Document:

FIFTH AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT  

    
	 

	

THIS FIFTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT ("Fifth Amendment") dated as of September 30, 2002, is among
SESI, L.L.C., as Borrower, SUPERIOR ENERGY SERVICES INC., as Parent, BANK ONE,
NA as Agent, WELLS FARGO BANK TEXAS, N.A., as Syndication Agent, WHITNEY
NATIONAL BANK, as Documentation Agent, and the lenders party hereto, who agree
as follows: 

    
	 
	
    
RECITALS 

	 
	
    
A. 
	 	
The Borrower, Parent, Agents and the lenders a
    party thereto (the "Lenders") have executed an Amended and Restated Credit
    Agreement dated as of December 31, 2000 (as amended to date, the "Credit
    Agreement") providing for a revolving line of credit of up to $75,000,000, a
    term loan one in the, original principal amount of $50,000,000, and a term
    loan two in the original principal amount of $32,000,000 (collectively, the
    "Loans"). 
	 	 	 
	
    
B.
	 	
The Borrower, Parent, Agents and the Lenders
    executed (i)
a First Amendment to Amended and Restated Credit Agreement (the "First
Amendment") dated as of May 2, 2001 which (x) increased the maximum amount of
the revolving loan from $60,000,000 to $70,000,000, and (y) combined term loan
one and term loan two into a single term loan in the principal amount of
$50,000,000; (ii) a Second Amendment to Amended and Restated Credit Agreement
(the "Second Amendment") dated as of November 14, 2001 which increased the
restriction on capital expenditures from $35,000,000 to $85,000,000 for the
fiscal year ending December 31, 2001 and to $50,000,000 for the fiscal year
ending December 31, 2002 and then back to $35,000,000 for each fiscal year
thereafter; (iii) a Third Amendment to Amended and Restated Credit Agreement
(the "Third Amendment") dated as of November 16, 2001, which increased the
maximum amount of the revolving loan from $70,000,000 to $75,000,000 and made a
new term loan to Borrower in the principal amount of $32,000,000; and (iv) a
Fourth Amendment to Amended and Restated Credit Agreement (the "Fourth
Amendment") dated as of June 11, 2002, which increased the maximum capital
expenditures and added certain other provisions relating to transactions with
affiliates and the creating of new subsidiaries in connection with that certain
loan from Agent and certain lenders to Lamb Energy Services, L.L.C., which loan
was guaranteed in part by the Borrower and the Parent. 
	 	 	 
	
    
C.
	 	
Borrower has requested an additional modification
    to the Credit Agreement relating to maximum capital expenditures, the
    maximum leverage ratio and to certain issues relating to the issuance of
    letters of credit.
	 	 	 
	
    D.
	 	
The Agent and the Lenders are willing to accept the
    Borrower's requests on the terms and conditions set forth below. 
	 	 	 
	
    E.
	 	
    Capitalized terms used in this Fifth Amendment and not otherwise defined in
    this Fifth Amendment shall have the meanings set forth in the Credit
    Agreement.
	 	 	 
	
    
AGREEMENT 

	 
	
    
   NOW, THEREFORE, for and in consideration of the
mutual covenants, agreements and undertakings herein contained, the Borrower,
Parent, Agents and Lenders hereby agree as follows: 

	 
	

I. AMENDMENTS TO CREDIT AGREEMENT 

    

	 
	
    Section 1.          
    Section 2.3.1 (Issuance of Letters of Credit) of the Credit Agreement is
    hereby amended to read as follows: 

	 
	
    2.3.1 Issuance of Letters of Credit.
From and including the Closing Date, the Agent or, with the approval of the
Borrower, any Lender (the "Issuing Lender") shall issue one or more standby
Letters of Credit for the account of the Borrower or any of its Subsidiaries,
pursuant to the Issuing Lender's standard form of application for standby
letters of credit. The aggregate face amount of all outstanding Letters of
Credit (i) shall constitute a portion of the Aggregate Revolving Loan
Commitments (thereby reducing the Revolving Loan Commitments available for
Revolving Loans on a dollar‐for‐dollar basis), and (ii) shall not exceed
$10,000,000. If the expiry date of a Letter of Credit is initially after the
Revolving Loan Termination Date, and if the Revolving Loan Termination Date is
not extended to a date after the expiry date of the Letter of Credit, then the
Borrower shall, not later than five Business Days prior to the Revolving Loan
Termination Date, either cause the Letter of Credit to be returned to the
Issuing Lender, or secure the Letter of Credit by delivering to the Issuing
Lender, for the benefit of the Lenders, one of the following: (i) cash in the
face amount of the Letter of Credit which shall be held in pledge until the
Letter of Credit is paid or expires without being drawn upon; or (ii) a backup
letter of credit issued by a financial institution acceptable to the Agent and
Issuing Lender in their sole discretion, for the benefit of the Issuing Lender,
in the face amount of the Letter of Credit and on terms satisfactory to the
Agent and the Issuing Lender. 

	 
	
    
Section 2.         Section 6.19.2 (Maximum Leverage Ratio) of the Credit
Agreement is hereby amended to read as follows: 

	 
	
    
6.19.2 Maximum Leverage Ratio. The Parent
will not permit the ratio (the "Leverage Ratio"), determined on a Pro Forma
Basis, of (i) Indebtedness (excluding the funded portion of any Indebtedness
guaranteed by the Federal Maritime Administration that is held in escrow and not
yet available to the Borrower) as of the end of each fiscal quarter to (ii)
EBITDA for the four fiscal quarters ending with such fiscal quarter, to be
greater than the following for the periods indicated: 

	 

  
  	Period	Maximum
      Leverage Ratio
	July 1, 2002
      through	
	     
      and including June 30, 2003	3.50 to 1.00
	July 1, 2003
      through	
	      
      and including September 30, 2003	3.25 to 1.00
	October 1,
      2003 through	
	     
      Revolving Loan Termination Date	3.00 to 1.00
		

  

	
Section 3.        
Section 6.19.4 (Maximum Capital Expenditures) of the
Credit Agreement is hereby amended to read as follows: 

    
	 
	
    Section 6.19.4 Maximum Capital
Expenditures. The Parent will not permit Capital Expenditures (on a
consolidated but non‐cumulative basis) of the Parent, the Borrower and their
Subsidiaries (i) during the fiscal year ending December 31, 2001 to be greater
    than $85,000,000, (ii) during the fiscal year ending December 31, 2002 to be
    greater than $110,000,000, (iii) during the fiscal year ending December 31,
    2003 to be greater than $65,000,000 and (iv) during any fiscal year
    thereafter to be greater than $35,000,000.

	 
	

II. MISCELLANEOUS 

    
	 
	
    
Section 1.         The Borrower and Parent
certify and acknowledge that (i) except with respect to date specific
representations and warranties, all the representations and warranties made by
or on behalf of the Borrower, Parent and Subsidiaries set forth in the Credit
Agreement are true and correct, in all material respects, as of the date of this
Fifth Amendment; (ii) the Borrower and the Parent are in compliance with all of
the covenants, terms and conditions of the Credit Agreement; and (iii) no
Unmatured Default or Default has occurred or is continuing. 

	 
	
    
Section 2.         Each of the Subsidiaries
hereby consents to this Fifth Amendment and agrees that its Subsidiary Guaranty
in favor of the Agent and the Lenders remains in full force and effect. 

	 
	
    
Section 3.        
    The Borrower and the Parent agree to execute (and cause their Subsidiaries)
    to execute any and all other documents reasonably required by the Agent,
    including without limitation, the amendment of any Loan Documents, to
    conform to the provisions of this Fifth Amendment.

	 
	
    
Section 4.         The Borrower agrees to pay
the Agent, for the ratable benefit of the Lenders, an amendment fee equal to
0.20% of the Aggregate Revolving Loan Commitment plus the principal amounts
outstanding on Term Loan One. 

	 
	
    
Section 5.         Except as otherwise
specifically amended hereby, all of the covenants, terms and conditions of the
Credit Agreement shall remain in full force and effect. Any references to the
Credit Agreement contained in the Notes or any other Loan Documents shall refer
to the Credit Agreement, as amended by this Fifth Amendment. 

	 
	
    
Section 6.         This Fifth Amendment may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute this Fifth
Amendment by signing any such counterpart. This Fifth Amendment shall be
effective when it has been executed by the Parent, the Borrower, the Agents and
the Lenders. 

	 
	
    
Section 7.         This Fifth Amendment shall be
governed by and construed in accordance with the internal law (but not the law
of conflicts) of the State of Louisiana, but giving effect to federal laws
applicable to national banks.

	 

  	
  
  IN WITNESS WHEREOF, the Parent, the Borrower,
  the Agents and the Lenders have executed this Agreement as of the date first
  above written.

      

   

  	
      BORROWER: 
      
	
      SESI, L.L.C.

	
       
	
       

	
       
	
      By:     Superior
      Energy Services, Inc.,

	
       
	
                 Member
      Manager

	
       
	
       

	
       
	
       

	
       
	
      By:      
      /s/ Robert S. Taylor                              
      

	
       
	
            Name: Robert S.
      Taylor

	
       
	
            Title: Chief
      Financial Officer

   

  	
      PARENT:
	
      SUPERIOR ENERGY
      SERVICES, INC.

	
       
	
       

	
       
	
       

	
       
	
      By:     /s/ Robert S.
      Taylor 
                                     
      
      

	
       
	
           Name: Robert S.
      Taylor

	
       
	
           Title: Chief
      Financial Officer

  

    

  	
       
	
       

	
      SUBSIDIARIES:
	
      
      ACE RENTAL TOOLS, L.L.C.

	
       
	
      
      BLOWOUT TOOLS, INC.

	
       
	
      
      CONCENTRIC PIPE AND TOOL RENTALS, L.L.C.

	
       
	
      
      CONNECTION TECHNOLOGY, L.L.C.

	
       
	
      
      DRILLING LOGISTICS, L.L.C.

	
       
	
      
      ENVIRONMENTAL TREATMENT TEAM, L.L.C.

	
       
	
      
      F. & F. WIRELINE SERVICE, L.L.C.

	
       
	
      
      FASTORQ, L.L.C.

	
       
	
      
      H.B. RENTALS, L.C.

	
       
	
      
      INTERNATIONAL SNUBBING SERVICES, L.L.C.

	
       
	
      
      NON‐MAGNETIC RENTAL TOOLS, L.L.C.

	
       
	
      
      OIL STOP, L.L.C.

	
       
	
      
      PRODUCTION MANAGEMENT

	
       
	
      
          INDUSTRIES, L.L.C.

	
       
	
      
      SELIM LLC

	
       
	
      
      SEGEN LLC

	
       
	
      
      STABIL DRILL SPECIALTIES, L.L.C.

	
       
	
      
      SUB‐SURFACE TOOLS, L.L.C.

	
       
	
      
      SUPERIOR ENERGY SERVICES, L.L.C.

	
       
	
      
      TECHNICAL LIMIT DRILLSTRINGS, INC.

	
       
	
      
      WILD WELL CONTROL, INC.

	
       
	
      
      WORKSTRINGS, L.L.C.

	
       
	
      
      1105 PETERS ROAD, L.L.C.

  

  	
       
	
       

	
       
	
       

	
       
	
      By:     /s/ Robert S.
      Taylor                            
      

	
       
	
           Name: Robert S.
      Taylor

	
       
	
           Title: Vice President
      and Treasurer

	
       
	
       

	
       
	
       

	
       
	
      SE FINANCE LP

	
       
	
       

	
       
	
      By:       SEGEN LLC,
      its General Partner

	
       
	
       

	
       
	
       

	
       
	
      
      By:     
      /s/ Robert S. Taylor                     
      

	
       
	
                      
      Name: Robert S. Taylor

	
       
	
                      
      Title: Manager

  

 

 

	
    AGENT AND LENDER:
	
    BANK ONE, NA (Chicago
    Main Office)

	
     
	
     

	
    
     
	
    By:        /s/
    Steve D. Nance                     
    

	
     
	
            Name: Steven D.
    Nance

	
     
	
            Title: Vice
    President

  

	
    SYNDICATION AGENT AND
    LENDER:
	
    WELLS FARGO BANK TEXAS,
    N.A.

	
     
	
     

	
     
	
    By:       /s/
    Scott J. Gildea                       
    

	
     
	
             Name:
    Scott J. Gildea

	
     
	
             Title:
    Assistant Vice President

  

	
    DOCUMENTATION AGENT
    AND LENDER:
	
    
    WHITNEY NATIONAL BANK

	
     
	
     

	
     
	
    By:       /s/
    Hollie L. Ericksen                   
    

	
     
	
            Name: Hollie
    L. Ericksen

	
     
	
            Title: Vice
    President

  

	
    LENDER
	
    CREDIT SUISSE FIRST
    BOSTON

	
     
	
     

	
     
	
    By:      /s/ James P. Moran                   
    

	
     
	
           Name: James P.
    Moran

	
     
	
           Title: Director

	
     	
     
	
     	
    By:     /s/ Ian W. Nalitt                          
    

	
     	
           Name: Ian W.
    Nalitt  

	
     	
           Title: Associate

  

	
    LENDER:
	
    
    HIBERNIA NATIONAL BANK

	
     
	
     

	
     
	
    By:       /s/ Stephen
    Birnbaum          
    

	
     
	
    Name: Stephen Birnbaum

	
     
	
    Title: Vice President

  

	
    LENDER:
	
    PNC BANK, NATIONAL
    ASSOCIATION

	
     
	
     

	
     
	
    By: 
            /s/ Doug Clark                                 
    
    

	
     
	
          Name: Doug Clark

	
     
	
          Title: Vice President

  

	
    LENDER:
	
    BANK OF SCOTLAND

	
     
	
     

	
     
	
    By:       Joseph
    Fratus                                    
    

	
     	
    Name: Joseph Fratus

	
     	
    Title: First Vice President

	
     
	
     

 

 

	
    LENDER:
	
    
    UNION PLANTERS BANK

	
     
	
     

	
     
	
    By: 
          /s/ Mark R. Phillips                            
    

	
     
	
           Name: Mark R.
    Phillips

	
     
	
           Title: Senior Vice
    President

  

	
    LENDER:
	
    NATEXIS BANQUES
    POPULAIRES

	
     
	
     

	
     
	
    By: 
         /s/ Timothy L. Polvado                        
    
    

	
     
	
           Name: Timothy L.
    Polvado

	
     
	
           Title: Vice
    President and Group Manager

	
     
	
     

	
     
	
    By:   /s/ Louis P. Laville, III                             
    

	
     
	
          Name: Louise P. Laville,
    III

	
     
	
          Title: Vice President
    and Group MangerEXHIBIT 10.2

                                   RECEIVABLES
                              PURCHASE AND TRANSFER
                                    AGREEMENT

                          Dated as of October 24, 2002

                                      Among

                          FIVE STAR QUALITY CARE, INC.,
                              as Primary Servicer,

                           THE PROVIDERS NAMED HEREIN

                                       and

                             FSQC FUNDING CO., LLC,
                                  as Purchaser

ALL THE RIGHT,  TITLE AND  INTEREST OF THE  PURCHASER IN AND TO, ALL BENEFITS OF
THE PURCHASER  UNDER AND ALL MONIES DUE OR TO BECOME DUE TO THE PURCHASER  UNDER
OR IN CONNECTION  WITH, THIS AGREEMENT HAVE BEEN ASSIGNED TO HFG HEALTHCO-4 LLC,
AS COLLATERAL SECURITY FOR ANY AND ALL THE OBLIGATIONS OF THE PURCHASER PURSUANT
TO A LOAN AND  SECURITY  AGREEMENT  DATED  AS OF  OCTOBER  24,  2002  AMONG  THE
PURCHASER, THE LENDERS FROM TIME TO TIME PARTY THERETO AND THE PROGRAM MANAGER.

<PAGE>
<TABLE>
<CAPTION>

                                                 TABLE OF CONTENTS

                                                                                                               Page
<S>              <C>                                                                                            <C>

ARTICLE I.        TERMS OF THE PURCHASES AND CONTRIBUTIONS
                  SECTION 1.01      Sale, Contribution and Purchase of Receivables................................1
                  SECTION 1.02      Monthly Report................................................................1
                  SECTION 1.03      The Transfers.................................................................2
                  SECTION 1.04      Collection and Payment Procedures.............................................2
                  SECTION 1.05      Allocation of Servicer Responsibilities.......................................3

ARTICLE II.       PAYMENT MECHANICS;MISDIRECTED PAYMENTS; EOB'S
                  SECTION 2.01      Non-Governmental Entities Payment Mechanics...................................4
                  SECTION 2.02      Governmental Entities Payment Mechanics.......................................4
                  SECTION 2.03      Misdirected Payments; EOB's...................................................5
                  SECTION 2.04      Unidentified Payments; Purchaser's Right
                                         of Presumption ..........................................................6
                  SECTION 2.05      No Rights of Withdrawal.......................................................6

ARTICLE III.      REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF TERMINATION;
                    GROUP-WIDE EVENTS OF TERMINATION
                  SECTION 3.01      Representations and Warranties; Covenants.....................................6
                  SECTION 3.02      Group-Wide Event of Termination; Event
                                         of Termination ..........................................................6

ARTICLE IV.       INDEMNIFICATION; GRANT OF SECURITY INTEREST
                  SECTION 4.01      Denied Receivables............................................................7
                  SECTION 4.02      Indemnities by the Provider...................................................8
                  SECTION 4.03      Right of Set-Off..............................................................9
                  SECTION 4.04      Grant of Security Interest....................................................9

ARTICLE V.        MISCELLANEOUS
                  SECTION 5.01      Amendments, etc..............................................................10
                  SECTION 5.02      Notices, etc.................................................................10
                  SECTION 5.03      Assignability................................................................10
                  SECTION 5.04      Further Assurances...........................................................11
                  SECTION 5.05      Costs, Expenses and Termination Fee..........................................11
                  SECTION 5.06      Confidentiality..............................................................12
                  SECTION 5.07      Term and Termination.........................................................12
                  SECTION 5.08      Sale and Contribution Treatment..............................................12
                  SECTION 5.09      Grant of Security Interest...................................................12
                  SECTION 5.10      No Liability of the Purchaser................................................13
                  SECTION 5.11      Addition and Removal of Providers............................................13
                  SECTION 5.12      Attorney-in-Fact.............................................................15
                  SECTION 5.13      Entire Agreement; Severability...............................................15

</TABLE>

                                                         i

<PAGE>
<TABLE>
<CAPTION>

<S>              <C>                                                                                           <C>

                  SECTION 5.14      Governing Law................................................................15
                  SECTION 5.15      Waiver of Jury Trial, Jurisdiction
                                               And Venue.........................................................15
                  SECTION 5.16      Execution in Counterparts....................................................16
                  SECTION 5.17      No Proceedings...............................................................16
                  SECTION 5.18      Survival of Termination......................................................16
                  SECTION 5.19      Joint and Several Liability; Providers.......................................16
                  SECTION 5.20      Accounting Information.......................................................16
</TABLE>

EXHIBITS
--------
Exhibit I           Definitions
Exhibit II          Conditions of Purchases
Exhibit III         Representations and Warranties
Exhibit IV          Covenants
Exhibit V           Events of Termination
Exhibit VI          Receivable Information
Exhibit VII-A       Form of Notice to Governmental Entities
Exhibit VII-B       Form of Notice to non-Governmental Entities
Exhibit VIII        Primary Servicer Responsibilities
Exhibit IX          Servicer Termination Events
Exhibit X           Interface Between Master Servicer and the Primary Servicer
Exhibit XI-A        Memorandum of Providers' Counsel
                    with Respect to the Patient Consent Forms
Exhibit XI-B        Form of Opinion of Providers' and Purchaser's Counsel
                    with Respect to Certain Corporate Matters
Exhibit XI-C        Form of Opinion of Providers' and Purchaser's Counsel
                    with Respect to Certain Bankruptcy Matters
Exhibit XII         Form of Depositary Agreement
Exhibit XIII        Form of Parent Guaranty
Exhibit XIV         Form of Pledge Agreement
Exhibit XV          Form of Subscription Agreement
Exhibit XVI         Form of Control Agreement
Exhibit XVII        Form of Government Depositary Agreement

SCHEDULES
---------
Schedule I          Providers
Schedule II         Addresses for Notices
Schedule III        Credit and Collection Policy
Schedule IV         Disclosures
Schedule V          Lockbox Information
Schedule VI         Tradenames
Schedule VII        Net Value Factors
Schedule VIII       Providers with Facilities in Certain States

                                       ii
<PAGE>

                   RECEIVABLES PURCHASE AND TRANSFER AGREEMENT

                          Dated as of October 24, 2002

         FIVE STAR QUALITY CARE, INC., a corporation organized under the laws of
the State of Maryland  (together with its successors and assigns,  "Five Star"),
each of the  entities  named on  Schedule  I hereto,  as such  Schedule I may be
amended from time to time pursuant to Section 5.11 hereof  (each,  together with
each  one's  successors  and  assigns,  a  "Provider"  and,  collectively,   the
"Providers") and FSQC Funding Co., LLC, a limited  liability  company  organized
under  the laws of the  State of  Delaware  (together  with its  successors  and
assigns, the "Purchaser"), agree as follows:

         PRELIMINARY  STATEMENTS.  Certain terms that are  capitalized  and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
herein and in the Exhibits and Schedules hereto to the "Agreement" refer to this
Agreement, as amended,  restated,  modified or supplemented from time to time in
accordance with its terms (the "Agreement").

         The  Providers  wish  to  sell  or  contribute  to the  Purchaser  on a
continuing basis all of its healthcare receivables. The Purchaser is prepared to
purchase or to accept the  contribution  of such  healthcare  receivables on the
terms and subject to the conditions set forth herein.  Accordingly,  the parties
agree as follows:

                                   ARTICLE I.

                    TERMS OF THE PURCHASES AND CONTRIBUTIONS

         SECTION 1.01 Sale,  Contribution  and Purchase of Receivables.  On each
Transfer  Date  until  the  Facility  Termination  Date  and  on the  terms  and
conditions set forth herein, each Provider agrees to sell or contribute, without
recourse except to the extent expressly  provided herein, all of such Provider's
Receivables  to the  Purchaser,  and the Purchaser  agrees to purchase or accept
such contribution of, all of each Provider's Receivables.

         SECTION 1.02 Monthly Report. On or prior to the 15th day of each Month,
the  Primary  Servicer,  on behalf of each  Provider,  shall  provide the Master
Servicer  by  Transmission  a  report  (the  "Monthly  Report")  containing  the
information  listed on Exhibit VI hereto (as such Exhibit may be modified by the
Purchaser from time to time, the "Receivable  Information")  with respect to the
new  Receivables  sold or  contributed to the Purchaser  during the  immediately
prior Month.  Based on the Monthly  Report,  the Providers  and Purchaser  shall
finalize  and record on their  respective  books and  records (to the extent not
previously  recorded) the determination of those Receivables that were purchased
and those  that  were  contributed.  All  Receivable  Information  that has been
received by the Master Servicer shall be reviewed by the Master Servicer and the
Program Manager.

<PAGE>
         SECTION  1.03 The  Transfers.  On each  Transfer  Date (i)  subject  to
satisfaction  of the applicable  conditions set forth in Exhibit II hereto,  the
Providers  shall  sell to the  Purchaser  all  Eligible  Receivables,  that  the
Providers have submitted, if any, to the Purchaser for purchase hereunder and to
be included in the Purchased  Batch,  (ii) the Providers will  contribute to the
capital of the  Purchaser  all other  Eligible  Receivables  in the  Transferred
Batch,  and (iii) the Providers will  contribute to the capital of the Purchaser
all other Receivables that do not constitute Eligible Receivables. The Purchaser
shall (x) pay to the Primary  Servicer for the benefit of the Providers,  at the
Primary Servicer Account, an amount equal to the Purchase Price of the Purchased
Batch,  and (y) record on the books and  records of the  Purchaser  the  capital
contribution with respect to those Receivables contributed to the capital of the
Purchaser  in such  Transferred  Batch,  in each case,  promptly and in no event
later  than seven  Business  Days after the  applicable  Transfer  Date for such
Batch.  The Primary  Servicer  shall remit the proceeds of the Purchase Price of
the  Purchased  Batch to each  Provider  in  accordance  with  their  respective
interests.

         (a) Effective on each Transfer Date, in consideration of the payment of
the Purchase  Price,  or the increase in the capital  accounts of the applicable
Provider in the Purchaser,  and for other good and valuable consideration,  each
Provider hereby sells, contributes, assigns and conveys to the Purchaser and the
Purchaser hereby purchases and accepts,  as absolute owner, all right, title and
interest  in and to the  Batch  Receivables  purchased  or  contributed  on such
Transfer Date.

         SECTION 1.04 Collection and Payment Procedures. Collections on Batches.
The Purchaser  shall be entitled with respect to each Batch,  (i) to receive all
Collections  on such Batch and (ii) to have and to  exercise  any and all rights
(x) to  collect,  record,  track  and,  during  the  continuance  of an Event of
Termination  or a  Servicer  Termination  Event,  take  all  actions  to  obtain
Collections with respect to each Batch Receivable  payable by Persons other than
Governmental  Entities  and (y) to the extent  permitted  by law and in a manner
consistent  with all  applicable  laws and  regulations,  to record,  track and,
during the  continuance  of an Event of  Termination  or a Servicer  Termination
Event,  take all actions to obtain  Collections  with respect to each Receivable
included in a Batch payable by Governmental Entities.

         (a)  Collections  Not Part of a Batch.  On each  Settlement  Date,  and
provided that (i) each  Provider  shall have paid all amounts then due and owing
to the  Purchaser  under this  Agreement,  (ii) each  Provider,  or the  Primary
Servicer  on  behalf  of  such  Provider,   shall  have   successfully  sent  by
Transmission to the Master Servicer all information required with respect to the
Batch Receivables for the immediately  preceding Settlement Period, and (iii) no
Event of Termination shall have occurred and be continuing,  the Purchaser shall
pay or turn over, as the case may be, to the Primary Servicer for the benefit of
the applicable  Providers any and all cash collections or other cash or non-cash
proceeds received by the Purchaser during the immediately  preceding  Settlement
Period  with  respect to  Accounts  that are not part of any Batch.  The Primary
Servicer shall remit such cash and proceeds to each Provider in accordance  with
their respective interests.

         (b) Distributions. On each Business Day and with respect to each Batch,
Total Collections shall be distributed to the Purchaser.

                                        2
<PAGE>
         SECTION  1.05  Allocation  of  Servicer  Responsibilities.  Tracking of
purchases,  Collections and other transactions pertaining to each Batch shall be
administered  by the Master  Servicer in a manner  consistent  with the terms of
this Agreement.  The responsibilities of the Providers, the Primary Servicer and
the Master  Servicer are set forth in Exhibit X attached  hereto.  Each Provider
shall  cooperate  fully with the  Primary  Servicer  and the Master  Servicer in
establishing  and  maintaining the  Transmission of the Receivable  Information,
including,  without  limitation,  the matters  described in Exhibit X, and shall
provide  promptly to the Master  Servicer  such other  information  necessary or
desirable for the  administration of Collections on the Batch Receivables as may
be requested from time to time.

         (a) The  Purchaser  hereby  appoints  Five  Star as its  agent  for the
administration  and servicing  obligations set forth in Exhibit VIII hereto with
respect to the Receivables sold or transferred by the Providers to the Purchaser
hereunder  (the  "Primary  Servicer  Responsibilities"),  and Five  Star  hereby
accepts   such   appointment   and  agrees  to  perform  the  Primary   Servicer
Responsibilities  on  behalf  of the  Providers;  provided,  however,  that such
appointment   shall  not   release  any   Provider   from  any  of  its  duties,
responsibilities,  liabilities and obligations  resulting or arising  hereunder.
Each of Five Star, the Providers and the Purchaser hereby  acknowledge that Five
Star's  appointment as Primary  Servicer is expressly  limited by and subject to
the Program  Manager's  right as specified by the Loan  Agreement to replace the
Purchaser  or its  agent  as the  Primary  Servicer  (which  replacement  may be
effectuated  through the  outplacement  to a Person of all back  office  duties,
including billing, collection and processing responsibilities, and access to all
personnel,   hardware   and   software   utilized   in   connection   with  such
responsibilities).  The Purchaser may, with the consent of the Program  Manager,
at any time following the occurrence of a Servicer Termination Event (and shall,
without  requirement of notice to any party,  upon a Servicer  Termination Event
resulting  from the events  described in clauses (g) or (j) of Exhibit V hereto)
or a Group-Wide  Event of Termination,  appoint another Person (which may be the
Master  Servicer) to succeed Five Star as agent for  performance  of the Primary
Servicer  Responsibilities  (which  appointment  may be effectuated  through the
outplacement  to  a  Person  of  all  back  office  duties,  including  billing,
collection  and  processing  responsibilities,  and  access  to  all  personnel,
hardware and software utilized in connection with such responsibilities).

         (b)  As  compensation  for  the  performance  of the  Primary  Servicer
Responsibilities,  the Providers  shall pay Five Star (or the successor  Primary
Servicer  who  performs  such  Primary  Servicer  Responsibilities)  the Primary
Servicing Fee.

                                   ARTICLE II.

                               PAYMENT MECHANICS;
                           MISDIRECTED PAYMENTS; EOB'S

         SECTION 2.01 Non-Governmental  Entities Payment Mechanics.  On or prior
to the Initial Transfer Date, each of the Primary Servicer,  the Providers,  the
Purchaser,  the Program Manager, the Collateral Agent and the Lockbox Bank shall
have entered  into the  Depositary

                                        3
<PAGE>
Agreement  and shall have  caused the  Lockbox  Bank to  establish  the  Primary
Purchaser  Account.  In addition,  on or prior to the Initial Transfer Date, the
Primary  Servicer,  the  Providers,  the  Purchaser,  the Program  Manager,  the
Collateral  Agent,  and the Local  Banks  shall have  entered  into the  Control
Agreements with respect to each of the Local  Purchaser  Accounts and shall have
caused the Local Banks to establish each Local Purchaser Account.

         (a)  Each  Provider  shall   prepare,   execute  and  deliver  to  each
non-Governmental  Entity who is or is expected to be an Obligor,  with copies to
the  Purchaser,  on  or  prior  to  the  Initial  Transfer  Date,  a  Notice  to
non-Governmental  Entities addressed to each such non-Governmental Entity, which
Notice to  non-Governmental  Entities  shall  state that all  present and future
Receivables  owing to such  Provider  have been and will be  transferred  to the
Purchaser  and that all checks and EOB's  from such  non-Governmental  Entity on
account of Receivables  shall be sent to the  applicable  Provider for immediate
deposit in the  applicable  Purchaser  Account and all wire  transfers from such
non-Governmental  Entity on account of Receivables  shall be wired directly into
the applicable Purchaser Account.

         (b) Each  Provider  covenants and agrees that, on and after the Initial
Transfer  Date,  all  invoices  (and,  if  provided  by  such  Provider,  return
envelopes)  to be sent to  non-Governmental  Entities  shall set forth  only the
address  of  the  applicable  Provider  as  a  return  address  for  payment  of
Receivables  and delivery of EOB's,  and only the applicable  Purchaser  Account
with respect to wire transfers for payment of Receivables.  Each Provider hereby
further covenants and agrees to cause each check received by such Provider to be
deposited  in the  applicable  Purchaser  Account no later than one Business Day
following receipt. Each Provider hereby further covenants and agrees to instruct
and  notify  each of the  members of its  accounting  and  collections  staff to
provide identical information in communications with  non-Governmental  Entities
with respect to payment of Receivables, wire transfers and EOB's.

         SECTION 2.02 Governmental  Entities Payment  Mechanics.  On or prior to
the Initial  Transfer Date,  each of the Primary  Servicer,  the Providers,  the
Purchaser,  the Program Manager, the Collateral Agent and the Lockbox Bank shall
have entered into the Depositary Agreement,  and the Providers shall have caused
the Lockbox Bank to establish the Primary  Provider  Account and the  Government
Lockboxes  and  Government  Lockbox  Accounts for those  Providers  indicated on
Schedule VIII. In addition,  on or prior to the Initial  Transfer Date,  each of
the Providers  listed on Schedule VIII hereto that have or will have established
a Government  Lockbox and  Government  Lockbox  Account at a bank other than the
Lockbox Bank shall have entered into a Government  Depositary Agreement with the
bank listed next to such Provider's name on Schedule VIII, the Primary Servicer,
the  Purchaser,  the Program  Manager and the Collateral  Agent,  and shall have
caused such bank to  establish a  Government  Lockbox and a  Government  Lockbox
Account.  Each Provider shall prepare,  execute and deliver to each Governmental
Entity or its fiscal  intermediary who is or is expected to be an Obligor,  with
copies to the Purchaser,  on or prior to the Initial  Transfer Date,  Notices to
Governmental Entities, which Notices to Governmental Entities shall provide that
all checks and EOB's from Governmental  Entities on account of Receivables shall
be sent to the applicable  Government  Lockbox and all wire transfers on account
of Receivables shall be wired directly into the applicable Provider Account.

                                        4

<PAGE>
         (a) Each  Provider  covenants and agrees that, on and after the Initial
Transfer  Date,  all  invoices  to be sent to  Governmental  Entities  (and,  if
provided by such Provider, return envelopes) shall set forth only the address of
the applicable Government Lockbox as a return address for payment of Receivables
and delivery of EOB's, and only the applicable  Provider Account with respect to
wire transfers for payment of Receivables.  Each Provider further  covenants and
agrees  to  instruct  and  notify  each of the  members  of its  accounting  and
collections  staff to  provide  identical  information  in  communications  with
Governmental Entities with respect to payment of Receivables, wire transfers and
EOB's.

         (b) The Providers shall maintain the Government Lockbox, the Government
Lockbox Account and the Provider  Account solely and exclusively for the receipt
of payments on account of Receivables from Governmental  Entities. The Providers
and the  Primary  Servicer  shall take all actions  necessary  to ensure that no
payments from any Person other than a Governmental  Entity shall be deposited in
any Government Lockbox or any Provider Account.

         SECTION  2.03  Misdirected  Payments;  EOB's.  In the  event  that  any
Provider  receives an EOB or a Misdirected  Payment in the form of a check, such
Provider shall immediately send or deposit such Misdirected Payment, in the form
received by such Provider,  by hand or overnight  delivery  service to the Local
Purchaser Account or Government  Lockbox,  as the case may be, together with the
EOB and the envelope in which such payment was  received.  In the event that any
Provider  receives a Misdirected  Payment in the form of cash or wire  transfer,
such Provider  shall  immediately  wire transfer the amount of such  Misdirected
Payment directly to the Primary Purchaser Account.  All Misdirected Payments and
EOB's shall be sent  promptly upon receipt  thereof,  and in no event later than
the close of business, on the first Business Day after receipt thereof.

         (a) If a Misdirected  Payment in the form of a check is received by the
Purchaser more than six days after the postmark date on the envelope enclosing a
check  from the  Obligor  (or,  if no such  envelope  is sent to the  Government
Lockbox by a  Provider,  more than six days after the date of such check or wire
transfer with respect  thereto),  then the Providers  shall pay interest on such
Misdirected  Payment  to the  Purchaser  from such sixth  subsequent  day to and
including the date such check is received in the Primary Purchaser Account, at a
rate equal to the interest rate then in effect under the Loan Agreement.

         (b) Each Provider  hereby  agrees and consents to the Purchaser  taking
such actions as are reasonably necessary to ensure that future payments from the
Obligor of a Misdirected  Payment  shall be made in  accordance  with the Notice
previously  delivered  to such  Obligor,  or,  if no  Notice  was  provided,  in
accordance  with the  provisions of Sections 2.01 and 2.02,  including,  without
limitation,  to the maximum  extent  permitted  by law, (i) the  Purchaser,  its
assigns or designees, or the Program Manager executing on such Provider's behalf
and delivering to such Obligor a new Notice, and (ii) the Purchaser, its assigns
or designees,  or the Program  Manager  contacting  such Obligor by telephone to
confirm the  instructions  previously  set forth in the Notice to such  Obligor.
Upon the  Purchaser's  request,  such Provider shall promptly (and in any event,
within two Business  Days from such  request)  take such similar  actions as the
Purchaser may request.

                                        5

<PAGE>

         SECTION 2.04 Unidentified  Payments;  Purchaser's Right of Presumption.
Each  Provider and the Purchaser  agree and consent that the Program  Manager or
its  designees or assigns,  may apply any payment it receives from an Obligor or
any other payor against a Transferred  Batch if the Program Manager is unable in
good faith to  determine  from the  information  in the EOB whether such payment
relates to a Transferred Batch.

         SECTION  2.05 No  Rights  of  Withdrawal.  None of the  Providers,  the
Primary  Servicer  or the  Purchaser  shall  have any  rights  of  direction  or
withdrawal with respect to amounts held in the Purchaser Account, except on each
day that  there  are any  funds in a Local  Purchaser  Account,  the  applicable
Provider shall cause all such funds to be  transferred to the Primary  Purchaser
Account.

                                  ARTICLE III.

                   REPRESENTATIONS AND WARRANTIES; COVENANTS;
             EVENTS OF TERMINATION; GROUP-WIDE EVENTS OF TERMINATION

         SECTION 3.01 Representations and Warranties;  Covenants.  Each Provider
makes, on the Initial  Transfer Date and on each  subsequent  Transfer Date, the
representations  and  warranties  on and as of such dates,  and hereby agrees to
perform  and  observe  the  covenants,   set  forth  in  Exhibits  III  and  IV,
respectively, hereto.

         SECTION 3.02 Group-Wide Event of Termination;  Event of Termination. If
a Group-Wide Event of Termination  shall occur and be continuing,  the Purchaser
may,  by notice to the  Providers  or by notice to the Primary  Servicer  (which
notice shall be deemed to have been given to the Providers), take either or both
of the  following  actions:  (x) declare the Facility  Termination  Date to have
occurred (except with respect to a Group-Wide Event of Termination  arising as a
result of clause (g) of Exhibit V, in which case the Facility  Termination  Date
shall be deemed to have  occurred  automatically  and without  notice),  and (y)
without limiting any rights hereunder, terminate the appointment of Five Star as
Primary  Servicer  and replace  Five Star as Primary  Servicer in the manner set
forth in  Section  1.05(b).  Upon  any  such  declaration  or  designation,  the
Purchaser  shall have, in addition to the rights and remedies  which it may have
under this Agreement, all other rights and remedies provided after default under
the UCC and under other  applicable  law,  which  rights and  remedies  shall be
cumulative.

         (a) If an Event of  Termination  shall  occur  and be  continuing  with
respect  to a  Provider,  following  the  receipt  by the  Purchaser  of (x) all
Collections  with respect to Eligible  Receivables  (that have not become Denied
Receivables)  and (y) all Return Prices and Indemnified  Amounts with respect to
Denied  Receivables,  in each case,  attributable to such Provider,  the Primary
Servicer  may  request  that such  Provider  be removed  as a  Provider  for the
purposes of the Provider  Documents,  provided that the  conditions set forth in
Section 5.11(b) shall have been satisfied.

                                        6

<PAGE>
                                   ARTICLE IV.

                                INDEMNIFICATION;
                           GRANT OF SECURITY INTEREST

         SECTION   4.01  Denied   Receivables.   If  a  breach  of  any  of  the
representations  or warranties  contained  herein relating to a Batch Receivable
shall be  discovered  at any time  (each,  a "Denied  Receivable"),  the Primary
Servicer or the applicable  Provider shall on the next Settlement Date, purchase
such Denied Receivable from the Purchaser at the Return Price.

         (a) For ease of  administration,  the  Purchaser  shall be  entitled to
presume that the failure of any Batch Receivable (or portion thereof) to be paid
in full on or after the 180th day following the Last Service Date thereof is the
result of a breach of a representation or warranty contained herein with respect
to such Batch  Receivable,  unless the Purchaser shall have actual  knowledge to
the contrary  (such as, by way of example,  actual  knowledge  of the  financial
inability of an Obligor to pay its  obligations  represented  by a  Receivable).
Each Provider  hereby  represents  and warrants to the  Purchaser  that it would
generally  become aware, in the ordinary  course of its business,  if an Obligor
did not have the  financial  ability  to pay its  obligations  represented  by a
Receivable.  Each Provider  agrees that it shall provide notice to the Purchaser
and the Program Manager, as soon as such Provider becomes aware of any Obligor's
financial inability to pay obligations represented by a Receivable. In the event
the Purchaser  receives the Return Price for any such Batch Receivable and it is
thereafter  determined  that the failure of such Batch  Receivable to be paid in
full was not the  result of a breach of  representation  or  warranty  contained
herein,  the  parties  hereto  shall  make  an  appropriate  adjustment  to  the
appropriate  Provider's  capital  account or increase the Purchase  Price of any
Purchased Batch to be purchased on or after such date.

         (b) Upon receipt by (or on behalf of) the Purchaser of the Return Price
with respect to any Denied  Receivable,  the  Purchaser  shall be deemed to have
reassigned and resold to the applicable  Provider such Denied Receivable without
any representation,  warranty or recourse whatsoever,  and, thereafter,  neither
the  Purchaser  nor any  member  of the  Lender  Group  shall  have any  further
servicing  or other  obligation  to such  Provider  with  respect to such Denied
Receivable.  At the request of a Provider (and at such  Provider's sole cost and
expense),  the Purchaser shall promptly deliver to such Provider such documents,
assignments,  releases,  notices and instruments of termination as such Provider
may reasonably request to evidence the reconveyance by the Purchaser of a Denied
Receivable pursuant to the terms of this Section 4.01(c).

         SECTION 4.02  Indemnities by the Provider.  Without  limiting any other
rights that the Purchaser,  the Program  Manager,  the Master Servicer or any of
their respective Affiliates (together with their respective officers, directors,
agents, representatives,  shareholders, counsel, employees and lenders, each, an
"Indemnified  Party") may have hereunder or under  applicable law, the Providers
hereby agree to indemnify  each  Indemnified  Party from and against any and all
claims,  losses  and  liabilities  (including,  without  limitation,  reasonable
attorneys'  fees)  (all  of the  foregoing  being  collectively  referred  to as
"Indemnified Amounts") arising out of or resulting from any of the following:

                                        7
<PAGE>

                  (a) the sale or contribution of any Receivable  which purports
         to be part of a Transferred Batch but which is not, at the date of such
         sale or contribution, an Eligible Receivable;

                  (b) any  representation or warranty made or deemed made by any
         Provider  (or any of its  officers)  under or in  connection  with this
         Agreement (and not relating to the  Eligibility  Criteria)  which shall
         have been incorrect in any material respect when made;

                  (c) the  failure by any  Provider or any Batch  Receivable  to
         comply with any applicable law, rule or regulation;

                  (d) the failure to vest in the Purchaser a perfected ownership
         interest in each  Receivable  included in a  Transferred  Batch and the
         proceeds  and  Collections  in respect  thereof,  free and clear of any
         Liens (other than Liens expressly permitted hereunder);

                  (e) any dispute,  claim, set-off or defense to the payment, in
         whole or in part, of any Receivable (including,  without limitation,  a
         defense based on such  Receivable not being a legal,  valid and binding
         obligation)  or  any  other  claim   resulting  from  the  services  or
         merchandise  related to such Receivable or the furnishing or failure to
         furnish  such  services  or   merchandise  or  relating  to  collection
         activities   with  respect  to  such  Receivable  (if  such  collection
         activities were performed by a Provider or any of its Affiliates acting
         as Primary Servicer);  provided,  however, this clause (e) shall not be
         deemed to include any dispute, claim, set-off or defense to the payment
         of any Receivable arising out of the financial  inability of an Obligor
         to pay  its  obligations  represented  by  such  Receivable  including,
         without limitation, a discharge in bankruptcy;

                  (f) a failure of any Provider,  including, without limitation,
         the Primary Servicer's actions on behalf of the Providers under Section
         1.05(b)  of  this   Agreement   with   respect   to  Primary   Servicer
         Responsibilities,  to perform its duties or  obligations  in accordance
         with the  provisions  hereof or to perform  its  duties or  obligations
         hereunder; or

                  (g) the commingling by any Provider of Collections at any time
         with other funds of such or any other Provider;

provided, however, that in all events there shall be excluded from the foregoing
indemnification  any claims,  losses or  liabilities  resulting  solely from the
gross  negligence  or  willful  misconduct  of an  Indemnified  Party  or  which
constitute credit recourse for an uncollectible Batch Receivable.

                  Such Indemnified Party shall notify the Primary  Servicer,  on
behalf of the Providers,  of such claim,  provided that the failure to so notify
shall not affect or invalidate  the indemnity  granted  pursuant to this Section
4.02.

         SECTION 4.03 Right of Set-Off. Unless a Provider notifies the Purchaser
in writing  that it desires to pay on the date when due the Return  Price  under
Section 4.01 or any  Indemnified  Amounts  under  Section 4.02 and such Provider
makes such payment to the Purchaser

                                        8

<PAGE>
in immediately  available funds on such date,  such Provider hereby  irrevocably
instructs  the  Purchaser  to set-off the full amount of the Return Price or the
Indemnified  Amounts,  as the case may be,  against  the  Purchase  Price of any
Purchased Batch to be purchased on or after such date. No further  notification,
act or consent of any nature  whatsoever  is required  prior to the right of the
Purchaser to exercise such right of set-off; provided, however, the Purchaser or
the Program Manager shall notify the Primary Servicer on behalf of such Provider
that a set-off  pursuant  to this  Section  4.03  occurred,  the  amount of such
set-off and a description of the Denied  Receivable or Indemnified  Amounts,  as
the case may be;  provided,  further  that the  failure  to so notify  shall not
affect or  invalidate  the  indemnity  granted  pursuant  to Section  4.02.  The
Purchaser shall exercise its right to set-off  hereunder to the extent funds are
available prior to making a demand for indemnification under Section 4.02.

         SECTION 4.04 Grant of Security Interest. As collateral security for the
Providers'  existing and future (i) obligations to purchase  Denied  Receivables
under Section 4.01 hereof,  (ii)  indemnification  obligations  to the Purchaser
under Section 4.02 hereof, and (iii) obligations to pay costs, expenses and fees
under Section 5.05 hereof,  each Provider hereby grants to the Purchaser a first
priority lien on and security interest in, and right of set-off against, (1) all
of the Accounts now or hereafter owned or held by such Provider,  (2) all of the
Additional  Collateral,  (3) any and all amounts held in any accounts maintained
at any bank, and (5) all proceeds of the foregoing  (all of the  foregoing,  the
"Collateral").

         (a) In connection with the grant under (a) above,  this Agreement shall
be deemed to be a security  agreement as understood under the UCC. Each Provider
agrees to execute,  and hereby  authorizes  the  Purchaser to file,  one or more
financing  statements  or  continuation  statements  or  amendments  thereto  or
assignments thereof in respect of the lien created pursuant to this Section 4.04
which  may at any time be  required  or, in the  opinion  of the  Purchaser,  be
desirable,  and to do so without the signature of such Provider where  permitted
by law.

                                   ARTICLE V.

                                  MISCELLANEOUS

         SECTION 5.01  Amendments,  etc. No amendment or waiver of any provision
of this Agreement or consent to any departure  therefrom by a party hereto shall
be effective  unless in writing signed by the Primary  Servicer,  each Provider,
the Purchaser,  and consented to in writing by the Collateral  Agent as assignee
of  all of  the  Purchaser's  rights  and  remedies  hereunder,  and  then  such
amendment,  waiver or consent shall be effective  only in the specific  instance
and for the  specific  purpose  for which  given.  No failure on the part of the
Purchaser,  the  Primary  Servicer or a Provider  to  exercise,  and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder  preclude any other or further
exercise thereof or the exercise of any other right.

         SECTION  5.02  Notices,  etc.  All  notices  and  other  communications
hereunder  shall,  unless  otherwise  stated  herein,  be in writing  (which may
include  facsimile  communication)

                                        9
<PAGE>
and shall be faxed or delivered  to, (i) each party  hereto,  at its address set
forth under its name on the  signature  pages hereof or at such other address as
shall be  designated  by such  party in a Written  Notice  to the other  parties
hereto  (each  Provider  hereby   acknowledges   and  agrees  that  notices  and
communications  to or for its  benefit  may be  delivered  to Five Star and such
delivery to Five Star shall be deemed to be received by such  Provider),(ii) the
Program  Manager and the Master  Servicer at the addresses set forth on Schedule
II attached hereto (as such Schedule may be amended from time to time) and (iii)
if the  Primary  Servicer  is a person  other  than Five  Star,  at the  address
provided by such Primary Servicer. Notices and communications by facsimile shall
be effective when sent (and shall be followed by hard copy sent by regular mail)
and notices and  communications  sent by other  means  shall be  effective  when
received.

         SECTION 5.03  Assignability.  This Agreement shall inure to the benefit
of and be  binding  upon the  parties  hereto  and  their  respective  permitted
successors and assigns.

         (a) Subject to Section  5.03(b) of the Loan  Agreement,  this Agreement
and  the  Purchaser's  rights  and  obligations   herein   (including,   without
limitation,  ownership of the Batch  Receivables in each Transferred  Batch, the
Purchaser  Account  and rights in  relation  to the  Government  Lockbox and the
Provider  Account)  shall be assignable by the Purchaser and its  successors and
assigns. Each Provider hereby acknowledges that the Purchaser is granting to the
Collateral  Agent, for the benefit of the Collateral  Agent, the Program Manager
and the Lenders,  which may further grant to their respective  lenders or to any
Federal Reserve Bank, a security interest in, and collateral assignment of, this
Agreement  and all of the  Purchaser's  rights,  title and  interests  hereunder
(including,   without   limitation,   the  Batch  Receivables,   the  Providers'
obligations  hereunder,  the  Purchaser  Account,  and rights in relation to the
Government Lockbox and the Provider Account).

         (b) No Provider may assign its rights or  obligations  hereunder or any
interest herein without the prior written consent of the Purchaser,  the Program
Manager and the Collateral Agent.

         SECTION 5.04 Further  Assurances.  Each Provider shall, at its cost and
expense,  upon the request of the Purchaser,  duly execute and deliver, or cause
to be duly executed and delivered, to the Purchaser such further instruments and
do and cause to be done such  further  acts as may be necessary or proper in the
reasonable opinion of the Purchaser to carry out more effectively the provisions
and purposes of this Agreement.

         SECTION 5.05 Costs,  Expenses and  Termination  Fee. In addition to the
rights of indemnification granted under Section 4.02 hereof, the Providers agree
to pay on demand  all  reasonable  costs and  expenses  in  connection  with the
preparation,   execution  and  delivery  of  this   Agreement  and  any  waiver,
modification, supplement or amendment hereto, including, without limitation, the
reasonable fees and out-of-pocket  expenses of counsel for the Purchaser and the
members of the  Lender  Group,  and all costs and  expenses,  if any  (including
reasonable counsel fees and expenses), of the Purchaser,  its Affiliates and the
members of the Lender  Group in  connection  with the  enforcement,  collection,
protection,  maintenance,  preservation  and  foreclosure  on its interests with
respect  to  this  Agreement,  any  related  documents,   any  Collateral,   the
Receivables, any Lien, or under any instrument or document delivered pursuant to
this Agreement, and the Purchaser

                                       10
<PAGE>
may take judgment for all such amounts.  The  attorneys'  fees arising from such
services,  including  those of any  appellate  proceedings,  and all  reasonable
out-of-pocket  expenses,  charges, costs and other fees incurred by such counsel
in any way or in any  respect  to or  arising  out of or in  connection  with or
relating to any of the events or actions described in this Section 5.05 shall be
payable by the Providers to the Purchaser on demand (with interest accruing from
the tenth Business Day following the date of such demand).

         (a) The  Providers  further  agree to pay on the Initial  Transfer Date
(and with respect to costs and expenses incurred  following the Initial Transfer
Date,  within  seven  days of  demand  therefor)  (i) all  reasonable  costs and
expenses  incurred by the  Purchaser or its agent in  connection  with  periodic
audits of the Receivables,  (ii) all reasonable  costs and expenses  incurred by
the Master Servicer or the Program Manager to accommodate any significant coding
or data system changes made by a Provider that would affect the  transmission or
interpretation of data received through the interface,  and (iii) all reasonable
costs and expenses  incurred by the Purchaser for  additional  time and material
expenses  of  the  Master  Servicer  resulting  from a lack  of  cooperation  or
responsiveness  of any Provider or the Primary Servicer to agreed-upon  protocol
and  schedules  with the Master  Servicer;  provided,  that such Provider or the
Primary  Servicer  has been  informed  of the  alleged  lack of  cooperation  or
responsiveness and has been provided an opportunity to correct such problems.

         (b) In the event that a Facility  Termination  Date is declared  (or is
deemed to have  occurred)  pursuant to a Group-Wide  Event of  Termination,  the
Providers shall pay to the Purchaser an early termination fee in an amount equal
to the termination  fee payable by the Purchaser  pursuant to Section 5.07(d) of
the Loan Agreement.

         SECTION 5.06  Confidentiality.  All parties hereto agree to comply with
all  applicable  state or federal  statutes or  regulations  relating to patient
medical record confidentiality.

         (a) Each of the  Providers,  the  Primary  Servicer  and the  Purchaser
hereby grants the Program Manager the right to place one or more  advertisements
in newspapers and journals,  on its website and in other its materials  (all, at
its own expense) that recites the transaction, the amount of the transaction and
utilizes the corporate logo of Five Star.

         SECTION 5.07 Term and  Termination.  This  Agreement  shall continue in
full  force and  effect  from the date  hereof  until the  Final  Payment  Date;
provided,  however,  that, with respect to any Transferred  Batches  transferred
prior to the Final Payment Date and not purchased  pursuant to Section 4.01, the
occurrence of the Final  Payment Date shall not terminate any security  interest
of the Purchaser hereunder,  nor shall it relieve or discharge any Provider, the
Primary  Servicer  or  the  Purchaser  of  or  from  their  respective   duties,
obligations or covenants hereunder and all the terms,  provisions and conditions
of this Agreement shall remain in effect for such purpose until such obligations
have been satisfied and performed in full. Upon the  satisfaction in full of all
the  obligations,  the Purchaser  shall deliver all  assignments,  certificates,
releases,  notices  and  other  documents  at  the  Providers'  expense,  as the
Providers may reasonably request to effect such termination.

                                       11
<PAGE>
         SECTION 5.08 Sale and  Contribution  Treatment.  The  Providers and the
Purchaser have structured the  transactions  contemplated by this Agreement with
respect to each Transferred Batch as a sale or contribution and intend that such
transactions constitute a sale or contribution.  Five Star will prepare year-end
financial statements on an annual basis for it and its consolidated subsidiaries
(including the Purchaser) in accordance with GAAP. Such  consolidated  financial
statements will contain  footnotes or other  information to the effect that: (i)
the Purchaser's business consists of both purchased and contributed  Receivables
from the  Providers;  and (ii) the  Purchaser  is a  separate  Delaware  limited
liability company with its own separate creditors which, upon liquidation of the
Purchaser will be entitled to be satisfied solely out of the Purchaser's assets.
The Purchaser will prepare separate financial statements,  which statements will
treat all transfers of purchased and  contributed  Receivables  pursuant to this
Agreement  respectively as sales and  contributions to the Purchaser's  capital,
and not as  secured  loans,  and Five  Star  will  classify  all  purchased  and
contributed  Receivables  transferred  under  this  Agreement  as  assets  owned
exclusively  by the Purchaser  for all  purposes.  Each Provider will advise all
persons  inquiring about the ownership of the  Receivables  that all Receivables
have been sold or contributed to the Purchaser. Each Provider will pay all taxes
(excluding income or franchise taxes of the Purchaser),  if any, relating to the
transactions contemplated under this Agreement,  including,  without limitation,
the sale, transfer and contribution of each Batch to the Purchaser.

         SECTION 5.09 Grant of Security Interest. In the event that, contrary to
the  mutual  intent  of  the  Providers  and  the  Purchaser,  any  purchase  or
contribution of a Batch is not  characterized  as a sale or  contribution,  each
Provider shall,  effective as of the date hereof, be deemed to have granted (and
such Provider  hereby does grant) (in addition to and not in substitution of the
grant under  Section 4.04  hereof) to the  Purchaser a first  priority  security
interest in and to any and all present and future  Receivables  and the proceeds
thereof to secure the repayment of all amounts paid to such  Provider  hereunder
with  accrued  interest  thereon,  and this  Agreement  shall be  deemed to be a
security  agreement.  With  respect to such grant of a  security  interest,  the
Purchaser  may at its option  exercise  from time to time any and all rights and
remedies  available to it under the UCC or otherwise.  Each Provider agrees that
five Business  Days shall be reasonable  prior notice to such Provider or to the
Primary Servicer on behalf of such Provider of the date of any public or private
sale or other disposition of all or any of the Batch Receivables.

         SECTION 5.10 No Liability of the Purchaser.  Neither this Agreement nor
any document  executed in connection  herewith shall constitute an assumption by
the  Purchaser  of any  obligation  to an  Obligor  or a  patient/customer  of a
Provider.

         SECTION 5.11 Addition and Removal of Providers. Subject to satisfaction
of the  conditions  set forth  below and any other  conditions  required  by the
Purchaser or the Program Manager,  upon 30-days' prior written request from time
to time of the Primary  Servicer,  the Purchaser  hereby agrees to the adding of
other  Persons  designated  by the  Primary  Servicer  as  additional  Providers
hereunder (each such event, an "Addition"):

                  (i) the Required  Lenders shall have agreed in writing to such
         Addition;

                                       12

<PAGE>
                  (ii) no Group-Wide  Event of  Termination  is existing and the
         proposed  Addition shall not cause, or shall not reasonably be expected
         to cause, a Group-Wide Event of Termination;

                  (iii)  as  of  the  effective  date  of  such  Addition,   the
         conditions  precedent applicable to such Person as set forth in Exhibit
         II hereto shall have been fulfilled;

                  (iv)  as  of  the  effective  date  of  such   Addition,   the
         representations   and  warranties  set  forth  in  Exhibit  III  hereto
         applicable to such Person shall be true and correct;

                  (v) the Purchaser  shall have received a certificate  from the
         Master  Servicer  stating  that all  computer  linkups  and  interfaces
         necessary  or  desirable,  in the judgment of the Master  Servicer,  to
         effectuate  the  transactions  and  information  transfers  under  this
         Agreement  with respect to the Addition,  are fully  operational to the
         reasonable  satisfaction of the Master Servicer and the Master Servicer
         shall have  received  an  interface  fee for each  additional  computer
         interface;

                  (vi) such Person shall  execute such  agreements,  instruments
         and  documents  as the  Purchaser  (or its  assignees)  may  reasonably
         request,  in  form  and  substance  satisfactory  to the  Purchaser  to
         effectuate  the  Addition,   including   without   limitation  (x)  the
         appropriate  subscription  agreement in the form of Exhibit XV attached
         (the  "Subscription  Agreement") to this Agreement  whereby such Person
         agrees  to be  bound  by the  terms of this  Agreement,  (y)  financing
         statements  covering  the  Receivables  that  such  Person  may sell or
         contribute to the Purchaser and (z) financing  statements  covering the
         Collateral in which such Person will grant a security interest pursuant
         to Section 4.04(a);

                  (vii) the  Purchaser  and its assigns shall have been provided
         with such information  (whether  financial or otherwise),  documents or
         opinions as they may reasonably request; and

                  (viii) such Person shall become a member of the Purchaser.

         Upon the  effectiveness  of any  Addition,  Schedule I hereto  shall be
deemed amended to add the name of the applicable Person.

         (a) Subject to  satisfaction  of the conditions set forth below and any
other conditions required by the Purchaser or the Program Manager, upon 30-days'
prior written  request of the Primary  Servicer made pursuant to Section 3.02(b)
or  otherwise,  the  Purchaser  hereby  agrees to the  removal  of any  Provider
designated by the Primary Servicer (each such event, a "Removal").

                  (i) if such Provider individually or in the aggregate with all
         other Providers removed pursuant to this Section 5.11(b)  constitutes a
         Group Wide Provider,  the Required Lenders shall have agreed in writing
         to such Removal;

                                       13
<PAGE>
                  (ii) no Group-Wide  Event of  Termination  is existing and the
         proposed  Removal shall not cause,  or shall not reasonably be expected
         to cause, a Group-Wide Event of Termination;

                  (iii) such Person shall execute such  agreements,  instruments
         and  documents as the  Purchaser may  reasonably  request,  in form and
         substance  satisfactory  to the  Purchaser to  effectuate  the Removal,
         including   without   limitation   an  amendment   to  this   Agreement
         effectuating such Removal;

                  (iv) the Purchaser  shall have received all  Collections  with
         respect  to  Eligible   Receivables   (that  have  not  become   Denied
         Receivables)  and (y) all Return  Prices and  Indemnified  Amounts with
         respect  to Denied  Receivables,  in each  case,  attributable  to such
         Person; and

                  (v) such  Person  shall  have  withdrawn  as a  member  of the
         Purchaser;  provided,  however, that such Person's capital account as a
         member  shall  not be paid out  until  the  earlier  of (x) the date of
         termination  of this Agreement as set forth in Section 5.07 and (y) the
         Final Payment Date with respect to the Receivables of such Provider.

         Upon the  effectiveness  of any  Removal,  Schedule  I hereto  shall be
deemed amended to delete the name of the applicable Person.

         (b)  Notwithstanding  any  Removal  of a Person as a  Provider  made in
accordance with the provisions of Section 5.11(b),  the provisions of Article IV
(and the representations and warranties with respect thereto) and Sections 5.06,
5.08, 5.10 and 5.17 shall, with respect to such Person, survive such Removal.

         SECTION  5.12   Attorney-in-Fact.   Each  Provider  hereby  irrevocably
designates  and  appoints  the  Purchaser,  the  Primary  Servicer,  the  Master
Servicer,  the Collateral Agent and the Program Manager, to the extent permitted
by applicable law and regulation,  as such Provider's  attorneys-in-fact,  which
irrevocable power of attorney is coupled with an interest, with authority to (i)
endorse  or sign such  Provider's  name to  financing  statements,  remittances,
invoices,  assignments, checks (other than payments from Governmental Entities),
drafts or other  instruments  or documents in respect of the Batch  Receivables,
(ii) notify non-Governmental  Entities to make payments on the Batch Receivables
directly  to the  Purchaser,  and (iii) bring suit in such  Provider's  name and
settle or  compromise  such Batch  Receivables  as the  Purchaser,  the  Primary
Servicer,  the Collateral  Agent or the Master  Servicer may, in its discretion,
deem appropriate.

         SECTION 5.13 Entire Agreement;  Severability. This Agreement, including
all exhibits and schedules hereto, and the documents referred to herein,  embody
the entire  agreement and  understanding  of the parties  concerning the subject
matter contained herein. This Agreement  supersedes any and all prior agreements
and understandings between the parties, whether written or oral.

                                       14
<PAGE>
         (a) If any  provision of this  Agreement  shall be declared  invalid or
unenforceable,  the parties  hereto agree that the remaining  provisions of this
Agreement shall continue in full force and effect.

         SECTION 5.14 GOVERNING LAW. THIS AGREEMENT  SHALL,  IN ACCORDANCE  WITH
SECTION  5-1401 OF THE  GENERAL  OBLIGATIONS  LAW OF THE  STATE OF NEW YORK,  BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,  WITHOUT  REGARD TO ANY CONFLICTS
OF LAWS  PRINCIPLES  THEREOF THAT WOULD CALL FOR THE  APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION.

         SECTION 5.15 WAIVER OF JURY TRIAL,  JURISDICTION AND VENUE. EACH OF THE
PARTIES  HERETO  HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY
LITIGATION  WITH  RESPECT TO ANY MATTER  RELATED TO THIS  AGREEMENT,  AND HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN NEW YORK COUNTY,  NEW YORK CITY,  NEW YORK IN  CONNECTION  WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION,
EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS,  COMPLAINT OR
OTHER  PROCESS  AND AGREES THAT  SERVICE  THEREOF  MAY BE MADE BY  CERTIFIED  OR
REGISTERED MAIL DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH ON THE SIGNATURE
PAGE HEREOF.  EACH OF THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS,
COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH SUCH
PARTY  FAILING  TO SO APPEAR  SHALL BE DEEMED IN  DEFAULT  AND  JUDGMENT  MAY BE
ENTERED  BY THE  OTHER  PARTY FOR THE  AMOUNT  OF THE  CLAIM  AND  OTHER  RELIEF
REQUESTED THEREIN.

         SECTION 5.16 Execution in Counterparts.  This Agreement may be executed
in  counterparts,  each of  which  when so  executed  shall be  deemed  to be an
original and all of which when taken together shall  constitute one and the same
agreement.

         SECTION 5.17 No  Proceedings.  Each Provider hereby agrees that it will
not  institute  against the  Purchaser or any Lender any  proceeding of the type
referred  to in  paragraph  (g) of Exhibit V so long as any senior  indebtedness
issued by the Purchaser or such Lender shall be  outstanding  or there shall not
have  elapsed  one year plus one day since the last day on which any such senior
indebtedness shall have been outstanding.

         SECTION 5.18 Survival of Termination. The provisions of Article IV (and
the  representations  and warranties  with respect  thereto) (other than Section
4.04) and Sections 5.05,  5.06,  5.10 and 5.17 shall survive any  termination of
this Agreement.

         SECTION  5.19 Joint and Several  Liability;  Providers.  Each  Provider
agrees that each reference to "the  Providers" in this Agreement shall be deemed
to refer to each such

                                       15
<PAGE>
Provider jointly and severally with the other Providers. Each Provider (i) shall
be jointly and  severally  liable for the  obligations,  duties and covenants of
each other such Provider under this Agreement and the acts and omissions of each
other such Provider including,  without limitation, under Article IV hereof, and
(ii) jointly and severally makes each representation and warranty for itself and
each other such  Provider  under this  Agreement;  provided,  however,  that the
breach of an  obligation,  duty,  covenant,  representation  or  warranty by one
Provider shall not result in an Event of  Termination  with respect to any other
Provider unless such breach constitutes a Group-Wide Event of Termination.

         SECTION 5.20  Accounting  Information.  Each  Provider  authorizes  the
Purchaser  and the  Lender  Group to  discuss  the  financial  position  of such
Provider with its independent  public  accountant with respect to their audit of
the financial statements of such Provider and agrees that none of the Purchaser,
the Lender Group or the independent public accountants, shall have any liability
to any Provider with respect to any such discussion or communication  except for
violations by a member of the Lender Group of federal and state  securities laws
solely with respect to such discussions or communications. The Purchaser and the
Lender  Group  expressly   agree  to  maintain  the  disclosed   information  in
confidence.  Each Provider shall deliver a letter  addressed to such accountants
authorizing them to comply with the provisions of this subsection,  which letter
shall be acknowledged to in writing by such  accountants.  The Purchaser and the
Lender Group may rely on the financial statements provided to such Purchaser and
Lender Group by each Provider.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       16

<PAGE>
                  IN WITNESS WHEREOF,  the parties have caused this Agreement to
be executed by their respective  officers  thereunto duly authorized,  as of the
date first above written.

PROVIDERS:                          FIVE STAR QUALITY CARE-AZ, LLC
                                    FIVE STAR QUALITY CARE-CA, LLC
                                    FIVE STAR QUALITY CARE-COLORADO, LLC
                                    FIVE STAR QUALITY CARE-CT, LLC
                                    FIVE STAR QUALITY CARE-GA, LLC
                                    FIVE STAR QUALITY CARE-IA, LLC
                                    FIVE STAR QUALITY CARE-KS, LLC
                                    FIVE STAR QUALITY CARE-MI, LLC
                                    FIVE STAR QUALITY CARE-MO, LLC
                                    FIVE STAR QUALITY CARE-NE, LLC
                                    FIVE STAR QUALITY CARE-WI, LLC
                                    FIVE STAR QUALITY CARE-WY, LLC
                                    FIVE STAR QUALITY CARE-CA, INC.
                                    FIVE STAR QUALITY CARE-IA, INC.
                                    FIVE STAR QUALITY CARE-MI, INC.
                                    FIVE STAR QUALITY CARE-NE, INC.

                                    By:  /s/ Bruce J. Mackey, Jr.
                                         Bruce J. Mackey, Jr.
                                         Chief Financial Officer, Treasurer
                                         and Assistant Secretary

                                         Address:    400 Center Street
                                                     Newton, MA 02458

                                         Facsimile Number: 617-796-8385

PURCHASER:                          FSQC FUNDING CO., LLC

                                    By:  /s/ Bruce J. Mackey, Jr.
                                         Bruce J. Mackey, Jr.
                                         Chief Financial Officer, Treasurer
                                         and Assistant Secretary

                                         Address:    400 Center Street
                                                     Newton, MA 02458

                                         Facsimile Number: 617-796-8385

<PAGE>

PRIMARY SERVICER:                   FIVE STAR QUALITY CARE, INC.

                                    By:  /s/ Bruce J. Mackey, Jr.
                                         Bruce J. Mackey, Jr.
                                         Chief Financial Officer, Treasurer
                                         and Assistant Secretary

                                         Address:    400 Center Street
                                                     Newton, MA 02458

                                         Facsimile Number: 617-796-8385

<PAGE>
                                    EXHIBIT I

                                   DEFINITIONS

         As used in the Agreement  (including its Exhibits and  Schedules),  the
following  terms shall have the following  meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

         "Accounts"  means  all  health-care-insurance   receivables,  accounts,
chattel  paper,  instruments,  general  intangibles  and  goodwill,  whether now
existing or hereafter arising,  including,  all Receivables and all payments due
from any  Governmental  Entity  based on a cost  report  settlement  or expected
settlement, and all proceeds of any of the foregoing.

         "Addition" has the meaning set forth in Section 5.11(a) hereto.

         "Additional Collateral" means all assets of each Provider.

         "Affiliate" means, as to any Person, any other Person that, directly or
indirectly,  is in control of, is controlled by or is under common  control with
such Person or is a director or officer of such Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to  direct  the  management  and  policies  of such  Person,  directly  or
indirectly,  whether through the ownership of voting securities,  by contract or
otherwise.

         "Agreement"  has the  meaning set forth in the  preliminary  statements
hereto.

         "Availability"  means,  the difference  between (a) the Borrowing Limit
(as defined in the LSA) and (b) Lender Debt (as defined in the LSA).

         "Batch"  means,  with respect to any Transfer  Date,  all  Receivables,
including the  Transferred  Batch with respect to such Transfer Date,  which are
purchased,  or purported to be purchased,  by the Purchaser or  contributed,  or
purported to be contributed, to the capital of the Purchaser.

         "Batch Receivable" means a Receivable that is included in a Transferred
Batch,  but  excludes a Denied  Receivable  for which the Return  Price has been
received by the Purchaser.

         "Business  Day"  means  any day on which  banks are not  authorized  or
required to close in New York City, New York.

         "Capital  Lease"  means,  as  applied to any  Person,  any lease of any
Property  (whether  real,  personal  or mixed) by that  Person  as  lessee,  the
obligations of which are required, in accordance with GAAP, to be capitalized on
the balance sheet of that Person.

         "CHAMPUS"  means  the  Civilian  Health  and  Medical  Program  of  the
Uniformed  Service,  a program of medical  benefits  covering  former and active
members of the uniformed services and certain of their dependents,  financed and
administered  by the United  States  Departments

<PAGE>
of  Defense,  Health  and Human  Services  and  Transportation  and  established
pursuant to 10 USC ss.ss. 1071-1106,  and all regulations promulgated thereunder
including  without  limitation (a) all federal statutes (whether set forth in 10
USC  ss.ss.  1071-1106  or  elsewhere)  affecting  CHAMPUS;  and (b) all  rules,
regulations  (including  32  CFR  199),  manuals,   orders  and  administrative,
reimbursement  and other  guidelines of all  Governmental  Entities  (including,
without limitation,  the Department of Health and Human Services, the Department
of Defense, the Department of Transportation, the Assistant Secretary of Defense
(Health Affairs),  and the Office of CHAMPUS, or any Person or entity succeeding
to  the  functions  of  any  of the  foregoing)  promulgated  pursuant  to or in
connection with any of the foregoing (whether or not having the force of law) in
each case as may be amended,  supplemented  or otherwise  modified  from time to
time.

         "Change of  Control"  means (a) any  "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Securities  Exchange Act of 1934, as
amended (the "Exchange  Act")) is or becomes the "beneficial  owner" (as defined
in Rules 13d-3 and 13d-5 under the  Exchange  Act,  except that a Person will be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire,  whether such right is  exercisable  immediately or only after
the passage of time), directly or indirectly, of 50% or more of the total voting
power of the then outstanding common equity of Five Star except as a result of a
transaction approved by Five Star's Board of Directors involving the issuance of
new Five Star common  shares,  or 15% or more of the total  voting  power of the
then  outstanding  equity of any Provider;  or (b)  individuals (or a substitute
elected by the holders of the equity of Five Star or any  Provider,  as the case
may be, and which are reasonably  satisfactory  to the Purchaser and the Program
Manager) who on the Initial Transfer Date constituted the Board of Directors (or
the  equivalent) of Five Star or any Provider cease for any reason to constitute
a majority of the Board of Directors  of such Person then in office;  or (c) any
two of Barry M. Portnoy,  Gerard M. Martin,  Evrett W. Benton or Bruce J. Mackey
(or a  substitute  elected by the  directors  or trustees of REIT  Management  &
Research  LLC or  Five  Star,  as the  case  may be,  and  which  is  reasonably
satisfactory  to the Purchaser and the Program  Manager) shall cease to serve as
an officer,  director or trustee of REIT  Management & Research LLC or Five Star
in a position,  in the case of an officer,  of equal or greater seniority to the
respective  offices each holds with REIT Management & Research LLC or Five Star,
as the case may be, as of the Closing  Date (any event that would be a Change of
Control  under  this  clause  (c)  shall  be  deemed  to  relate  to Five  Star,
individually); or (d) the sale, lease, conveyance, transfer, assignment or other
disposition  in one or  more  transactions  of all or  substantially  all of the
assets of Five Star or any Provider  (whether now or hereafter  acquired) to any
Person or group (as such term is  defined in Section  13(d)(3)  of the  Exchange
Act); or (e) the  liquidation  or  dissolution  of (or the adoption of a plan of
liquidation by) Five Star or any Group-Wide Providers.

         "Closing Date" means October 24, 2002.

         "CMS" means the  Centers  for  Medicare  and  Medicaid  Services of the
United States Department of Health and Human Services.

         "Collateral" has the meaning set forth in Section 4.04(a) hereto.

         "Collateral  Agent" means HFG  Healthco-4  LLC and its  successors  and
assigns.

<PAGE>
         "Collections"  means,  with  respect to any  Receivable  included  in a
Batch,  all cash  collections,  wire transfers,  electronic  funds transfers and
other cash  proceeds of such  Receivable,  deposited  in or  transferred  to the
Primary Purchaser  Account,  including,  without  limitation,  all cash proceeds
thereof.

         "Consolidated  Net  Worth"  means  with  respect  to any Person and its
Subsidiaries  determined on a consolidated  basis, at any date of determination,
total stockholders', owners' or members' equity in accordance with GAAP.

         "Control Agreement" means each Control Agreement,  dated as of the date
hereof,  among the Primary Servicer,  the Provider named therein, the Purchaser,
the Program Manager,  the Collateral Agent and the Local Bank named therein,  in
substantially  the form attached hereto as Exhibit XVI, as such agreement may be
amended, modified or supplemented from time to time.

         "Credit  and  Collection  Policy"  means those  receivables  credit and
collection  policies and practices of the Providers in effect on the date of the
Agreement and set forth in Schedule III hereto, as modified from time to time in
accordance with the consent of the Purchaser and the Program Manager.

         "Current  Assets" means,  at any date of  determination,  the aggregate
amount of all assets of Five Star and its  Subsidiaries on a consolidated  basis
that are  classified as current  assets at such date computed and  calculated in
accordance with GAAP and excluding the Marriott Assets.

         "Current  Liabilities"  means,  at  any  date  of  determination,   the
aggregate  amount  of all  liabilities  of Five Star and its  Subsidiaries  on a
consolidated basis that would be classified as current  liabilities at such date
computed and  calculated  in  accordance  with GAAP and  excluding  the Marriott
Current Liabilities and current portions of long term debt due.

         "Current Ratio" means, at any date of  determination,  the ratio of (i)
the  remainder  of  (x)  Current  Assets  plus   Availability  to  (ii)  Current
Liabilities.

         "Debt"  means  as  to  any  Person  (without   duplication):   (i)  all
obligations of such party for borrowed money, (ii) all obligations of such party
evidenced by bonds, notes, debentures,  or other similar instruments,  (iii) all
obligations  of such party to pay the  deferred  purchase  price of  property or
services  (other than trade payables in the ordinary  course of business),  (iv)
all Capital Leases of such party,  (v) all Debt of others directly or indirectly
Guaranteed (which term shall not include  endorsements in the ordinary course of
business)  by such party,  (vi) all  obligations  secured by a Lien  existing on
property owned by such party,  whether or not the  obligations  secured  thereby
have been assumed by such party or are  non-recourse to the credit of such party
(but  only  to the  extent  of the  value  of  such  property),  and  (vii)  all
reimbursement  obligations  of such party  (whether  contingent or otherwise) in
respect of letters of credit, bankers' acceptance and similar instruments.

         "Defaulted  Receivable"  means a Batch  Receivable  (i) as to which the
Obligor therefor or any other Person obligated  thereon has taken any action, or
suffered any event to occur, of the type described in paragraph (g) of Exhibit V
or (ii) which, consistent with the Credit and

                                       I-3
<PAGE>
Collection  Policy,  would be written  off the  applicable  Provider's  books as
uncollectible;  provided,  however,  that a Batch  Receivable  as to  which  the
Obligor therefor has suffered a temporary  governmental  shutdown or delay shall
not be a "Defaulted Receivable".

         "Delinquent  Receivable" means a Batch Receivable (a) that has not been
paid in full on or  following  the  180th  day  following  the date of  original
invoicing thereof, or (b) that is a Denied Receivable.

         "Denied  Receivable"  has the  meaning  set  forth in  Section  4.01(a)
hereto.

         "Depositary Agreement" means that certain Depositary Account Agreement,
dated as of the date hereof,  among the Primary  Servicer,  the  Providers,  the
Purchaser,  the Program  Manager,  the Collateral Agent and the Lockbox Bank, in
substantially  the form attached hereto as Exhibit XII, as such agreement may be
amended,  modified  or  supplemented  from time to time in  accordance  with its
terms.

         "Eligibility Criteria" has the meaning specified in the Loan Agreement.

         "Eligible  Receivables"  means Receivables that satisfy the Eligibility
Criteria, as determined by the Program Manager.

         "Employee  Benefit  Plan" means any  employee  benefit  plan within the
meaning of ss. 3(3) of ERISA  maintained by the Provider or any ERISA Affiliate,
or with respect to which any of them have any liability.

         "EOB" means the  explanation of benefit from an Obligor that identifies
the services rendered on account of the Batch Receivable specified therein.

         "Equity Net  Proceeds"  means,  with respect to the  issuance,  sale or
other  disposition of any stock or other equity  interests or any security which
under  GAAP is  recorded  as  equity,  the  excess of (i) the  aggregate  amount
received  in cash  (excluding  any  cash  received  by way of  deferred  payment
pursuant to a note receivable,  other non-cash consideration or otherwise, prior
to the time when such cash is so received)  in  connection  with such  issuance,
sale or  other  disposition,  over  (ii)  the sum of (A)  the  reasonable  fees,
commissions,  discounts  and other  out-of-pocket  expenses  including,  without
limitation,   related  legal,   investment   banking  and  accounting  fees  and
disbursements  incurred  in  connection  with  such  issuance,   sale  or  other
disposition,  and (B) all income and transfer  taxes payable in connection  with
such  issuance,  sale or other  disposition,  whether  payable  at such  time or
thereafter.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended.

         "ERISA  Affiliate"  means any entity which is under common control with
any  Provider  within  the  meaning  of ERISA or  which is  treated  as a single
employer with any Provider under the Internal Revenue Code of 1986, as amended.

                                       I-4
<PAGE>
         "Event of Termination"  means any of the events  specified in Exhibit V
hereto.

         "Expected Net Value" means, with respect to any Batch  Receivable,  the
gross unpaid amount of such Receivable on the Transfer Date therefor,  times the
applicable Net Value Factor.

         "Facility  Termination  Date" means the earlier of (a) October 24, 2005
(subject to automatic  extensions of such date to coincide with extensions under
Section  5.07  of the  Loan  Agreement)  and (b) the  date  of  occurrence  of a
Group-Wide Event of Termination.

         "Final  Payment  Date" means the first  Settlement  Date  following the
Settlement  Period in which final  collection  has been  received  for all Batch
Receivables  or  such  Batch  Receivables  have  become  Denied  Receivables  or
Defaulted Receivables.

         "Five Star" has the meaning set forth in the preamble hereto.

         "GAAP" means  generally  accepted  accounting  principles in the United
States of America,  applied on a consistent  basis,  as set forth in Opinions of
the Accounting  Principles  Board of the American  Institute of Certified Public
Accountants or in statements of the Financial  Accounting Standards Board or the
rules  and  regulations  of the  Securities  and  Exchange  Commission  or their
respective  successors and which are applicable in the  circumstances  as of the
date in question.

         "Governmental  Entity" means the United  States of America,  any state,
any political  subdivision of a state and any agency or  instrumentality  of the
United States of America or any state or political  subdivision  thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.  Payments from  Governmental  Entities
shall be deemed to include  payments  governed under the Social Security Act (42
U.S.C. ss.ss. 1395 et seq.),  including payments under Medicare,  Medicaid,  and
CHAMPUS/Champva, and payments administered or regulated by CMS.

         "Government   Depositary   Agreement"  means  each  Depositary  Account
Agreement, dated as of the date hereof, among the Primary Servicer, the Provider
named therein, the Purchaser,  the Program Manager, the Collateral Agent and the
bank named therein,  in substantially  the form attached hereto as Exhibit XVII,
as such agreement may be amended,  modified or supplemented from time to time in
accordance with its terms.

         "Government  Lockbox(es)"  means each of the  lockboxes  identified  on
Schedule V hereto as a Government  Lockbox,  established  to receive  checks and
EOB's  with  respect to  Receivables  payable by  Governmental  Entities  to the
Providers listed on Schedule VIII hereto.

         "Government  Lockbox  Account(s)" means each of the accounts identified
on Schedule V hereto as a Government  Lockbox  Account in the name of a Provider
listed on  Schedule  VIII  hereto and  associated  with the  Government  Lockbox
established  and  controlled by such  Provider to deposit all cash  collections,
wire  transfers,   electronic   funds  transfers  and  other  cash  proceeds  of
Receivables  from the  applicable  Governmental  Entity listed on Schedule VIII,
including

                                       I-5
<PAGE>
collections  received  in the  associated  Government  Lockbox  and  collections
received by wire transfer directly from applicable the Governmental  Entity, all
as more fully set forth in the Government Depositary Agreement.

         "Group-Wide  Event of  Termination"  means (i) an Event of  Termination
which relates to the  Group-Wide  Providers or Five Star,  individually,  (ii) a
Servicer Termination Event or (iii) an Event of Termination arising under any of
clause (i), clause (t) or clauses (w) through (aa) of Exhibit V hereto.

         "Group-Wide  Providers"  means,  as of any date of  determination,  the
Providers responsible for the sale or contribution to the Purchaser of more than
25% of the Batch Receivables  (whether or not purchased) in the 90 days prior to
such date (or,  if less than 90 days,  the number of days as shall have  elapsed
from the Closing Date to such date of determination).

         "Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly  guaranteeing any Debt or other obligation
of any other Person and, without  limiting the generality of the foregoing,  any
obligation,  direct or indirect,  contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay),  or (ii)  entered  into for the  purpose of  assuring in any other
manner the obligee of such Debt or other obligation of the payment thereof or to
protect the obligee of such Debt or other  obligation of the payment  thereof or
to protect the obligee  against  loss in respect  thereof (in whole or in part),
provided that the term Guaranty shall not include endorsements for collection or
deposit in the ordinary  course of business.  The term "Guaranty" used as a verb
has a corresponding meaning.

         "Indemnified Amounts" has the meaning set forth in Section 4.02 hereto.

         "Indemnified Party" has the meaning set forth in Section 4.02 hereto.

         "Initial  Transfer  Date"  means the date of the initial  purchase  and
contribution of Receivables hereunder.

         "Insurer" means any Person (other than a Governmental  Entity) which in
the ordinary  course of its business or activities  agrees to pay for healthcare
goods and  services  received by  individuals,  including  commercial  insurance
companies,  nonprofit  insurance  companies  (such as Blue  Cross,  Blue  Shield
entities),  employers or unions which  self-insure for employee or member health
insurance,  prepaid health care organizations,  preferred provider organizations
and health maintenance  organizations.  "Insurer"  includes insurance  companies
issuing  health,  personal  injury,  workers'  compensation  or  other  types of
insurance but does not include any individual guarantors.

         "Interest  Expense"  means,  with respect to any Person for any period,
the  interest  expense  of such  Person  during  such  period as  determined  in
accordance with GAAP.

                                       I-6
<PAGE>
         "Last Service Date" means, with respect to any Receivable, the date set
forth on the  related  invoice or  statement  as the most  recent  date on which
services or  merchandise  were  provided by the related  Provider to the related
patient.

         "Lender"  means the Persons  party to the Loan  Agreement  from time to
time as lenders.

         "Lender  Group"  means each  Lender,  the Program  Manager,  the Master
Servicer,  the  Collateral  Agent and their  agents,  delegates,  designees  and
assigns identified from time to time.

         "Lien" means any lien, mortgage,  security interest,  tax lien, pledge,
hypothecation, assignment, preference, priority, other charge or encumbrance, or
any other type of preferential  arrangement of any kind or nature  whatsoever by
or with any Person (including, without limitation, any conditional sale or title
retention  agreement),  whether  arising  by  contract,  operation  of  law,  or
otherwise.

         "Loan Agreement" means the Loan and Security  Agreement dated as of the
date hereof among the Purchaser as borrower,  the Lenders,  the Program  Manager
and the Collateral  Agent,  as such agreement may be modified,  supplemented  or
amended from time to time in accordance with its terms.

         "Local  Bank"  means  each bank at which a Local  Purchaser  Account is
located.

         "Local  Purchaser  Account"  means each of the accounts  identified  on
Schedule V hereto as a Local Purchaser  Account  established by the Purchaser to
deposit all cash  collections,  wire transfers,  electronic  funds transfers and
other cash proceeds of Receivables  from  non-Governmental  Entities,  including
collections  received  in the form of a check and  collections  received by wire
transfer directly from non-Governmental Entities.

         "Lockbox Bank" means Citizens Bank as lockbox bank under the Depositary
Agreement.

         "Marriott  Current  Assets" means,  at any date of  determination,  all
current assets  computed and  calculated in accordance  with GAAP that relate to
the facilities managed by Marriott on behalf of Five Star (and excluding amounts
due from Marriott that relate to payment of prior Months' owner's profit).

         "Marriott Current Liabilities" means, at any date of determination, all
current liabilities  computed and calculated in accordance with GAAP that relate
to the facilities managed by Marriott on behalf of Five Star.

         "Master Servicer" means Healthcare  Finance Group,  Inc., and any other
Person then identified by the Program  Manager to the Providers,  or the Primary
Servicer on behalf of the  Providers,  as being  authorized  to  administer  and
service Receivables.

                                       I-7
<PAGE>
         "Material Adverse Effect" means any event, condition,  change or effect
that  (a)  has  a  materially  adverse  effect  on  the  business,   Properties,
capitalization, liabilities, operations, prospects or financial condition of (i)
the Providers,  taken as a whole, or (ii) Five Star, (b) materially  impairs the
ability of the Primary Servicer or any Provider to perform its obligations under
the Agreement,  (c)  materially  impairs the validity or  enforceability  of, or
materially  impairs the rights,  remedies or benefits available to the Purchaser
under the Agreement,  or (d) changes, or could reasonably be expected to change,
the characterization and treatment of the sales and contributions of Receivables
under the Agreement as something other than a true sale or complete  transfer of
ownership.

         "Misdirected  Payment"  means any form of payment in respect of a Batch
Receivable  made by an Obligor in a manner  other than as provided in the Notice
sent to such  Obligor  or other  than as  provided  in  Sections  2.01 and 2.02,
including,  in the case of a check  received  by a  Provider  with  respect to a
payment made by an Obligor  that is not a  Governmental  Entity,  the failure to
deposit such check in the applicable Local Purchaser Account within one Business
Day of receipt of such check.

         "Month" means a calendar month.

         "Monthly Report" has the meaning set forth in Section 1.02 hereto.

         "Multiemployer  Plan" means a plan,  within the meaning of ss. 3(37) of
ERISA,  as to which the Primary  Servicer,  any Provider or any ERISA  Affiliate
contributed or was required to contribute within the preceding five years.

         "Net Value  Factor"  means,  initially,  the  percentages  set forth on
Schedule VII hereto, as such percentages may be adjusted upwards or downwards in
accordance  with  the  Loan  Agreement,  based on the  historical  actual  final
collections received on the Receivables within 180 days of the Last Service Date
of such  Receivables  (without regard to the factors set forth in the definition
of "Defaulted Receivable").

         "New Patient  Consent  Form" has the meaning set forth in clause (i) of
Exhibit II hereto.

         "Notice"  means  a  Notice  to  Governmental   Entities  or  Notice  to
non-Governmental Entities, as applicable.

         "Notice to Governmental Entities" means a notice letter on a Provider's
corporate letterhead in substantially the form attached hereto as Exhibit VII-A.

         "Notice  to  non-Governmental  Entities"  means a  notice  letter  on a
Provider's  corporate  letterhead in  substantially  the form attached hereto as
Exhibit VII-B.

         "Obligor"  means each Person who is responsible  for the payment of all
or any portion of a Receivable.

                                       I-8
<PAGE>
         "Parent  Guaranty"  means that certain  Guaranty,  dated as of the date
hereof,  made by Five Star in favor of the Purchaser,  in substantially the form
attached hereto as Exhibit XIII.

         "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any entity
succeeding to all or any of its functions under ERISA.

         "Permitted Debt" means, with respect to the Providers, any Debt that is
(i) in connection with this Agreement and the transactions  contemplated hereby,
(ii) purchase money Debt incurred to finance the  acquisition  of equipment,  or
(iii)  obligations  secured by a Lien existing on property  owned by such party,
that are non-recourse to the credit of such party (but only to the extent of the
value of such property).

         "Person" means an  individual,  partnership,  corporation  (including a
business  trust),  limited  liability  company,  joint  stock  company,   trust,
unincorporated  association,  joint  venture  or other  entity,  an Insurer or a
Governmental Entity.

         "Pledge  Agreements" means the Pledge  Agreement,  dated as of the date
hereof, between Five Star and the Purchaser,  in substantially the form attached
hereto as Exhibit XIV.

         "Primary  Provider  Account"  means the account set forth on Schedule V
hereto in the name of the Providers  established and controlled by the Providers
to deposit all cash collections, wire transfers,  electronic funds transfers and
other cash  proceeds of  Receivables  from  Governmental  Entities,  collections
received in the Government  Lockbox  Accounts and  collections  received by wire
transfer directly from Governmental Entities, all as more fully set forth in the
Depositary Agreement and the Government Depositary Agreement.

         "Primary  Purchaser Account" means the account identified on Schedule V
hereto as the Primary Purchaser Account, established by the Purchaser to deposit
all cash collections, wire transfers,  electronic funds transfers and other cash
proceeds of Receivables from  non-Governmental  Entities,  including collections
received  in the Local  Purchaser  Accounts  and  collections  received  by wire
transfer directly from non-Governmental Entities, all as more fully set forth in
the Depositary Agreement.

         "Primary  Servicer" means any person then appointed as Primary Servicer
to perform the Primary  Servicer  Responsibilities  pursuant to Section  1.05(b)
hereto, initially being Five Star.

         "Primary  Servicer  Account"  means account  #1135638907 of the Primary
Servicer at Citizens  Bank,  ABA  #211070175,  Exchange  Place,  53 State Street
Building, Boston, MA 02109, or such other bank account designated by the Primary
Servicer by Written Notice to the Master Servicer, the Purchaser and the Program
Manager  from time to time,  as the account for receipt of proceeds on behalf of
the Provider.

         "Primary  Servicer  Responsibilities"  has the  meaning  set  forth  in
Section 1.05(b) hereto.

                                       I-9
<PAGE>
         "Primary  Servicing Fee" means, with respect to any Transferred  Batch,
an amount equal to 0.1% of  Collections  with respect to the  Receivables in all
Transferred Batches;  provided,  however, that if the Primary Servicer is at any
time a Person other than Five Star or an Affiliate of Five Star,  then  "Primary
Servicing Fee" means, with respect to any Transferred  Batch, an amount equal to
the greater of (i) 0.1% of  Collections  with respect to the  Receivables in all
Transferred Batches and (ii) the then-current market rate.

         "Program   Manager"   means  (i)   collectively,   Dresdner   Kleinwort
Wasserstein  LLC and Healthcare  Finance  Group,  Inc., or (ii) any other Person
identified  by the then  Program  Manager in writing to the Primary  Servicer as
being  authorized  to  provide  administrative  services  with  respect  to  the
Purchaser and the  Purchaser's  purchase,  funding and  collection of healthcare
receivables.

         "Property" means property of all kinds, movable, immovable,  corporeal,
incorporeal, real, personal or mixed, tangible or intangible (including, without
limitation,  all rights relating thereto), whether owned or acquired on or after
the date of this Agreement.

         "Provider"  or  "Providers"  has the meaning set forth in the  preamble
hereto.

         "Provider  Documents" means this Agreement,  the Depositary  Agreement,
the  Government  Depositary  Agreements,  the  Control  Agreements,  the  Parent
Guaranty, the Pledge Agreement, each agreement now existing or hereafter created
providing  collateral  security for the payment or performance of any Provider's
obligations  described in Section  4.04(a) or any Person's  obligations  under a
Guaranty  of such  obligations  of the  Providers,  and each other  document  or
instrument  now or hereafter  executed and  delivered to the  Purchaser by or on
behalf of the Providers pursuant to or in connection herewith or therewith.

         "Provider Account(s)" means, collectively, the Primary Provider Account
and the Government  Lockbox  Accounts set forth on Schedule V hereto in the name
of the Providers and associated, in the case of the Government Lockbox Accounts,
with the  Government  Lockboxes  established  and controlled by the Providers to
deposit all cash  collections,  wire transfers,  electronic  funds transfers and
other  cash  proceeds  of  Receivables  from  Governmental  Entities,  including
collections  received in the Government  Lockboxes and  collections  received by
wire transfer directly from Governmental  Entities,  all as more fully set forth
in the Depositary Agreement and the Government Depositary Agreements.

         "Purchase  Price" means,  with respect to Eligible  Receivables in each
Purchased  Batch, an amount equal to 95% of the aggregate  Expected Net Value of
such Receivables.

         "Purchased  Batch"  means all  Eligible  Receivables  purchased  on any
Transfer Date.

         "Purchaser" has the meaning set forth in the preamble hereto.

                  "Purchaser  Account(s)"  means,   collectively,   the  Primary
Purchaser  Account  and the Local  Purchaser  Accounts  set forth on  Schedule V
hereto  established  by the  Purchaser  to deposit  all

                                      I-10
<PAGE>
cash  collections,  wire  transfers,  electronic  funds transfers and other cash
proceeds of Receivables from  non-Governmental  Entities,  including collections
received  in the  form of a check  and  collections  received  by wire  transfer
directly from non-Governmental Entities.

         "Receivable  Information"  has the  meaning  set forth in Section  1.02
hereto.

         "Receivables"   means  all   third-party   reimbursable   portions   or
third-party directly payable portions of health-care-insurance  receivables, all
accounts and general  intangibles,  and all other obligations for the payment of
money, in each case, owing (or in the case of Unbilled Receivables, to be owing)
to any  Provider  and  arising  out  of  the  rendition  of  medical,  surgical,
diagnostic  or  other  professional  medical  services  or the  sale of  medical
products by such Provider in the ordinary course of its business,  including all
rights to  reimbursement  under any agreements  with and payments from Obligors,
customers,  residents,  patients or other Persons, together with, to the maximum
extent permitted by law, all accounts and general  intangibles  related thereto,
all rights, remedies, guaranties, security interests and Liens in respect of the
foregoing,  all books,  records and other Property  evidencing or related to the
foregoing, and all proceeds of any of the foregoing.

         "Removal" has the meaning set forth in Section 5.11 hereto.

         "Required Lenders" has the meaning specified in the Loan Agreement.

         "Return Price" means,  with respect to a Denied  Receivable,  an amount
equal to (x) either the Purchase Price or the increase in the capital account of
the applicable Provider with respect to the prior contribution  thereof, in each
case, of such Denied Receivable, minus (y) any cash received from the Obligor in
the Primary Purchaser Account with respect to such Denied  Receivable,  plus (z)
accrued and unpaid interest on such amount  calculated at the interest rate then
in effect under the Loan Agreement on the average outstanding difference between
clauses (x) and (y) from and  including  the Business Day following the Transfer
Date of such Denied  Receivable  to the date the Return Price is received by the
Purchaser.

         "Servicer  Termination  Event"  means any of the  events  specified  in
Exhibit IX hereto.

         "Settlement  Date"  means  two  Business  Days  following  the  date of
delivery of the Monthly Report;  provided, that, if, following the occurrence of
a Group-Wide  Event of  Termination,  the Purchaser shall have selected a period
shorter than one month as the Settlement  Period, the Settlement Date shall mean
the fifth Business Day following the end of each such Settlement Period.

         "Settlement Period" means each Month;  provided,  that  notwithstanding
the  foregoing,  the  first  Settlement  Period  shall  be the  period  from and
including  the Initial  Transfer  Date through  October 24, 2002;  and provided,
further, that following the occurrence of a Group-Wide Event of Termination, the
Purchaser may from time to time, by notice to the Primary  Servicer on behalf of
the Providers, select a shorter period as the Settlement Period.

         "Subscription  Agreement"  has the  meaning  set forth in Section  5.11
hereof.

                                      I-11
<PAGE>
         "Subsidiary"  means,  with respect to any Person,  any  corporation  or
entity of which at least a majority of the outstanding  shares of stock or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors (or Persons  performing similar functions) of
such  corporation or entity  (irrespective of whether or not at the time, in the
case of a corporation,  stock of any other class or classes of such  corporation
shall  have or  might  have  voting  power by  reason  of the  happening  of any
contingency)  is at the time directly or indirectly  owned or controlled by such
Person.

         "Total   Collections"   means,  as  to  each  Batch,  the  sum  of  all
Collections,  Return Prices and Indemnified Amounts (but only to the extent that
such Indemnified Amounts are received in lieu of Collections) distributed to and
received by the Purchaser with respect thereto.

         "Transfer  Date" means the Initial  Transfer Date and each Business Day
thereafter.

         "Transferred  Batch"  means,  with  respect to any Transfer  Date,  all
Receivables  purported  by the  Primary  Servicer  and  applicable  Provider  to
constitute  Eligible  Receivables  and which are  purchased by the  Purchaser or
contributed to capital of the Purchaser as of such Transfer Date.

         "Transmission"  means, upon establishment of computer interface between
the Providers  and the Master  Servicer in  accordance  with the  specifications
established by the Master Servicer,  the transmission of Receivable  Information
through computer  interface or e-mail  communication to the Master Servicer in a
manner satisfactory to the Master Servicer.

         "UCC" means the Uniform  Commercial Code as in effect from time to time
in the specified jurisdiction.

         "Unbilled  Receivable" means a Receivable in respect of which the goods
have been  shipped,  or the  services  rendered,  to the  relevant  customer  or
patient,  and rights to payment  therefor have accrued,  but the invoice has not
been rendered to the applicable Obligor.

         "Written   Notice"   and  "in   writing"   mean  any  form  of  written
communication or a communication by means of telex, facsimile device,  telegraph
or cable.

         Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance  with GAAP. All terms used in Article 9 of the UCC in
the State of New York, and not specifically  defined herein,  are used herein as
defined in such Article 9.

                                      I-12
<PAGE>
                                   EXHIBIT II

                    CONDITIONS OF PURCHASES AND CONTRIBUTIONS

         1. Conditions  Precedent on the Initial  Transfer Date. The purchase or
contribution  of the  Transferred  Batch  under  the  Agreement  on the  Initial
Transfer Date is subject to the conditions  precedent  that the Purchaser  shall
have received on or before the Initial Transfer Date the following, each (unless
otherwise   indicated)  dated  such  date,  in  form  and  substance  reasonably
satisfactory to the Purchaser:

         (a) For each Provider and the Primary Servicer, a certificate issued by
the Secretary of State of the state of such entity's (i)  organization as to the
legal  existence  and good standing of such entity and (ii) locale of operation,
if different from its state of  organization,  as to the foreign  qualification,
authorization  and good  standing  of such  entity in such  locale (all of which
certificates  shall be dated not more than 20 days prior to the Initial Transfer
Date).

         (b) For each Provider and the Primary Servicer, certified copies of the
charter and by-laws of such entity, certified copies of resolutions of the Board
of Directors of such entity  approving the  Agreement,  certified  copies of all
documents filed to register any and all assumed/trade  names of such entity, and
certified copies of all documents  evidencing  other necessary  corporate action
and governmental approvals, if any, with respect to the Agreement.

         (c) For each Provider and the Primary  Servicer,  a certificate  of the
Secretary or Assistant  Secretary of such entity  certifying  the names and true
signatures  of the  incumbent  officers  of such entity  authorized  to sign the
Agreement and the other documents to be delivered by it hereunder.

         (d) (i) Certified  copies of the  consolidated  balance  sheets of Five
Star and its Subsidiaries as at December 31, 2001, and for the prior fiscal year
and the related  consolidated  statements  of income and expense,  cash flow and
retained  earnings of Five Star and its  Subsidiaries  for the fiscal years then
ended,  each  certified in a manner  acceptable to the Purchaser by  independent
public  accountants  acceptable  to the  Purchaser  and  demonstrating  that  no
Material Adverse Effect has occurred; (ii) certified copies of the consolidating
balance  sheets of Five Star and its  Subsidiaries  as at December 31, 2001, and
for the prior fiscal year and the related consolidating statements of income and
expense of Five Star and its  Subsidiaries  for the fiscal years then ended; and
(iii) unaudited  consolidated and consolidating  balance sheets of Five Star and
its  Subsidiaries for the fiscal quarters ended March 31, 2002 and June 30, 2002
and the related consolidated and consolidating  statements of income and expense
and the  related  consolidated  statements  of cash  flow of Five  Star  and its
Subsidiaries for the periods then ended.

         (e)  Acknowledgment  or time stamped receipt copies of proper financing
statements  (showing  each Provider as  debtor/seller,  the Purchaser as secured
party/purchaser  and the  Collateral  Agent as  assignee,  and stating  that the
financing  statements  are  being  filed  because  UCC  Section  9-109  does not
distinguish between a sale and a secured loan for filing purposes) duly filed

                                      II-1
<PAGE>
on or before the Initial Transfer Date under the UCC of all  jurisdictions  that
the Purchaser may deem  necessary or desirable in order to perfect the ownership
interests contemplated by the Agreement.

         (f)  Acknowledgment or time-stamped  receipt copies of proper financing
statements  (showing  each Provider as debtor and the Purchaser as secured party
and the Collateral  Agent as assignee with respect to the grant by such Provider
of a first priority  security  interest to the Purchaser in the  Collateral,  as
contemplated  by  Section  4.04 of the  Agreement)  duly  filed on or before the
Initial Transfer Date under the UCC of all jurisdictions  that the Purchaser may
deem necessary or desirable in order to perfect such security interest.

         (g)  Completed  requests for  information  (UCC search  results)  dated
within 20 days of the Initial  Transfer Date, and a schedule thereof listing all
effective  financing  statements  filed  in  the  jurisdictions  referred  to in
subsections  (e) and (f) above that name each Provider as debtor,  together with
copies of all other  financing  statements  filed against each Provider (none of
which shall cover any Collateral or the Receivables).

         (h)  Releases  of,  and  acknowledgment  copies of  proper  termination
statements  (Form  UCC-3),  if any,  necessary  to  evidence  the release of all
security interests,  ownership and other rights of any Person previously granted
by the Provider in the  Receivables or any of the other  Collateral and proceeds
thereof.

         (i) A memorandum of Schnader  Harrison  Segal & Lewis LLP,  counsel for
the  Providers,  substantially  in the form  attached  hereto as  Exhibit  XI-A,
regarding compliance with patient confidentiality laws, and including a new form
of patient  consent  form to be used by the  Providers  in each locale (the "New
Patient  Consent  Form"),  and as to such  other  matters  as the  Lender  Group
requests.

         (j) A favorable opinion of Schnader Harrison Segal & Lewis LLP, counsel
for the Primary  Servicer and the Providers,  substantially in the form attached
hereto as  Exhibit  XI-B,  and as to such  other  matters  as the  Lender  Group
requests.

         (k) A favorable opinion of Schnader Harrison Segal & Lewis LLP, counsel
for the Primary  Servicer and the Providers,  substantially in the form attached
hereto as  Exhibit  XI-C,  and as to such  other  matters  as the  Lender  Group
requests.

         (l) Proof of payment of all fees and other amounts due and payable,  on
or prior to the Initial  Transfer Date under this Agreement,  the Loan Agreement
or  otherwise,  including  the  reimbursement  or payment  of all  out-of-pocket
expenses  required to be reimbursed or paid and all reasonable  attorneys'  fees
and disbursements incurred by the Purchaser and the Lender Group.

         (m) A  duly  executed  Depositary  Agreement,  together  with  evidence
satisfactory to the Purchaser that the Primary Purchaser Account and the Primary
Provider Account and the Government  Lockbox and the Government  Lockbox Account
with respect to the  applicable  Providers  listed on Schedule  VIII hereto have
been established.

                                      II-2
<PAGE>
         (n) Duly  executed  Government  Depositary  Agreements,  together  with
evidence  satisfactory  to the Purchaser that the  Government  Lockboxes and the
Government  Lockbox Accounts with respect to the applicable  Providers listed on
Schedule VIII hereto have been established.

         (o)  Duly   executed   Control   Agreements,   together  with  evidence
satisfactory  to the  Purchaser  that the  Local  Purchaser  Accounts  have been
established.

         (p)  Copies of all  Notices  required  pursuant  to  Article  II of the
Agreement,  together  with  evidence  satisfactory  to the  Purchaser  that such
Notices have been or will be delivered to the addressees thereof.

         (q) A copy of each new form of invoice from each  Provider  showing the
applicable Government Lockbox as the remittance address.

         (r) A copy of all of each Provider's existing forms of patient consents
which were signed by each patient for which the currently  existing  Receivables
were created, as well as a copy of each New Patient Consent Form to be signed by
each  patient  for which a  Receivable  will be created on or after the  Initial
Transfer  Date,  which  consents  authorize  certain   demographic  and  medical
information with respect to such patient to be disclosed by such Provider to its
servicing  agents  and by such  servicing  agents  to any third  party  obligors
thereon,  certified  by an officer of such  Provider,  as being true,  complete,
correct and the only consent forms presently in effect.

         (s) A certificate  from the Master  Servicer  stating that all computer
linkups and  interfaces  necessary or  desirable,  in the judgment of the Master
Servicer, to effectuate the transactions and information transfers  contemplated
hereunder,  are fully  operational to the reasonable  satisfaction of the Master
Servicer.

         (t) A duly executed Parent Guaranty.

         (u) A duly executed Pledge Agreement,  the certificates  evidencing the
equity  interests  pledged  thereunder,  together with undated  equity  interest
powers executed in blank.

         2.  Conditions  Precedent  on All  Transfer  Dates.  Each  purchase and
contribution  of a Transferred  Batch on a Transfer Date  (including the Initial
Transfer  Date) shall be subject to the further  conditions  precedent  that the
Primary  Servicer,  the Providers  and the Purchaser  shall have agreed upon the
terms of such purchase and also that:

         (a) The Providers  shall have  delivered to the Purchaser or the Master
Servicer,  as the case may be, at least one Business Day prior to such  Transfer
Date, in form and substance satisfactory to the Purchaser or the Master Servicer
(as the case may be), to the extent not previously provided, executed Notices to
each Obligor  responsible for the payment of any of the Batch  Receivables to be
transferred  on such Transfer  Date,  directing such Obligors to make payment to
the addresses and accounts  designated in such Notices,  as set forth in Article
II hereof,  together with evidence that such Notices have been delivered to such
Obligors.

                                      II-3
<PAGE>

         (b) On each such Transfer Date the following  statements  shall be true
(and  acceptance  of the  proceeds of such  purchase by the Primary  Servicer on
behalf of the Providers  shall be deemed a  representation  and warranty by each
Provider that such statements are then true):

                  (i) the  representations  and warranties  contained in Exhibit
         III are true and correct in all material respects on and as of the date
         of such  purchase  as  though  made on and as of such date  except  any
         representation  or warranty that  expressly  indicates that it is being
         made as of a  specific  date,  in which  case  such  representation  or
         warranty shall be true and correct on and as of such date, and

                  (ii) no event has occurred and is continuing,  or would result
         from such  purchase,  that  constitutes  an Event of  Termination  or a
         Group-Wide  Event of Termination  or that would  constitute an Event of
         Termination  or  a  Group-Wide   Event  of  Termination   but  for  the
         requirement that notice be given or time elapse or both.

         (c) The  Purchaser  shall have  received a duly  executed  Subscription
Agreement for each Provider  that became a Provider  after the Initial  Transfer
Date.

         (d) The Purchaser shall have received such other approvals, opinions or
documents as it may reasonably request.

                                      II-4
<PAGE>
                                   EXHIBIT III

                         REPRESENTATIONS AND WARRANTIES

         Each  Provider  and the Primary  Servicer  represents  and  warrants as
follows:

         (a) It is duly incorporated or organized,  validly existing and in good
standing  under  the laws of the  state  of its  formation  as set  forth in the
preamble  hereto or on Schedule I hereto,  and is duly qualified to do business,
and is in good standing,  in every jurisdiction where the nature of its business
requires it to be so qualified,  except in any jurisdiction where the failure to
be so qualified would not result in a Material Adverse Effect.

         (b) The execution,  delivery and performance by it of the Agreement and
the other documents to be delivered by it thereunder, (i) are within its powers,
(ii) have been duly authorized by all necessary action,  (iii) do not contravene
(1) its charter, by-laws or operating agreement, (2) any law, rule or regulation
applicable to it, (3) any contractual  restriction binding on or affecting it or
its Property,  or (4) any order,  writ,  judgment,  award,  injunction or decree
binding on or affecting it or its Property, and (iv) do not result in or require
the  creation of any Lien upon or with respect to any of its  Properties,  other
than the  interests  created  by the  Agreement.  The  Agreement  has been  duly
executed and delivered by it. It has furnished to the Purchaser a true,  correct
and complete copy of its certificate of incorporation, organization or formation
and by-laws or operating  agreement,  as  applicable,  including all  amendments
thereto.

         (c) No  authorization  or approval or other action by, and no notice to
or filing with, any Governmental Entity other than as required by this Agreement
is  required  for the  due  execution,  delivery  and  performance  by it of the
Agreement or any other document to be delivered thereunder.

         (d) The Agreement  constitutes the legal,  valid and binding obligation
of it, enforceable against it in accordance with its terms, except as limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating
to the  enforcement  of creditors'  rights  generally and general  principles of
equity (regardless of whether enforcement is sought at equity or law).

         (e) It has all  power and  authority,  and has all  permits,  licenses,
accreditations,   certifications,   authorizations,   approvals,   consents  and
agreements of all Insurers,  Governmental  Entities,  accreditation agencies and
any other Person (including without limitation, accreditation by the appropriate
Governmental Entities and industry  accreditation agencies and accreditation and
certifications as a provider of healthcare  services eligible to receive payment
and compensation and to participate under Medicare,  Medicaid,  CHAMPUS/Champva,
Blue Cross/Blue Shield and other equivalent programs), necessary or required for
it (i) to own the assets  (including  Receivables) that it now owns, and (ii) to
carry on its business as now conducted,  except, in each case, where the failure
to do so could not  reasonably  be  expected  to result  in a  Material  Adverse
Effect.

                                      III-1
<PAGE>
         (f) It has not been  notified by any  Insurer,  Governmental  Entity or
instrumentality,   accreditation   agency  or  any  other  Person,   during  the
immediately  preceding  24 Month  period,  that such party has  rescinded or not
renewed,  or is reasonably likely to rescind or not renew, any permit,  license,
accreditation,  certification,  authorization,  approval,  consent or  agreement
granted  to it or to which it is a party  except as  disclosed  in  Schedule  IV
hereto.

         (g) As of the Initial Transfer Date, all conditions precedent set forth
in Exhibit II have been fulfilled or waived in writing by the Purchaser,  and as
of each Transfer Date, the conditions precedent set forth in paragraph 2 of such
Exhibit II have been fulfilled or waived in writing by the Purchaser.

         (h) The consolidated balance sheet of Five Star and its Subsidiaries as
at June 30, 2002, and the related consolidated statements of income and expense,
and cash flows of Five Star and its  Subsidiaries  for the fiscal  periods  then
ended, copies of which have been furnished to the Purchaser,  fairly present the
consolidated  financial  position of Five Star and its  Subsidiaries  as at such
date and the results of the operations of Five Star and its Subsidiaries for the
period ended on such date, all in accordance  with GAAP, and since June 30, 2002
there has been no Material Adverse Effect.

         (i) There is no  pending  or, to its  knowledge,  threatened  action or
proceeding or injunction,  writ or restraining  order affecting it or any of its
Subsidiaries  before any court,  Governmental  Entity or arbitrator  which could
reasonably  be expected to result in a Material  Adverse  Effect,  and it or any
Subsidiary thereof is not currently the subject of, and has no present intention
of commencing, an insolvency proceeding or petition in bankruptcy.

         (j) It is the legal and beneficial  owner of each Batch Receivable free
and  clear  of any Lien  (other  than any  Lien on  Accounts  that is  expressly
subordinated in writing to the Lien created  hereunder in a manner acceptable to
the Purchaser, in its sole discretion);  upon each purchase or contribution of a
Transferred  Batch,  the Purchaser  shall acquire valid  ownership of each Batch
Receivable  therein and in the  collections  with respect  thereto  prior to all
other Liens  thereon.  No  effective  financing  statement  or other  instrument
similar in effect covering any Collateral or any Batch  Receivable is on file in
any  recording  office,  except  those  filed  in favor  of the  Purchaser,  the
Collateral  Agent or any permitted  assignee of the Collateral Agent or a Lender
relating to the Agreement,  and no competing notice or notice  inconsistent with
the transactions contemplated in the Agreement remains in effect with respect to
any Obligor.

         (k) All Receivable Information, information provided in the application
for the program  effectuated by the Agreement,  and each other document,  report
and Transmission  provided by the Primary Servicer or any Provider to the Lender
Group is or shall be accurate in all material  respects as of its date and as of
the date so furnished,  and no such document contains or will contain any untrue
statement  of a  material  fact or omits or will omit to state a  material  fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.

                                      III-2
<PAGE>
         (l) The principal place of business and chief executive  office of each
Provider and the office where such  Provider  keeps its records  concerning  the
Collateral  and the Batch  Receivables  are  located at the  respective  address
referred to on the signature pages of the Agreement and there have been no other
such locations for the four immediately prior Months.

         (m) Each transfer of a Transferred  Batch will constitute a purchase or
other acquisition of notes,  drafts,  acceptances,  open accounts  receivable or
other  obligations  representing  part or all of the sales price of merchandise,
insurance or services  within the meaning of Section  3(c)(5) of the  Investment
Company Act of 1940, as amended.

         (n) The  provisions  of the Agreement  create legal and valid  security
interests  in all of the  Collateral  owned  or  held  by the  Providers  in the
Purchaser's  favor,  and when all proper filings and other actions  necessary to
perfect  such  Liens  have been  completed,  will  constitute  a  perfected  and
continuing  Lien  on  all of the  Collateral  owned  or  held  by the  Providers
(excluding the Batch  Receivables sold or contributed to the Purchaser  pursuant
to the  provisions of the  Agreement),  having  priority over all other liens on
such  Collateral  of the  Providers,  enforceable  against the Providers and all
third parties.

         (o) All  required  Notices  have been  prepared  and  delivered to each
applicable  Governmental Entity and Insurer,  and all invoices now bear only the
appropriate  remittance  instructions  for payment  direction to the  applicable
Provider  (solely in the case of invoices to Obligors that are not  Governmental
Entities) the applicable Purchaser Account, the applicable Government Lockbox or
the applicable Provider Account, as the case may be.

         (p) Except as disclosed on Schedule IV hereto,  no Provider has changed
its  principal  place of  business  or chief  executive  office in the last five
years.

         (q) The exact name of each  Provider  is as set forth on the  signature
pages of the Agreement  and,  except as set forth on such signature page or in a
Written  Notice  pursuant to clause  (j)(vii)  of Exhibit  IV, no  Provider  has
changed its name in the last five years and,  except as set forth on Schedule IV
or in a Written  Notice  pursuant to clause  (j)(vii) of Exhibit IV, during such
period  no  Provider  has  used,  nor  does any  Provider  now  use,  any  other
fictitious, assumed or trade name.

         (r) With respect to itself or any  Subsidiary  thereof  there exists no
event which has or is reasonably likely to result in a Material Adverse Effect.

         (s) It is not in violation under any applicable  statute,  rule, order,
decree or regulation of any court,  arbitrator  or  governmental  body or agency
having jurisdiction over it which could result in a Material Adverse Effect.

         (t) It has filed on a timely basis all tax returns (federal,  state and
local) required to be filed and has paid, or made adequate provision for payment
of, all taxes,  assessments and other  governmental  charges due from it, unless
contested in good faith by appropriate  proceedings.  No tax Lien has been filed
and is now  effective  against it or any of its  Properties,  except any Lien in
respect of taxes and other  charges  not yet due or  contested  in good faith by
appropriate proceedings.

                                      III-3
<PAGE>
To its  knowledge,  there  are no  pending  investigations  of it by any  taxing
authority or any pending but  unassessed  tax  liability of it. It does not have
any obligation under any tax sharing agreement for periods prior to December 31,
2001.

         (u) It is solvent and will not become  insolvent after giving effect to
the  transactions  contemplated  by the Agreement;  it has not incurred debts or
liabilities  beyond its  ability to pay;  it will,  after  giving  effect to the
transaction contemplated by the Agreement, have an adequate amount of capital to
conduct its business in the foreseeable  future;  the sales and contributions of
Receivables hereunder are made in good faith and without intent to hinder, delay
or defraud its present or future creditors.

         (v) The  Government  Lockboxes  are the only post office  boxes and the
Provider  Accounts are the only accounts or lockbox  accounts  maintained by any
Provider for Receivables,  the Obligors of which are Governmental  Entities; the
Providers do not maintain any lockboxes and the Purchaser  Accounts are the only
lockbox  accounts  maintained  for  Receivables,   the  Obligors  of  which  are
non-Governmental  Entities;  and no  direction  of  any  Provider  is in  effect
directing Obligors to remit payments on Receivables other than to the applicable
Provider,   Purchaser  Account,   Government  Lockbox  or  Provider  Account  in
accordance with Sections 2.01 and 2.02.

         (w) Each pension plan or profit sharing plan to which it is a party has
been fully funded in accordance with its obligations as set forth in such plan.

         (x)  To  its  knowledge,   there  are  no  pending  civil  or  criminal
investigations  by any  Governmental  Entity  involving  it or its  officers  or
directors  and neither it nor any of its officers or directors has been involved
in, or the subject of, any civil or criminal  investigation  by any Governmental
Entity,  other than facility  reviews or license  reviews in the ordinary course
that have not  resulted  in any action  being taken by the  Governmental  Entity
against it or its officers or directors.

         (y)  The  primary  business  of  each  Provider  is  the  provision  of
healthcare services, products, merchandise or equipment and the primary business
of Five Star is the  ownership and  operation of senior  residences  directly or
through Subsidiaries.

         (z) The  assets  of each  Provider  are free and  clear of any liens in
favor of the Internal  Revenue  Service,  any Employee  Benefit Plan or the PBGC
other than inchoate tax liens resulting from an assessment of such Provider.

         (aa) With respect to each Employee Benefit Plan of it, including to its
knowledge as to any Multiemployer  Plan, such Employee Benefit Plan has complied
and been administered in accordance with its terms and in substantial compliance
with all applicable  provisions of ERISA and the Internal  Revenue Code of 1986,
as amended;  neither it nor any ERISA Affiliate has been notified by the sponsor
of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has
been terminated, within the meaning of Title IV of ERISA; and it has no material
unpaid and unaccrued liability for any Employee Benefit Plan.

                                      III-4
<PAGE>
         (bb) No Batch  Receivable  constitutes or has constituted an obligation
of any Subsidiary thereof, parent or other Person which is its Affiliate.

         (cc)  No  transaction   contemplated   under  this  Agreement  requires
compliance with any bulk sales act or similar law.

         (dd) It has,  or has the right to use,  valid  provider  identification
numbers and licenses to generate the Receivables.

         (ee) Five Star will prepare year-end financial  statements on an annual
basis for it and its  consolidated  Subsidiaries  (including  the  Purchaser) in
accordance with GAAP, which will contain  footnotes or other  information to the
effect  that:  (i) the  Purchaser's  business  consists  of both  purchased  and
contributed Receivables from the Providers; and (ii) the Purchaser is a separate
Delaware limited liability  company with its own separate  creditors which, upon
liquidation of the Purchaser will be entitled to be satisfied  solely out of the
Purchaser's assets and the Purchaser will prepare separate financial statements,
which   statements  will  treat  all  transfers  of  purchased  and  contributed
Receivables  pursuant to this Agreement  respectively as sales and contributions
to the  Purchaser's  capital,  and not as  secured  loans,  and Five  Star  will
classify  all  purchased  and  contributed  Receivables  transferred  under this
Agreement as assets owned exclusively by the Purchaser for all purposes.

         (ff)  It is  not  engaged  principally,  or as  one  of  its  important
activities, in the business of extending credit for the purpose of purchasing or
carrying  margin stock (within the meaning of Regulation T, U, or X of the Board
of Governors of the Federal Reserve System),  and no part of the proceeds of any
extension of credit under this  Agreement  will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.

         (gg) On and after  the  Initial  Transfer  Date,  only the New  Patient
Consent  Forms are being  obtained  by it from each  patient  and  customer  who
commences to receive services or products from any Provider thereafter.

         (hh) With respect to each Receivable  contributed to the capital of the
Purchaser  in  each  Batch,  the  Purchaser  shall  record  in  each  applicable
Provider's  own  capital  account  the  aggregate  Expected  Net  Value  of such
Receivables as a capital contribution.

         (ii) Except as set forth on Schedule IV, no Provider has any Debt other
than Permitted Debt.

                                      III-5
<PAGE>
                                   EXHIBIT IV

                                    COVENANTS

         Until the later of the Facility  Termination Date and the Final Payment
Date, each Provider and the Primary Servicer agrees as follows:

         (a) Compliance With Laws, etc. It will comply in all material  respects
with all  applicable  laws,  rules,  regulations  and  orders and  preserve  and
maintain  its  corporate  existence,  rights,  franchises,  qualifications,  and
privileges.

         (b) Offices,  Records and Books of Account.  It will keep its principal
place of business and chief  executive  office and the office where it keeps its
records  concerning the Collateral and the Batch  Receivables at the address set
forth under its name on the  signature  pages to the Agreement or, upon 30 days'
prior Written Notice to the Purchaser,  at any other locations in  jurisdictions
where all actions reasonably  requested by the Purchaser or otherwise  necessary
to protect,  perfect  and  maintain  the  Purchaser's  security  interest in the
Collateral  have been taken and completed.  It shall keep its books and accounts
in  accordance  with GAAP and shall  make a notation  on its books and  records,
including any computer  files, to indicate which  Receivables  have been sold or
contributed  to the Purchaser and the security  interest of the Purchaser in the
Collateral and its  Receivables  not sold or  contributed  to the Purchaser.  It
shall maintain and implement administrative and operating procedures (including,
without  limitation,  an ability to recreate records evidencing  Receivables and
related contracts in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other information reasonably
necessary or advisable for collecting all Batch Receivables (including,  without
limitation,  records adequate to permit the daily  identification  of each Batch
Receivable  and  all  Collections  of and  adjustments  to each  existing  Batch
Receivable) and for providing the Receivable Information.

         (c) Performance and Compliance With Contracts and Credit and Collection
Policy.  It will,  at its expense,  timely and fully perform and comply with all
material provisions,  covenants and other promises required to be observed by it
under the contracts and other documents related to the Batch Receivables and its
responsibilities  under  the  Agreement,  and  timely  and  fully  comply in all
material  respects with the Credit and Collection Policy in regard to each Batch
Receivable and the related contract,  and it shall maintain,  at its expense, in
full operation each of the bank accounts and lockboxes required to be maintained
under the Agreement.  It shall not do anything to impede or interfere, or suffer
or permit any other Person to impede or interfere in any material respect,  with
the  collection  by the  Purchaser,  or the Master  Servicer or any other Person
designated  by  the  Purchaser  on  behalf  of  the  Purchaser,   of  the  Batch
Receivables.

         (d)  Notice of  Breach  of  Representations  and  Warranties.  It shall
promptly (and in no event later than one Business Day following actual knowledge
thereof) inform the Purchaser and the Master Servicer of any breach of covenants
or representations and warranties hereunder, including, without limitation, upon
discovery  of a  breach  of the  Eligibility  Criteria  set  forth  in the  Loan
Agreement.

                                      IV-1
<PAGE>
         (e) Sales,  Liens and Debt.  It will not sell,  assign (by operation of
law or  otherwise)  or  otherwise  dispose  of, or create or suffer to exist any
Liens upon or with respect to, the Collateral,  the Batch Receivables or upon or
with respect to any account to which any Collections of any Batch Receivable are
sent,  or assign any right to receive  income in respect  thereof  except  those
Liens in favor of the  Purchaser,  the  Collateral  Agent or any assignee of the
Collateral Agent or any Lender relating to the Agreement.  It will not, directly
or  indirectly  (x) at any time pay any amount of principal or prepay,  defease,
purchase,  redeem any Debt, during the continuance of an Event of Termination or
(y) pay any  management  fees or other similar fees to any  Affiliate;  provided
that  nothing in this clause (e) shall  prohibit  payment of  non-cash  interest
"in-kind" thereunder.

         (f)  Extension or Amendment of Batch  Receivables.  It shall not amend,
waive or otherwise permit or agree to any deviation from the terms or conditions
of any Batch  Receivable  except in  accordance  with the Credit and  Collection
Policy.

         (g)  Change  in  Credit  and  Collection  Policy.  It will not make any
material  change in the Credit and  Collection  Policy without the prior written
consent of the Program Manager;  provided,  however, that during the continuance
of an Event of  Termination,  it will not make  any  change  in the  Credit  and
Collection  Policy.  The Providers  will not make any change in the character of
their  businesses  that is  reasonably  likely to result in a  Material  Adverse
Effect.

         (h)  Audits  and  Visits.  It will,  at any time and from  time to time
during  regular  business  hours  as  requested  by the  Purchaser,  permit  the
Purchaser,  or its agents or  representatives  (including the Master  Servicer),
upon reasonable notice, (i) on a confidential  basis, to examine and make copies
of and  abstracts  from all books,  records and  documents  (including,  without
limitation,  computer  tapes and disks) in its  possession  or under its control
relating  to  Batch  Receivables  including,  without  limitation,  the  related
contracts,  and (ii) to visit its  offices  and  properties  for the  purpose of
examining  and auditing  such  materials  described in clause (i) above,  and to
discuss matters  relating to Batch  Receivables or its performance  hereunder or
under the contracts  with any of its officers or employees  having  knowledge of
such  matters.  It  shall,  at any  time and from  time to time  during  regular
business hours as requested by the Master  Servicer,  permit the Master Servicer
to  have  at  least  one  agent  or  representative  physically  present  in its
administrative  office,  upon reasonable  notice, to assist it in performing its
obligations  under the Agreement,  including its obligations with respect to the
collection  of  Batch  Receivables  pursuant  to  Article  I of  the  Agreement;
provided,  however,  that no notice shall be required upon the occurrence of and
during the continuance of an Event of Termination.

         (i) Change in Payment  Instructions.  It will not terminate the Primary
Provider Account,  any Government Lockbox, or any Government Lockbox Account, or
make any change or  replacement  in the  instructions  contained in any invoice,
Notice or otherwise,  or regarding  payments with respect to  Receivables  to be
made to the any Government Lockbox,  any Government Lockbox Account, the Primary
Provider Account, the Primary Purchaser Account, or any Local Purchaser Account,
except upon the prior and express  written consent of the Program Manager or the
Purchaser.

                                      IV-2
<PAGE>
         (j)  Reporting  Requirements.  It will  provide  to the  Purchaser  (in
multiple copies, if requested by the Purchaser) the following:

                  (i) as soon as available and in any event within 45 days after
         the end of each of the first three quarters of each fiscal year of Five
         Star,  consolidated and  consolidating  balance sheets of Five Star and
         its  Subsidiaries  as of the end of such quarter and  consolidated  and
         consolidating  statements  of income  and  consolidated  cash flows and
         retained  earnings  of Five Star and its  Subsidiaries  for the  period
         commencing at the beginning of the current  fiscal year and ending with
         the end of such quarter,  certified by the chief  financial  officer of
         Five Star and accompanied by a certificate of an authorized  officer of
         the  Primary  Servicer   detailing  the  Primary  Servicer's  and  each
         Provider's compliance for such fiscal period with all terms,  including
         calculations  demonstrating  compliance  with the financial  covenants,
         contained  in  the  Agreement,  and to the  extent  any  non-compliance
         exists,  a description of the steps being taken by the Primary Servicer
         or the applicable Provider to address such non- compliance;

                  (ii) as soon as  available  and in any  event  within  90 days
         after the end of each fiscal year of Five Star a copy of  consolidating
         financial statements and the audited consolidated  financial statements
         (together  with  explanatory  notes  thereon) and the auditor's  report
         letter  for such  year for Five Star and its  Subsidiaries,  containing
         financial  statements  for such  year  audited  by Ernst & Young LLP or
         other independent public accountants of recognized  standing acceptable
         to the  Purchaser,  certified  by the chief  financial  officer  of the
         Primary  Servicer and  accompanied  by a  certificate  of an authorized
         officer of the Primary  Servicer  detailing the Primary  Servicer's and
         each  Provider's  compliance  for such  fiscal  period  with all terms,
         including the financial covenants,  contained in the Agreement,  and to
         the extent any non-compliance  exists, a description of the steps being
         taken by the  Primary  Servicer or the  applicable  Provider to address
         such non-compliance;

                  (iii)  on or  before  the  25th of  each  Month,  monthly  and
         year-to-date   statistical   and   financial   reports  and   unaudited
         consolidated profit and loss reports,  from the chief financial officer
         of the Providers;

                  (iv)  promptly and in any event within two Business Days after
         the occurrence of (x) each Event of  Termination  or event which,  with
         the giving of notice or lapse of time,  or both,  would  constitute  an
         Event of  Termination,  a statement of the chief  financial  officer of
         applicable  Provider setting forth details of such Event of Termination
         or event,  and the action  that it has taken and  proposes to take with
         respect thereto and (y) each  Group-Wide  Event of Termination or event
         which,  with the  giving  of notice  or lapse of time,  or both,  would
         constitute a Group-Wide  Event of  Termination,  a  certificate  of the
         Primary  Servicer setting forth the details of such Group-Wide Event of
         Termination  or event,  and the action that has been taken and proposes
         to take with respect thereto;

                  (v)  promptly  after the  sending or filing  thereof,  if any,
         copies of all reports and registration  statements that any Provider or
         any   Subsidiary   thereof  files  with  the  Securities  and  Exchange
         Commission or any national securities exchange and official

                                      IV-3
<PAGE>
         statements  that any  Provider  or any  Subsidiary  thereof  files with
         respect to the issuance of tax-exempt  indebtedness  and after an Event
         of Termination or Servicer Termination Event, copies of all reports (if
         any) that the Provider or any  Subsidiary  thereof  sends to any of its
         security holders;

                  (vi) promptly after the filing or receiving thereof, copies of
         all reports and notices that any Provider or any of its  Affiliates (it
         being  understood that for purposes of this Section  (j)(vi),  the term
         "Affiliates"  does not include REIT Management & Research LLC or Senior
         Housing  Properties  Trust) files under ERISA with the Internal Revenue
         Service  or the  PBGC or the  U.S.  Department  of  Labor  or that  any
         Provider or any of its Affiliates receives from any of the foregoing or
         from  any  Multiemployer  Plan to  which  such  Provider  or any of its
         Affiliates is or was,  within the preceding  five years, a contributing
         employer,  in each case in  respect  of the  assessment  of  withdrawal
         liability  or an event or  condition  which  could,  in the  aggregate,
         result in the  imposition  of  liability  on such  Provider or any such
         Affiliate in excess of $100,000;

                  (vii) at least ten  Business  Days  prior to any change in any
         Provider's name or any  implementation of a new  trade/assumed  name, a
         Written  Notice  setting  forth  the new  name or  trade  name  and the
         proposed effective date thereof and copies of all documents required to
         be filed in connection therewith;

                  (viii)  promptly  (and in no event later than one Business Day
         following  actual  knowledge  or receipt  thereof),  Written  Notice in
         reasonable  detail,  of (w) any Lien  asserted or claim made  against a
         Batch Receivable,  (x) the occurrence of a Service Termination Event or
         a  Group-Wide  Event of  Termination,  or any other  event  which could
         result in a material  adverse effect on the value of a Batch Receivable
         or on the  interest of the  Purchaser  in a Batch  Receivable,  (y) any
         notice of any  investigations  or similar  audits of any Provider being
         conducted by any federal,  state or county  Governmental  Entity or its
         agents or  designees  or (z) the results of any cost  report  filed and
         reviewed  by any  Governmental  Entity or its  fiscal  intermediary  or
         settled,  and any investigation or similar audit being conducted by any
         federal,   state  or  county  Governmental  Entity  or  its  agents  or
         designees;

                  (ix) not later  than 30 days  after the  commencement  of each
         fiscal year, a consolidated and consolidating  operating plan (together
         with a statement in reasonable  detail of the assumptions on which such
         plan is based) of Five Star and its  Subsidiaries,  and which shall, in
         each case,  include  budgets  for the  prospective  year in  reasonable
         detail acceptable to the Purchaser and will integrate  operating profit
         and cash flow projections, capital expenditures, and facilities plans;

                  (x) promptly upon receipt  thereof,  a copy of any  management
         letter or written  report  submitted  to any  Provider  by  independent
         certified public accountants with respect to the Subsidiaries  thereof,
         business, condition (financial or otherwise), operations, prospects, or
         Properties of such Provider;

                                      IV-4

<PAGE>
                  (xi) no later than two  Business  Days after the  commencement
         thereof,  Written Notice of all actions,  suits, and proceedings before
         any Governmental Entity or arbitrator  affecting any Provider which, if
         determined  adversely  to such  Provider,  could  result in a  Material
         Adverse Effect;

                  (xii)  promptly after the  furnishing  thereof,  copies of any
         statement  or report  furnished  by any  Provider  to any  other  party
         pursuant  to the terms of any  indenture,  loan,  or credit or  similar
         agreement and not  otherwise  required to be furnished to the Purchaser
         pursuant to this Agreement;

                  (xiii) as soon as possible  and in any event  within five days
         after becoming aware of the occurrence  thereof,  Written Notice of any
         matter  that  could  reasonably  be  expected  to result in a  Material
         Adverse Effect;

                  (xiv) as soon as  available,  (A) one  copy of each  financial
         statement,  report,  notice or proxy statement sent by Five Star to its
         stockholders generally,  (B) and one copy of each regular,  periodic or
         special report,  registration  statement,  or prospectus  filed by Five
         Star  with any  securities  exchange  or the  Securities  and  Exchange
         Commission or any successor agency or the Bankruptcy Court, and (C) all
         press releases and other  statements made available by Five Star to the
         public concerning developments in the business of such Provider;

                  (xv) within the sixty (60) day period prior to the end of each
         fiscal  year of each  Provider,  a report  satisfactory  in form to the
         Purchaser, listing all material insurance coverage maintained as of the
         date of such report by such Provider and all material insurance planned
         to be maintained by such Provider in the subsequent fiscal year; and

                  (xvi) promptly, and in no event later than three Business Days
         following  the earlier of actual  knowledge or receipt of  notification
         from  a  Governmental  Entity,  estimates  of  amounts  of  Receivables
         generated which are subject to offset by Governmental Entities;

                  (xvii) at the time of each Monthly Report, internally prepared
         cost-report settlement estimates with respect to Governmental Entities;
         and

                  (xviii) such other  information  respecting the Receivables or
         the condition or operations, financial or otherwise, of any Provider or
         any  Subsidiary or Affiliate  thereof as the Purchaser may from time to
         time reasonably request.

         (k) Notice of  Proceedings;  Overpayments.  The Primary  Servicer shall
promptly  notify  the  Master  Servicer  in  the  event  of  any  action,  suit,
proceeding,  dispute, set-off, deduction, defense or counterclaim that is or may
be asserted by an Obligor with respect to any Batch  Receivable.  Each  Provider
shall  make any and all  payments  to the  Obligors  necessary  to  prevent  the
Obligors from  offsetting any earlier  overpayment to such Provider  against any
amounts the Obligors owe on any Batch Receivables.

                                      IV-5
<PAGE>
         (l)  Officer's  Certificate.  On  the  date  the  financial  statements
referred  to in clause (j) above are to be  delivered  in each fiscal year after
the Initial  Transfer Date, the chief  financial  officer of each Provider shall
deliver a certificate to the  Purchaser,  stating that, as of such date, (i) all
representations  and warranties set forth in the Agreement are true and correct,
(ii) the  conditions  precedent set forth in paragraph 2 of Exhibit II have been
fulfilled  or  waived  in  writing  by the  Purchaser,  and  (iii)  no  Event of
Termination or Group-Wide Event of Termination exists and is continuing.

         (m) Further Instruments,  Continuation Statements. Each Provider shall,
at its  expense,  promptly  execute  and deliver  all  further  instruments  and
documents, and take all further action that the Program Manager or the Purchaser
may reasonably request, from time to time, in order to perfect,  protect or more
fully  evidence  the  full and  complete  transfer  of  ownership  of the  Batch
Receivables  and the  security  interest  in the  Collateral,  or to enable  the
Purchaser  or the  Program  Manager to  exercise  or  enforce  the rights of the
Purchaser  hereunder  or under  the  Batch  Receivables.  Without  limiting  the
generality of the foregoing,  each Provider will upon the request of the Program
Manager  execute and file such UCC  financing  or  continuation  statements,  or
amendments  thereto  or  assignments  thereof,  and such  other  instruments  or
notices,  as may  be,  in the  opinion  of the  Program  Manager,  necessary  or
appropriate.  Each  Provider  hereby  authorizes  the  Program  Manager  or  its
designees,  upon two Business  Days'  notice,  to file one or more  financing or
continuation statements and amendments thereto and assignments thereof, relative
to all or  any of the  Batch  Receivables  or the  Collateral  now  existing  or
hereafter arising without the signature of such Provider where permitted by law.
If any Provider fails to perform any of its agreements or obligations  under the
Agreement,  the  Program  Manager  may (but  shall not be  required  to)  itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Program Manager incurred in connection therewith shall be payable by such
Provider.

         (n) Taxes.  Each Provider  shall pay any and all taxes  (excluding  the
Purchaser's income, gross receipts,  franchise, doing business or similar taxes)
relating to the transactions contemplated under the Agreement, including but not
limited to the sale, transfer and assignment of each Batch Receivable.

         (o) Deviation from Terms of Batch  Receivable,  etc. No Provider shall,
without the prior written consent of the Purchaser:

                  (i) other than in  connection  with the  purchase  of a Denied
         Receivable,  compromise, adjust, extend, satisfy, subordinate, rescind,
         set off, waive,  amend, or otherwise  modify, or permit or agree to any
         deviation  from, the terms and conditions of any Batch  Receivable,  or
         materially or adversely amend, modify or waive any term or condition of
         any contract related thereto;

                  (ii) (x) amend, modify,  supplement or delete in any way or to
         any extent  any  provision  for  uncollectible  accounts  and free care
         applicable to any Batch  Receivable or (y) amend,  modify or supplement
         in any way or to any extent any financial category or change in any way
         or to any extent the manner in which any financial  category is treated
         or reflected in the Provider's records;

                                      IV-6
<PAGE>
                  (iii) alter or modify (x) its claims processing system, or (y)
         its third party billing  system,  as  applicable  (except for technical
         changes of an immaterial nature); or

                  (iv) change,  modify or rescind any direction contained in any
         invoice or previously delivered Notice.

         (p) Purchaser's Ownership of Batch Receivables. It shall not prepare or
permit to be prepared  any  financial  statements  which  shall  account for the
transactions  contemplated  hereby in a manner which is, or in any other respect
account  for  the  transactions  contemplated  hereby  in  a  manner  which  is,
inconsistent with the Purchaser's ownership of the Batch Receivables.

         (q) No  "Instruments".  It shall not take any action which would allow,
result in or cause any Transferred  Batch or Batch Receivable to be evidenced by
an "instrument" within the meaning of the UCC of the applicable jurisdiction.

         (r) Deviation from New Patient Consent Form. No Provider shall, without
the prior written consent of the Purchaser,  substitute, alter, modify or change
in any way the New Patient Consent Form.

         (s)  Implementation  of New  Invoices.  Each  Provider  shall  take all
reasonable steps to ensure that all invoices  rendered or dispatched on or after
the Initial  Transfer  Date contain only the  remittance  instructions  required
under Article II of this Agreement.

         (t) Assumed/Trade  Name  Certificates.  On or before December 31, 2002,
the Purchaser shall receive copies of all certificates filed by each Provider in
each applicable  jurisdiction  regarding the use of each of the trade or assumed
names set forth opposite such Provider's name on Schedule VI attached hereto.

         (u) Notice of Termination or Suspension of Contracts. It shall promptly
(and in no event later than one Business Day following actual knowledge thereof)
inform the Purchaser and the Master Servicer of any termination or suspension of
any of its contracts.

         (v) Incurrence of Debt. It will not incur any Debt other than Permitted
Debt.

                                      IV-7
<PAGE>

                                    EXHIBIT V

                              EVENTS OF TERMINATION

         Each of the following shall be an "Event of Termination":

         (a) The Primary  Servicer,  in its capacity as agent for the  Providers
and the Purchaser pursuant to Section 1.05(b),  shall fail to perform or observe
any  term,   covenant   or   agreement   included   in  the   Primary   Servicer
Responsibilities  (other than a Servicer  Termination  Event  resulting from the
events described in paragraph (g) of this Exhibit) and such failure shall remain
unremedied  for 15 days or the Primary  Servicer or any  Provider  shall fail to
make when due any payment or deposit to be made by it under the Agreement.

         (b) A Provider  or the  Primary  Servicer  (i) fails to  transfer  in a
timely manner any  servicing  rights and  obligations  with respect to the Batch
Receivables  to any  successor  designated  pursuant  to Section  1.05(b) of the
Agreement,  (ii) fails to make any payment required under the Agreement  (unless
such payment  obligation has been fulfilled in full pursuant to the  Purchaser's
set-  off  rights  under  Section  4.03  of the  Agreement)  or  (iii)  sends  a
"Revocation  Order" (as defined in the  Depositary  Agreement or the  Government
Depositary  Agreement)  or makes any  change  or  replacement  in the  "Standing
Revocable Instruction" (as defined in the Depositary Agreement or the Government
Depositary Agreement).

         (c) Any  representation  or warranty (other than those  representations
and warranties (i) with respect to the purchase of Receivables  that are covered
by paragraph (f) of this Exhibit and (ii) with respect to Batch Receivables, the
Return  Price with  respect  thereto is paid to the  Purchaser in the manner set
forth in Article IV of this Agreement  within two Business Days following demand
therefor)  made or deemed made by any Provider or the Primary  Servicer under or
in connection with the Agreement,  any Provider's Document or any information or
report  delivered  by any  Provider  or the  Primary  Servicer  pursuant  to the
Agreement or any Provider  Document shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered.

         (d) A Provider or the Primary  Servicer fails to perform or observe any
other term,  covenant or agreement  contained  in the  Agreement or in any other
Provider  Document on its part to be  performed or observed and any such failure
shall  remain  unremedied  for five  Business  Days after the earlier of (i) the
discovery  thereof by such  Provider or the Primary  Servicer  and (ii)  written
notice thereof shall have been given to such Provider or the Primary Servicer by
the Purchaser.

         (e) A  Provider  shall  fail  to pay any  principal  of or  premium  or
interest on any of its Debt when the same  becomes  due and payable  (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or  instrument  relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such  Debt and  shall  continue  after  the  applicable  grace  period,  if any,
specified in such agreement or

                                       V-1
<PAGE>
instrument,  if the effect of such event or  condition is to  accelerate,  or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared  to be due and  payable,  or  required  to be prepaid  (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to repay,  redeem,  purchase or defease  such Debt shall be required to be
made, in each case prior to the stated maturity thereof.

         (f) Any purchase or contribution of a Transferred Batch pursuant to the
Agreement shall for any reason (other than pursuant to the terms hereof) fail or
cease to create or fail or cease to be a valid and perfected  ownership interest
in each Batch  Receivable in such  Transferred  Batch and the  Collections  with
respect  thereto  free and clear of all Liens  (other than Liens  referred to in
paragraph (e) of Exhibit IV) unless, as to any such Batch Receivable, the Return
Price with respect  thereto is paid to the  Purchaser in the manner set forth in
Article IV of the Agreement within five Business Days following demand therefor.

         (g) A Provider  or the Primary  Servicer  shall  generally  not pay its
debts as such debts  become due, or shall admit in writing its  inability to pay
its debts  generally,  or shall  make a general  assignment  for the  benefit of
creditors; or any proceeding shall be instituted by or against a Provider or the
Primary  Servicer  seeking to adjudicate it a bankrupt or insolvent,  or seeking
liquidation, winding up, reorganization,  arrangement,  adjustment,  protection,
relief,  or composition of it or its debts under any law relating to bankruptcy,
insolvency or  reorganization  or relief of debtors,  or seeking the entry of an
order for relief or the appointment of a receiver,  trustee,  custodian or other
similar  official for it or for any substantial part of its Property and, in the
case of any such  proceeding  instituted  against it (but not instituted by it),
either such proceeding  shall remain  undismissed or unstayed for a period of 30
days,  or any of the  actions  sought  in such  proceeding  (including,  without
limitation,  the entry of an order for relief  against,  or the appointment of a
receiver,  trustee,  custodian  or other  similar  official  for,  it or for any
substantial  part of its  Property)  shall  occur;  or a Provider or the Primary
Servicer  shall take any action to authorize  any of the actions set forth above
in this paragraph (g).

         (h) As of any date of  determination,  a Provider is found to have been
overpaid by Governmental  Entities by an amount equal to 10% of the Expected Net
Value of all Eligible  Receivables or more during any period covered by an audit
conducted  by CMS or any state  authority  and such  overpayment  is not  repaid
within 30 days of its due date or reserved for in a manner reasonably acceptable
to the Program Manager.

         (i) There shall have  occurred any Material  Adverse  Effect since June
30, 2002.

         (j) There shall have occurred a Change of Control.

         (k)  Judgments or orders for payment of money (other than  judgments or
orders in respect of which  adequate  insurance  is  maintained  for the payment
thereof)  against a  Provider  in excess of  $100,000  in the  aggregate  remain
unpaid, unstayed on appeal,  undischarged,  unbonded or undismissed for a period
of 30 days or more.

                                       V-2
<PAGE>
         (l) Any governmental  authority  (including,  without  limitation,  the
Internal  Revenue  Service  or the PBGC)  files a notice of a Lien  against  the
assets  of a  Provider  other  than a Lien (i) that is  limited  by its terms to
assets  other  than  Receivables  and (ii)  that does not  result in a  Material
Adverse Effect.

         (m) A  Provider  does  not  maintain,  keep,  and  preserve  all of its
Properties  necessary  or useful in the proper  conduct of its  business in good
repair,  working order, and condition (ordinary wear and tear excepted) and make
all reasonably  necessary  repairs,  renewals,  replacements,  betterments,  and
improvements thereof.

         (n) A  Provider  does not pay or  discharge  at or before  maturity  or
before becoming delinquent (i) all taxes, levies, assessments,  and governmental
charges imposed on it or its income or profits or any of its Property,  and (ii)
all lawful claims for labor,  material,  and supplies,  which, if unpaid,  might
become a Lien upon any of its Property.

         (o) A Provider does not keep insured by financially sound and reputable
insurers all Property of a character usually insured by corporations  engaged in
the same or similar  business  similarly  situated against loss or damage of the
kinds and in the amounts  customarily  insured against by such  corporations and
carry such other  insurance  as is usually  carried by such  corporations.  Each
policy  referred  to in this  clause  (o)  shall  provide  that  it will  not be
canceled, amended, or reduced except after not less than thirty (30) days' prior
written notice to the Purchaser and the Collateral  Agent and shall also provide
that the  interests  of the  Purchaser  shall not be  invalidated  by any act or
negligence of the applicable  Provider. A Provider does not advise the Purchaser
promptly of any policy  cancellation,  reduction,  or  amendment.  Any insurance
policy for property,  casualty, liability and business interruption coverage for
a Provider  does not name the  Collateral  Agent as assignee of the Purchaser as
loss payee (as the Purchaser's  interests may appear) or an additional  insured,
as appropriate.

         (p) A Provider or the Primary  Servicer does not maintain  proper books
of record and account in which full, true and correct entries in conformity with
GAAP are made of all dealings and  transactions  in relation to its business and
activities.

         (q) A Provider or the Primary  Servicer does not comply in all material
respects with (i) any document directly relating to the responsibilities of such
Provider or the Primary Servicer,  respectively, under the Agreement or (ii) any
agreement, contract, or instrument that results in a Material Adverse Effect.

         (r) A Provider  does not comply with all minimum  funding  requirements
and all other material  requirements of ERISA, if applicable,  so as not to give
rise to any material liability thereunder.

         (s) A Provider engages in any line or lines of business  activity other
than the businesses in which it is engaged on the date hereof.

                                       V-3
<PAGE>
         (t) An "Event of  Default"  (as  defined in the Loan  Agreement)  shall
occur under the Loan Agreement.

         (u) Any  provision of this  Agreement  shall for any reason cease to be
valid and  binding on the  Primary  Servicer  or any  Provider,  or the  Primary
Servicer or any Provider shall so state in writing.

         (v) A Change of Control shall occur.

         (w) The Current  Ratio,  calculated at the end of any fiscal quarter of
the Providers, is less than 1.05:1.00.

         (x) The  Consolidated  Net  Worth  of Five  Star  and its  Subsidiaries
calculated at the end of any fiscal  quarter of the  Providers,  is less than an
amount  equal  to the  sum of (i)  $37,500,000  plus  (ii)  100% of  Equity  Net
Proceeds.

                                       V-4

<PAGE>
                                   EXHIBIT VI

                             RECEIVABLE INFORMATION

         The following  information  shall, as appropriate,  be provided by each
Provider to the Master Servicer with respect to each Batch Receivable,  together
with such other information and in such form as may reasonably be requested from
time to time by the Master  Servicer and as, in accordance  with applicable law,
may  be  disclosed  or  released  to  the  Master   Servicer  (the   "Receivable
Information"):

                  (i) customer/patient demographic information;

                  (ii)  insured  party  demographic  and  other   policy-related
         information;

                  (iii) such  Provider's  services and  products  classification
         information  (i.e.,  D.R.G. and other like  information  established by
         such Provider from time to time to classify  services rendered or goods
         sold at or by such Provider's institutions);

                  (iv) Obligor required information (i.e.,  information provided
         in the  ordinary  course of  business to any  specified  Obligor or any
         other information required to be provided to an Obligor pursuant to any
         agreement, contract or other arrangement with such Obligor); and

                  (v) billing  information  (i.e.,  all information  provided by
         such  Provider  on  invoices  to  Obligors  and any  other  information
         required to be provided  pursuant to the Credit and  Collection  Policy
         and, to the extent the Transmission will not be via computer interface,
         including a copy of the admitting  face sheet,  CMS Form and a detailed
         copy of the bill).

                                      VI-1
<PAGE>
                                  EXHIBIT VII-A

                     FORM OF NOTICE TO GOVERNMENTAL ENTITIES

                          [Letterhead of the Provider]
                                                                       [Date]
[Name and Address
of Governmental Entity]

                  Re:      Change of Account and Address

To Whom it May Concern:

         Please be advised  that we have  opened a new bank  account at [Lockbox
Bank]1 and a  post-office  box with respect to such bank  account.  Accordingly,
until further notice, we hereby request that:

                  (1) All wire transfers be made directly into our account at:

                           [Lockbox Bank]
                           ___________________
                           ___________________
                           Account #_______________
                           ABA #__________________
                           Confirm Phone Number:  _______________
                           Attention:  ___________________

                  (2)      All Explanations of Benefits,  remittance advices and
                           other forms of payment,  including checks, be made to
                           our post office box located at:

                           ___________________
                           ___________________
                           ___________________

                           Reference:  Account #____________

                  Thank you for your cooperation in this matter.

                                            [NAME OF PROVIDER]

                                            By:____________________
                                                  [Authorized Officer]
--------
1                 In the case of WI it will not be the Lockbox Bank.

                                     VII-A-1

<PAGE>

                                  EXHIBIT VII-B

                   FORM OF NOTICE TO NON-GOVERNMENTAL ENTITIES

                          [Letterhead of the Provider]
                                                                        [Date]

[Name and Address
of Obligor]

                  Re:      Change of Account and Address

To Whom it May Concern:

                  Please be advised that we are selling and contributing to FSQC
Funding Co., LLC (the "Purchaser"),  an affiliated company,  all of our existing
and future receivables  payable by you to us; and the Purchaser is assigning the
aforementioned   existing  and  future  arising  receivables  as  collateral  to
____________,  for the benefit of the Purchaser's lenders . Accordingly, you are
hereby directed to make:

                  (1) All wire transfers directly to the following account:

                           __________________
                           __________________
                           ___________________
                           Account #_______________
                           ABA #__________________
                           Confirm Phone Number:  _______________
                           Attention:  ___________________

                   (2)     All Explanation of Benefits,  remittance  advices and
                           other  forms of  payment,  including  checks,  to the
                           following address:

                           __________________
                           __________________
                           Reference:  _________________

                  The   foregoing   directions   shall  apply  to  all  existing
receivables  payable to us and (until further written notice) to all receivables
arising in the future and may not be revoked except by a writing executed by the
Purchaser.

                                     VII-B-1

<PAGE>

                  Please  acknowledge your receipt of this notice by signing the
enclosed copy of this letter and returning it in the enclosed envelope.

                  Thank you for your cooperation in this matter.

                                    [NAME OF PROVIDER]

                                    By:_______________________________
                                             [Authorized Officer]

FSQC FUNDING CO., LLC

By:____________________
   [Authorized Officer]

Receipt Acknowledged:
  [Name of Obligor]

By:  ____________________
         Title:

                                     VII-B-2

<PAGE>
                                  EXHIBIT VIII

                        PRIMARY SERVICER RESPONSIBILITIES

         Each Provider shall be responsible for the following administration and
servicing obligations (the "Primary Servicer  Responsibilities")  which shall be
performed by the Primary  Servicer on behalf of the Providers until such time as
a successor servicer shall be designated and shall accept  appointment  pursuant
to Section 1.05(b) of the Agreement:

         (a) Servicing Standards and Activities.  The Primary Servicer agrees to
administer  and  service  the  Batch  Receivables  sold  or  contributed  by the
Providers  in each  Transferred  Batch  (i) to the  extent  consistent  with the
standards  set forth in clauses  (b)(i)  through (iv) below,  with the same care
that it exercises in administering and servicing similar receivables for its own
account,  (ii) within the  parameters  of services set forth in paragraph (b) of
this  Exhibit  VIII,  as such  parameters  may be  modified  by  mutual  written
agreement of the Purchaser and the Primary Servicer,  (iii) in compliance at all
times  with  applicable  law and with  the  agreements,  covenants,  objectives,
policies and procedures set forth in the Agreement,  and (iv) in accordance with
industry  standards for servicing  healthcare  receivables unless such standards
conflict with the  procedures set forth in paragraph (b) of this Exhibit VIII in
which case the provisions of paragraph (b) shall control.  The Primary  Servicer
shall establish and maintain electronic data processing services for monitoring,
administering  and  collecting  the Batch  Receivables  in  accordance  with the
foregoing  standards and shall, within three Business Days of the deposit of any
checks,  other  forms of cash  deposits,  EOB's or other  written  matter into a
Government  Lockbox,  post such  information to its electronic  data  processing
services.

         (b)   Parameters   of   Primary   Servicing.   The   Primary   Servicer
Responsibilities shall be performed within the following parameters:

                  (i) Subject to the review and  authority of the  Purchaser and
         except as otherwise  provided  herein,  the Primary Servicer shall have
         full power and authority to take all actions that it may deem necessary
         or  desirable,  consistent  in all material  respects with its existing
         policies  and  procedures  with  respect  to  the   administration  and
         servicing of accounts receivable, in connection with the administration
         and servicing of Batch Receivables.  Without limiting the generality of
         the foregoing,  the Primary  Servicer  shall, in the performance of its
         servicing  obligations  hereunder,  act in  accordance  with all  legal
         requirements  and subject to the terms and conditions of the Agreement.
         The Primary  Servicer  agrees that the Primary  Servicing  Fee has been
         calculated to cover all costs and expenses  incurred in the performance
         of its servicing  obligations  hereunder and no other  reimbursement of
         costs and expenses shall be payable to the Primary Servicer.

                  (ii) The  Primary  Servicer  shall not be  entitled  to sue to
         enforce or  collect  any Batch  Receivable  without  the prior  written
         consent  of the  Purchaser  unless  the  Primary  Servicer  shall  have
         purchased such Batch Receivable in accordance with the Agreement.

                                     VIII-1
<PAGE>

                  (iii) The Primary  Servicer  shall not change in any  material
         respect  its  existing  policies  and  procedures  with  respect to the
         administration and servicing of accounts receivable (including, without
         limitation,  the  amount and timing of  write-offs)  without  the prior
         written consent of the Purchaser.

                  (iv) The Primary  Servicer will be responsible  for monitoring
         and collecting the Batch Receivables,  including,  without  limitation,
         contacting  Obligors  that have not made  payment  on their  respective
         Batch  Receivables  within the customary  time period for such Obligor,
         and  resubmitting  any claim  rejected by an Obligor due to  incomplete
         information.

                  (v) If the Primary  Servicer  determines  that a payment  with
         respect to a Batch  Receivable has been received  directly by a patient
         or any other Person,  the Primary  Servicer shall  promptly  advise the
         Purchaser,  and the  Purchaser  shall be entitled  to presume  that the
         reason  such  payment  was made to such  patient  or other  Person  was
         because of a breach of representation or warranty in the Agreement with
         respect to such Batch Receivable (such as, by way of example, the forms
         related to such Batch Receivable not being properly  completed so as to
         provide for direct  payment by the  Obligor to the  Primary  Servicer),
         unless the  Primary  Servicer  shall  demonstrate  that such is not the
         case. In the case of any such Batch  Receivable which is determined not
         to be a Denied  Receivable,  the Primary Servicer shall promptly demand
         that such patient or other Person remit and return such funds.  If such
         funds are not promptly received by the relevant  Provider,  the Primary
         Servicer shall take all reasonable steps to obtain such funds.

                  (vi)  Notwithstanding   anything  to  the  contrary  contained
         herein,  the Primary Servicer may not amend,  waive or otherwise permit
         or agree to any  deviation  from the terms or  conditions  of any Batch
         Receivable  in any material  respect  without the prior  consent of the
         Purchaser.

         (c) The Loan Agreement. The Primary Servicer shall be responsible, with
the Purchaser, for the determination and application of the Eligibility Criteria
and the delivery and  certification  of information  relating to the Receivables
required to be delivered under the Loan Agreement.

         (d) Aged Term Servicing.  The parties hereby agree that at such time as
any Batch  Receivable  is unpaid for more than 120 days  after the Last  Service
Date, the Primary Servicer shall,  upon the request of the Purchaser,  turn over
all of its Primary Servicer  Responsibilities  under this Agreement with respect
to such Batch Receivable to a successor servicer selected by the Purchaser,  and
such servicer shall thereafter service such Batch Receivable.

         (e) Termination of Primary Servicer Responsibilities; Cooperation. Upon
the termination of the performance of the Primary Servicer  Responsibilities  by
the Primary  Servicer in accordance with Section  1.05(b) of the Agreement,  the
Primary Servicer shall immediately  transfer to a successor servicer  designated
by the Purchaser all records,  computer access and other information as shall be
necessary or desirable, in the reasonable judgment of such successor servicer,

                                     VIII-2
<PAGE>
to perform such responsibilities. The Primary Servicer shall otherwise cooperate
fully with such successor servicer.

         (f) Primary  Servicing Fee. Upon the transfer of servicing with respect
to any  Receivable  pursuant to this  Agreement,  the Primary  Servicer shall no
longer be paid the Primary Servicing Fee relating to such Receivables,  and such
Primary  Servicing  Fee  will be paid to the  successor  Person  performing  the
Primary Servicer Responsibilities with respect thereto.

                                     VIII-3

<PAGE>
                                   EXHIBIT IX

                           SERVICER TERMINATION EVENTS

         Each of the following shall be a "Servicer Termination Event":

         (a) An event has occurred and is continuing  that  constitutes an Event
of Termination  with respect to the Primary Servicer or that would constitute an
Event  of  Termination  with  respect  to  the  Primary  Servicer  but  for  the
requirement that notice be given or time elapse or both.

         (b) The Primary  Servicer is not performing,  or becomes unable (in the
commercially  reasonable  determination of the Purchaser) to perform,  fully the
Primary  Servicer  Responsibilities  set  forth in  Exhibit  VIII  hereof or the
Purchaser,   in  its  sole  judgment,   which  judgment  shall  be  commercially
reasonable,  is not  satisfied  with the  performance  by any  Provider,  or the
Primary   Servicer  on  behalf  of  the  Providers,   of  the  Primary  Servicer
Responsibilities.

         (c) The  Primary  Servicer  is  unable  to  maintain  the  Transmission
interface  described in Exhibit X to the reasonable  satisfaction  of the Master
Servicer, or the electronic  information  servicing  capabilities of the Primary
Servicer  are not  functioning  for a  period  of more  than  three  consecutive
Business Days.

         (d) The Primary Servicer has sent multiple  Transmissions to the Master
Servicer in a manner that is not in compliance with the specifications set forth
in Exhibit X hereof.

         (e) As of any date after the Initial Transfer Date, more than 8% of all
outstanding Batch Receivables  (excluding Denied Receivables) are aged more than
120 days but less than 180 days from the  respective  Last Service Dates of such
Batch Receivables.

                                      IX-1

<PAGE>
                                    EXHIBIT X

           INTERFACE BETWEEN MASTER SERVICER AND THE PRIMARY SERVICER

         1.       The Master Servicer will convey  appropriate data requirements
                  and  instructions  to the  Primary  Servicer  to  establish  a
                  computer  interface between the Primary Servicer's systems and
                  the  Master  Servicer's  receivables  monitoring  system.  The
                  interface   will   permit  the  Master   Servicer  to  receive
                  electronically  the  Primary  Servicer's  accounts  receivable
                  data, including the Receivable  Information,  billing data and
                  collection  and  other   transaction   data  relating  to  the
                  Receivables.

         2.       The Primary  Servicer  shall give the Master  Servicer and the
                  Purchaser  at least ten  Business  Days'  notice of any coding
                  changes or electronic  data  processing  system  modifications
                  made by the Primary  Servicer  which  could  affect the Master
                  Servicer's  processing  or  interpretation  of  data  received
                  through the interface.

         3.       The Master Servicer shall have no  responsibility to return to
                  the Primary Servicer any information which the Master Servicer
                  receives pursuant to the computer interface.

         4.       The Primary  Servicer will prepare weekly accounts  receivable
                  data  files of all  transaction  types for all of the  Primary
                  Servicer's sites that are included in the program.  The weekly
                  cutoff will occur at a  predetermined  time each week, and the
                  weekly  cutoff date for all of the sites must occur at exactly
                  the same time.  The cutoff date that will be selected  will be
                  at the end of business for a specific  day of the week,  or in
                  other words, at the end of the Primary Servicer's  transaction
                  posting  process  for that  day.  The  Primary  Servicer  will
                  temporarily  maintain a copy of the accounts data files in the
                  event  that  the  data  is   degraded  or   corrupted   during
                  transmission, and needs to be re-transmitted.

         5.       The Master  Servicer will be responsible for the management of
                  the hardware, communications and software used in the program.

         6.       The Master  Servicer's data center will receive the Receivable
                  files, and immediately confirm that the files have been passed
                  without  degradation  or  corruption  of data by balancing the
                  detailed items to the control totals that accompany the files.
                  Any problems in this process will be  immediately  reported to
                  the Primary  Servicer so that the  Receivable  file can be re-
                  transmitted, if necessary.

         7.       Once the receipt of the  Receivable  data has been  confirmed,
                  the Master  Servicer  will perform  certain tests and edits to
                  ensure that each Receivable

                                       X-1

<PAGE>
                  meets the specified  eligibility  criteria for purchase by the
                  Purchaser.   Compliance  with  concentration  limits  will  be
                  verified  and the Master  Servicer  will  notify  the  Program
                  Manager to initiate a Receivable purchase using the Receivable
                  file received.  Upon the successful  completion of a purchase,
                  the Master  Servicer  will  generate a one-line  trial balance
                  (listing all purchased  accounts)  confirming the  Receivables
                  that have been purchased.  A copy of the trial balance will be
                  forwarded to the Providers,  to the Primary  Servicer,  to the
                  Purchaser, and to the Program Manager to confirm the purchase.

         8.       The  Primary  Servicer's  sites  will  continue  to post daily
                  transactions to their respective Receivable files. The Primary
                  Servicer's  Receivable  files for each of the  eligible  sites
                  will  include all  transactions  posted  through that day. The
                  Primary  Servicer  will  create  a  transaction  report  and a
                  Receivable   file  for  each  of  the  eligible   sites.   The
                  transaction report will contain all transactions posted to the
                  respective site Receivable file for the specified  period (and
                  will indicate the respective  site and the number of items and
                  total   dollars  on  each   transaction   report  for  control
                  purposes).  The  Receivable  file will contain  balances  that
                  reflect  the  transactions  posted on the  Primary  Servicer's
                  systems through the end of business of the specified period.

         9.       The Primary  Servicer will transmit the billing,  transaction,
                  and the most  current  Receivable  data  files  to the  Master
                  Servicer's data center according to the established  schedule.
                  The Providers and the Primary Servicer should, again, maintain
                  the  backup  of each of these  files in the  event  that a re-
                  transmission is necessary.

         10.      The Master  Servicer's data center will confirm that the files
                  have been received intact,  and will  immediately  communicate
                  any  problems to the  Primary  Servicer in order to initiate a
                  re-transmission.  The  Master  Servicer  will  then  post  the
                  transaction   files  to  the  accounts   receivable   for  the
                  previously  purchased  accounts  that the Master  Servicer  is
                  maintaining,  and consequently  update the affected  balances.
                  Upon  completion of the posting  process,  the Master Servicer
                  will generate  summary reports of the posting process that the
                  Program   Manager  will  use  to  complete   various   funding
                  activities. The Master Servicer summary reports will reference
                  the Primary Servicer's transaction codes and activity to codes
                  that are common to the funding program.

         11.      The Master  Servicer  will then  compare the updated  accounts
                  balances on the Master  Servicer's system to the corresponding
                  account balances  reflected on the Receivable file. The Master
                  Servicer expects that the balances for the funded  Receivables
                  will be congruent,  and any discrepancies  will be immediately
                  examined and resolved  through the  cooperative  effort of the
                  Master Servicer and the Primary Servicer.  The Master Servicer
                  shall produce

                                       X-2
<PAGE>
                  discrepancy reports (e.g.,  "Funding Only" or "Out of Balance"
                  reports) and the Primary  Servicer  shall respond  promptly to
                  such reports.

         12.      Once the  reconciliation  process has been  completed  and any
                  discrepancies  between  the Master  Servicer  and the  Primary
                  Servicer's  Receivable  files resolved through the discrepancy
                  report  process  described in  paragraph 11 above,  the Master
                  Servicer will then process the Receivable  file and advise the
                  Purchaser  that it may  purchase  any new  Receivable  that is
                  eligible.  The  Master  Servicer  will  then  proceed  through
                  exactly the same process described in paragraph 6 above.

                                       X-3

<PAGE>

                                   SCHEDULE I

                                    PROVIDERS

Five Star Quality Care-AZ, LLC
Five Star Quality Care-CA, LLC
Five Star Quality Care-Colorado, LLC
Five Star Quality Care-CT, LLC
Five Star Quality Care-GA, LLC
Five Star Quality Care-IA, LLC
Five Star Quality Care-KS, LLC
Five Star Quality Care-MI, LLC
Five Star Quality Care-MO, LLC
Five Star Quality Care-NE, LLC
Five Star Quality Care-WI, LLC
Five Star Quality Care-WY, LLC
Five Star Quality Care-CA, Inc.
Five Star Quality Care-IA, Inc.
Five Star Quality Care-MI, Inc.
Five Star Quality Care-NE, Inc.

<PAGE>
                                   SCHEDULE II

                              ADDRESSES FOR NOTICE

If to the Program Manager:

                               Dresdner Kleinwort Wasserstein LLC
                               75 Wall Street, 32nd Floor
                               New York, New York  10005
                               Attention: Stephen Kovach
                               Tel:    (212) 895-1774
                               Fax:    (212) 895-1766

                               and

                               Healthcare Finance Group, Inc.
                               110 Wall Street, 2nd Floor
                               New York, New York 10005
                               Attention:  David Hyams, Chief Credit Officer
                               Tel: (212) 785-9212
                               Fax: (212) 785-9211

If to the Master Servicer:

                               Healthcare Finance Group, Inc.
                               110 Wall Street, 2nd Floor
                               New York, New York 10005
                               Attention:  David Hyams, Chief Credit Officer
                               Tel: (212) 785-9212
                               Fax: (212) 785-9211

<PAGE>

                         OMITTED EXHIBITS AND SCHEDULES

The following  Exhibits and Schedules to the  Receivables  Purchase and Transfer
Agreement have been omitted:

Exhibit Number                 Exhibit Title
--------------                 -------------

XI-A                           Memorandum of Providers' Counsel with respect to
                               the Patient Consent Forms

XI-B                           Form of Opinion of Providers' and Purchaser's
                               Counsel with Respect to Certain Corporate Matters

XI-C                           Form of Opinion of Providers' and Purchaser's
                               Counsel with Respect to Certain Bankruptcy
                               Matters

XII                            Form of Depository Agreement

XIII                           Form of Parent Guaranty

XIV                            Form of Pledge Agreement

XV                             Form of Subscription Agreement

Schedule Number                Schedule Title
---------------                --------------

Schedule III                   Credit and Collection Policy

Schedule IV                    Disclosures

Schedule V                     Lockbox Information

Schedule VI                    Tradenames

Schedule VII                   Net Value Factors

Schedule VIII                  Providers with Facilities in Certain States

The Registrant agrees to furnish  supplementally a copy of the foregoing omitted
exhibits and schedules to the Securities and Exchange Commission upon request.

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