummation of the transactions  contemplated  herein or interfere with any SNH
Entity's  ownership,   lease,  use,  enjoyment  or  operation  of  the  Retained
Facilities.



                                      -12-
<PAGE>

         6.8 No Default.  Consummation of the transactions  contemplated in this
Agreement shall not constitute, nor with the passage of time or giving of notice
or both result in, a default or event of default under any agreement,  contract,
indenture,  Permit,  instrument  or  understanding  to which any of the  Mariner
Entities  or any of their  subsidiaries  is a party or by which it or any of its
properties  is bound and which is  enforceable  against the Mariner  Entities in
their capacity as debtors in possession.

         6.9  True  and  Complete   Representation.   All   representations  and
warranties of each of the Mariner  Entities  hereunder and under the  Settlement
Documents shall be true, complete and correct in all material respects as of the
date hereof and as of the Effective Time.

         6.10  Employment  Matters.  The SNH  Entities  shall have  reviewed and
approved the contracts and agreements listed in Schedule 9.15 hereof.


         6.11 Condition of Retained Facilities. Neither any asset to be conveyed
or  transferred  to any SNH Entity  pursuant to this  Agreement nor the business
conducted at any of the Retained  Facilities shall have been adversely  affected
in any  material  way from the date  hereof to the  Effective  Time,  including,
without limitation:  by (a) any actual or threatened  interference with use; (b)
fire or  other  casualty  or  condemnation;  (c)  pending  or  threatened  loss,
revocation,  restriction  or  limitation,  including,  without  limitation,  any
pending or threatened  loss,  revocation,  restriction  or  limitation  which is
stayed pursuant to an order of the Bankruptcy  Court,  of any material  license,
certification or Permit; or (d) any other material  operational matter.  Between
the date  hereof  and the  Effective  Time,  each SNH  Entity and its agents and
consultants  shall  have been  given  all  reasonable  access  to each  Retained
Facility  to  perform  such   investigations  and  due  diligence  as  it  deems
appropriate  to determine  whether each condition  precedent to its  obligations
hereunder has been satisfied.

         6.12  Opinions.  The SNH  Entities  and each New  Operator  shall  have
received  such  opinions  of  counsel  for the  Mariner  Entities  as they shall
reasonably request.

         6.13 Approval  Order.  The Court shall have entered the Approval  Order
and (a) no court of competent  jurisdiction  shall have entered an order staying
the Approval Order pending appeal, or, in the event a stay of the Approval Order
shall  have been  entered,  then the stay shall  have been  terminated;  (b) all
appeal  periods  shall  have  expired  with no appeal  having  been taken or all
appeals  shall  have been  dismissed,  or the  Approval  Order  shall  have been
affirmed,  by final order no longer subject to appeal; or (c) if appealed,  such
appeal shall have otherwise been settled or resolved to the  satisfaction of the
SNH Entities or this condition  shall have been waived by the SNH Entities.  The
Approval  Order  as  entered  by  the  Court  shall  contain  no   modifications
unacceptable  to  the  SNH  Entities  and  shall  include,  without  limitation,
provisions as follows:

                  (i)  Findings  determining  that  notice  of  the  Transaction
                  Approval  Motion and hearing  thereon have been adequate under
                  the circumstances;



                                      -13-
<PAGE>

                  (ii) Findings that the SNH Entities are good faith  purchasers
                  pursuant to 11 U.S.C.ss.363(m);

                  (iii) Findings that the consideration  provided to the Mariner
                  Entities by the SNH Entities is adequate;

                  (iv) Findings that proceeding with those matters  provided for
                  in  the  Agreement  is in the  best  interest  of the  Mariner
                  Entities and their respective creditors;

                  (v) Finding that Schedule 9.16,  updated as appropriate,  is a
                  complete list of Employee Accruals;

                  (vi) Ordering that the transfer of the Retained Facilities and
                  personal  property  present at or used in connection  with the
                  operation of the Retained  Facilities is free and clear of all
                  liens, claims,  encumbrances and interests pursuant to Section
                  363(f)  of the  Bankruptcy  Code,  except  for  the  Permitted
                  Encumbrances;

                  (vii) Ordering that the transactions pursuant to the terms and
                  conditions  set forth in this  Agreement  are  approved in all
                  respects pursuant to Sections 363(b),  363(f),  365(b), 365(f)
                  and 1146(c) of the Bankruptcy Code, and otherwise;

                  (viii)  Ordering  that all Medicare and Medicaid  payments for
                  services on or after the  Effective  Time shall be received by
                  the respective  Mariner  Entities and delivered by each to the
                  SNH Entities free and clear of any liens, claims, encumbrances
                  or interests;

                  (ix) Ordering that none of the SNH Entities or their  nominees
                  shall have any liability for any  Pre-Closing  Obligations  or
                  other obligations of any Mariner Entity or their affiliates or
                  subsidiaries  (except  as  otherwise  expressly  provided  for
                  herein); and

                  (x) Ordering  that,  in  consideration  of, and upon,  the SNH
                  Entities' or their  nominees'  assuming the  obligation to pay
                  the Employee  Accruals,  the Mariner Entities shall pay to the
                  SNH Entities the cash equivalent of such Employee Accruals.

         6.14 Notice.  Within a reasonable  time  following  the filing with the
Court of the Approval  Motion,  and prior to the hearing and relevant  objection
date, the Mariner Entities shall have served notice of the Transaction  Approval
Motion in a form  acceptable  to the SNH Entities  upon those  persons  mutually
designated  by both parties and shall  publish the notice in such  newspapers as
mutually  designated by both parties.  The Mariner  Entities shall pay the costs
incurred in connection with providing notice to  mutually-designated  parties as
aforesaid and the Mariner  Entities and the SNH Entities shall each pay half the
costs for publishing notices in mutually-designated  newspapers as aforesaid. In
addition,  to the extent that the SNH



                                      -14-
<PAGE>

Entities shall request that any  additional  parties be served any such notices,
or that any such notices be published in any additional newspapers,  the Mariner
Entities  shall  cooperate with the SNH Entities to accomplish the same, and the
SNH Entities shall pay for all such costs in connection therewith.

         6.15  Chase/Lender  Approval.  The SNH  Entities  shall  have  received
evidence  satisfactory to them that the Chase Manhattan Bank, in its capacity as
collateral agent for the Mariner Entities'  pre-petition  senior secured lenders
and as agent for the  Mariner  Entities'  debtor in  possession  lenders (in its
capacities  as  the  collateral  agent  and  the  debtor  in  possession  agent,
respectively,  "Chase"),  has  consented  to, or agreed  not to object  to,  the
transactions contemplated under this Agreement and all related documents.

         6.16  Hart-Scott-Rodino.  There shall be no filing  required  under the
Hart-Scott-Rodino  Antitrust  Improvements Act of 1976, as amended,  relating to
the consummation of the transactions  contemplated by this Agreement or, if such
a filing is required,  all applicable  consents shall have been obtained and the
Mariner  Entities  shall have  agreed to pay all  reasonable  costs  incurred in
connection with such filing.

                                    ARTICLE 7

         CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE MARINER ENTITIES

         The obligation of each Mariner  Entity to consummate  the  transactions
contemplated by this Agreement  shall be subject to the  satisfaction of each of
the conditions set forth in this Article 7. The determination that any condition
set forth in this Article 7 has been satisfied or has not been  satisfied  shall
be made by the  Mariner  Entities  in their sole  discretion  (unless  otherwise
expressly provided herein, such as in Section 7.2 hereof).

         7.1  Receipt  of  Certain  Permits.  The  Mariner  Entities  shall have
received all Permits from all federal,  state and local  regulatory  agencies to
enable  them to: (a)  surrender  the Master  Lease;  (b) enter into the  Interim
Management   Agreement  and  the  Interim  Occupancy  Agreements  with  the  New
Operators;  and (c) do such other acts and enter into such other  agreements  as
are  necessary  or  desirable  to carry out the  intents  and  purposes  of this
Agreement.

         7.2  Documentation.  All  documentation  evidencing or implementing the
transactions  contemplated  by this  Agreement  shall be in form  and  substance
reasonably satisfactory to the Mariner Entities and their counsel.

         7.3  No  Litigation.  There  shall  be no  investigation,  governmental
proceeding,  suit or other litigation  pending or threatened  seeking to, or the
effect  of which  would be to,  enjoin,  prevent  or delay  consummation  of the
transactions contemplated by this Agreement.

         7.4 Lien Reports.  With respect to each of the Transferred  Facilities,
Mariner shall have received a  satisfactory  lien report showing that, as of the
Effective Time, such Transferred



                                      -15-
<PAGE>

Facility  is not  subject to any liens,  claims or  encumbrances  other than the
Permitted Encumbrances.

         7.5 Title  Commitments.  The Mariner Entities shall have obtained title
commitments (the "Title Commitments") committing to insure, at prevailing market
rates,  subject to standard  exceptions but subject to no special exceptions for
(a) liens or encumbrances  arising by or through  SPTMNR,  SNH, HRP or any other
subsidiary  of SNH or HRP (other than those  consented to by Mariner or that are
Permitted Encumbrances) or (b) mortgages, deeds of trust, attachments or similar
liens securing payment obligations arising by or through SPTMNR, SNH, HRP or any
other   subsidiary   of  SNH  or  HRP  (other  than  those  that  are  Permitted
Encumbrances).

         7.6  True  and  Complete   Representations.   All  representations  and
warranties  of the SNH  Entities  shall be true,  complete  and  correct  in all
material respects as of the date hereof and as of the Effective Time.

         7.7 Approval Order.  The condition set forth in Section 6.13 shall have
been satisfied.

         7.8  Chase/Lender  Approval.  The Mariner  Entities shall have received
evidence  satisfactory  to them that  Chase has  consented  to, or agreed not to
object to, the  transactions  contemplated  under this Agreement and all related
documents.

         7.9  Hart-Scott-Rodino.  There  shall be no filing  required  under the
Hart-Scott-Rodino  Antitrust  Improvements Act of 1976, as amended,  relating to
the consummation of the transactions  contemplated by this Agreement or, if such
a filing is required,  all applicable  consents shall have been obtained and the
Mariner  Entities  shall have  agreed to pay all  reasonable  costs  incurred in
connection with such filing.

                                    ARTICLE 8

                 REPRESENTATIONS AND WARRANTIES OF SNH ENTITIES

         8.1 Reliance. Each of the SNH Entities,  jointly and severally,  hereby
makes the  representations  and  warranties set forth in this Article 8. Each of
the SNH Entities  expressly  acknowledges and agrees that,  notwithstanding  any
provision to the contrary in this or in any other agreement between or among the
parties:  (a) Mariner, AMS Properties,  GCI and their respective  affiliates are
relying,  may rely and are and shall be  justified  in relying on the  following
representations  and  warranties in entering  into this  Agreement and the other
agreements  and  instruments  referred  to in,  contemplated  by, or executed in
connection with this Agreement and the other Settlement  Documents;  (b) each of
the  following  representations  and  warranties  is made to induce the  Mariner
Entities  and their  respective  affiliates  to enter  into and  consummate  the
transactions contemplated by this Agreement and the other agreements referred to
in or contemplated  by this Agreement and the other  Settlement  Documents,  and
their   respective   affiliates,   are  and  shall  be  beneficiaries  of  these
representations  and warranties;  and (c) each of the following  representations
and  warranties  shall be a  continuing  representation  and



                                      -16-
<PAGE>

warranty and shall survive the closing of the transactions  contemplated by this
Agreement,   the  execution  of  any  Settlement   Documents,   and  performance
thereunder.

         8.2  Organization.  SPTMNR  is a  real  estate  investment  trust  duly
organized,  validly existing and in good standing under the laws of the State of
Maryland.  SPTMNR has all requisite power and authority to carry on its business
as such business is presently  being  conducted and,  subject to approval of its
Board  of  Trustees,  to  enter  into  this  Agreement  and  to  consummate  the
transactions contemplated hereby.

         8.3  Authorization.  The  execution,  delivery and  performance of this
Agreement and each other  Settlement  Document and all  transfers,  conveyances,
surrenders of leases,  assignments and deliveries  provided for herein have been
duly authorized by all necessary corporate,  partnership and stockholder action.
This  Agreement  has been duly executed by each SNH Entity and  constitutes  the
valid and binding obligation of each SNH Entity,  enforceable in accordance with
its terms.

         8.4 Successor to HRP.  SPTMNR is the successor in interest to HRP under
the Master Lease and the Existing Documents, it has assumed all of HRP's rights,
duties and obligations under the Master Lease and the Existing Documents and HRP
no longer has any rights or claims thereunder.

         8.5  Brokerage.  The SNH  Entities  have not used the  services  of any
broker  or finder  in  connection  with the  transactions  contemplated  by this
Agreement and they will  indemnify  and hold harmless the Mariner  Entities from
and against all claims,  actions,  causes of action, costs, expenses,  including
attorneys' fees, and liabilities  arising in or out of, or related to any broker
or finder claiming any compensation or fee by reason of an alleged  agreement or
understanding with any of the SNH Entities.

         8.6 No Actions.  There are no actions,  proceedings,  investigations or
audits pending or threatened  against any of the SNH Entities,  before or by any
court,  arbitrator,  administrative agency or other Governmental Authority which
are expected, in the reasonable judgment of the executive officers of any of the
SNH  Entities,  to materially  and adversely  affect the assets or the financial
condition or operations  of any of the SNH  Entities,  or their ability to carry
out the transactions contemplated in this Agreement.

         8.7  TRANSFERRED  FACILITIES  CONVEYED  "AS IS".  THE MARINER  ENTITIES
ACKNOWLEDGE  THAT THE  TRANSFERRED  REAL ESTATE BEING CONVEYED OR TRANSFERRED TO
AMS PROPERTIES OR ITS DESIGNEE  HEREUNDER IS BEING CONVEYED AND  TRANSFERRED "AS
IS, WHERE IS" WITHOUT REPRESENTATION OR WARRANTY,  EXPRESS OR IMPLIED, AS TO THE
CONDITION,  TITLE,  DESIGN,  MERCHANTABILITY OR FITNESS FOR USE OF SUCH PROPERTY
AND NO SNH  ENTITY  HAS  MADE,  OR SHALL  BE  DEEMED  TO HAVE  MADE,  ANY  OTHER
REPRESENTATION OR WARRANTY,  OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT
OR ANY  OTHER  SETTLEMENT  DOCUMENT.  Without  limiting  the  generality  of the
foregoing, except for representations and



                                      -17-
<PAGE>

warranties  expressly  set forth in this  Agreement  or in any other  Settlement
Document,  the  transactions  contemplated  by this  Agreement  are  without any
statutory, express or implied warranty, representation,  agreement, statement or
expression  of opinion  on the part of any SNH Entity of or with  respect to (i)
the condition or title of the assets or any aspect thereof,  including,  without
limitation,  any  and all  statutory,  express  or  implied  representations  or
warranties related to suitability for habitation, merchantability or fitness for
a  particular  use or  purpose,  (ii) the  nature or  quality  of  construction,
structural design or engineering of the improvements  located on the Transferred
Real  Estate,  (iii) the  quality  of the  labor or  materials  included  in the
improvements  located on the Transferred Real Estate,  (iv) the soil conditions,
drainage,  topographical features,  flora, fauna or other conditions of or which
affect the  Transferred  Real Estate,  (v) any conditions at or which affect the
Transferred Real Estate with respect to any particular use, purpose  development
potential or otherwise, (vi) area, size, shape, configuration, location, access,
capacity, quantity, quality, cash flow, expenses, value, condition, make, model,
composition,    accuracy,    completeness,     applicability,     assignability,
enforceability,  exclusivity,  usefulness,  authenticity  or  amount,  (vii) any
statutory,  express,  or implied,  representations  or warranties created by any
affirmation of fact or promise, by any description of the assets or by operation
of law, (viii) any  environmental,  structural,  or other condition or hazard or
the absence thereof heretofore, now, or hereafter affecting in any manner any of
the Transferred Real Estate,  and (ix) all other  statutory,  express or implied
representations and warranties whatsoever.

                                    ARTICLE 9

             REPRESENTATIONS AND WARRANTIES OF THE MARINER ENTITIES

         9.1  Reliance.  Each of the Mariner  Entities,  jointly and  severally,
hereby makes the  representations  and  warranties  set forth in this Article 9.
Each  of  the  Mariner   Entities   expressly   acknowledges  and  agrees  that,
notwithstanding  any provision to the contrary in this or in any other agreement
between or among the parties,  the New Manager  and/or any New Operator or their
respective affiliates:  (a) SPTMNR, the New Manager, each New Operator and their
respective  affiliates  are relying,  may rely and are and shall be justified in
relying on the following  representations  and  warranties in entering into this
Agreement and the other agreements and instruments  referred to in, contemplated
by, or executed  in  connection  with this  Agreement  and the other  Settlement
Documents;  (b) each of the following  representations and warranties is made to
induce  the SNH  Entities  and their  respective  affiliates  to enter  into and
consummate  the  transactions  contemplated  by this  Agreement  and  the  other
agreements  referred  to in or  contemplated  by this  Agreement  and the  other
Settlement  Documents,  and  their  respective  affiliates,  are  and  shall  be
beneficiaries  of  these  representations  and  warranties;  and (c) each of the
following  representations  and warranties shall be a continuing  representation
and warranty and shall survive the closing of the  transactions  contemplated by
this  Agreement,  the execution of any  Settlement  Documents,  and  performance
thereunder.

         9.2 Organization.  Each of the Mariner Entities is a corporation,  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its  incorporation.  Subject to the entry of the Approval Order,
each of the  Mariner  Entities  has full  power,



                                      -18-
<PAGE>

authority and legal right to execute,  deliver and perform under this Agreement,
to enter into the Interim Occupancy Agreements, Interim Management Agreement and
the other Settlement  Documents and to take all other actions necessary to carry
out the intents and purposes of this Agreement.

         9.3  Authorization.  The  execution,  delivery and  performance of this
Agreement and each other  Settlement  Document and all  transfers,  conveyances,
surrenders of leases,  assignments and deliveries  provided for herein have been
duly authorized by all necessary corporate,  partnership and stockholder action.
This Agreement has been duly executed by each Mariner Entity and, subject to the
entry of the Approval  Order,  constitutes  the valid and binding  obligation of
each Mariner Entity, enforceable in accordance with its terms.

         9.4 No  Liabilities.  None of the Mariner  Entities has any liabilities
which would  impair or encumber  title to, or  materially  adversely  affect the
Retained Facilities or their operations,  whether absolute, contingent or fixed,
liquidated or unliquidated, matured or not yet due, of any nature, including tax
liabilities,  other than liquidated,  noncontingent  liabilities incurred by the
Mariner Entities in the ordinary course of their businesses. Each of the Mariner
Entities  has (a) filed all tax  returns  which it is  required  to file and (b)
paid,  or  simultaneously  with the closing will have paid,  any taxes levied or
assessed against it or any of its assets, or under any judgment,  order, decree,
or a  regulation  of any  court,  arbitrator,  administrative  agency  or  other
Governmental  Authority to which it may be subject which would, in each case, or
in the aggregate, adversely affect the assets, business, prospects, operation or
financial condition of any Retained Facility after the Effective Time.

         9.5 Personal  Property.  The Mariner  Entities own all the tangible and
intangible  personal property necessary to operate each Retained Facility (other
than those assets  subject to personal  property  leases  (complete and accurate
copies of which shall be provided to the SNH Entities for review within  fifteen
(15)  Business  Days of the  execution  hereof) and the tangible and  intangible
personal property necessary to operate the Subleased Facilities,  which personal
property is owned by the Subtenants at the Subleased Facilities) with the number
of beds, and providing such services, as are described in Schedule 9.5, free and
clear of all liens, encumbrances, charges, restrictions,  conditions and adverse
claims  of  any  kind  or  nature,   except  for  Permitted   Personal  Property
Encumbrances.  The  Consumables  located  at each  Retained  Facility  as of the
Effective Date and included in the personal  property  being  transferred by the
Mariner  Entities  pursuant to Section 3.2 are sufficient for at least three (3)
days' operations at such Retained Facility as currently operated,  which reserve
is typical and otherwise in accordance  with sound  business and care  practices
for such Retained Facilities.

         9.6  Required  Consents.   No  material  consent,   approval  or  other
authorization  of, or  registration,  declaration  or filing with,  any court or
governmental  agency or  commission  which has not been  heretofore  obtained or
which will not be obtained  prior to the Effective  Time is required for the due
execution,  delivery or performance  of this Agreement and the other  Settlement
Documents,  the  assignments  and  conveyances  contemplated  hereby  or for the
validity or enforceability thereof against any of the Mariner Entities.



                                      -19-
<PAGE>

         9.7 No Third Party Payor Actions. To the best of their knowledge, there
are  no  actions,  proceedings,  investigations  or  audits  claims,  orders  or
settlement agreements pending or threatened against any of the Mariner Entities,
before or by any court, arbitrator,  administrative agency or other Governmental
Authority or Third Party Payor or its agent, including,  without limitation, any
action, proceeding,  investigation, audit, claim, order, or settlement agreement
likely to result in a Third Party  Payor  suspending,  withholding,  or reducing
payments to any of the  Facilities  for services  after the  Effective  Time, in
order to recoup,  offset,  or  otherwise  secure for  overpayments  or penalties
claimed  to be owed by a Mariner  Entity,  or to secure  the  payment  of fines,
penalties, interest, or other costs in connection therewith, which are expected,
in the  reasonable  judgment  of the  executive  officers  of any of the Mariner
Entities,  to  materially  and  adversely  affect  the  assets or the  financial
condition  or  operations  of any of the  Retained  Facilities,  or the  Mariner
Entities' ability to carry out the transactions  contemplated in this Agreement,
and except as otherwise  disclosed in writing to the SNH Entities within fifteen
(15) Business Days of the execution hereof.

         9.8 No Violations.  The execution and delivery of this  Agreement,  the
compliance with the provisions  hereof and the  consummation of the transactions
herein  contemplated by each of the Mariner  Entities,  will not result in (a) a
breach or violation of (i) any material law or  governmental  rule or regulation
now in effect and applicable to any of the Mariner Entities,  (ii) any provision
of the Articles of Organization, Certificate of Incorporation, or By-laws of any
of the  Mariner  Entities,  (iii) any  judgment,  order or decree of any  court,
arbitrator,  administrative agency or other Governmental  Authority binding upon
any of the Mariner  Entities,  (iv) any  agreement or instrument to which any of
the  Mariner  Entities  is a party  and by which  it is  bound  as a  debtor  in
possession or by which it or any of its properties is bound, or (b) the creation
of any lien, claim or encumbrance  (other than the Permitted  Encumbrances) upon
any of the Retained Facilities.

         9.9  Condition  of  Retained  Facilities.  As to each  of the  Retained
Facilities  (but,  in the case of the Subleased  Facilities,  to the best of the
knowledge of the Mariner  Entities (as such Subleased  Facilities  are, and have
been, operated by the Subtenants)):

                  (a) Each  Retained  Facility and its  operation and use are in
         compliance with all material municipal, county, state and federal laws,
         regulations,  ordinances,  standards and orders and with all municipal,
         health,  building and zoning laws and regulations  (including,  without
         limitation, the fire safety code) where the failure to comply therewith
         could  reasonably be anticipated  to have a material  adverse effect on
         the business, property, condition (financial or otherwise) or operation
         of the  Retained  Facility  as it is  presently  being  operated or the
         ability to obtain any Necessary License (as such term is defined in the
         Interim Management Agreement);

                  (b) There are no outstanding  material  deficiencies  cited by
         any  Governmental  Authority  having  jurisdiction  over  any  Retained
         Facility requiring  conformity to any applicable  statute,  regulation,
         ordinance or bylaw  pertaining to the type of facility  presently being
         operated;



                                      -20-
<PAGE>

                  (c) No  claim,  requirement  or  demand  has been  made by any
         licensing or certifying agency supervising or having authority over any
         Retained  Facility to  construct or install  improvements  to or on, or
         otherwise  alter or  redesign,  such  Retained  Facility  or to provide
         additional  furniture,  fixtures,  equipment  or  Consumables  so as to
         conform to or comply with any existing law, code or standard  which has
         not been fully satisfied prior to the date hereof;

                  (d) There exists no material  defect or deficiency with regard
         to  the  structure,  soil,  fixtures,   plumbing,  septic,  electrical,
         mechanical  or other  systems  of any  Retained  Facility  which  would
         materially impair the use or value of such Retained Facility,  and each
         Retained  Facility  is in good  repair  and  working  order  and is not
         subject to any substantial deferred maintenance; there is no termite or
         other  infestation  at any  Retained  Facility  and  there is not earth
         subsidence or earth  movement  affecting  any Retained  Facility or the
         property on which it is situated; and

                  (e)  Except as set forth in  Schedule  9.9(e),  each  Retained
         Facility is duly and properly  licensed under all  applicable  federal,
         state and local laws,  ordinances  and  regulations  and in conformance
         with all insurance  requirements  and requirements of Third Party Payor
         Programs,  and holds all other  Permits and approvals  issued,  and has
         satisfied all eligibility and other similar  requirements  imposed,  by
         hospital, health or similar regulatory bodies,  administrative agencies
         or other governmental bodies,  agencies or officials, or that relate to
         all  Third  Party  Payor  Programs  or other  private  or  governmental
         programs  for the  reimbursement  or  payment  of health  care costs or
         charges to provide the  services and operate the number of beds at such
         Retained  Facility as described in Schedule 9.5 in the ordinary  course
         of business  consistent  with past  practices.  Other than the Approval
         Order and the Chase  consents  required as provided in Section 6.13 and
         Section 6.15 hereof,  no consents,  approvals or other  authorizations,
         registrations,  declarations  or filings,  except those with respect to
         which  application has heretofore been made and received,  or will have
         been so received by the Effective  Time,  are required for the transfer
         of  the  property  to the  SNH  Entities  and  the  other  transactions
         contemplated by this Agreement,  including, without limitation, Article
         3, Article 4 and Article 10 hereof,  and for the Approval Order.  There
         is no action  pending  or  recommended  or  threatened  by any state or
         federal agency having jurisdiction thereof,  either to revoke, withdraw
         or suspend any license to operate any Retained  Facility,  nor is there
         any decision or threat, or action, pending,  recommended or threatened,
         not to renew or to revoke any  Medicare  or Medicaid  certification  or
         Provider Agreements related to any Retained Facility,  or any action of
         any other  type  which  would  have a  material  adverse  effect on any
         Retained  Facility,   its  operations  or  business.  No  liability  or
         obligations with respect to any matters referred to herein is being, or
         shall be deemed to have been, assumed by SPTMNR or by any SNH Entity.

                  (f) As to the  property  on which each  Retained  Facility  is
         located:

                           (i) the Mariner Entities have not received any notice
                  that any buildings and  improvements  on the property have not
                  been  constructed in



                                      -21-
<PAGE>

                  compliance  with  the   requirements  of  all  material  laws,
                  ordinances,  rules,  regulations  and  restrictions  of record
                  applicable  thereto, or that any bills for labor and materials
                  in connection with the construction thereof have not been paid
                  in full or provided for;

                           (ii)  there  has  been  no  material  damage  to  the
                  buildings  and   improvements   on  the   property,   and  all
                  improvements are insured for full replacement value;

                           (iii) all public  utilities or adequate and complying
                  private septic systems,  including, but not limited to, water,
                  sewer,  gas and  electricity,  to the extent necessary for the
                  operation  of the  property,  are  available  to  service  the
                  property  and  are  adequate  for  the  intended  use  of  the
                  property;

                           (iv) all Permits  which are  necessary  to permit the
                  use of the property in accordance  with the provisions of this
                  Agreement and the transactions  contemplated thereby have been
                  obtained and are in full force and effect,  and there has been
                  no actual or claimed  violations  of the terms and  conditions
                  thereof;

                           (v)  to the  best  of the  knowledge  of the  Mariner
                  Entities, no Hazardous Substance,  including,  but not limited
                  to, asbestos,  PCB's or ureaformaldehyde,  has been generated,
                  released  into,  stored or deposited  over,  upon or below the
                  property,  into any water  systems on or below the  surface of
                  the property,  or in any  structures  located on the property,
                  including,  without limitation, the Retained Facilities,  from
                  any sources  whatsoever,  except  such as are used,  stored or
                  disposed of in full compliance  with all applicable  statutes,
                  regulations and rules pertaining thereto; and

                           (vi) no Mariner  Entity has entered into,  nor is the
                  property subject to, any option, lease, claim for occupancy or
                  other  agreement  other than as contemplated by this Agreement
                  (other than the Subleases).

         9.10 Non-Foreign Status. No Mariner Entity is a "foreign person" within
the meaning of Section 1445(f) of the Internal Revenue Code.

         9.11  Filing of Reports and Claims.  Each of the Mariner  Entities  has
filed with all  applicable  Third Party Payor Programs all required cost reports
and claims for payment with respect to each of the Retained Facilities. All such
reports  and claims for  payment  have been  prepared  and  retained in material
compliance  with all applicable  governmental  and program  statutes,  rules and
regulations and are true and correct in all material  respects.  All services to
which such cost  reports and claims  relate  have been at all times  provided in
material compliance with all applicable governmental and program statutes, rules
and  regulations.  The Mariner  Entities have retained all records  necessary to
document that all facility  services have been provided as claimed.  Each of the
Mariner Entities has paid or simultaneously with the Closing shall have paid any
liabilities  assessed  against  it or any of its  assets  under any



                                      -22-
<PAGE>

regulation,  claim, settlement agreement,  judgment, order, decree or regulation
of any  administrative  agency,  Third Party Payor,  Third Party Payor  Program,
court or arbitrator to which it may be subject, in each case, to the extent that
such liabilities are enforceable  against the Mariner Entities in their capacity
as debtors in possession.

         9.12 Patient Trust  Accounts.  There are no  deficiencies in any of the
Patient Trust  Accounts held for the benefit of residents of any of the Retained
Facilities. Each Mariner Entity has at all times properly prepared and filed all
accountings for Patient Trust Accounts  required by applicable law or reconciled
and rectified any improperly prepared or filed accountings.

         9.13 List of Patients.  On or prior to the Effective  Time, each of the
Mariner  Entities  shall  provide the SNH Entities with an accurate and complete
list of the  residents  of each of the  Retained  Facilities  and the Persons or
Third Party Payor Programs responsible for payment of their charges.

         9.14  Contracts.  No  Mariner  Entity  is a party  to,  and none of the
Retained  Facilities  is  subject  in any way to,  any  contract,  agreement  or
arrangement,  written  or oral with any other  Mariner  Entity,  any  directors,
partners,  shareholders  or officers of any Mariner  Entity,  any  affiliate  or
subsidiary of any Mariner  Entity,  any third party  affiliated  with any of the
foregoing, or with any employees,  consultants, advisors or agents of any of the
foregoing,  with respect to: (i) any plan,  contract,  agreement or arrangement,
written  or  oral,   providing   for  bonuses,   pensions,   options,   deferred
compensation,  termination or severance pay, retirement payments, profit sharing
or the like that could  create any  liability or  obligation  for any of the SNH
Entities;  (ii) any contract or agreement  involving any joint venture or profit
sharing  arrangement with respect to any Retained Facility;  (iii) any option or
right  of  first  refusal  with  respect  to any  Retained  Facility;  (iv)  any
noncompetition  agreement or similar restrictive  covenant;  (v) any contract or
agreement entered into outside the ordinary course of business and affecting the
assets,  business,  prospects,  operation or financial condition of any Retained
Facility that is enforceable  against the Mariner  Entities in their capacity as
debtors in possession.

         9.15 Labor Unions,  Etc. Except as set forth in Schedule 9.15,  neither
any Mariner  Entity,  nor any  Retained  Facility is a party to any  contract or
agreement  with  a  labor  union,   including  without  limitation,   collective
bargaining  or  employment  agreements,  or  any  agreements  that  contain  any
severance or termination pay liabilities that is enforceable against the Mariner
Entities in their capacity as debtors in possession.

         9.16 Employment  Matters.  Except as set forth in Schedule 9.16,  there
are no wages, salaries,  vacation,  holiday, sick pay or severance pay due or to
become due any  employee of any Mariner  Entity  relating to, or arising out of,
such employee's  employment at any Retained Facility prior to the Effective Time
that is enforceable against the Mariner Entities in their capacity as debtors in
possession.



                                      -23-
<PAGE>

         9.17 No  Litigation.  Except  for the Cases,  there is no suit,  claim,
action,   or  legal,   administrative,   arbitration  or  other   proceeding  or
governmental or Third Party Payor investigation or audit pending, or to the best
knowledge of each Mariner  Entity,  threatened by or against any Mariner Entity,
or any of the  Facilities,  and no event or  condition of any  character,  which
could  prevent  the  consummation  of  the  transactions  contemplated  by  this
Agreement or adversely affect the SNH Entities' use or enjoyment of the Retained
Facilities or diminish the value of such  properties  has, to the best knowledge
of each of the Mariner Entities, occurred; and there are no judgments,  decrees,
orders,  ruling,  writs or  injunctions,  against any Mariner Entity which could
adversely  affect the  operations  or finances of the Retained  Facilities,  the
property on which each is situated, or the transactions contemplated herein.

         9.18  Insurance.  Each Mariner  Entity has  maintained  or caused to be
maintained  insurance  since  commencement  of its  operations  at  each  of the
Retained  Facilities,  without any interruption of coverage,  against liability,
loss  or  casualty  on all  aspects  of  each  Retained  Facility's  operations,
including, but not limited to, its assets, personnel,  employees, and residents,
as well as  appropriate  malpractice  insurance.  The insurance  policies  which
currently provide the foregoing  insurance  coverage are listed and described in
Schedule 9.18.

         9.19 Subleases.  To the best of the knowledge of the Mariner  Entities,
(i) no Mariner  Entity has received any notice from any Subtenant  purporting to
exercise any right to renew or extend the term of any Sublease, (ii) the list of
Subleases and other  documents  contained in Schedule  9.19  attached  hereto is
true, complete and accurate, includes all amendments thereto and constitutes the
entire  agreement  between the Mariner  Entities and the Subtenants  thereunder,
including,  without  limitation,  any financing  agreements  and all  agreements
entered into between the Mariner  Entities and the Subtenants and any promissory
notes  executed and  delivered in  connection  therewith,  and (iii) the Mariner
Entities have provided the SNH Entities with complete and accurate copies of all
documents  and  correspondence  relating  to the  Subleases  that  are in  their
possession.

         9.20 Brokerage. Each of the Mariner Entities represents that it has not
used the services of any broker or finder in  connection  with the  transactions
contemplated  by this Agreement and each of the Mariner  Entities will indemnify
and hold harmless the SNH Entities from and against all claims,  actions, causes
of action, costs,  expenses,  including attorneys' fees, and liabilities arising
in or out of, or related to any broker or finder  claiming any  compensation  or
fee by reason of an alleged  agreement or understanding  with any of the Mariner
Entities.

         9.21 Knowledge and Expertise.  Each of the Mariner Entities  represents
that it has the knowledge  and  expertise in financial  and business  matters to
enable it to evaluate the risks and merits of the  transactions  contemplated by
this Agreement.

                                      -24-
<PAGE>


                                   ARTICLE 10

              CERTAIN MATTERS RELATING TO TRANSITION OF PROPERTIES

         10.1 Employees; Employee Benefits.

         10.1.1 After the Effective Time and subject to the terms of the Interim
Management  Agreement,  the Mariner Entities shall employ qualified nursing home
administrators who shall be responsible for the functional  day-to-day operation
of the  Retained  Facilities  and  supervision  of  personnel  at  the  Retained
Facilities,  as well  as all  on-site  professional,  custodial,  food  service,
cleaning,   maintenance,   clerical,   secretarial,   bookkeeping,   management,
collection,  and other  employees for the day-to-day  operations of the Retained
Facilities.  All such  administrators  and other personnel shall be employees of
the Mariner Entities.

         Notwithstanding  the foregoing,  the New Manager shall offer employment
to all or substantially  all of the qualified  nursing home  administrators  and
other  employees at the Retained  Facilities as soon after the Effective Time as
is reasonably practicable.  The Mariner Entities acknowledge that the ability of
the New Manager to make any such offer is contingent  upon the  employees  being
employable  under state and Federal law and may be subject to the New Operators'
or New Manager's receipt of all licenses,  permits,  approvals,  authorizations,
provider  agreements,  and  certificates  and  determinations  of  need  as  are
necessary for the New Operators and the New Manager to operate the Facilities as
licensees and to receive  Medicare and Medicaid  reimbursement  for the services
provided  therein,  and that in any event the New  Manager  will  first  have to
implement an appropriate  accounting and payroll function.  The Mariner Entities
further  acknowledge that the New Manager may not hire all such employees on the
same date or at the same time. The Mariner  Entities agree to cooperate with the
New  Manager in  connection  with such offers of  employment  and to release any
personnel  to  whom  the New  Manager  offers  employment  from  any  employment
agreements,  non-competition,  non-solicitation and non-disclosure agreements or
common law obligations relating to their employment with the Mariner Entities to
which they may be a party or subject.

         10.1.2  Payroll and payroll  related  costs shall be prorated as of the
Effective Time.

         In addition, the Mariner Entities shall pay to the New Manager for each
Facility an amount of cash  equivalent to all Employee  Accruals with respect to
such Retained Facility at the Effective Time and, in connection  therewith,  the
SNH Entities shall assume the Mariner Entities' obligation to pay the same.

         AMS Properties,  GCIHCC, or the New Manager,  as the case may be, shall
pay all payroll and payroll related costs, and maintain, prepare and process all
employee  payroll records and tax withholding  filings,  relating to, or arising
out of, any employee's employment from and after the Effective Date, as provided
in the Interim Management Agreement.



                                      -25-
<PAGE>

         The  Mariner  Operator  of  each  Retained  Facility  shall,  as of the
Effective Time,  deliver to the New Manager all personnel  records for employees
at such Retained Facility.  Each Mariner Operator shall have the right to retain
copies  of any  files  which  are  delivered  to the New  Manager.  The  Mariner
Operators,  the New  Operators  and the New  Manager,  as the case may be,  each
further  acknowledge  and agree that, in order to facilitate the  application of
the proration  provisions of this Section 10.1, they shall generate  terminating
payrolls and make  corresponding  payments to employees with respect thereto for
each  Retained  Facility  on both the  Effective  Date and the date that the New
Manager  shall hire all or  substantially  all of the employees at such Retained
Facility.

         10.2 Prorations.

                  10.2.1  Revenues and expenses  pertaining to Contracts (to the
extent  applicable),  utility  charges  for the  billing  period  in  which  the
Effective Time occurs,  prepaid expenses,  real estate taxes, municipal charges,
payroll,  Employee  Accruals and Employee  Benefits and other  related  items of
revenue or expense  attributable  to any  Retained  Facility  shall be  prorated
between the Mariner  Operator  for such  Retained  Facility and the relevant New
Operator as of the Effective Time. In general,  such prorations shall be made so
as to reimburse such Mariner  Operator for prepaid expense items,  and to charge
the relevant  Mariner Operator for prepaid revenue items, to the extent that the
same are attributable to periods after the Effective Time.

                  10.2.2  All  such  prorations  shall  be made on the  basis of
actual days elapsed in the relevant  accounting or revenue period and (i) in the
case of utility charges, real estate taxes, municipal charges, payroll, Employee
Accruals and Employee  Benefits,  shall be calculated  and paid at the Effective
Time as provided  in Section  10.2.3  hereof,  based on  invoices,  remittances,
statements and other information available with respect to such charges, and, if
such invoices,  remittances,  statements and other information are not available
with  respect to such  charges,  on  estimates  based on prior  charges for such
items,  (ii) in the case of all Contracts (to the extent  applicable)  and other
items of revenue or expense  attributable  to any  Retained  Facility,  shall be
calculated  and paid on the date that is the sixtieth  (60th) day (the  "True-Up
Time") after the Effective Time, as provided in Section 10.2.3 hereof,  based on
invoices,  remittances,  statements  and other  information  then available with
respect to such charges,  and, if such  invoices,  remittances,  statements  and
other  information  continue to be unavailable with respect to such charges,  on
estimates  based on prior  charges for such items,  and (iii) to the extent that
any  prorations for payments and charges  outlined in the preceding  clauses (i)
and (ii) are based on estimates, the SNH Entities and the Mariner Entities agree
to reconcile the  estimates for such items against the actual costs  therefor by
no later than  September  30, 2000.  The SNH  Entities and the Mariner  Entities
agree  that the  calculation  of the  proration  at the  True-Up  Time  shall be
performed by Ernst & Young U.S.  LLP and that they shall each pay fifty  percent
(50%) of the cost therefor. Notwithstanding anything contained in this Agreement
to the contrary, the SNH Entities shall be obligated to make payment for amounts
it collects on account of any prorations paid to the SNH Entities by the Mariner
Entities in accordance with this Section 10.2.

                  10.2.3 The  accounts of the Mariner  Entities and SNH Entities
created pursuant hereto shall be netted against each other. If (i) the result is
a net positive balance for the



                                      -26-
<PAGE>

Mariner Entities,  the SNH Entities shall pay to the Mariner Entities the amount
of such  balance by  corporate  check,  and (ii) if the result is a net positive
balance  for the SNH  Entities,  the  Mariner  Entities  shall pay to SPTMNR the
amount of such balance by corporate check.

                  10.2.4  There  shall  be no  prorations  with  respect  to the
Transferred  Facilities  (other  than with  respect  to rent and  other  amounts
payable  under the  Master  Lease),  as all such  expenses  with  respect to the
Transferred  Facilities are the  responsibility of the Mariner Entities prior to
the Effective Time, as lessee under the Master Lease,  and thereafter,  as owner
of the Transferred Facilities.

         10.3 Accounts  Receivable.  From and after the Effective  Time, (i) the
New Operators shall, to the extent permitted by applicable law, own all accounts
receivable  which  relate  to or arise  out of  services  provided  by or at the
Retained Facilities from or after the Effective Time (the "Post-Effective A/R"),
(ii)  the  Mariner   Operators   shall  make  and  effect   collections  of  all
Post-Effective  A/R,  (iii)  the  Mariner  Operators  shall  establish  new bank
accounts (the "New A/R  Accounts") in the name of each Mariner  Operator at such
local banks to be agreed upon by the SNH Entities and the Mariner Entities,  and
shall  instruct all Third Party Payors and other Persons that  directly  deposit
monies into the existing  bank  accounts  (the  "Existing  A/R  Accounts")  with
respect to the Retained Facilities to terminate such direct deposit and commence
depositing such monies into the New A/R Accounts from and after the date that is
sixty (60) days after the  Effective  Time (the "Account  Transfer  Time") or as
soon as is  practicable  thereafter  (and the Mariner  Entities  shall take such
further  action as may be reasonably  necessary to cause such Third Party Payors
and other Persons to comply with such  instructions  so that all  Post-Effective
A/R are deposited into the New A/R Accounts from and after the Account  Transfer
Time or as soon as is practicable thereafter),  (iv) the Mariner Operators shall
continue to endorse and deposit all monies,  checks, drafts or other instruments
or items  received as payment  for any  Post-Effective  A/R with  respect to any
Facility into the Existing A/R Accounts until the Account Transfer Time, (v) the
Mariner Operators shall endorse and deposit all monies,  checks, drafts or other
instruments  or items  received as payment for any  Post-Effective  A/R from and
after the Account Transfer Time into the New A/R Accounts,  (vi) within five (5)
days of the New Operators request therefor (but no sooner than the SNH Licensing
Date),  the Mariner  Operators  shall assign,  set over and transfer the New A/R
Accounts to the New Operators, and (vii) the Mariner Entities shall disburse all
proceeds  attributable  to  Post-Effective  A/R  deposited  in the  Existing A/R
Accounts or the New A/R  Accounts or  otherwise  received or held by the Mariner
Entities to the SNH  Entities  (or to such other  Person as the SNH Entities may
direct) within five (5) days of the Mariner Entities' receipt thereof.

         The SNH Entities and the Mariner  Entities  acknowledge  and agree that
(i) the Mariner  Entities  shall continue to own all accounts  receivable  which
relate to or arise out of  services  provided by or at the  Retained  Facilities
prior to the Effective Time (the "Pre-Effective A/R"), (ii) the Mariner Entities
shall be entitled  to retain all  proceeds  attributable  to  Pre-Effective  A/R
deposited  in the  Existing  A/R  Accounts or the New A/R  Accounts or otherwise
received  or held by the  Mariner  Entities,  and (iii) the SNH  Entities  shall
disburse  to the  Mariner  Entities  (or to



                                      -27-
<PAGE>

such other Person as the Mariner Entities may direct) all such Pre-Effective A/R
within five (5) days of the SNH Entities' receipt thereof.

         10.4 No Assumption  of  Liabilities.  Notwithstanding  anything in this
Agreement or elsewhere to the  contrary,  no SNH Entity is assuming,  and no SNH
Entity shall be  responsible  for, any  liability of any kind or nature  whether
known or unknown, absolute, mature or not yet due, liquidated or non-liquidated,
contingent,  non-contingent,  direct or  indirect or  otherwise,  of any Mariner
Entity or any other person for:

                  (a) Any costs or  expenses,  including,  but not  limited  to,
         legal fees, accounting fees, consulting and financing costs incurred by
         any Mariner Entity in negotiating this Agreement or in consummating the
         transactions contemplated hereby;

                  (b) Any claim as a result of any injury to any person  arising
         out of the  rendering  of or failure to render  services by any Mariner
         Entity or its or his employees,  agents or representatives or any other
         person  performing  services for or on behalf of any Mariner Entity (i)
         with respect to the Retained  Facilities,  prior to the Effective  Time
         and,  subject to, and upon the terms and  conditions  contained  in the
         Interim Management  Agreement,  after the Effective Time, and (ii) with
         respect to the  Transferred  Facilities or any other  operations of the
         Mariner Entities (except as otherwise expressly set forth herein), both
         prior to, and after, the Effective Time;

                  (c) Any liability to set off or recoupment  (including set off
         or recoupment against  Post-Effective Time accounts  receivable) by any
         Third Party Payor by reason of any contractual claim, settlement, order
         or  judgment   retroactively   adjusting   the   amounts   payable  for
         reimbursement purposes or recovering overpayments made or requiring the
         payment of fines,  penalties or damages,  or  reduction of  prospective
         payments to any Facility or  interest,  with respect to, or based upon,
         the  services  rendered by any Mariner  Entity (i) with  respect to the
         Retained  Facilities,  prior to the Effective Time and, subject to, and
         upon the terms  and  conditions  contained  in the  Interim  Management
         Agreement,  after the  Effective  Time,  and (ii) with  respect  to the
         Transferred  Facilities  or other  operations  of the Mariner  Entities
         (except as otherwise  expressly set forth  herein),  both prior to, and
         after, the Effective Time, including  liabilities that are subject to a
         stay ordered by the Court and liabilities that may be collected against
         the New Operator under state or Federal law;

                  (d) Any taxes owed by any Mariner Entity,  including,  but not
         limited  to, any  investment  tax  recapture,  depreciation  recapture,
         employer taxes such as F.I.C.A.  and F.U.T.A.,  any sales or use taxes,
         any personal  property taxes,  any  withholding  taxes and any workers'
         compensation or unemployment  insurance premiums or adjustments and, in
         the case of any Mariner  Entity's  employees or any of its  affiliates'
         employees,  relating to, or arising out of, such employee's  employment
         at any Retained  Facility prior to the Effective Time; and with respect
         to the  Transferred  Facilities  or  other  operations  of the  Mariner
         Entities, both prior to, and after, the Effective Time;



                                      -28-
<PAGE>

                  (e) Any claim by any employee of any Mariner Entity for wages,
         salary,  vacation,  holiday,  sick pay,  welfare,  or fringe  benefits,
         relating to, or arising out of, such employee's employment prior to the
         Effective Time,  except for those Employee  Accruals assumed by the New
         Manager  pursuant  to  Section  10.1  hereof  and with  respect  to the
         Transferred  Facilities  or other  operations  of the Mariner  Entities
         (except as otherwise  expressly set forth  herein),  both prior to, and
         after, the Effective Time;

                  (f)  Any  claim  arising  under  any  instrument,   agreement,
         indenture,  contract or  understanding to which any Mariner Entity is a
         party or by which  it or any of its  property  is  bound,  unless  such
         instrument,   agreement,   indenture,   contract  or  understanding  is
         explicitly  described  and  affirmed and assumed by the SNH Entities in
         this  Agreement  or is  otherwise  expressly  affirmed  and  assumed by
         separate instrument in writing executed by SPTMNR; or

                  (g) Any claim,  order or judgment otherwise arising out of the
         operation of any Facility or other  operations of the Mariner  Entities
         (except  as  otherwise  expressly  set forth  herein  but  specifically
         including any claim,  order or judgment  arising  under any  applicable
         Federal,  state  or  local  statutes,   laws,  ordinances,   rules  and
         regulations,  licensing  requirements or conditions (including Medicare
         or Medicaid  requirements or conditions,  and  environmental  laws), or
         involving the imposition of any lien under any applicable law), in each
         case to the extent  arising or  attributable  to  conditions  or events
         occurring prior to the Effective  Time,  and,  subject to, and upon the
         terms and  conditions  contained in the Interim  Management  Agreement,
         after the  Effective  Time,  and (ii) with  respect to the  Transferred
         Facilities  or other  operations  of the  Mariner  Entities  (except as
         otherwise  expressly set forth herein),  both prior to, and after,  the
         Effective Time.

         10.5  Indemnification.  Without  limiting  any of the  foregoing,  each
Mariner Entity agrees,  on a joint and several basis,  to indemnify,  defend and
hold  harmless,  the SNH Entities,  and their  respective  officers,  employees,
directors,  trustees,  managers, members, consultants and advisors, any of their
respective successors or assigns (individually an "Indemnitee") from and against
the following (collectively,  "Damages"): (i) all Pre-Closing Obligations or any
contravention or  non-compliance  with the Approval Order, and associated claims
or liability, and all other liabilities,  losses, damages, costs and expenses of
any kind (including,  without limitation,  the reasonable fees and disbursements
of  counsel  for  the  SNH  Entities  in  connection  with  any   investigative,
administrative  or  judicial  proceeding  arising  out of the  operation  of any
Facility or other operations of the Mariner Entities (including any violation or
alleged  violation of any and all applicable  Federal,  state or local statutes,
laws, ordinances,  rules and regulations,  licensing requirements or conditions,
or involving the imposition of any lien under any such applicable law)) prior to
the Effective Time or for any contravention or non-compliance  with the Approval
Order, (ii) any and all liabilities,  losses, damages, costs and expenses of any
kind arising out of either a breach, default,  contravention,  non-compliance by
any Mariner Entity of its obligations under this Agreement or the Approval Order
(including  the  failure  of any  representation  by any  Mariner  Entity  to be
accurate and complete on the date when made or deemed made),  or the enforcement
of such  obligations,  and (iii) the existence,  prior to the Effective Time, of
any Hazardous  Substance  on, in, or under any Retained  Facility (to the



                                      -29-
<PAGE>

extent provided for in the Master Lease). The SNH Entities shall, in addition to
any other rights,  be entitled to payment in compensation  for any of the above,
holding allowed administrative period claims for all such payments due thereon.

         10.6 Post-Effective Time Liabilities (Retained Facilities). Each of the
SNH Entities  acknowledges  and agrees that,  subject to, and upon the terms and
conditions contained in the Interim Management Agreement, the New Manager and/or
the New  Operators  shall  indemnify  the Mariner  Entities from and against all
costs,  expenses and liabilities  arising out of the operation,  maintenance and
management of the Retained Facilities after the Effective Time, except for those
costs,  expenses and liabilities  arising out of the gross negligence or willful
misconduct of any of the Mariner Entities.

         10.7 Financial  Records,  Etc. Each of the SNH Entities and the Mariner
Entities  agree that they shall provide such other party access to the books and
records and other financial information maintained by such party with respect to
the operation of the  Facilities  (both before and after the Effective  Time) as
such party may reasonably  request.  The Mariner  Entities shall provide the SNH
Entities and their  accountants  with such  certifications  with respect to such
financial  information  as the SNH  Entities  may from  time to time  reasonably
request.

         10.8 Contracts. The Mariner Entities acknowledge that the New Operators
may desire to assume certain of the Contracts and, in connection therewith,  the
Mariner  Entities agree that they shall (i) within fifteen (15) Business Days of
the  execution  hereof,  provide the SNH  Entities  with a complete  list of the
Contracts  and  the  status  thereof  (including,  without  limitation,  amounts
outstanding under such Contracts  (including those amounts  outstanding prior to
the  Petition  Date)),  (ii)  assist in the New  Operators'  evaluation  of such
Contracts by providing  such  information  as the New  Operators' may reasonably
request  regarding the contracting  party's  performance  thereunder,  and (iii)
subject to Bankruptcy  Court Approval,  assume and assign any Contracts that the
New Operators may elect to have the Mariner  Entities assume and assign to them,
provided  that in no event shall any Mariner  Entity be required to pay any cure
amounts,  or incur  any  additional  obligations,  under  any such  Contract  in
connection with such assumption and assignment beyond those enforceable  against
the  Mariner  Entities  in their  capacity  as debtors in  possession  (it being
intended by the  parties  hereto  that if the New  Operators  elect to cause the
Mariner  Entities to assume and assign any such Contract in accordance with this
Section  10.7,  the New Operators  will pay any cure amounts  required to effect
such assumption and assignment).

         10.9  Survival.  The  provisions  of this Article 10 shall  survive the
Closing hereunder.

                                   ARTICLE 11

                   DAMAGE TO PROPERTY FROM CASUALTY OR TAKING

         11.1 In the event of any  casualty or damage to any  Facility  prior to
the  Effective  Time (which shall not be fully  restored  prior to the Effective
Time),  all sums recovered on



                                      -30-
<PAGE>

account of such insurance shall be held in trust for the benefit of and in order
to be paid over to, and all sums  recoverable  on such account shall be assigned
to, the  appropriate SNH Entity or Mariner Entity at the Effective Time. The SNH
Entity and the Mariner Entity which owns,  leases or manages such Facility shall
execute and deliver such further instruments of assignment of insurance proceeds
and other documents (including,  without limitation,  appropriate endorsement of
checks)  as any SNH Entity or  Mariner  Entity may from time to time  reasonably
request in order to make such insurance  proceeds  payable to such SNH Entity or
Mariner Entity.

         11.2 In the event that prior to the  Effective  Time any portion of any
Retained  Facility  shall be taken or shall be  threatened  with a taking by any
exercise of the right of eminent domain, or any portion of any Retained Facility
shall  sustain any direct or  consequential  damage for which the owner  thereof
shall be entitled to compensation by any public  authority,  the appropriate SNH
Entity shall be entitled to bring any suit in connection with recovery  therefor
in the name of such SNH Entity or, if applicable,  any Mariner Entity,  or both,
and all sums  received  on  account  of any such  taking  or  damages  and or an
assignment  of all the  owner's  rights to  collect  damages  therefor  shall be
delivered  to the  appropriate  SNH Entity  together  with the  delivery  of the
Transaction  Documents.  The Mariner  Entities  shall  execute and deliver  such
further instruments of assignment and such other documents  (including,  without
limitation,  appropriate endorsements of checks and pleadings) as any SNH Entity
may from time to time reasonably request in connection with the foregoing.

         11.3 In the event that prior to the  Effective  Time any portion of any
Transferred  Facility shall be taken or shall be threatened with a taking by any
exercise  of the right of eminent  domain,  or any  portion  of any  Transferred
Facility  shall sustain any direct or  consequential  damage for which the owner
thereof  shall  be  entitled  to  compensation  by  any  public  authority,  the
appropriate  Mariner  Entity  shall be entitled to bring any suit in  connection
with recovery therefor in the name of such Mariner Entity or, if applicable, any
SNH  Entity,  or both,  and all sums  received  on account of any such taking or
damages  and or an  assignment  of all the  owner's  rights to  collect  damages
therefor shall be delivered to the appropriate  Mariner Entity together with the
delivery  of the  Transaction  Documents.  The SNH  Entities  shall  execute and
deliver  such  further  instruments  of  assignment  and  such  other  documents
(including,   without  limitation,   appropriate   endorsements  of  checks  and
pleadings)  as any Mariner  Entity may from time to time  reasonably  request in
connection with the foregoing.

                                   ARTICLE 12

                                    RELEASES

         12.1 Release of SNH  Entities.  Subject to, and in  consideration  for,
each SNH Entity entering into this Agreement and  consummating  the transactions
contemplated  hereby,  each Mariner Entity shall release and forever  discharge,
each SNH Entity and their respective successors,  assigns, agents, shareholders,
directors,   officers,   employees,   agents,  attorneys,  parent  corporations,
subsidiary corporations, affiliated corporations,  affiliates, and each of them,
from  any and all  claims,  debts,  liabilities,  demands,  obligations,  costs,
expenses, actions



                                      -31-
<PAGE>

and causes of action, of every nature and description, whether known or unknown,
absolute,  mature,  or not yet due,  liquidated or  non-liquidated,  contingent,
non-contingent,  direct or indirect or otherwise,  which any Mariner  Entity now
has or at any time may hold, by reason of any matter,  cause or thing  occurred,
done,  omitted or suffered to be done on or prior to the  Effective  Time.  Each
Mariner  Entity waives the benefits of any law,  which may provide in substance:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of  executing  the  release,  which if
known by him must have materially affected his settlement with the debtor." Each
Mariner  Entity  understands  that the facts which it believes to be true at the
time of  making  the  release  provided  for  herein  may  later  turn out to be
different than it believes now or at the time of granting such release, and that
information which is not now or then known or suspected may later be discovered.
Each Mariner  Entity accepts this  possibility,  and each Mariner Entity assumes
the risk of the facts  turning out to be  different  and new  information  being
discovered; and each Mariner Entity further agrees that the release provided for
herein  shall in all  respects  continue  to be  effective  and not  subject  to
termination  or  rescission  because of any  difference in such facts or any new
information.

         Notwithstanding anything to the contrary contained in this Section 14.1
or  otherwise,  this release  shall only be effective on and as of the Effective
Time and specifically  only upon the  consummation of the transactions  provided
for in this Agreement and not otherwise.

         None of the  Mariner  Entities  is  releasing  any SNH Entity  from any
claims, debts, liabilities,  demands,  obligations,  costs, expenses, actions or
causes of action arising out of this Agreement,  any Settlement  Document or the
transactions  contemplated  hereby, or otherwise,  except as expressly  provided
herein.

         12.2 Release of Mariner Entities.  Subject to, and in consideration for
each  Mariner  Entity  entering  into  this  Agreement  and   consummating   the
transactions  contemplated  hereby,  each SNH Entity  shall  release and forever
discharge each Mariner Entity and their respective successors,  assigns, agents,
shareholders,   directors,   officers,   employees,  agents,  attorneys,  parent
corporations, subsidiary corporations, affiliated corporations,  affiliates, and
each of them, from any and all claims, debts, liabilities, demands, obligations,
costs, expenses,  actions and causes of action, of every nature and description,
whether known or unknown,  which any SNH Entity now has or at any time may hold,
by reason of any matter,  cause or thing occurred,  done, omitted or suffered to
be done on or prior to the Effective  Time.  Each SNH Entity waives the benefits
of any law, which may provide in substance:  "A general  release does not extend
to claims which the  creditor  does not know or suspect to exist in his favor at
the time of executing  the release,  which if known by him must have  materially
affected his settlement with the debtor." Each SNH Entity  understands  that the
facts which it  believes  to be true at the time of making the release  provided
for herein may later turn out to be  different  than it  believes  now or at the
time of granting such  release,  and that  information  which is not now or then
known or  suspected  may  later be  discovered.  Each SNH  Entity  accepts  this
possibility, and each SNH Entity assumes the risk of the facts turning out to be
different and new  information  being  discovered;  and each SNH Entity  further
agrees that the release provided for herein shall in all



                                      -32-
<PAGE>

respects  continue to be effective and not subject to  termination or rescission
because of any difference in such facts or any new information.

         Notwithstanding anything to the contrary contained in this Section 14.2
or  otherwise,  this release  shall only be effective on and as of the Effective
Time and specifically  only upon the  consummation of the transactions  provided
for in this Agreement and not otherwise.

         None of the SNH  Entities  is  releasing  any  Mariner  Entity from any
claims, debts, liabilities,  demands,  obligations,  costs, expenses, actions or
causes of action arising out of this Agreement,  any Settlement  Document or the
transactions  contemplated  hereby, or otherwise,  except as expressly  provided
herein.

         12.3 No  Further  Commitments  by SNH  Entities.  Each  Mariner  Entity
further  acknowledges that, from and after the Effective Time, no SNH Entity has
any existing commitments, obligations or agreements to advance credits or loans,
or to lease property,  or make financial or other  accommodations to any Mariner
Entity,  except  as may be  specifically  set  forth  in this  Agreement  or the
Settlement Documents.

                                   ARTICLE 13

                               GENERAL PROVISIONS

         13.1 MUTUAL  WAIVER OF RIGHT TO JURY TRIAL.  EACH PARTY  HERETO  HEREBY
WAIVES  THE  RIGHT TO TRIAL BY JURY IN ANY  ACTION  OR  PROCEEDING  BASED  UPON,
ARISING OUT OF, OR IN ANY WAY  RELATING  TO: (I) THIS  AGREEMENT,  OR ANY OF THE
AGREEMENTS,  INSTRUMENTS  OR  DOCUMENTS  REFERRED  TO HEREIN;  OR (II) ANY OTHER
PRESENT OR FUTURE  INSTRUMENT  OR AGREEMENT  BETWEEN OR AMONG THEM; OR (III) ANY
CONDUCT,  ACTS OR  OMISSIONS  OF ANY  PARTY  HERETO  OR ANY OF THEIR  DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED
WITH THEM; IN EACH OF THE FOREGOING CASES,  WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.

         13.2  Survival.  Except as otherwise  provided by this  Agreement,  all
covenants,  agreements,  representations  and  warranties  made by each  Mariner
Entity or SNH  Entity  herein  and in all  certificates  and  other  instruments
delivered pursuant to this Agreement shall survive the execution and delivery of
the deeds to the  Transferred  Facilities  and the  closing of the  transactions
contemplated  hereby,  and the Mariner  Entities  shall be and remain liable for
breaches of the provisions of this Agreement,  the Interim Management  Agreement
and the Interim  Occupancy  Agreements,  contravention  of the Approval Order or
otherwise  for the  period  including  the  greater  of one (1) year or the last
administrative claims bar date that is established by order of the Court (except
that the SNH Entities shall in all events remain liable to the Mariner  Entities
for the amount of any  deductible  or  self-insured  retention  amounts  paid or
payable  under Section  5.1(a) of the Interim  Management  Agreement  until such
deductible or  self-insured  retention  amounts shall have been paid). If and to
the extent the  Mariner  Entities



                                      -33-
<PAGE>

shall emerge from the Cases pursuant to a confirmed plan of reorganization prior
to the expiration of such period, then the obligations  provided herein shall be
a continuing  obligation of the reorganized Mariner Entities for the duration of
such period and any plan confirmed in the Cases shall so provide.

         13.3 Notices. All notices,  demands and other communications  hereunder
shall be in  writing  and  delivered,  telegraphed  or mailed  (by  first  class
registered or certified mail, postage prepaid) addressed as follows:

                  (a)      if to an SNH Entity:

                           c/o SENIOR HOUSING PROPERTIES TRUST
                           400 Centre Street
                           Newton, MA  02458
                           Attention: Treasurer

                  (b)      with copy to:

                           SULLIVAN & WORCESTER LLP
                           One Post Office Square
                           Boston, MA 02109
                           Attention:  Nancy S. Grodberg, Esq.

                  (c)      if to any Mariner Entity:

                           MARINER POST-ACUTE NETWORK, INC.
                           One Ravinia Drive
                           Atlanta, GA 30346
                           Attention:  Associate General Counsel

                  (d)      with a copy to:

                           Powell, Goldstein, Frazer & Murphy LLP
                           191 Peachtree Street
                           Atlanta, GA 30303
                           Attention:  Douglas S. Gosden, Esq.


or to such other  address as may  hereafter be  designated by any party for such
other purpose, and shall be effective upon receipt if hand delivered or upon the
expiration of the fifth business day after the day of mailing.

         13.4 Governing Law. This Agreement  shall be governed by,  interpreted,
construed,  applied and enforced in accordance  with the Bankruptcy Code and the
laws of the  Commonwealth  of  Massachusetts  applicable  to  contracts  between
residents  of the



                                      -34-
<PAGE>

Commonwealth  of  Massachusetts  which are to be performed  entirely  within the
Commonwealth  of  Massachusetts,  regardless  of (i)  where  this  Agreement  is
executed or delivered;  or (ii) where any payment or other performance  required
by this  Agreement is made or required to be made;  or (iii) where any breach of
any  provision  of this  Agreement  occurs,  or any  cause of  action  otherwise
accrues;  or (iv) where any action or other proceeding is instituted or pending;
or (v) the nationality,  citizenship,  domicile,  principal place of business or
jurisdiction of organization or  domestication of any party; or (vi) whether the
laws  of  the  forum  jurisdiction   otherwise  would  apply  the  laws  of  the
jurisdiction  other  than  the  Commonwealth  of  Massachusetts;  or  (vii)  any
combination of the foregoing.

         To the  maximum  extent  permitted  by  applicable  law,  any action to
enforce,  arising out of, or relating  in any way to, any of the  provisions  of
this  Agreement may be brought and prosecuted in such court or courts located in
the Commonwealth of Massachusetts as is provided by law; and the parties consent
to the  jurisdiction  of said  court or courts  located in the  Commonwealth  of
Massachusetts  and to  service of process by  registered  mail,  return  receipt
requested, or by any other manner provided by law.

         13.5 Successors and Assigns.  This Agreement shall be binding upon each
party thereto and its successors and assigns.  The rights and obligations of any
party  hereto  under this  Agreement  may not be  assigned  by any party  hereto
without the prior written consent of each of the parties hereto.

         13.6 Entire  Agreement.  This  Agreement,  together  with the  exhibits
hereto and such other documents as are referred to herein, constitute the entire
agreement of the parties in respect of the subject matter described herein,  and
may not be changed or modified  except by an agreement in writing  signed by the
parties hereto.

         13.7 Severability.  In case any one or more of the provisions contained
in this Agreement  should be invalid,  illegal or  unenforceable in any respect,
the validity,  legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired  thereby and the
Agreement  shall thereupon be reformed and construed and enforced to the maximum
extent permitted by law.

         13.8  Attorneys'   Fees.  If  any  legal  action  is  brought  for  the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the  successful  or  prevailing  party or parties  shall be  entitled to recover
attorneys' fees and other costs incurred in that action in addition to any other
relief to which it or they may be entitled.

         13.9 Non-Disclosure.  Until this Agreement is publicly announced by SNH
(i) the  Mariner  Entities,  the SNH  Entities,  and  each  of  their  officers,
directors,  employees, agents, consultants and advisors, shall keep confidential
all terms hereof and information contained herein (except to the extent required
either (a) in  connection  with the  satisfaction  of the  conditions  contained
herein  (including,  without  limitation,  providing  such  information  to  its
creditors and their  advisors),  (b) by the Securities  Exchange Act of 1934, as
amended,  and the



                                      -35-
<PAGE>

rules and  regulations  promulgated  thereunder  (the  "Exchange  Act"),  or (c)
reporting  requirements,   if  any,  of  the  New  York  Stock  Exchange  ("NYSE
Requirements")), and (ii) neither any Mariner Entity nor any persons or entities
affiliated with any of them or their  officers,  directors,  employees,  agents,
consultants  and advisors  (within the meaning of Rule 405 under the  Securities
Act of 1933, as amended) shall trade in SNH's stock.  In addition,  each Mariner
Entity  and each SNH  Entity  shall  obtain  the  approval  of Mariner or SPTMNR
(respectively),  which approval  shall not be  unreasonably  withheld,  prior to
making any public  announcements  concerning this Agreement or the  transactions
contemplated  hereby.  Each Mariner Entity,  however,  acknowledges that SNH may
disclose  the  existence of this  Agreement  and the  transactions  contemplated
hereby in appropriate  public filings under the Exchange Act, or pursuant to the
NYSE Requirements,  and each Mariner Entity further agrees that it shall provide
such financial  statements as are available to such Mariner Entity, as SNH shall
determine  necessary  for SNH to comply with  reporting  requirements  under the
Exchange Act or NYSE Requirements, if any, with respect to this transaction.

         13.10 Required  Disclosure.  Notwithstanding  Section 13.8 hereof, each
party  hereby may and shall give all required  notices of the  existence of this
Agreement and the pending  consummation of the transactions  contemplated hereby
to any and all appropriate governmental agencies..

         13.11  LIMITATION ON LIABILITY.  THE DECLARATION OF TRUST OF SNH, DATED
DECEMBER 16, 1998, A COPY OF WHICH,  TOGETHER WITH ALL  AMENDMENTS  THERETO (THE
"SNH DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND,  PROVIDES  THAT THE NAME "SENIOR  HOUSING
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SNH DECLARATION  COLLECTIVELY
AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY,  AND THAT NO TRUSTEE,  OFFICER,
SHAREHOLDER,  EMPLOYEE OR AGENT OF SNH SHALL BE HELD TO ANY PERSONAL  LIABILITY,
JOINTLY OR SEVERALLY,  FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH. ALL PERSONS
DEALING  WITH SNH,  IN ANY WAY,  SHALL LOOK ONLY TO THE  ASSETS OF SNH,  FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

         13.12  LIMITATION ON  LIABILITY.  THE  DECLARATION  OF TRUST OF SPTMNR,
DATED JANUARY 14, 1999, A COPY OF WHICH,  TOGETHER WITH ALL  AMENDMENTS  THERETO
(THE "SPTMNR  DECLARATION"),  IS DULY FILED IN THE OFFICE OF THE  DEPARTMENT  OF
ASSESSMENTS  AND  TAXATION  OF THE  STATE OF  MARYLAND,  PROVIDES  THAT THE NAME
"SPTMNR  PROPERTIES  TRUST" REFERS TO THE TRUSTEES UNDER THE SPTMNR  DECLARATION
COLLECTIVELY  AS  TRUSTEES,  BUT NOT  INDIVIDUALLY  OR  PERSONALLY,  AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER,  EMPLOYEE OR AGENT OF SPTMNR SHALL BE HELD TO ANY
PERSONAL  LIABILITY,  JOINTLY  OR  SEVERALLY,  FOR ANY  OBLIGATION  OF, OR CLAIM
AGAINST, SPTMNR. ALL PERSONS DEALING WITH SPTMNR, IN ANY WAY, SHALL LOOK ONLY TO
THE  ASSETS OF SPTMNR,  FOR THE  PAYMENT  OF ANY SUM OR THE  PERFORMANCE  OF ANY
OBLIGATION.



                                      -36-
<PAGE>

         13.13 Costs and Expenses.  The Mariner  Entities  shall pay any and all
costs and expenses  incurred by the SNH Entities as a result of or in connection
with the transactions contemplated by this Agreement (other than attorneys' fees
of the SNH Entities),  regardless of whether such  transactions are consummated,
including,  without limitation,  (i) all taxes,  including,  without limitation,
documentary transfer taxes,  documentary stamp taxes, mortgage taxes, intangible
taxes,  sales and similar  taxes  applicable  to the  transactions  contemplated
herein together with interest and penalties,  if any, thereon, but excluding any
income  taxes of the SNH  Entities,  and (ii) all costs  relating to  surrender,
assignnment and conveyances contemplated hereby, including,  without limitation,
title  reports,  all costs  relating  to owner's  or  lender's  title  insurance
commitments and policies, and all costs and charges related to recording fees.

         13.14  Confidentiality.  The  parties  agree not to  disclose or permit
their  respective  representatives,  attorneys,  auditors or agents to disclose,
except as may be required by law or  performance  hereunder,  any  confidential,
non-public  information  of the  others  which  is  obtained  by any of  them in
connection with the transactions contemplated by this Agreement.

         13.15 Reservation of Rights. Each party hereto acknowledges that it and
the other parties hereto have entered into this Agreement in order to settle and
compromise  certain  potential  claims  between  them and  that  the  execution,
delivery  and  performance  of this  Agreement  by the parties  hereto is not an
admission of any party's obligations or liabilities whatsoever. This document is
subject to the  protections  of Federal  Rule of  Evidence  408 and all  similar
provisions and supporting authorities.

         13.16  Third  Party   Beneficiaries.   This  Agreement  and  all  other
instruments  executed and delivered in  connection  herewith are not intended to
benefit any third parties, including,  without limitation, any such parties that
may have claims against any of the Mariner Entities.



                                      -37-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written and their  respective  seals to
be hereunto affixed and attested by their respective duly authorized officers.

                           SENIOR HOUSING PROPERTIES TRUST,
                           a Maryland real estate investment trust



                           By: /s/ Ajay Saini
                               David J. Hegarty, President
                               Ajay Saini, Treasurer and Chief Financial Officer


                           SPTMNR PROPERTIES TRUST,
                           a Maryland real estate investment trust



                           By: /s/ Ajay Saini
                               David J. Hegarty, President
                               Ajay Saini, Treasurer and Chief Financial Officer


                           FIVE STAR QUALITY CARE, INC.,
                           a Delaware corporation



                           By: /s/ Ajay Saini
                               Ajay Saini, Treasurer and Assistant Secretary


                           SHOPCO-AZ, LLC,
                           a Delaware limited liability company

                           By:  SENIOR HOUSING PROPERTIES TRUST,
                                a Maryland real estate investment trust,
                                   its Member



                                By: /s/ Ajay Saini
                                    David J. Hegarty, President
                                    Ajay Saini, Treasurer and
                                       Chief Financial Officer



                                      -38-
<PAGE>

                           SHOPCO-CA, LLC,
                           a Delaware limited liability company

                           By:  SENIOR HOUSING PROPERTIES TRUST,
                                a Maryland real estate investment trust,
                                   its Member


                                By: /s/ Ajay Saini
                                    David J. Hegarty, President
                                    Ajay Saini, Treasurer and
                                       Chief Financial Officer



                           SHOPCO-COLORADO, LLC,
                           a Delaware limited liability company

                           By:  SENIOR HOUSING PROPERTIES TRUST,
                                a Maryland real estate investment trust,
                                   its Member


                                By: /s/ Ajay Saini
                                    David J. Hegarty, President
                                    Ajay Saini, Treasurer and
                                       Chief Financial Officer



                           SHOPCO-WI, LLC,
                           a Delaware limited liability company

                           By:  SENIOR HOUSING PROPERTIES TRUST,
                                a Maryland real estate investment trust,
                                   its Member



                                By: /s/ Ajay Saini
                                    David J. Hegarty, President
                                    Ajay Saini, Treasurer and
                                       Chief Financial Officer



                                      -39-
<PAGE>

                           MARINER POST-ACUTE NETWORK, INC.
                           (f/k/a Paragon Health Network, Inc.),
                           a Delaware corporation



                           By: /s/ Todd Andrews
                               Name: Todd Andrews
                               Its: Vice President


                           GRANCARE, INC.
                           (f/k/a New GranCare, Inc.),
                           a Delaware corporation



                           By: /s/ Todd Andrews
                               Name: Todd Andrews
                               Its: Vice President


                           AMS PROPERTIES, INC.,
                           a Delaware corporation



                           By: /s/ Todd Andrews
                               Name: Todd Andrews
                               Its: Vice President


                           GCI HEALTH CARE CENTERS, INC,
                           a Delaware corporation



                           By: /s/ Todd Andrews
                               Name: Todd Andrews
                               Its: Vice President


                                      -40-
<PAGE>
                                 SCHEDULE 1.1.1

                    PERMITTED PERSONAL PROPERTY ENCUMBRANCES


                                      None.



<PAGE>
<TABLE>
<CAPTION>
                                             SCHEDULE 1.1.2

                                          RETAINED FACILITIES

                  Property Name                           Property Address                      Tenant
-----------------------------------------------------------------------------------------------------------
<S>                                                <C>                                     <C>

Cedars Health Care Center                           1599 Ingalls Street                     AMS Properties
                                                    Lakewood, CO

Cherrelyn Manor Nursing Home                        5555 South Elati                        AMS Properties
                                                    Littleton, CO

Christopher East Health Care Center                 1132 East Knapp Street                  AMS Properties
                                                    Milwaukee, WI 53202

Greentree Health Care Center                        70 Greentree Road                       AMS Properties
                                                    Clintonville, WI 54929

La Mesa Healthcare Center                           2470 S. Arizona Avenue                  GCIHCC
                                                    Yuma, AZ 85364

La Salette Health Care & Rehabilitation Center      537 E. Fulton                           GCIHCC
                                                    Stockton, CA 95204

Lancaster Health Care Center                        1642 West Avenue "J"                    AMS Properties
                                                    Lancaster, CA

Northwest Health Care Center                        7800 West Fond du Lac Avenue            AMS Properties
                                                    Milwaukee, WI 53218

Pine Manor Health Care Center                       East Side of County Y Highway           AMS Properties
                                                    Embarrass (Clintonville), WI

River Hills West Health Care Center                 321 Riverside Drive                     AMS Properties
                                                    Pewaukee, WI 53072

Sunny Hill Health Care Center                       4325 Nakoma Road                        AMS Properties
                                                    Madison, WI

Sunquest Village of Yuma                            265 East 24th Street                    GCIHCC
                                                    Yuma, AZ 85364

Thousand Oaks Health Care Center                    93 West Avenida de los Arobules         AMS Properties
                                                    Thousand Oaks, CA 91360

Van Nuys Health Care Center                         6835 Hazeltine Avenue                   AMS Properties
                                                    Van Nuys, CA 91405

Village Green Nursing Home                          2932 North 14th Street                  GCIHCC
                                                    Phoenix, AZ 85094

Virginia Health Care Center                         1471 Waukesha Avenue                    AMS Properties
                                                    Waukesha, WI

Woodland Health Care Center                         18740 W. Bluemound Road                 AMS Properties
                                                    Brookfield, WI

</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                             SCHEDULE 1.1.3

                                          SUBLEASED FACILITIES

                Property Name                                Property Address                        Tenant
-------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                      <C>                        <C>
Huron Nursing Home:                             1251 Arizona SW          15th & Michigan            GCIHCC
Sunquest Village                                Huron, SD 57530          Huron, SD 57350

Southridge Health Care Center:                  3600 S. Norton                                      GCIHCC
Mom & Dad's Health Care Center                  Sioux Falls, SD 57105

Pacific Gardens Nursing and Rehabilitation      577 South Peach Street                              AMS Properties
Center: Pleasant Care                           Fresno, CA

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                             SCHEDULE 1.1.4

                                         TRANSFERRED FACILITIES

                Property Name                       Property Address                           Tenant
---------------------------------------------------------------------------------------------------------------
<S>                                            <C>                                         <C>
Brian Centers-Carbarrus                         250 Bishop Lane                             AMS Properties
                                                Concord, NC 28025

Brian Centers-Wilson                            2501 Downing Street Extension               AMS Properties
                                                Wilson, NC 53702

Brian Centers-Winston-Salem                     6000 Brian Center Lane                      AMS Properties
                                                Winston-Salem, NC 47106

Flagship Health Care Center                     466 Flagship Road                           AMS Properties
                                                Newport Beach, CA

Tarzana Health Care Center                      5640 Reseda Avenue (5650 Reseda Road)       AMS Properties
                                                Tarzana, CA
</TABLE>

<PAGE>
                                  SCHEDULE 2.1

                               EXISTING DOCUMENTS


1.   A Master Lease comprised of: (i) a Master Lease Document  General Terms and
     Conditions  dated as of December  28, 1990 and entered  into by and between
     Health and Retirement  Properties Trust ("HRP"),  and AMS Properties,  Inc.
     ("AMS  Properties");  (ii)  a  Master  Lease  Document  General  Terms  and
     Conditions  dated as of June 30, 1992 and  entered  into by and between HRP
     and GCI  Health  Care  Centers,  Inc.  ("GCIHCC");  (iii)  twenty-six  (26)
     facility  lease  supplements,  some of which are dated as of  December  28,
     1990, some of which are dated as of March 27, 1992, some of which are dated
     June 30,  1992 and  others of which are dated as of June 29,  1998,  all as
     entered into pursuant to the documents  described in preceding  clauses (i)
     and (ii);  and (iv)  Guaranty,  Cross-Default  and  Cross-Collateralization
     Agreement by AMS Properties and GCIHCC, dated as of June 30, 1992, pursuant
     to which AMS  Properties and GCIHCC  cross-defaulted,  cross-collateralized
     and  guaranteed  each other's  obligations to HRP., all as amended to date,
     pursuant to which AMS and GCIHCC lease  twenty-six (26) health care related
     facilities (the "Leased Facilities").

2.   A  Guaranty,  dated  as of  December  28,  1990,  from  GranCare,  Inc.,  a
     __________________ corporation ("Old GranCare") in favor of HRP pursuant to
     which all obligations of AMS Properties are guaranteed; the obligations and
     liabilities  under such Guaranty  having been assumed by GranCare,  Inc., a
     Delaware corporation ("GranCare"), pursuant to the Assumption Agreement.

3.   Memoranda of Lease,  each dated as of December 28, 1990,  March 27, 1992 or
     June 30, 1992 and recorded  with the  Registry of Deeds of the  appropriate
     county with respect to each Leased Facility.

4.   UCC Financing  Statements by AMS  Properties,  showing AMS  Properties,  as
     lessee, and HRP, as lessor, filed with the appropriate State and County UCC
     filing office with respect to each Leased Facility.

5.   An Amended and Restated HRP Shares Pledge  Agreement,  dated as of June 30,
     1992, between HRP and AMS Properties,  pursuant to which AMS Properties has
     pledged  certain of its shares of HRP to HRP to secure its  obligations  to
     HRP;

6.   An Amended and Restated Voting Trust  Agreement,  dated as of June 30, 1992
     from AMS  Properties  to HRPT  Advisors,  Inc., as voting  trustee,  with a
     Voting Trust Certificate and Stock Power attached thereto.

7.   A Security Agreement,  dated as of December 28, 1990 from AMS Properties to
     HRP,  granting  HRP a  security  interest  in all now owned  and  hereafter
     acquired tangible personal property and all accounts  receivable,  contract
     rights and general intangibles of AMS Properties.

8.   A Collateral Assignment of Contracts and Permits,  dated as of December 28,
     1990 from AMS Properties to HRP, assigning to HRP all contracts and permits
     of AMS Properties.
<PAGE>

9.   UCC Financing  Statements/Fixture  Filings by AMS  Properties,  showing AMS
     Properties,   as  debtor,  and  HRP,  as  secured  party,  filed  with  the
     appropriate  UCC filing  office  and  registries  of deeds to  perfect  the
     interests  of HRP as a  secured  creditor  under the  security  instruments
     referred to above.

10.  An Amended and Restated  Renovation  Funding  Agreement dated as of January
     13, 1992, between AMS Properties and HRP.

11.  A Renovation Loan Agreement, dated as of March 28, 1992, by and between AMS
     Properties  and  HRP  relating  to  certain  renovations  to be made at the
     Christopher East Health Care Center, Milwaukee, Wisconsin.

12.  A Promissory  Note,  dated as of March 28, 1992, in the original  principal
     amount of $1,250,000, executed by AMS Properties and accepted by HRP.

13.  A Security Agreement, dated as of March 28, 1992, made by AMS Properties in
     favor of HRP.

14.  A Pledge  Agreement  dated as of December 28, 1990,  as  supplemented  by a
     Pledge  Agreement  Supplement  dated  as of  December  29,  1993,  from Old
     GranCare  (as  successor  to AMS) to HRP  pursuant  to which all  shares of
     capital  stock  of  AMS  Properties  are  pledged  to  HRP,  together  with
     certificates  relating  to the  AMS  Properties  shares  and  stock  powers
     relating to such shares;  the obligations and liabilities under such Pledge
     Agreement and Pledge Agreement  Supplement  having been assumed by GranCare
     pursuant to the Assumption Agreement.

15.  A Subordination  Agreement dated as of December 28, 1990 among Old GranCare
     as  subordinate  creditor,  AMS  Properties  as  debtor,  and HRP as senior
     creditor;   the  obligations  and  liabilities  under  such   Subordination
     Agreement  having  been  assumed by  GranCare  pursuant  to the  Assumption
     Agreement.

16.  A  Subordination  Agreement  dated as of  December  28,  1990  among HMI as
     subordinate creditor, AMS Properties as debtor and HRP as senior creditor.

17.  A  Subordination  Agreement  dated as of December  28, 1990 among AMS Green
     Tree as  subordinate  creditor,  AMS Properties as debtor and HRP as senior
     creditor.

18.  A  Subordination  Agreement  dated as of December  28, 1990 among Am-Cal as
     subordinate creditor, AMS Properties as debtor and HRP as senior creditor.

19.  A Consent  Letter dated March 31, 1995 by HRP and consented to by GranCare,
     AMS Properties and GCIHCC re: Subleases.

20.  An  Assignment  of Sublease  Documents  dated  March 31,  1995  between AMS
     Properties and HRP.

21.  An  Assignment  of Leases and Rents dated March 31, 1995 by AMS  Properties
     re: Subleases.

22.  A Rescission  Agreement and Amendment to Transaction  Documents dated as of
     October 1, 1994 among Old GranCare, AMS Properties, GCIHCC and HRP.

                                      -ii-

<PAGE>

23.  An Assumption Agreement by New GranCare, Inc. in favor of HRP.

24.  A Letter Agreement dated April 25, 1992, from HRP to GranCare,  accepted by
     GranCare.

25.  A  Guaranty,  dated as of June 30,  1992 from Old  GranCare in favor of HRP
     pursuant to which all  obligations of AMS Properties  are  guaranteed;  the
     obligations  and  liabilities  under such  Guaranty  having been assumed by
     GranCare pursuant to the Assumption Agreement referenced below.

26.  A  Security  Agreement,  dated as of June 30,  1992,  from  GCIHCC  to HRP,
     granting HRP a security  interest in all tangible and  intangible  personal
     property and including all accounts receivable, contract rights and general
     intangibles.

27.  An  Assignment  of  Contracts,  Licenses and Permits,  dated as of June 30,
     1992,  from GCIHCC to HRP,  assigning to HRP, all  contracts,  licenses and
     permits used in connection with the operation of the Facilities.

28.  A Pledge Agreement,  dated as of June 30, 1992 Date, from GranCare pursuant
     to which all of the capital stock of GCIHCC (the "GCIHCC Stock") is pledged
     to HRP to secure the obligations of GCIHCC.

29.  A Stock Power relating to GCIHCC Stock.

30.  A  Subordination  Agreement dated as of June 30, 1992 among Old GranCare as
     subordinate  creditor,  GCIHCC as debtor,  and HRP as senior creditor;  the
     obligations and liabilities under such Subordination  Agreement having been
     assumed by GranCare pursuant to the Assumption Agreement.

31.  A  Subordination  Agreement,  dated  as of  June  30,  1992,  among  AMS as
     subordinated  creditor,  GCI as the  debtor  and  HRP as  senior  creditor,
     pursuant to which all  obligations of GCIHCC to the  subordinated  creditor
     are subordinated.

32.  A Representation Letter and Indemnification Agreement, dated June 30, 1992,
     from Old GranCare,  AMS and GCI, with respect to, inter alia, the continued
     effectiveness  of the  representations  and warranties made by GranCare and
     GCI in, and the absence of any Defaults under, the Transaction Documents.

33.  A Consent  Letter  dated  March 31,  1995 by HRP and  consented  to by GCI,
     GranCare and AMS re: HealthQuest Subleases.

34.  An  Assignment of Sublease  Documents  dated March 31, 1995 between GCI and
     HRP re: HealthQuest Subleases.

35.  An  Assignment  of  Leases  and  Rents  dated  March  31,  1995  by GCI re:
     HealthQuest Subleases.

36.  A Rescission  Agreement and Amendment to Transaction  Documents dated as of
     October 1, 1994 among GranCare, AMS, GCI and HRP.


                                     -iii-
<PAGE>

                                 SCHEDULE 3.5-A

                      FORM OF INTERIM MANAGEMENT AGREEMENT


<PAGE>

                          INTERIM MANAGEMENT AGREEMENT


         THIS INTERIM MANAGEMENT  AGREEMENT (this "Agreement") is made this ____
day of __________ , 2000,  among Mariner  Post-Acute  Network,  Inc., a Delaware
corporation  (formerly known as Paragon Health Network,  Inc.) ("Mariner"),  AMS
Properties,  Inc., a Delaware  corporation ("AMS  Properties"),  GCI Health Care
Centers,   Inc.,  a  Delaware  corporation  ("GCIHCC"  and,  together  with  AMS
Properties,  collectively,  the "Mariner  Licensees"),  the  entities  listed on
Schedule  A  hereto,  each of  which is a  Delaware  limited  liability  company
(collectively,  the "Proposed SNH Licensees"), and Five Star Quality Care, Inc.,
a Delaware corporation (the "Manager").

                              W I T N E S S E T H:

         WHEREAS,  SPTMNR  Properties  Trust, a Maryland real estate  investment
trust ("SPTMNR"), is the owner of all of the real property, buildings, plant and
equipment  and certain of the  personal  property  used in  connection  with the
operation of the skilled nursing,  intermediate  care or residential  facilities
listed on Schedule B (each a "Facility" and collectively, the "Facilities"); and

         WHEREAS,   SPTMNR  currently  leases  the  Facilities  to  the  Mariner
Licensees; and

         WHEREAS,  the  Mariner  Licensees  hold the  licenses  to  operate  the
Facilities; and

         WHEREAS, pursuant to a Settlement Agreement, dated as of March __, 2000
(the  "Settlement  Agreement"),  among Mariner,  the Mariner  Licensees,  Senior
Housing  Properties  Trust,  a Maryland real estate  investment  trust  ("SNH"),
SPTMNR,  the Proposed SNH Licensees and the Manager,  the Mariner Licensees have
requested SPTMNR, and SPTMNR has agreed, to accept a surrender (through SPTMNR's
designees the Proposed SNH Licensees),  of the Mariner  Licensees'  lease of the
Facilities,  subject to, and upon, the terms and conditions  contained  therein;
and

         WHEREAS,  in  connection  therewith,  the  Proposed SNH  Licensees  are
submitting  the  applications,  filings  and other  documentation  necessary  to
receive all governmental licenses, permits, approvals, authorizations,  provider
agreements and certificates and determinations of need in order for the Proposed
SNH Licensees to operate the Facilities as licensees and to receive Medicare and
Medicaid  reimbursement  for  the  services  provided  therein  (such  licenses,
permits,  approvals,  authorizations,  provider agreements, and certificates and
determinations of need are hereafter  referred to individually,  as a "Necessary
License" and collectively, as the "Necessary Licenses"); and

         WHEREAS, the Proposed SNH Licensees and the Mariner Licensees desire to
enter into certain arrangements  regarding the management of the Facilities and,
more  specifically,  to  provide  for  the  Mariner  Licensees  to  operate  the
Facilities  pending,  and in  anticipation  of, the receipt by the  Proposed SNH
Licensees  or the  Manager  of the  Necessary  Licenses  (the  date on which any
Proposed SNH  Licensee or the Manager  shall have  received  all such  Necessary
<PAGE>

Licenses with respect to a Facility being referred to herein as such  Facility's
"SNH  Licensing  Date"),  and to consult and  cooperate  with the  Proposed  SNH
Licensees' designee, the Manager, in connection therewith;

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

1. Mariner Licensee; Interim Occupancy Agreements.  Each Facility shall continue
to be operated  subject to the  direction  and control of the  relevant  Mariner
Licensee until such Facility's SNH Licensing Date and, in connection  therewith,
each  such  Mariner  Licensee  (i)  shall  retain  ultimate  authority  over the
business, policies, operations and assets of the Facility, (ii) shall remain the
responsible  licensee of such Facility and, as such, be fully liable and legally
accountable  at all  times to all  patients,  governmental  agencies  and  third
parties for all patient care and funds,  and all other  aspects of the operation
and  maintenance  of the  Facility,  and (iii) shall  perform  those general and
specific duties described in Sections 2 and 3 hereof.

         In  order  to  permit  the   foregoing,   each  Mariner   Licensee  is,
simultaneously   herewith,   entering  into  an  Interim   Occupancy   Agreement
(collectively,  the  "Occupancy  Agreements"),  [in the form attached  hereto as
Schedule C,] with the  relevant  Proposed  SNH  Licensee,  pursuant to which the
Proposed SNH Licensee  shall grant to such Mariner  Licensee the right to occupy
such  Facility  and use  certain  related  personal  property  for  purposes  of
exercising its rights, duties and obligations hereunder.

         The Mariner Licensees, the Proposed SNH Licensees and the Manager agree
that,  subject in all events to the  provisions  of the first  paragraph of this
Section 1, the SNH  Proposed  Licensees  or the  Manager  may from time to time,
notify the Mariner  Licensees that the Manager is prepared to provide any one or
more of those  services  (the  "Designated  Services")  designated in Schedule D
attached hereto (the "Designated Services Schedule"), with respect to any one or
more of the  Facilities,  and from and after the date  specified in such notice,
the Mariner  Licensee shall delegate to Manager and the Manager shall assume and
perform  such  Designated  Services.  The Mariner  Licensees,  the  Proposed SNH
Licensees and the Manager shall  reasonably  cooperate in the  transition of the
responsibility  for such  Designated  Service(s) to the Manager,  subject to the
continued  authority  and  responsibility  of the Mariner  Licensee  referred to
herein.

         The Mariner  Licensees,  the  Proposed  SNH  Licensees  and the Manager
acknowledge  and agree that the Mariner  Licensees have agreed in this Agreement
that the Mariner  Licensees may continue to provide  certain  services after the
SNH Licensing  Date. The Mariner  Licensees,  the Proposed SNH Licensees and the
Manager acknowledge and agree,  however,  that, from and after the SNH Licensing
Date with respect to a Facility, the relevant Proposed SNH Licensee shall direct
and control the operations of such Facility and, in connection therewith,  shall
have ultimate authority over the business, policies, operation and assets of the
Facility and be the responsible licensee of such Facility and, as such, be fully
liable and legally  accountable  at all times to all patients  and  governmental
agencies for all patient care and funds at such Facility,  and all other aspects
of the operation and maintenance of such Facility.

                                      -2-
<PAGE>

2.  General  Duties.  The  Mariner  Licensees  shall  manage and  supervise  the
day-to-day  operation of the Facilities with the objective of providing  skilled
nursing, intermediate care and residential services to patients and residents of
the Facilities and to carry out general management functions with respect to the
Facilities,  including,  but  not  limited  to,  the  following:  supervise  the
performance  of  all  administrative  functions  as  may  be  necessary  in  the
management and operation of the Facilities; select, hire or contract for, train,
supervise,  monitor the  performance  of, and  terminate or fire,  all personnel
involved in the  administration  and  day-to-day  operations of the  Facilities,
including,  without limitation,  professional  personnel,  custodial,  cleaning,
maintenance,  and other operational  personnel,  and secretarial and bookkeeping
personnel;  provide accounting,  billing,  purchasing and bill payment functions
for the Facilities;  maintain  systems of accounts and supervise the maintenance
of ledgers and other primary  accounting records with respect to the Facilities;
supervise the financial  affairs of the Facilities;  establish and supervise the
implementation  of operating  budgets,  and establish and  administer  financial
controls  over the  operations  and  management of the  Facilities;  develop and
establish  financial  standards  and  norms  by which  the  income,  costs,  and
operations of the Facilities may be evaluated;  operate, maintain and administer
the information management systems of the Facilities; maintain patients' medical
records  in  accordance  with all  applicable  state and  Federal  requirements;
furnish reports and economic and statistical data in connection with or relative
to the management of the Facilities in order to comply with  applicable laws and
regulations;   represent  the  Facilities  in  their  dealings  with  regulatory
authorities,  patients,  personnel, agents for collection,  insurers and, at the
request  of the  Proposed  SNH  Licensees,  creditors;  prepare  and  file  with
applicable state Medicaid programs and the Medicare program and all other public
and private  third party  reimbursement  programs  (collectively,  "third  party
payors") all required  cost reports;  administer  trust funds for the benefit of
residents  of the  Facilities  and prepare and file all  accounts for such funds
required by applicable law; maintain listings of all residents of the Facilities
and the persons or third party payors  responsible for their charges;  on behalf
of the SNH  Entities,  disburse  and  collect  the  funds of the  Facilities  in
accordance  with the  provisions  of Section 9.1  hereof,  and pay the debts and
fulfill the obligations of the Facilities  incurred  subsequent to the Effective
Time (as hereafter defined);  market the services of the Facilities;  manage and
supervise  the  admission  and  discharge  of residents as required by state and
Federal  laws;  and  generally  see  to the  operations  and  management  of the
Facilities, the marketing of their services, planning for future operations, and
the establishment and implementation of policies for the Facilities.

3. Specific  Duties.  The Mariner  Licensees  shall have the following  specific
duties:

         3.1  Employees.  The Mariner  Licensees  shall recruit,  evaluate,  and
select qualified  nursing home  administrators  who shall be responsible for the
functional  operation  of the  Facilities  and  supervision  of personnel at the
Facilities,  on a  day-to-day  basis,  as  well  as  all  on-site  professional,
custodial,  food  service,   cleaning,   maintenance,   clerical,   secretarial,
bookkeeping,  management,  collection,  and other  employees for the  day-to-day
operations of the Facilities.  Such  administrators and all such other personnel
shall be employees of the Mariner  Licensees,  and, subject to the provisions of
Section 5 hereof  (providing  for the Proposed SNH Licensees to pay expenses set
forth in the Expense Statement  (including,  without limitation,  those expenses
specified   in  Section   5.1(a))   the  Mariner   Licensees   shall  have  full
responsibility for payment of their wages,  salaries, and other compensation and
benefits.  The Mariner Licensees shall establish such personnel  policies,  wage
structures,  and  staff  schedules  as they

                                      -3-
<PAGE>

deem  necessary  and advisable in accordance  with  applicable  law. The Mariner
Licensees shall have authority to continue to employ and to discharge employees.
The Mariner  Licensees  shall  maintain  payroll  records and shall  prepare and
process employee  payrolls,  and returns of withholding taxes in accordance with
current payroll schedules in place at each Facility.

         Anything  in this  Section  3.1 to the  contrary  notwithstanding,  the
Manager  shall offer  employment  to all or  substantially  all of the qualified
nursing home  administrators and other employees at the Facilities as soon after
the  Effective  Time  as  is  reasonably  practicable.   The  Mariner  Licensees
acknowledge that the ability of the Manager to make any such offer is contingent
upon the  employees  being  employable  under  state and  Federal law and may be
subject  to the  Proposed  SNH  Licensees'  and  the  Manager's  receipt  of all
licenses,   permits,   approvals,   authorizations,   provider  agreements,  and
certificates  and  determinations  of need as are necessary for the Proposed SNH
Licensees and the Manager to operate the  Facilities as licensees and to receive
Medicare and Medicaid  reimbursement for the services provided therein, and that
in any event the Manager will first have to implement an appropriate  accounting
and payroll function. The Mariner Licensees further acknowledge that the Manager
may not hire all  such  employees  on the  same  date or at the same  time.  The
Mariner  Licensees  agree to cooperate with the Manager in connection  with such
offers of  employment  and to release any  personnel to whom the Manager  offers
employment from any employment agreements, non-competition, non-solicitation and
non-disclosure agreements or common law obligations relating to their employment
with the Mariner Licensees to which they may be a party or subject.

         3.2  Purchasing.  The Mariner  Licensees  shall  (subject to Section 5)
purchase,  in the name, and for the account, of the Proposed SNH Licensees,  all
necessary  supplies,  foodstuffs,  materials,  appliances,  tools, and equipment
customarily used in the operation of the Facilities. The Mariner Licensees shall
use  commercially  reasonable  efforts to limit purchasing costs and to maintain
such costs at a level  reasonably  calculated to allow the Facilities to operate
profitably.  The Mariner Licensees may, but shall not be obligated to, make such
purchases in bulk under a centralized  purchasing system established by them for
other facilities under their operation or management in order to minimize costs.
The Mariner Licensees shall arrange contracts for electricity,  gas,  telephone,
and any other utility or service  necessary to the operation of the  Facilities,
in each case in the name,  and for the account,  of the Proposed SNH  Licensees.
The Mariner  Licensees  shall, on their own behalf and/or on behalf of the owner
of the buildings and real  property in and on which the  Facilities  are located
(the  "Real  Property  Owner"),  contract  for and  supervise  the making of any
necessary  repairs,  alterations,  and improvements to the Facilities,  provided
that in the case of any repair,  alteration  or  improvement,  the cost of which
exceeds  $5,000,  the Mariner  Licensees  shall obtain the prior approval of the
Proposed  SNH  Licensee/Manager,  except  that no such prior  approval  shall be
required if the  expenditure is made under  circumstances  reasonably  requiring
emergency action. The Mariner Licensees shall prepare such  certifications as to
expenses incurred in the operation of the Facilities as may be required in order
to comply with applicable law and regulations,  including,  without  limitation,
law and regulations applicable to preparation and submission of cost reports.

         3.3 Bookkeeping.  The Mariner  Licensees shall establish and maintain a
record and bookkeeping system for the operation and conduct of the Facilities in
accordance with generally accepted accounting principles.  Full books of account
with entries of all receipts and

                                      -4-
<PAGE>

expenditures of the Facilities  shall be open for inspection by  representatives
of Proposed SNH Licensees and Manager upon  reasonable  notice and at reasonable
times.

         3.4 Financial  Reports.  The Mariner  Licensees  shall:  (a) as soon as
reasonably  possible  after the close of each  calendar  month,  furnish  to the
Proposed  SNH  Licensee  and Manager a statement of income for the month and for
the year to date, together with a detailed statement of billings, cash receipts,
cash disbursements,  accounts payable and accounts receivable (in hard copy and,
to the extent possible, in electronic format); (b) in the event the Proposed SNH
Licensee or Mariner  Licensee is required by applicable law,  regulations or the
provisions  of any  material  contract  to which it is a party or by which it is
bound or at such other time as the  Proposed  SNH  Licensees  may elect in their
reasonable  discretion,  to  conduct  an  audit  of  the  Facilities'  financial
performance,  make available all books and records of the Facilities on a timely
basis and cooperate fully with any auditors or accountants  selected by Proposed
SNH  Licensee;  (c) as soon as  reasonably  possible  after  the  close  of each
applicable  reporting period for rate setting  purposes,  and not later than the
applicable  deadline,  prepare and submit a cost report for each  Facility  (and
including in any event,  any short-year  cost report required to be submitted by
the  Mariner  Licensee  or  Proposed  SNH  Licensee),   showing  the  costs  and
expenditures  relating  to  resident  care for  such  Facility  and  such  other
information as is required by the applicable governmental  authority,  each such
report being in all material respects  (including as to form) in compliance with
the requirements of such applicable  governmental  authority;  and (d) cooperate
with and furnish  information  to each  Proposed  SNH  Licensee and Manager in a
timely  manner  in  connection  with the  preparation  of  applications  by such
Proposed SNH Licensee for any Necessary Licenses with respect to the Facilities.

         3.5 Marketing.  The Mariner Licensees shall use commercially reasonable
efforts  to market the  services  of the  Facilities  in order to  maintain  the
patient  or  resident  census  at the  Facilities  in such  numbers  and of such
categories  as, in the Mariner  Licensees'  judgment,  will tend to maintain the
financial  stability of the Facilities and to ensure  compliance with applicable
laws,  regulations,  orders and  judgments  applicable  to the  Facilities.  The
Mariner  Licensees  may design and  implement  programs with third party payors,
such as insurance companies,  federal agencies and state and local agencies, for
services to  patients on a contract  basis,  for the  purpose of  improving  the
financial stability of the Facilities.

         3.6 Liaison  with  Agencies.  In  consultation  with the  Proposed  SNH
Licensees  and Manager,  the Mariner  Licensees  shall appear in,  prosecute and
defend all formal and informal  proceedings  before any and all local, state and
federal agencies which regulate the Facilities.  Each of the Mariner  Licensees,
the Proposed SNH Licensees and Manager shall  promptly  inform the others of the
commencement  of any such  proceedings  known to it  which  may have a  material
impact upon the operation of the  Facilities or which affect  reimbursement  for
services provided in or by the Facilities, including challenging any findings of
violations or the creation of a duty to correct.

         3.7  Insurance.   The  Mariner  Entities  shall  obtain  on  behalf  of
themselves, the Proposed SNH Licensees, the Manager and the Real Property Owners
for each Facility, as their interests may appear, all customary liability,  fire
and  extended  coverage,  professional  or  malpractice  liability  and worker's
compensation insurance covering the Facilities, any equipment used in connection
with the Facilities,  the Facilities'  employees,  and the Mariner Entities, the

                                      -5-
<PAGE>

Proposed  SNH  Licensees,  the  Manager  and the Real  Property  Owners for each
Facility,  as  their  interests  may  appear,  in such  amounts  and  with  such
deductibles and other provisions as may be reasonably agreed upon by the Mariner
Entities, the Proposed SNH Licensees, the Manager and the Real Property Owners.

         3.8  Technical  and  Professional  Services.  The Mariner  Entities may
secure such engineering, legal, and other specialized technical and professional
services as may be necessary to advise or to represent the Mariner Entities, the
Proposed  SNH  Licensees,  the  Manager  and the Real  Property  Owners for each
Facility,  in  connection  with  any  matter  involving  or  arising  out of the
operation of the Facilities or the conduct of the Facilities.

         3.9  Necessary  Licenses.  Upon  receipt by the  relevant  Proposed SNH
Licensee or the Manager of the  Necessary  Licenses  with respect to a Facility,
the  Proposed  SNH  Licensee  or the  Manager  shall give the  relevant  Mariner
Licensee prompt written notice.

         3.10 Collections, Accounts, Disbursements and Termination Accounting.

                  (a) Billing.  The Mariner  Licensees  shall prepare and submit
bills for all moneys owing,  whether from  patients or third party  payors,  for
services  provided by or at the Facilities at any time,  whether prior to ______
o'clock p.m. on [day preceding the Closing] (the "Effective  Time") or after the
Effective Time.

                  (b) Collection of Accounts  Receivable.  The Mariner Licensees
acknowledge  that,  from and after the  Effective  Time,  (i) the  Proposed  SNH
Licensees  shall,  to the extent  permitted by applicable  law, own all accounts
receivable  which  relate  to or arise  out of  services  provided  by or at the
Facilities from or after the Effective Time (the "Post-Effective A/R"), (ii) the
Mariner Licensees shall make and effect collections of all  Post-Effective  A/R,
(iii) the Mariner  Licensees  shall  establish  new bank  accounts (the "New A/R
Accounts") in the name of each Mariner Licensee at such local banks to be agreed
upon by the Proposed SNH Licensees and the Mariner Licensees, and shall instruct
all Third  Party  Payors and other  Persons  (as such  terms are  defined in the
Settlement  Agreement)  that  directly  deposit  monies into the  existing  bank
accounts (the "Existing A/R Accounts")  with respect to the Retained  Facilities
to terminate  such direct deposit and commence  depositing  such monies into the
New A/R  Accounts  from and  after the date  that is sixty  (60) days  after the
Effective  Time  (the  "Account  Transfer  Time")  or as soon as is  practicable
thereafter  (and the Mariner  Licensees shall take such further action as may be
reasonably  necessary  to cause such  Third  Party  Payors and other  Persons to
comply with such instructions so that all  Post-Effective A/R are deposited into
the New A/R Accounts  from and after the Account  Transfer Time or as soon as is
practicable  thereafter),  (iv) the Mariner  Licensees shall continue to endorse
and deposit all monies, checks, drafts or other instruments or items received as
payment  for any  Post-Effective  A/R  with  respect  to any  Facility  into the
Existing A/R Accounts until the Account Transfer Time, (v) the Mariner Licensees
shall endorse and deposit all monies,  checks,  drafts or other  instruments  or
items received as payment for any  Post-Effective A/R from and after the Account
Transfer  Time  into  the New A/R  Accounts,  (vi)  within  five (5) days of the
applicable  Proposed SNH  Licensee's  request  therefor  (but no sooner than the
applicable SNH Licensing Date), the Mariner Licensees shall assign, set over and
transfer  the New A/R  Accounts to the  Proposed  SNH  Licensees,  and (vii) the
Mariner Licensees shall disburse all proceeds attributable to Post-Effective A/R
deposited  in the  Existing  A/R

                                      -6-
<PAGE>

Accounts or the New A/R  Accounts or  otherwise  received or held by the Mariner
Licensees to the Proposed SNH Licensees (or to such other Person as the Proposed
SNH Licensees may direct) within five (5) days of the Mariner Licensees' receipt
thereof.

         The SNH Entities and the Mariner  Licensees  acknowledge and agree that
(i) the Mariner  Licensees shall continue to own all accounts  receivable  which
relate to or arise out of services provided by or at the Facilities prior to the
Effective Time (the  "Pre-Effective  A/R"),  (ii) the Mariner Licensees shall be
entitled to retain all proceeds  attributable to Pre-Effective  A/R deposited in
the Existing A/R Accounts or the New A/R Accounts or otherwise  received or held
by the Mariner Licensees, and (iii) the Proposed SNH Licensees shall disburse to
the Mariner  Licensees  (or to such other  Person as the Mariner  Licensees  may
direct) all such  Pre-Effective  A/R within five (5) days of the SNH  Licensees'
receipt thereof.

                  (c) Books and Records. During the term of this Agreement,  the
Mariner  Licensees  shall keep  accurate and  complete  books and records of all
receipts  with respect to all  billing,  accounts  receivable,  all deposits and
other transactions  whether to the Existing A/R Accounts,  the New A/R Accounts,
or to other checking  accounts,  which books and records shall be made available
to the SNH Licensees and the Manager upon request, and after termination of this
Agreement  shall make such  books and  records  available  to the  Proposed  SNH
Licensees  and the Manager to the extent  necessary  to enable the  Proposed SNH
Licensee  and the Manager to comply with all  applicable  laws and  regulations,
including  regulations governing preparation and submission of cost reports. The
Mariner  Licensees  shall  timely  prepare  and  file  any  cost  reports  which
applicable laws and regulations  require that they file after the termination of
this Agreement.

         3.11 Patient  Trust  Accounts.  At such time as a Proposed SNH Licensee
has received all Necessary Licenses with respect to a Facility and has given the
Mariner  Licensee  notice as provided in Section 3.9, the Mariner  Licensee will
transfer the patient  trust  accounts  held for the benefit of residents of such
Facility  to the  Proposed  SNH  Licensee,  together  with  all  records  and an
accounting regarding such accounts.

4. Fee.  The  Mariner  Licensees  shall  earn,  for  services  rendered  by them
hereunder, a servicer fee (the "Fee") on a  Facility-by-Facility  basis for each
calendar  month  during  the term of this  Agreement  in an amount  equal to the
lesser of (i) five  percent (5%) of net patient  revenues (as defined  below) of
such Facility for such month and (ii) an amount  calculated by  multiplying  (A)
the sum of the Designated Services  Percentages,  as specified in the Designated
Services  Schedule,  attributable to the Designated  Services being performed by
the  applicable  Mariner  Licensee  at such  Facility  for such month by (B) the
amount of net patient revenues of such Facility for such month.

         Until  the  Agreed  Deficiency  shall  have been  reduced  to zero (0),
payment of the Fee shall be made by  dollar-for-dollar  reduction of the Reduced
Deficiency   (as  such   term  is   defined   in  the   Settlement   Agreement).
Notwithstanding anything to the contrary contained in this Section 4, in each of
the first  three (3) months of the term  hereof,  the Fee earned by the  Mariner
Licensees  hereunder  shall be not less than Four  Hundred  Thousand  ($400,000)
(regardless  of the amount of net patient  revenues at the  Facilities  for such
month or whether  the  Manager  shall have  elected to

                                      -7-
<PAGE>

discontinue the Mariner  Licensees'  provision of any services  specified herein
during such period).

         As used in this Agreement,  "net patient  revenues" shall mean, for any
period,  the aggregate  amount of all revenues  (determined  in accordance  with
generally accepted accounting principals, consistently applied), received by, or
by reason of the operation of, such Facility  during such period,  but excluding
(a) revenues from  professional  fees or charges by physicians and  unaffiliated
providers of ancillary  services to the extent such charges are paid over to, or
separately   billed  by,  such  physicians  and  unaffiliated   providers,   (b)
non-operating  revenues, (c) revenues attributable to services provided off-site
to  non-patients,  and (d) all  revenues,  if any,  attributable  to child  care
services provided  primarily to employees of such Facilities,  but in all events
excluding any revenues  generated for services  provided to patients referred by
any Mariner Entity.

5. Expenses.

         5.1  During  the  period  from and after  the  Effective  Time to,  but
excluding,  the date of termination of this  Agreement,  for each Facility,  the
Mariner Licensee shall provide the Proposed SNH Licensees and the Manager with a
weekly  statement of expenses of the type listed below to the extent incurred in
the  operation  and  management  of such  Facility  (the  "Expense  Statements")
accompanied by such  documentation  as the Proposed SNH Licensee and the Manager
shall reasonably request:

                  (a)  salary  and  expenses  (including,   without  limitation,
payroll taxes, workers'  compensation,  costs of employee benefit plans (or such
portion thereof as is properly allocable to such Facility),  travel,  insurance,
and  fidelity  bonds)  of  employees  at  such  Facility,   including,   without
limitation, administrative,  professional, custodial, food service, cleaning and
maintenance, operational, secretarial and bookkeeping personnel;

                  (b) all supplies and  equipment  necessary  and  desirable for
operation  of the such  Facility  as a skilled  nursing,  intermediate  care and
residential  facility;  food; fuel; kitchen and food service equipment;  linens;
beds; furniture; clothing and all other supplies and equipment used in supplying
services to patients;

                  (c) expenses connected directly or indirectly with the design,
acquisition,  disposition,  lease, occupancy, ownership or operation of real and
personal  property  devoted,  used or consumed in the business of such Facility,
including,  without  limitation,  maintenance,  repair,  and  improvement of the
Facilities,  and premiums,  deductibles and self-insured  retention amounts with
respect to insurance (including,  without limitation,  the insurance required to
be obtained  pursuant to Section 3.7 hereof  (except  that the premiums for such
insurance shall be allocated among the facilities  covered thereby on such basis
as the Mariner Licensees deem commercially appropriate based on their experience
in such matters and reasonable business judgment, including an assessment by the
Mariner Licensees of the differing risk profiles  associated with the facilities
and business of the Mariner  Licensees,  on the one hand, and the Facilities and
the business of the Proposed SNH Licensees, on the other)); and


                                      -8-
<PAGE>

                  (d) all other costs,  expenses and liabilities  arising out of
the operation, maintenance and management of the Facilities,  including, without
limitation,  fees of  professionals  engaged to fulfill the  Mariner  Licensees'
obligations  under  Section 3.6 and Section  3.8,  but  excluding  those  costs,
expenses  and  liabilities  arising  out of any such  Mariner  Licensee's  gross
negligence or willful misconduct.

         5.2 The following  expenses of the Mariner  Licensees  shall be for the
sole account of the Mariner  Licensees and shall not be subject to reimbursement
hereunder: (a) overhead and ordinary administrative expenses, salary (including,
without  limitation,  payroll taxes,  workers'  compensation,  costs of employee
benefit plans,  travel,  insurance and fidelity bonds) of financial,  accounting
and other  personnel  employed by the Mariner  Licensees to provide  centralized
billing,  collection,  bill  paying,  accounting,  record  keeping,  information
management,  purchasing, personnel and policy planning services to any Facility,
it being understood that in no event shall the salary of the  administrator of a
Facility be an expense of the Mariner  Licensees;  and (b) any losses,  cost and
expenses under Section 11(a).

         5.3 The Proposed SNH  Licensees  shall cause the Manager to establish a
bank  account  under its name and control and to deposit and  maintain a minimum
balance therein of $100,000.  The Mariner Licensees shall have signing authority
with respect to such account and weekly, upon approval of the Expense Statement,
the Manager  shall fund such account with an amount  sufficient  (over and above
the  minimum  balance) to fund and for the  purpose of paying the  expenses  set
forth in the Expense  Statement.  If any Mariner Licensee advances its own funds
for any approved  Expense  Statement  expense,  the Manager and the Proposed SNH
Licensees shall promptly reimburse such Mariner Licensee therefor.

         5.4 Each Proposed SNH Licensee of each Facility shall pay the Manager a
monthly management fee (the "Manager's Fee") for each Facility, payable prior to
the __ day following the end of each calendar month during the term hereof,  (i)
for the first two (2) months of the term hereof, in an amount equal to the costs
and expenses actually incurred by the Manager in connection with the performance
of its duties hereunder  during such calendar month, and (ii) thereafter,  in an
amount equal to 4.5% of net patient revenues for such Facility for such calendar
month.

6. Access to Records. For the time and to the extent required by applicable law,
including, without limitation, Section 1861(v)(1)(I) of the Social Security Act,
the Mariner Licensees shall retain, and shall permit the Comptroller  General of
the United States, the U.S.  Department of Health and Human Services,  and their
respective  duly   authorized   representatives,   and  duly  authorized   state
representatives,  access to  examine  or copy  this  Agreement  and such  books,
documents,  and  records as are  reasonably  necessary  to verify the nature and
extent of goods and  services  supplied  and the costs of the goods and services
supplied,  and the  payments  claimed  under  this  Agreement.  In the event any
Mariner Licensee provides any of its services under this Agreement pursuant to a
subcontract and if (i) the services  provided pursuant to the subcontract have a
value or cost of  $10,000 or more over a twelve  (12) month  period and (ii) the
subcontract is with a related  organization,  then such Mariner  Licensee agrees
that the  subcontract  shall  contain a clause  requiring the  subcontractor  to
retain  and allow  access to its  records on the same  terms and  conditions  as
required by such Mariner Licensee.

                                      -9-
<PAGE>

7. Duty of Mariner  Licensees;  Prohibited  Transactions.  The Mariner Licensees
shall render the  services  called for  hereunder in good faith.  Other than the
Fee, none of the Mariner  Licensees or any person,  firm or  corporation  which,
directly or indirectly owns or controls,  is owned or controlled by, or is under
direct or indirect common ownership or control with the Mariner Licensees or any
person  related by blood or marriage  within the third degree to persons in such
control  (an   "Affiliate"),   shall  receive  any   remuneration   (other  than
reimbursements and other payments expressly provided for herein), whether direct
or  indirect,  for any  purchases  of goods or  services  made on  behalf of the
Mariner  Licensees,  the Proposed SNH Licensees or the Manager,  and none of the
Mariner  Licensees or any of their Affiliates shall markup,  increase the price,
or obtain any premium for goods or services purchased by any Mariner Licensee on
behalf  of or for  the  benefit  of the  Mariner  Licensees,  the  Proposed  SNH
Licensees or the Manager.

8.  Relationship  of Parties.  No party to this  Agreement is a partner or joint
venturer  with any other party,  and nothing  herein shall be construed so as to
make  them  such  partners  or  joint  venturers  or  impose  on any of them any
liability as partners or joint venturers.

9. Term and Termination.

         9.1 The term of this Agreement shall commence at the Effective Time and
shall continue in full force for twelve (12) months unless earlier terminated as
provided below, and thereafter, from month to month thereafter unless terminated
upon not less than thirty (30) days' prior written  notice from the Proposed SNH
Licensees or the Mariner Licensees to the other.

         Subject to the  provisions of the first  paragraph in Section 1 of this
Agreement,  the Proposed SNH Licensees shall have the further right from time to
time to require the Mariner  Licensees' to  discontinue  provision of any or all
services  hereunder  to any one or more of the  Facilities  upon not  less  than
thirty (30) days' prior written notice to the relevant Mariner Licensee.

         If there is a final adverse determination with respect to any Necessary
Licenses,  provided  that the  Proposed SNH Licensee  shall have  exhausted  all
appeals with respect thereto, this Agreement shall terminate with respect to the
Facility(ies) which would be affected.

         9.2 From and after the effective  date of termination of this Agreement
in accordance  with Section 9.1, the Mariner  Licensees shall not be entitled to
compensation  for  further   services   hereunder  (and,  in  the  case  of  the
discontinuation  of services at a Facility in accordance  with Section 9.1, from
and after the effective date of such discontinuance, the Mariner Licensees shall
not be  entitled  to  compensation  for further  services  with  respect to such
Facility).  Upon termination or  discontinuance,  the relevant Mariner Licensees
shall forthwith:

                  (a)  pay  over  to the  relevant  Proposed  SNH  Licensee  all
collections of Post-Effective  A/R received by the Mariner Licensees pursuant to
this Agreement;

                  (b) deliver to the  relevant  Proposed SNH  Licensees  and the
Manager a full accounting,  including a statement showing all payments collected
by it and a statement of all money held by it, covering the period following the
date of the last accounting furnished to them; and

                                      -10-
<PAGE>

                  (c) deliver to the  relevant  Proposed SNH  Licensees  and the
Manager,  as the  case  may  be,  all  property  and  documents  of any of  them
(including,  without limitation,  health care and other patient records) then in
the custody of the Mariner Licensee(s).

10. Notices. All notices and other  communications  provided for hereunder shall
be in writing  (including  telecopy  communication)  and mailed,  telecopied  or
delivered addressed as follows:

                  (a)      if to the Manager:

                           Five Star Quality Care, Inc.
                           400 Centre Street
                           Newton, MA  02458
                           Attention:  Treasurer
                           Telecopy No.:  617-796-8349

                  (b)      with copy to:

                           Sullivan & Worcester LLP
                           One Post Office Square
                           Boston, MA 02109
                           Attention:  Nancy S. Grodberg, Esq.
                           Telecopy No.:  617-338-2880

                  (c)      if to the Mariner Licensees:

                           AMS Properties, Inc.
                           On Ravinia Drive, Suite 1500
                           Atlanta, Georgia 30346
                           Attention:  Associate General Counsel
                           Telecopy No. 770-698-8199

                           and to:

                           GCI Health Care Centers, Inc.
                           One Ravinia Drive, Suite 1500
                           Atlanta, Georgia  30346
                           Attention:  Associate General Counsel
                           Telecopy No. 770-698-8199

                  (d)      If to the Proposed SNH Licensees:

                           SHOPCO-AZ, LLC
                           400 Centre Street
                           Newton, MA  02458
                           Attention:  Treasurer
                           Telecopy No.:  617-796-8349

                           SHOPCO-CA, LLC

                                      -11-
<PAGE>

                           400 Centre Street
                           Newton, MA  02458
                           Attention:  Treasurer
                           Telecopy No.:  617-796-8349

                           SHOPCO-COLORADO, LLC
                           400 Centre Street
                           Newton, MA  02458
                           Attention:  Treasurer
                           Telecopy No.:  617-796-8349

                           SHOPCO-WI, LLC
                           400 Centre Street
                           Newton, MA  02458
                           Attention:  Treasurer
                           Telecopy No.:  617-796-8349

or to such other  address as may  hereafter be  designated by any party for such
other  purpose,  and shall be  effective  upon receipt if hand  delivered,  when
telecopied,  if  transmitted  by telecopier or upon the  expiration of the fifth
Business Day after being deposited in the mails, if mailed.

11.      Indemnification.

                  (a) Mariner Licensees' Indemnification. The Mariner Licensees,
jointly and severally,  shall  protect,  indemnify and hold harmless each of the
Proposed SNH  Licensees,  the Manager and their  respective  agents,  employees,
officers,  directors,  partners,  members,  trustees,  attorneys,  successors or
assigns  (hereafter the "SNH  Indemnitees," and when referred to singly, an "SNH
Indemnitee")  for,  from and  against any and all debts,  obligations,  damages,
penalties,  liabilities,  liens, claims, causes of action, administrative orders
or notices, costs, fines, penalties or expenses (including,  without limitation,
reasonable attorney's fees and expenses actually incurred) to the maximum extent
permitted by law imposed upon,  incurred by or asserted  against any  Indemnitee
and arising in  connection  with any act,  omission or obligation of any Mariner
Licensee  hereunder,  under its Interim  Occupancy  Agreement,  or  otherwise in
connection with the Mariner Licensees' activities in operating or overseeing the
operation of any of the  Facilities.  The Mariner  Licensees,  at their expense,
shall contest,  resist and defend any such claim,  action or proceeding asserted
or instituted  against any SNH Indemnitee or may compromise or otherwise dispose
of the same,  with the relevant SNH  Indemnitee's  prior written  consent (which
consent may not be unreasonably withheld or delayed).

                  (b) Proposed SNH Licensees' and Manager's Indemnification. The
Proposed  SNH  Licensees  and the Manager  (collectively  referred to as the SNH
Indemnitors),  jointly and severally, shall protect, indemnify and hold harmless
each of the Mariner Licensees and their respective agents, employees,  officers,
directors,  partners,  members,  trustees,  attorneys,  successors  and  assigns
(hereafter  the  "Mariner  Indemnitees"  and when  referred to singly,  "Mariner
Indemnitee")  for,  from and  against any and all debts,  obligations,  damages,
penalties,  liabilities,  liens, claims, causes of action, administrative orders
or notices, costs, fines, penalties, or expenses (including, without limitation,
reasonable attorney's fees and expenses actually

                                      -12-
<PAGE>

incurred) to the maximum  extent  permitted by law imposed upon,  incurred by or
asserted against any Mariner  Indemnitee and arising in connection with any act,
omission  or  obligation  of any SNH  Indemnitor  hereunder,  under the  Interim
Occupancy  Agreements,   or  otherwise  in  connection  with  the  SNH  Parties'
activities  in operating or overseeing  the operation of any of the  Facilities.
The SNH Parties',  at their expense,  shall contest,  resist and defend any such
claim,   action  or  proceeding  asserted  or  instituted  against  any  Mariner
Indemnitee or may compromise or otherwise dispose of the same, with the relevant
Mariner  Licensee's prior written consent (which consent may not be unreasonably
withheld or delayed).

         The provisions of this Section 11 shall survive the termination of this
Agreement.

12.      Miscellaneous.

         12.1 This  Agreement  shall not be changed,  modified,  terminated,  or
discharged in whole or in part except by an instrument in writing signed by each
of the parties hereto or their respective successors or assigns.

         12.2  Non-Assignability.  This  Agreement  shall not be assigned by any
party without the consent of the other party and this Agreement shall be binding
upon and shall inure to the benefit of consented to successors and assigns.

         12.3 Governing Law. This Agreement  shall be governed by,  interpreted,
construed,  applied and enforced in accordance with the laws of the Commonwealth
of Massachusetts  applicable to contracts  between residents of the Commonwealth
of Massachusetts  which are to be performed  entirely within the Commonwealth of
Massachusetts,  regardless of (i) where this Agreement is executed or delivered;
or (ii) where any payment or other  performance  required by this  Agreement  is
made or required to be made;  or (iii) where any breach of any provision of this
Agreement  occurs, or any cause of action otherwise  accrues;  or (iv) where any
action or other  proceeding is instituted  or pending;  or (v) the  nationality,
citizenship,   domicile,   principal   place  of  business  or  jurisdiction  of
organization  or  domestication  of any party;  or (vi)  whether the laws of the
forum jurisdiction otherwise would apply the laws of the jurisdiction other than
the Commonwealth of Massachusetts; or (vii) any combination of the foregoing.

         12.4  Entire  Agreement.  This  Agreement,   together  with  the  other
agreements  contemplated  by,  referred  to in, or  contemplated  by  agreements
referred to herein,  together  constitute  the entire  agreement  of the parties
hereto with respect to the subject  matter  hereof and  supersede and cancel any
preexisting agreements with respect to such subject matter.

         12.5  Attorney's  Fees and  Costs.  If any  action is  brought  for the
enforcement  of this  Agreement,  or because of a  dispute,  breach,  default or
misrepresentation  in connection  with any of the provisions of this  Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs  incurred in that action in addition to any other relief to which it
may be entitled.

         12.6 Confidentiality. The parties agree not to disclose or permit their
respective representatives, attorneys, auditors or agents to disclose, except as
may be required by law or performance  hereunder,  any  confidential  non-public
information  of the others which is obtained by any of them in  connection  with
the transactions contemplated by this Agreement.

                                      -13-
<PAGE>

         12.7 Cooperation;  Commercially  Reasonable Efforts.  The parties shall
cooperate in good faith in connection with all actions to be taken to consummate
the  transactions  contemplated  by,  and to enforce  the rights  created by and
perform the  responsibilities  imposed by, this Agreement and in order to assure
compliance  with  Federal,  state and local  laws,  rules and  regulations.  The
parties agree to execute such  amendments,  modifications or supplements to this
Agreement or any other  agreements  between or among any of the parties  hereto,
necessary or appropriate to assure such compliance.

         12.8  Responsibility  for Compliance  with Law. During the term of this
Agreement,  each  Mariner  Licensee  will  keep in full  force  and  effect  all
licenses,   permits,   approvals,   authorizations,   provider  agreements,  and
certificates or  determinations  of need necessary for such Mariner  Licensee to
occupy  and  operate  its  Facilities  and  to  receive  Medicare  and  Medicaid
reimbursement  for  services  provided  therein and the Mariner  Licensees  will
cooperate  with  Proposed  SNH  Licensees  in  connection  with the Proposed SNH
Licensees  obtaining  provider  agreements  to ensure there is no period  during
which  neither a Mariner  Licensee  nor a Proposed  SNH  Licensee is entitled to
reimbursement for services provided at the Facilities.

         12.9 Bankruptcy Court Authorization.  Mariner and the Mariner Licensees
shall  seek  authorization  from the  United  States  Bankruptcy  Court  for the
District of Delaware in order to proceed with those matters provided herein,  in
conjunction  with the  authorization  sought for proceeding  with the Settlement
Agreement.  The  form  of  order  providing  authorization  shall  be in a  form
acceptable to SPTMNR, the Proposed SNH Licensees and the Manager.



                                      -14-
<PAGE>


         IN WITNESS  WHEREOF,  the  parties  have caused  this  Agreement  to be
executed under seal by their duly  authorized  officers as of the date first set
forth above.

                             MARINER POST-ACUTE NETWORK, INC.


                             By:________________________________
                                      Its (Vice) President


                             AMS PROPERTIES, INC.


                             By:________________________________
                                      Its (Vice) President


                             GCI HEALTH CARE CENTERS, INC.


                             By:________________________________
                                      Its (Vice) President


                             SHOPCO-AZ, LLC


                             By:________________________________
                                      Its (Vice) President


                             SHOPCO-CA, LLC


                             By:________________________________
                                      Its (Vice) President


                             SHOPCO-COLORADO, LLC


                             By:________________________________
                                      Its (Vice) President


                                      -15-
<PAGE>




                             SHOPCO-WI, LLC


                             By:________________________________
                                      Its (Vice) President


                             FIVE STAR QUALITY CARE, INC.

                             By:_______________________
                                      Its (Vice) President


                                      -16-
<PAGE>

                                   SCHEDULE A

                             PROPOSED SNH LICENSEES

1.      SHOPCO-AZ LLC, a Delaware limited liability company.

2.      SHOPCO-CA LLC, a Delaware limited liability company.

3.      SHOPCO-COLORADO LLC, a Delaware limited liability company.

4.      SHOPCO-WI LLC, a Delaware limited liability company.



<PAGE>
<TABLE>
<CAPTION>



                                                  SCHEDULE B

                                                  FACILITIES

                  Property Name                      Property Address                          Tenant
-------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                                    <C>
Cedars Health Care Center                           1599 Ingalls Street                     AMS Properties
                                                    Lakewood, CO

Cherrelyn Manor Nursing Home                        5555 South Elati                        AMS Properties
                                                    Littleton, CO

Christopher East Health Care Center                 1132 East Knapp Street                  AMS Properties
                                                    Milwaukee, WI 53202

Greentree Health Care Center                        70 Greentree Road                       AMS Properties
                                                    Clintonville, WI 54929

La Mesa Health Care Center                          2470 S. Arizona Avenue                  GCIHCC
                                                    Yuma, AZ 85364

La Salette Health Care & Rehabilitation Center      537 E. Fulton                           GCIHCC
                                                    Stockton, CA 95204

Lancaster Health Care Center                        1642 West Avenue "J"                    AMS Properties
                                                    Lancaster, CA

Northwest Health Care Center                        7800 West Fond du Lac Avenue            AMS Properties
                                                    Milwaukee, WI 53218

Pine Manor Health Care Center                       East Side of County Y Highway           AMS Properties
                                                    Embarrass (Clintonville), WI

River Hills West Health Care Center                 321 Riverside Drive                     AMS Properties
                                                    Pewaukee, WI 53072

Sunny Hill Health Care Center                       4325 Nakoma Road                        AMS Properties
                                                    Madison, WI

Sunquest Village of Yuma                            265 East 24th Street                    GCIHCC
                                                    Yuma, AZ 85364

Thousand Oaks Health Care Center                    93 West Avenida de los Arobules         AMS Properties
                                                    Thousand Oaks, CA 91360

Van Nuys Health Care Center                         6835 Hazeltine Avenue                   AMS Properties
                                                    Van Nuys, CA 91405

Village Green Nursing Home                          2932 North 14th Street                  GCIHCC
                                                    Phoenix, AZ 85094

Virginia Health Care Center                         1471 Waukesha Avenue                    AMS Properties
                                                    Waukesha, WI

Woodland Health Care Center                         18740 W. Bluemound Road                 AMS Properties
                                                    Brookfield, WI
</TABLE>


<PAGE>



                                   SCHEDULE C

                           FORM OF OCCUPANCY AGREEMENT


                               See attached copy.



               [See Schedule 3.5-B to the Settlement Agreement.]


<PAGE>

                                   SCHEDULE D


                               Designated Services


     Information Technology Support                              1.0%

            Reimbursement                                        0.5%

Accounts Payable and Payroll Processing                          1.5%

   Facility, Regional and Clinical                               2.0%
   (Quality Assurance) Operations



<PAGE>

                                 SCHEDULE 3.5-B

                       FORM OF INTERIM OCCUPANCY AGREEMENT



<PAGE>

                           INTERIM OCCUPANCY AGREEMENT

         This Interim Occupancy  Agreement (this "Interim Occupancy  Agreement")
is made this ___ day of 2000,  between [insert name of applicable New Operator],
a Delaware  corporation  ("Sublessor"),  and [insert name of applicable  Mariner
Licensee], a Delaware corporation ("Sublessee").

                                   WITNESSETH

         WHEREAS,  SPTMNR  Properties  Trust, a Maryland real estate  investment
trust  ("SPTMNR"),  and Sublessor are parties to an Amended and Restated  Master
Lease  Agreement,  dated as of  ____________  ___,  ______ (the  "Lease"),  with
respect to the skilled  nursing  facility  known as "[insert  name of facility]"
(the "Facility"); and

         WHEREAS,  SPTMNR,  Sublessor,  Sublessee and various other parties have
entered into a Settlement  Agreement (the "Settlement  Agreement"),  pursuant to
which  Sublessee has agreed to manage the operation of the Facility on the terms
contained therein and in an Interim Management  Agreement,  dated as of the date
hereof (the "Interim  Management  Agreement"),  between Sublessor and Sublessee;
and

         WHEREAS, in order to accomplish the foregoing,  Sublessor has agreed to
sublease the Facility to Sublessee on the terms contained herein;

         NOW THEREFORE, in consideration of the premises, and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged by the parties hereto,  the parties hereto,  intending to be bound,
hereby agree as follows:

         1. Sublease.  Upon and subject to the terms and conditions  hereinafter
set forth,  Sublessor  subleases to  Sublessee,  and  Sublessee  subleases  from
Sublessor,  all of  Sublessor's  right,  title and  interest  in,  to,  under or
relating  to the  real  property,  improvements,  fixtures  and  related  rights
constituting  the  Facility  (the  "Demised   Premises"),   including,   without
limitation,  any leasehold rights of Sublessor  relating to the use or occupancy
thereto,  and  Sublessor  agrees that  Sublessee  has and will  continue to have
throughout the term of this Interim  Occupancy  Agreement,  the right to use and
occupy the Demised Premises as the licensed operator of the Facility.

         2. Term. The term of this Interim Occupancy Agreement shall commence on
the  date  hereof,  and  shall  end on the  earlier  of (i) the  date  on  which
Sublessee's  obligation to provide services in connection with the management of
the operation of the Facility under the Interim Management  Agreement shall have
expired  or been  terminated  pursuant  to the  terms  thereof  and (ii) the SNH
Licensing Date (as defined in the Interim Management  Agreement).  Sublessor and
Sublessee acknowledge that under the Interim Management Agreement, Sublessor may
terminate Sublessee's provision of one or more services thereunder,  and that if
Sublessor shall elect to do so, this Interim Occupancy Agreement shall remain in
effect  notwithstanding  such termination  until Sublessor shall have elected to
terminate  Sublessee's  provision of all services  under the Interim  Management
Agreement with respect to the Facility.
<PAGE>

         3.  Rent.  Sublessee  shall pay to  Sublessor  as the rent  under  this
Interim Occupancy Agreement (the "Rent"),  all net patient revenues derived from
the  operation  of the  Facility  during  the  term  of this  Interim  Occupancy
Agreement  to the extent such net patient  revenues  are  actually  collected by
Sublessee.  Except as expressly set forth in the preceding  sentence,  Sublessee
shall  have no  obligation  to pay any  amounts or perform  any  obligations  in
respect of this Interim Occupancy Agreement;  it being the purpose and intent of
Sublessor and Sublessee that this Interim  Occupancy  Agreement is a gross lease
and  that  except  for  the  payment  of  the  Rent,  all  costs,  fees,  taxes,
impositions,  utility  charges,  repairs,  alterations,  restorations,  charges,
expenses,  reimbursements  and  obligations of every kind and manner  whatsoever
relating to the Demised  Premises  which may arise or become due during or after
the term of this Interim  Occupancy  Agreement,  shall be paid and discharged by
Sublessor.

         4.  Surrender  of  Possession.  At the end of the term of this  Interim
Occupancy Agreement, Sublessee shall surrender the Facility to Sublessor and, if
Sublessee shall fail to do so, Sublessee shall be a tenant-at-sufferance subject
to all of the terms of this Interim  Occupancy  Agreement except that Rent shall
be twice the Rent in effect  immediately  prior to the expiration or termination
hereof.  Sublessee  shall be liable for all damages  incurred by  Sublessor as a
result of such holding over.

         5. No Subletting or  Assignment.  Sublessee  shall not sublet or assign
any or all of the Facility  without the prior  consent of  Sublessor;  provided,
however,  that the  foregoing  shall not be deemed to  prohibit  Sublessee  from
permitting  patients or residents to occupy the Facility in the ordinary  course
of Sublessee's business.

         6. Notices.  All notices  required or permitted  hereunder  shall be in
writing and shall be deemed to be properly  given when  personally  delivered to
the party  entitled to receive the notice or on the date of actual  receipt,  if
sent by  certified  or  registered  mail,  postage  prepaid  and return  receipt
requested,  or one  business  day  after  being  sent by  nationally  recognized
overnight courier service,  properly  addressed and postage prepaid to the party
entitled to receive such notice at the address stated below:

If to the Sublessor:                ____________________
                                    400 Centre Street
                                    Newton, MA 02458
                                    Attention: Treasurer

with a copy to:                     Sullivan & Worcester LLP
                                    One Post Office Square
                                    Boston, MA 02109
                                    Attention:  Nancy S. Grodberg, Esq.

If to the Sublessee:                ____________________
                                    One Ravinia Drive, Suite 1500
                                    Atlanta, GA 30346
                                    Attention:  Associate General Counsel

                                      -2-
<PAGE>

with a copy to:                     Powell, Goldstein, Frazier & Murphy
                                    191 Peachtree Street
                                    Atlanta, GA 30308
                                    Attention:  Douglas S. Gosden, Esq.

7.      Miscellaneous.

                  (a) All the  terms and  provision  of this  Interim  Occupancy
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their respective  successors and permitted  assigns.  Neither party shall be
entitled to assign its rights or  obligations  under this  Sublease  without the
prior consent of the other party hereto.

                  (b) The headings in this Interim  Occupancy  Agreement are for
convenience of reference only and shall not limit or otherwise  affect the terms
hereof.

                  (c) This Interim Occupancy  Agreement shall be governed by and
construed  in  accordance  with the  internal  laws of the  State  in which  the
Facility  is  located,  without  giving  effect  to  contrary  conflicts  of law
principles.

                  (d)  This  Interim  Occupancy  Agreement  may be  executed  in
separate counterparts, each of which shall be considered an original, and all of
which, when taken together, shall constitute one and the same instrument.

                  (e) This Interim Occupancy Agreement  (including the Schedules
and Exhibits  hereto),  and the other  documents  and  instruments  specifically
provided for herein and therein,  contain the entire  understanding  between the
parties  concerning  the  subject  matter  hereof  and  thereof,  and  except as
expressly provided for herein or therein, supersede all prior understandings and
agreements  whether  oral or written,  between  them with respect to the subject
matter hereof and thereof.

                  (f) Neither this Interim Occupancy Agreement nor any provision
hereof may be changed, waived,  discharged or terminated except by an instrument
in writing signed by Sublessor and Sublease.

                  (g) Any  rights or  remedies  that any party  hereto  may have
under this Interim  Occupancy  Agreement with respect to any matter shall not be
deemed to be such  party's  exclusive  rights or remedies  with  respect to such
matter  arising  out of the  Settlement  Agreement  (or  any of the  Transaction
Documents  referred  to  therein),  and any party may  exercise  its  rights and
remedies under this Interim Occupancy Agreement or the Settlement  Agreement (or
any of the Transaction Documents referred to therein) concurrently with any such
other rights or  remedies,  or in any order that it  determines  in its sole and
absolute discretion.

                            [SIGNATURES ON NEXT PAGE]


                                      -3-
<PAGE>

         IN WITNESS  WHEREOF,  the parties  have caused this  Interim  Occupancy
Agreement to be executed and  delivered by their  respective  officers  hereunto
duly authorized.

SUBLESSOR:                                     SUBLESSEE:

[insert name of applicable New Operator]       [insert name of Mariner Licensee]



By:___________________________                  By:___________________________
Its: _________________________                  Its: _________________________





<PAGE>

                                  SCHEDULE 3.6

                             TRANSFERRED REAL ESTATE

         [This schedule contains legal descriptions of real property.]

<PAGE>


                                  SCHEDULE 6.7

                                   LITIGATION

                                   [Omitted.]

<PAGE>
<TABLE>
<CAPTION>


                                                     SCHEDULE 9.5

                                                  BEDS AND SERVICES

                Property Name                         Beds                             Services
--------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>          <C>
Cedars Health Care Center                            175/14       Skilled Nursing Facility/Assisted Living Facility

Cherrelyn Manor Health Care Center                    230         Skilled Nursing Facility

Christopher East Health Care Center                   215         Skilled Nursing Facility

Greentree Health Care Center                           69         Skilled Nursing Facility

La Mesa Health Care Center                            128         Skilled Nursing Facility

La Salette Health Care and Rehab. Center              120         Skilled Nursing Facility

Lancaster Health Care Center                           99         Skilled Nursing Facility

Northwest Health Care Center                          101         Skilled Nursing Facility

Pine Manor Health Care Center                        83/25        Skilled Nursing Facility/Facility for Dev. Disabled

River Hills West Health Care Center                   237         Skilled Nursing Facility

Sunny Hill Health Care Center                          73         Skilled Nursing Facility

Sunquest Village of Yuma                               80         Assisted Living Facility

Thousand Oaks Health Care Center                      124         Skilled Nursing Facility

Van Nuys Health Care Center                            58         Skilled Nursing Facility

Village Green Health Care Center                      127         Skilled Nursing Facility

Virginia Health Care Center                           105         Skilled Nursing Facility

Woodland Health Care Center                           226         Skilled Nursing Facility

</TABLE>



<PAGE>

                                  SCHEDULE 9.15

                       LABOR UNION CONTRACTS OR AGREEMENTS

1.       Contract Agreement,  dated as of May 1, 1998, between Local 150 Service
         Employees   International  Union  AFL-CIO-CLC  and  Mariner  Post-Acute
         Network,  Inc.  d/b/a The  Shores  Health  and  Rehabilitation  Center,
         Northwest Healthcare Center, Christopher East Health and Rehabilitation
         Center, and Park Manor Heathcare Center and Healthcare  Services Group,
         Inc., a Contractor.

2.       Collective  Bargaining  Agreement,  dated May 1, 1998,  between Mariner
         Post Acute  Network,  d/b/a River Hills West  Nursing Home and District
         1199W/United Professionals for Quality Health Care, SEIU, AFL-CIO.


<PAGE>


                                  SCHEDULE 9.16

                                EMPLOYEE ACCRUALS



                                   [Omitted.]

<PAGE>

                                  SCHEDULE 9.18

                               INSURANCE POLICIES



                                   [Omitted.]


<PAGE>


                                  SCHEDULE 9.19

                          SUBLEASES AND OTHER DOCUMENTS

Fresno Sublease Documents

         Pleasant Care Corporation

1.       Tenant Purchase and Sale Agreement,  dated March 31, 1993, by and among
         GCI  Properties,  Inc.("GCI  Properties"),  AMS Properties and Pleasant
         Care Corporation ("Pleasant Care") (Exhibits A through H missing).

2.       Sublease   Agreement,   dated  March  31,  1993,  by  and  between  AMS
         Properties, as sublessor, and Pleasant Care, as subtenant.

3.       Assignment and Assumption of Contracts,  dated as of March 31, 1993, by
         AMS Properties (Exhibit A missing).

4.       Bill of Sale,  dated  March 31,  1993,  by AMS  Properties  (Exhibit  A
         missing).

5.       Temporary  Management  Agreement,  dated as of March 31,  1993,  by and
         between AMS Properties and Pleasant Care.

6.       Management/Transition  Agreement,  dated as of March 31,  1993,  by and
         between AMS Properties and Pleasant Care.

7.       Security  Agreement,  dated as of March 31, 1993, by and among Pleasant
         Care and GCI Properties, AMS Properties and GranCare.

8.       Guaranty, dated as of March 31, 1993, by Emanuel I. Bernabe in favor of
         GCI Properties, AMS Properties and GranCare.

9.       UCC-1  Financing  Statement,  dated March 31, 1993, by Pleasant Care in
         favor of GCI Properties, AMS Properties and GranCare.

10.      Assignment  of Leases and  Rents,  dated as of March 31,  1993,  by AMS
         Properties to HRPT.

11.      Assignment  of Sublease  Documents,  dated as of March 31, 1993, by AMS
         Properties, GCI Properties, and GranCare to HRPT.

12.      Memorandum  of Sublease,  made as of March 31, 1993, by and between AMS
         Properties and Pleasant Care.

13.      UCC-1 Financing Statement (undated) by GCI Properties in favor of HRPT,
         as assignee.

14.      UCC-2  Financing  Statement  by  Pleasant  Care in favor  of  HRPT,  as
         assignee.


<PAGE>
         Covenant Care California, Inc.

1.       Assignment  and  Assumption of Sublease,  Consent,  Waiver and Estoppel
         Agreement,  dated as of  January  13,  1995,  by and  among  HRPT,  AMS
         Properties, Pleasant Care and Covenant Care California, Inc. ("Covenant
         Care").

2.       Assignment of Sublease Documents,  dated as of January 13, 1995, by AMS
         Properties to HRPT.

3.       Letter  Agreement,  dated as of January 13,  1995,  between  HRPT,  AMS
         Properties,  GranCare and GCIHCC re:  Transfer  from  Pleasant  Care to
         Covenant Care of Rights as Sublessee under Sublease,  dated as of March
         31, 1993.

4.       Memorandum of Sublease, dated as of January 13, 1995.

5.       UCC-1 Financing Statement, notarized January 11, 1995, by Covenant Care
         in favor of AMS Properties.

6.       UCC-2 Financing Statement, notarized January 11, 1995, by Covenant Care
         in favor of AMS Properties and HRPT, as assignee

South Dakota Sublease Documents

         HealthQuest,  Inc.  (Southridge  Health Care  Center/Mom & Dad's Health
         Care Center)

1.       Tenant Purchase and Sale Agreement,  dated as of March 31, 1994, by and
         between GCIHCC and HealthQuest, Inc. ("HealthQuest").

2.       Sublease,  dated  as of March  31,  1994,  by and  between  GCIHCC  and
         HealthQuest.

3.       Transition  Agreement  dated as of March 31, 1994 by and between GCIHCC
         and HealthQuest.

4.       Amended and Restated Security Agreement,  made as of March 31, 1994, by
         and between GCIHCC and HealthQuest.

5.       Assignment and Assumption of Contracts,  dated as of March 31, 1994, by
         GCIHCC to HealthQuest.

6.       Bill of Sale, dated as of March 31, 1994 by GCIHCC.

7.       Amended and Restated  Promissory  Note,  dated as of March 31, 1994, by
         HealthQuest in favor of GCIHCC in the amount of $1,190,000.00.

8.       Promissory Note, dated as of March 31, 1994, by HealthQuest in favor of
         GCIHCC in the amount of $450,000.00.

9.       Amended and Restated  Guaranty of Joseph M.  Higdon,  dated as of March
         31, 1994.

                                      -ii-
<PAGE>

10.      Omnibus First Amendment  Agreement,  dated as of April 15, 1994, by and
         between GCIHCC and HealthQuest.

11.      UCC-1 Financing  Statement by HealthQuest d/b/a Mom & Dad's Home Health
         Care Center in favor of GCIHCC.

         HealthQuest (Huron Nursing Home/Sunquest Village)

1.       Tenant Purchase and Sale Agreement,  dated as of April 29, 1994, by and
         between GCIHCC and HealthQuest.

2.       Sublease,  dated  as  of  May  1,  1994,  by  and  between  GCIHCC  and
         HealthQuest.

3.       Transition Agreement, dated as of April 29, 1994, by and between GCIHCC
         and HealthQuest.

4.       Security  Agreement,  made as of May 1, 1994, by and between GCIHCC and
         HealthQuest.

5.       Assignment  and  Assumption of  Contracts,  dated as of May 1, 1994, by
         GCIHCC to HealthQuest.

6.       Bill of Sale, dated as of May 1, 1994, by GCIHCC.

7.       Secured  Promissory  Note,  dated as of May 1, 1994, by  HealthQuest in
         favor of GCIHCC in the amount of $240,000.00.

8.       Secured  Promissory  Note,  dated as of May 1, 1994, by  HealthQuest in
         favor of GCIHCC in the amount of $1,360,000.00.

9.       Secured  Promissory  Note,  dated as of May 1, 1994, by  HealthQuest in
         favor of GCIHCC in the amount of $450,000.00.

10.      Guaranty of Joseph M. Higdon, dated as of May 1, 1994.

11.      UCC-1  Financing  Statement by HealthQuest  d/b/a  Sunquest  Village of
         Huron and d/b/a Huron Nursing Home in favor of GCIHCC.

                                     -iii-