Document:

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                   FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

         THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ("FIRST AMENDMENT")
dated as of the 30th day of September, 2003, is made and entered into by and
between FORMATION PROPERTIES III, LLC, a Delaware limited liability company
("PURCHASER") and FC PROPERTIES III, LLC, a Delaware limited liability company
("PARENT") and MARINER HEALTH CARE, INC., a Delaware corporation; MARINER HEALTH
CARE MANAGEMENT COMPANY, a Delaware corporation; MARINER HEALTH CENTRAL, INC., a
Delaware corporation; MARINER HEALTH OF FLORIDA, INC., a Delaware corporation;
TAMPA MEDICAL ASSOCIATES, INC., a Florida corporation; MHC/LCA FLORIDA, INC., a
Delaware corporation; MARINER HEALTH CARE OF ORANGE CITY, INC., a Delaware
corporation; MARINER HEALTH CARE OF PORT ORANGE, INC., a Delaware corporation;
MARINER HEALTH CARE OF PALM CITY, INC., a Delaware corporation; MARINER HEALTH
CARE OF LAKE WORTH, INC., a Delaware corporation; MARINER HEALTH CARE OF
PINELLAS POINT, INC., a Delaware corporation; MHC/CSI FLORIDA, INC., a Delaware
corporation; MARINER HEALTH CARE OF TUSKAWILLA, INC., a Delaware corporation;
MARINER HEALTH CARE OF METROWEST, INC., a Delaware corporation; MARINER HEALTH
CARE OF INVERNESS, INC., a Delaware corporation; MARINER HEALTH CARE OF
MACCLENNY, INC., a Delaware corporation; MARINER HEALTH PROPERTIES IV, LTD., a
Florida limited partnership; MARINER HEALTH AT BONIFAY, INC., a Delaware
corporation; MARINER HEALTH CARE OF ATLANTIC SHORES, INC., a Delaware
corporation; MARINER HEALTH OF ORLANDO, INC., a Delaware corporation; MARINER
HEALTH OF PALMETTO, INC., a Delaware corporation and MARINER HEALTH OF
JACKSONVILLE, INC., a Delaware corporation (collectively, "SELLERS").

                                    RECITALS

         A.       The parties entered into the Asset Purchase Agreement dated as
of August 19, 2003 ("ASSET PURCHASE AGREEMENT") pursuant to which Sellers agreed
to sell to Purchaser and Purchaser agreed to purchase from Sellers the Purchased
Assets, which are related to certain skilled nursing facilities located in the
State of Florida and which are owned or leased by Sellers, on the terms and
conditions set forth in the Asset Purchase Agreement, including the Mariner
Health of St. Augustine Facility ("ST. AUGUSTINE FACILITY").

         B.       Pursuant to the St. Augustine Lease Agreement commencing as of
June 1, 1995 by and between Regency Investors, Ltd., a Georgia limited
partnership ("REGENCY") and Mariner Health of Florida, Inc., a Delaware
corporation (formerly known as Regency Health Care Centers, Inc.) ("MHF")
("LEASE"), as evidenced by the Memorandum of Lease recorded in O.R. Book 1114,
page 116 in the Official Records of St. John's County, Florida ("MEMORANDUM"),
MHF leases from Regency and Regency leases to MHF the land and improvements
associated with the St. Augustine Facility and the furniture, fixtures,
equipment and other personal property used in the operation of the St. Augustine
Facility. Additionally, pursuant to the Option Agreement dated May 2, 1996 by
and between MHF and Regency

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("OPTION"), Regency granted to MHF the exclusive option to purchase the St.
Augustine Facility on the terms and conditions set forth in the Option
Agreement.

                  C. Purchaser and Regency have entered into the Asset Purchase
Agreement dated September 26, 2003 ("ST. AUGUSTINE PURCHASE AGREEMENT") pursuant
to which Purchaser agrees to purchase from Regency and Regency agrees to sell to
Purchaser all of Regency's assets related to the St. Augustine Facility
("REGENCY ASSETS") on the terms and conditions set forth in the St. Augustine
Purchase Agreement.

         D.       Sellers are subject to (i) the Civil and Administrative
Settlement Agreement dated March 25, 2002 by and between the United States of
America, acting through the United States Department of Justice and on behalf of
the Office of Inspector General of the Department of Health and Human Services
and Mariner Post-Acute Network, Inc.; Mariner Health Group, Inc.; and Affiliated
Debtors ("CASA") pursuant to which Sellers have agreed to settle certain claims
as set forth in the CASA and (ii) the Corporate Integrity Agreement dated as of
March 25, 2002 by and between the Office of Inspector General of the Department
of Health and Human Services ("OIG") and Mariner Health Care, Inc. ("CIA")
pursuant to which Sellers are required to take certain actions to insure
compliance by Sellers with the requirements of Medicare, Medicaid and all other
Federal health care programs, on the terms and conditions set forth in the CIA.

         E.       Pursuant to the Section 4.25 of the Asset Purchase Agreement,
Sellers are to use commercially reasonable efforts to secure evidence reasonably
acceptable to Purchaser from OIG that Purchaser will not be subject to the terms
of the CASA and CIA. Notwithstanding such efforts, OIG may require that
Sovereign Health Care, LLC ("SOVEREIGN"), the parent of the proposed operators
of the Facilities or certain of its affiliates, enter into a Successor
Monitoring Agreement with OIG (the "SUCCESSOR CIA").

         F.       Several of the Facilities are subject to various restrictions,
covenants, requirements and conditions that are of record in the county in which
such Facilities are located ("CCR'S"), which may subject Sellers, as the owner
of such Facilities, to various charges, liens, assessments or other payments.

         G.       The parties desire to amend the Purchase Agreement to provide
for (i) the direct purchase of the Regency Assets from Regency, the termination
of the St. Augustine Lease and Memorandum and the termination of the Option;
(ii) the possibility that Sovereign may be required to enter into the Successor
CIA and the allocation of expenses incurred in complying with the Successor CIA;
(iii) the allocation of expenses incurred and liability arising before Closing
with respect to the CCR's, all on the terms and conditions set forth in this
First Amendment; and (iv) such other amendments as set forth herein.

         NOW, THEREFORE, in consideration of the Recitals, and the mutual
agreements, covenants and conditions contained in this First Amendment and the
Asset Purchase Agreement, the parties agree as follows:

         I.       Acquisition of the St. Augustine Facility.

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                  1.1.     Representations and Warranties. Notwithstanding that
Purchaser has entered into the St. Augustine Purchase Agreement to purchase the
Regency Assets directly from Regency, all of Sellers' representations and
warranties in the Asset Purchase Agreement that are directly relevant to MHF and
the St. Augustine Facility shall remain in full force and effect as set forth in
the Asset Purchase Agreement to the same extent as if the St. Augustine Facility
constituted a Facility under the Asset Purchase Agreement.

                  1.2.     Closing Deliveries. Sellers shall make those closing
deliveries directly relevant to MHF and the St. Augustine Facility as are
necessary to transfer to Purchaser and Purchaser's designee all of the Purchased
Assets related to the St. Augustine Facility as and when the Closing occurs
under the St. Augustine Purchase Agreement. Additionally, MHF shall deliver to
Purchaser on the Closing Date instruments in form and substance reasonably
acceptable to Purchaser and Title Company necessary to terminate the Lease, the
Memorandum and the Option. If the Closing under the St. Augustine Purchase
Agreement occurs on a date other than the Closing Date, Sellers shall
nevertheless make all of its closing deliveries on the Closing Date, and such
closing deliveries shall be held in escrow by the Escrow Agent pursuant to
escrow instructions mutually agreed on by Purchaser and Sellers and delivered to
Escrow Agent on the Closing Date.

                  1.3.     Lease Termination Fee. At Closing, Seller shall pay
to Purchaser the sum of $250,000.00 as consideration for the termination of the
Lease. At Purchaser's option, such amount shall be paid to Purchaser at Closing
by wire transfer or shown as a credit to Purchaser on the Closing settlement
statement.

                  1.4.     Tax Prorations. All real estate and personal property
taxes related to the St. Augustine Facility shall be prorated as of the date the
Lease terminates, and Sellers shall be responsible for all such taxes accruing
as of such date.

         II.      Representations and Warranties and Covenants Related to the
CASA and the CIA.

                  2.1.     Representations and Warranties. Sellers represent and
warrant that (i) Sellers are in compliance in all material respects with the
CASA and CIA; (ii) Sellers are not in default of the terms of the CASA or CIA in
any material respect; and (iii) no event has occurred which, with the giving of
notice or the lapse of time or both, would cause a material breach or material
default under the CASA or CIA.

                  2.2.     Covenants. Sellers shall be responsible for all
reasonable direct fees, costs, expenses, obligations, liabilities and
expenditures (excluding, without limitation, reasonable attorney's fees and
other reasonable legal costs and expenses actually incurred and internal
administrative costs) ("Section 2.1 Expenditures") incurred by Purchaser, Health
Services Properties, LLC ("HSP"), the tenants of Health Services Properties, LLC
("HSP Tenants"), Sovereign and any subsidiary or affiliate of such entities
resulting from or arising out of the monitoring requirements that may be set
forth in the Successor CIA; provided, however, Sellers shall not be responsible
for any penalties imposed on any party to the Successor CIA arising out of a
breach of the Successor CIA.

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                  2.3.     Payment of Section 2.1 Expenditures. Sellers shall
pay to Purchaser, or Purchaser's designee, on demand all Section 2.1
Expenditures incurred by Purchaser, HSP, HSP Tenants, Sovereign or any
subsidiary or affiliate of Purchaser, HSP, HSP Tenants or Sovereign, as
evidenced by invoices or other documentation reasonably identifying such Section
2.1 Expenditures. If any Section 2.1 Expenditures are not paid within ten (10)
days after written demand to Sellers, such Section 2.1 Expenditures shall bear
interest at an interest rate per annum equal to the prime rate published from
time to time by the Wall Street Journal plus one percent (1%) ("DEFAULT RATE")
until paid in full.

         III.     Covenants Related to the CCR's.

                  Sellers shall be responsible for all fees, costs, expenses,
obligations, liabilities and assessments accruing or arising under the CCR's
pertaining to the period before the Closing Date.

         IV.      Indemnification.

                  4.1.     Notwithstanding anything contained in Articles VII of
the Asset Purchase Agreement to the contrary, MHC indemnifies, exculpates and
holds Purchaser Indemnified Parties harmless from and against, and agrees
promptly to defend Purchaser Indemnified Parties from and reimburse Purchaser
Indemnified Parties for, Purchaser Indemnified Losses which Purchaser
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with (i) any misrepresentation or inaccuracy in or
any breach of the representations and warranties contained in Section 2.1 of
this First Amendment; (ii) any and all obligations arising under Article II and
III of this First Amendment, the CASA and the CIA.; or (iii) any and all
obligations of Sellers arising under the CCR's and pertaining to the period
prior to the Closing Date; provided, however, Purchaser Indemnified Parties
shall not be entitled to reimbursement for any Purchaser Indemnified Losses to
the extent that Purchaser is reimbursed for such losses by the Title Company.

                  4.2.     The limitations set forth in Section 7.6 of the Asset
Purchase Agreement shall not apply to the Purchaser Indemnified Losses set forth
in Section 4.1 of this First Amendment.

         V.       Title Policy Premium Rebate

                  Purchaser and Sellers agree to share equally in any title
insurance premium rebates provided by Title Company.

         VI.      Remediation Fund.

                  6.1.     Escrowed Remediation Fund. The Escrowed Remediation
Fund shall be equal to the amount of Six Hundred Sixty-Five Thousand Dollars
($665,000) less all Remediation Expenses incurred before the Closing Date to
repair the roof located at the Mariner Health of Palmetto Facility ("PALMETTO
FACILITY") that are supported by documentation provided to Purchaser
demonstrating the amount expended in connection with such roof repairs
("PALMETTO ROOF REMEDIATON EXPENSES"), and the parties acknowledge that such
amounts are held by Lasalle Bank National Association ("LASALLE") as the
Escrowed Remediation Fund.

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Additionally, the items set forth on Schedule 6.1 to this First Amendment shall
be deemed to be Remediated Conditions and shall be treated for all intents and
purposes as Remediated Conditions identified as of the date of execution of the
Asset Purchase Agreement.

                  6.2.     Mariner Health of Palmetto, Inc. and Tar Heel
Roofing, Inc. have entered into the Roof Construction Agreement dated August 11,
2003 ("ROOF REPAIR CONTRACT") to effect certain repairs described in such
agreement in connection with the Palmetto Facility. The Roof Repair Contract
amount, less the Palmetto Roof Remediation Expenses already paid by Sellers
pursuant to the Roof Repair Contract, are included in the Remediation Fund.
Mariner shall timely forward to Purchaser all invoices, bills and requests for
payments in connection with the Roof Repair Contract, and Purchaser, in turn,
shall submit such requests for payment to Lasalle. If Lasalle does not pay any
such reasonably documented expenses in connection with the Roof Repair Contract
within five (5) Business Days after such submission, Purchaser shall pay all
such expenses and shall concurrently provide to Sellers reasonable evidence of
any such payment.

                  6.3.     The parties acknowledge that Section 6.2(a) of the
Asset Purchase Agreement requires any unused portion of the Remediation Fund to
be returned to Sellers on the Remediation Fund Release Date. If Lasalle does not
pay to Sellers such unused portion of the Remediation Fund within ten (10)
Business Days after the Remediation Fund Release Date, Purchaser shall pay to
Sellers within ten (10) Business Days thereafter an amount equal to the unused
portion of the Remediation Fund not paid to Sellers by Lasalle. Purchaser shall
promptly provide Sellers with copies of all correspondence pertaining to
withdrawals from the Escrowed Remediation Fund through the Remediation Fund
Release Date.

         VII.     Miscellaneous

                  7.1.     Any terms not otherwise defined in this First
Amendment shall have the meanings ascribed to them in the Asset Purchase
Agreement.

                  7.2.     Except as modified by this First Amendment, the Asset
Purchase Agreement shall remain in full force and effect.

                  7.3.     This First Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  7.4.     The Article and Section headings contained in this
First Amendment are for reference purposes only and shall not affect in any way
the meaning or interpretation of this First Amendment.

                  7.5.     Sovereign and all affiliates of Sovereign shall be
third-party beneficiaries of Sections 2.2 and 2.3 of this Agreement.

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                  WITNESS the following signatures, as of the date of this
agreement.

                                       FORMATION PROPERTIES III, LLC,
                                       a Delaware limited liability company

                                       By:   FC Direction III, Inc.,
                                             its Managing Member

                                       By:   /s/ Christopher M. Sertich

                                       FC PROPERTIES III, LLC,
                                       a Delaware limited liability company

                                       By:   FC Investors III, LLC,
                                             its Manager

                                       By:   /s/ Christopher M. Sertich
                                             Christopher M. Sertich, Manager

                                       6
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                                       MARINER HEALTH CARE, INC.,
                                       a Delaware corporation

                                       By:  /s/ Boyd P. Gentry
                                            Boyd P. Gentry
                                            Senior Vice-President & Treasurer

                                       MARINER HEALTH CARE MANAGEMENT COMPANY,
                                       a Delaware corporation

                                       By:  /s/ Boyd P. Gentry
                                            Boyd P. Gentry
                                            Senior Vice President and Treasurer

                                       MARINER HEALTH CENTRAL, INC.,
                                       a Delaware corporation

                                       By:  /s/ Boyd P. Gentry
                                            Boyd P. Gentry
                                            President and Treasurer

                                       7
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                                  MARINER HEALTH OF FLORIDA, INC.,
                                  a Delaware corporation,
                                  TAMPA MEDICAL ASSOCIATES, INC.,
                                  a Florida corporation,
                                  MHC/LCA FLORIDA, INC., a Delaware corporation,
                                  MARINER HEALTH CARE OF ORANGE CITY, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF PORT ORANGE, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF PALM CITY, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF LAKE WORTH, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF PINELLAS POINT,
                                  INC., a Delaware corporation,
                                  MHC/CSI FLORIDA, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF TUSKAWILLA, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF METROWEST, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF INVERNESS, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF MACCLENNY, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH PROPERTIES IV, LTD.,
                                  a Florida limited partnership,
                                           By:   Mariner Health of Florida, Inc.
                                           Its:  General Partner
                                  MARINER HEALTH AT BONIFAY, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH CARE OF ATLANTIC SHORES,
                                  INC., a Delaware corporation,
                                  MARINER HEALTH OF ORLANDO, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH OF PALMETTO, INC.,
                                  a Delaware corporation,
                                  MARINER HEALTH OF JACKSONVILLE, INC.,
                                  a Delaware corporation

                                  By:  /s/ Boyd P. Gentry
                                       Boyd P. Gentry
                                       Vice President and Treasurer

                                       8<PAGE>
                                 PROMISSORY NOTE

$13,086,957.00                                                   October 1, 2003
                                                                Atlanta, Georgia

         FOR VALUE RECEIVED, FC PROPERTIES III, LLC, a Delaware limited
liability company ("Maker"), hereby promises to pay to the order of Mariner
Health Care., Inc., a Delaware corporation, as agent for, and for the account
of, the Sellers hereinafter referred to (together with any and all of its
successors and assigns and/or any other holder of this Note, "Payee"), without
offset, in immediately available funds in lawful money of the United States of
America, at the office of Payee, One Ravinia Drive, Suite 1500, Atlanta, DeKalb
County, Georgia or at such other place as Payee from time to time may designate
in writing, the principal sum of THIRTEEN MILLION EIGHTY-SIX THOUSAND NINE
HUNDRED FIFTY-SEVEN AND NO/100 DOLLARS ($13,086,957.00), together with interest
on the unpaid principal balance of this Note from day to day outstanding as
hereinafter provided.

         1.       Payment Schedule and Maturity Date. The entire principal
balance of this Note then unpaid shall be due and payable in full on September
30, 2008 (the "Maturity Date"), the final maturity of this Note. Accrued unpaid
interest shall be due and payable on November 11, 2003, and on the eleventh
(11th) day of each succeeding calendar month thereafter and on the Maturity Date
until all principal and accrued interest owing on this Note shall have been
fully paid and satisfied.

         2.       Senior Credit Facility. Maker's subsidiary, Formation
Properties III, LLC, a Delaware limited liability company (the "Purchaser"), has
financed a portion of the purchase price of acquiring the Facilities (as
hereinafter defined) with the proceeds of a $62,000,000 senior, secured loan (as
amended, supplemented, extended, renewed, restated or replaced from time to
time, the "Senior Credit Facility") pursuant to that certain Loan Agreement
dated as of September 30, 2003 (the "Senior Loan Agreement") by and among Maker,
the financial institutions signatory thereto as lenders (the "Senior Lenders"),
Citigroup Global Markets Realty Corp., as agent for the Senior Lenders (the
"Administrative Agent") and LaSalle Bank National Association, as collateral
agent for the Senior Lenders (together with any successor collateral agent
thereunder, the "Collateral Agent"). This Note is subject to the provisions of
that certain Intercreditor Agreement dated as of the date hereof (the
"Intercreditor Agreement"), by and between Payee and the Administrative Agent,
on behalf of the Senior Lender.

         3.       Interest.

                  3.1      Regular Interest. The unpaid principal balance of
this Note from day to day outstanding which is not past due, shall bear interest
at a rate of interest equal to eight percent (8.0%) per annum. Interest shall be
calculated on the basis of a year consisting of 360 days and with twelve (12)
thirty (30)-day months, except that interest due and payable for less than a
full month shall be calculated by multiplying the actual number of days elapsed
in such period by a daily interest rate based upon a 360-day year.

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                  3.2      Default Rate. Upon the occurrence and during the
continuation of a Default (as hereinafter defined), the entire outstanding
principal of, and to the extent permitted by applicable law, any overdue
interest on, this Note, and any other sum payable hereunder shall bear interest
at a rate per annum (the "Default Rate") equal to thirteen percent (13%) and
will be payable on demand; provided, however, that during the first two (2)
Forbearance Periods (as hereinafter defined) the Default Rate shall be equal to
ten and one-half percent (10.5%) per annum. In the event a Forbearance Period
for which the lower Default Rate applies is instituted with respect to an
interest payment Default, such lower Default Rate shall apply retroactively to
the date on which the Default occurred. The term "Interest Default Period" shall
be any period during which the sole Default existing under this Note shall be
the failure to make timely payment of interest on this Note, after giving effect
to any applicable grace or cure period.

         4.       Prepayment.

                  4.1      Optional Prepayment. Maker may prepay the principal
balance of this Note, in full at any time or in part from time to time without
prepayment penalty or premium, provided that: (i) Payee shall have actually
received from Maker, at least ten (10) days in advance of the prepayment date,
written notice of Maker's intent to prepay, specifying the amount of principal
which will be prepaid (the "Prepaid Principal"), and the date on which the
prepayment will be made; and (ii) each prepayment shall be in the amount of 100%
of the Prepaid Principal, plus accrued unpaid interest thereon to the date of
prepayment.

                  4.2      Mandatory Prepayment.

                  (a)      Sale of Facilities. This Note shall be subject to
mandatory prepayment in full or in part, as the case may be, on the effective
date of the sale or transfer of legal or beneficial ownership of any or all of
the Facilities (as hereinafter defined) (whether by asset sale, merger,
consolidation, sale or transfer of a majority of the equity interests in Maker,
or otherwise) (each such event, a "Sale"). On such effective date, Maker shall
prepay principal in an amount equal to the lesser of (i) one hundred ten percent
(110%) of the portion of the Loan (as hereinafter defined) allocated to the
Facility or Facilities subject to such Sale as set forth on Schedule 4.2
attached hereto and made a part hereof, and (ii) the entire outstanding
principal amount of this Note.

                  (b)      Refinancing of Senior Credit Facility. This Note
shall be subject to mandatory prepayment in full or in part, as the case may be,
on the date the Senior Credit Facility is refinanced. On such date Maker shall
prepay a portion of the outstanding principal amount of this Note in an amount
equal to the Net Refinancing Proceeds or the Net Increase Proceeds (as each such
capitalized terms is hereinafter defined), as applicable. The term "Net
Refinancing Proceeds" shall mean all loan proceeds received by Maker from the
refinancing of the Senior Credit Facility in excess of (i) the principal amount
of the Senior Credit Facility prepaid or repaid with the proceeds of such
refinancing, (ii) any prepayment premiums and exit fees required to be paid to
the Senior Lenders under the terms of the Senior Loan Agreement, as in effect on
the date hereof, and (iii) reasonable and customary transactional fees paid or
payable by Purchaser in connection with the closing of such refinancing. The
term "Net Increase Proceeds" shall mean all loan proceeds received by Maker in
connection with an increase in the amount of the Senior Credit Facility, less

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reasonable and customary transactional fees paid or payable by Purchaser in
connection with the closing of such increase transaction.

                  (c)      Excess Cash Flow Recapture. Maker shall be obligated
to make mandatory prepayments on this Note from time to time, during each
calendar year of Maker (commencing with calendar year 2004), in an amount equal
to all aggregate cash distributions made to the members of Maker in excess of
THREE MILLION SIX HUNDRED THIRTY-SIX AND NO/100 DOLLARS ($3,636,000.00);
provided, however, that the maximum mandatory prepayments under this paragraph
in any such calendar year shall not exceed FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000.00). Such prepayments shall be made contemporaneously with the
corresponding distributions to Maker's members.

                  (d)      Notice of Mandatory Prepayment. Maker shall give
Payee at least five (5) days prior written notice of each Sale or Refinancing
and the estimated amount of principal to be prepaid hereunder (though failure to
give such notice shall not affect Maker's obligation to make the corresponding
mandatory prepayment as and when herein provided), and shall on the date of such
prepayment also pay to Payee all accrued and unpaid interest on this Note to the
date of prepayment. Contemporaneously with each mandatory prepayment pursuant to
Section 4.2(c), Maker shall provide Payee with written notice specifying the
amount being prepaid and the calculation thereof.

         5.       Late Charges. If Maker shall fail to make any payment under
the terms of this Note within ten (10) days after the date such payment is due,
Maker shall pay to Payee on demand a late charge equal to One Thousand Five
Hundred and No/100 Dollars ($1,500.00) for each such delinquent payment. Such
ten (10) day period shall not be construed as in any way extending the due date
of, or cure period for, any payment. The late charge is imposed for the purpose
of defraying the expenses of Payee incident to handling such delinquent payment.
This charge shall be in addition to, and not in lieu of, any other remedy Payee
may have and is in addition to any fees and charges of any agents or attorneys
which Payee may employ upon the occurrence of a Default, whether authorized
herein or by law. Notwithstanding anything to the contrary contained in this
paragraph, no such late charge shall be payable with respect to any particular
delinquent interest installment if, within ten (10) days after demand by Payee
for such late charge, Maker initiates a Forbearance Period by delivery of an
Insufficient Funds Notice pursuant to Section 8.2(b)(i) hereof.

         6.       Certain Provisions Regarding Payments. Except as expressly
required to the contrary herein, all payments made under this Note shall be
applied, to the extent thereof, to accrued but unpaid interest then due and
payable, to unpaid principal, and to any other sums due and unpaid to Payee
under this Note or under any documents or agreements securing this Note (the
"Collateral Documents"), in such manner and order as Payee may elect in its sole
discretion. All permitted or required prepayments on this Note shall be
accompanied by the payment of accrued interest then due and payable (if any),
and such amounts, collectively, shall be applied, to the extent thereof, first
to accrued interest on this Note then due and payable, then to the outstanding
principal balance hereof, and thereafter to any other sums due and unpaid to
Payee under this Note or the Collateral Documents, in such manner and order as
Payee may elect in its sole discretion. Remittances in payment of any part of
the indebtedness other than in the required amount in

                                       3
<PAGE>

immediately available U.S. funds shall not, regardless of any receipt or credit
issued therefor, constitute payment until the required amount is actually
received by Payee in immediately available U.S. funds and shall be made without
offset, demand, counterclaim, deduction, or recoupment (each of which is hereby
waived) and accepted subject to the condition that any check or draft may be
handled for collection in accordance with the practice of the collecting bank or
banks. Acceptance by the Payee of any payment in an amount less than the amount
then due on any indebtedness shall be deemed an acceptance on account only,
notwithstanding any notation on or accompanying such partial payment to the
contrary, and shall not in any way excuse the existence of a Default. Whenever
any payment under this Note or any other Collateral Document falls due on a day
other than a Business Day (as hereinafter defined), such payment may be made on
the next succeeding Business Day, and the extension of time in such case shall
be included in the computation of interest. The term "Business Day," as used in
this Note, shall mean any day other than a Saturday, Sunday or other day on
which banks in Atlanta, Georgia, or Houston, Texas are required or authorized by
law or government action to close.

         Special Covenants. Until the indebtedness evidenced by this Note and
all other obligations of Payee arising hereunder or under any Collateral
Documents (collectively, the "Obligations") shall have been paid in full, Payee
hereby covenants and agrees with Payee as follows:

                  7.1      Due on Sale or Encumbrance. Upon the consummation of
any Transfer (as that term is hereinafter defined), the outstanding principal
amount of this Note shall, at Payee's option, become immediately due and payable
in full. The term "Transfer," as used herein, shall mean any encumbrance,
pledge, conveyance, transfer, assignment, lease or sale by Maker of any or all
of its interest in the Facilities or in any personal property of Maker from time
to time there situated or used in connection with the operation thereof, except
(a) liens and encumbrances evidenced by any documents, instruments and
agreements evidencing or securing the Senior Credit Facility (the "Senior Loan
Documents"), and only the Senior Credit Facility, (b) the Master Lease
(including any replacement thereof), (c) any change in the direct or indirect,
legal or beneficial ownership of any of the equity interests in Maker, whether
by conveyance, transfer, assignment, sale, merger or otherwise, expressly
permitted under the Senior Loan Documents, as in effect on the date hereof, and
(d) the sale of any Facility in connection with which Maker makes the mandatory
prepayment with respect to such sale required pursuant to Section 4.2(a) hereof.

                  7.2      Restrictions on Indebtedness. Maker shall not create,
incur, assume or guarantee, or otherwise become or remain directly or indirectly
liable with respect to any Debt (as hereinafter defined), except for Permitted
Debt (as hereinafter defined). The term "Debt", as used herein, shall mean,
without duplication, (i) all indebtedness for borrowed money; (ii) that portion
of obligations with respect to capital leases that is properly classified as a
liability on a balance sheet in conformity with generally accepted accounting
principles; (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money; (iv) any
obligation owed for all or any part of the deferred purchase price of property
or services, which purchase price is (A) due more than six months from the date
of incurrence of the obligation in respect thereof or (B) evidenced by a note or
similar written instrument; (v) all indebtedness secured by any lien or
encumbrance on any property or asset owned or held by Maker regardless of
whether the indebtedness secured thereby shall have been assumed by Maker or is
nonrecourse to the credit of Maker; (vi) reimbursement obligations in respect of
any letters of credit; (vii) the

                                       4
<PAGE>

direct or indirect guarantee, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by Maker of the obligation of another; (viii) any
obligation of Maker the primary purpose or intent of which is to provide
assurance to an obligee that the monetary obligation of the obligor thereof will
be paid or discharged, or the holders thereof will be protected (in whole or in
part) against loss in respect thereof; and (ix) any liability of Maker for the
obligation of another through any agreement (contingent or otherwise) (A) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (B) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (A) or (B) of this clause (ix), the primary purpose
or intent thereof is as described in clause (viii) above. The term "Permitted
Debt" shall mean (a) Debt arising under the Senior Loan Documents; (b) Debt
evidenced by this Note; (c) Debt, if any, of Maker under the Asset Purchase
Agreement; (d) unsecured Debt incurred after the date hereof by Maker which is
subordinated in right of payment to the Debt evidenced by this Note pursuant to
a written subordination agreement in form and substance satisfactory to Payee;
provided, however that in no event shall Maker be permitted to make any cash
payments on such subordinated unsecured debt while any Obligations of Maker
remain unpaid; or (e) trade payables incurred by Maker in the ordinary course of
business.

                  7.3      Administrative Services Agreement. Maker and, by its
acceptance of this Note, Payee, acknowledge that (i) Maker has leased the
Facilities to Health Services Properties, LLC, a Delaware limited liability
company (the "Lessee"), pursuant to that certain Master Lease Agreement of even
date herewith (the "Master Lease") between Maker, as lessor, and Operator, as
lessee; (ii) the Lessee has subleased each of the Facilities to separate direct
or indirect subsidiaries of Sovereign Healthcare Holdings, LLC, a Delaware
limited liability company ("Sovereign"), which are their licensed operators of
their respective Facilities (each, an "Operator," and together, the
"Operators"); and (iii) Sovereign Healthcare, LLC, a wholly owned, direct
subsidiary of Sovereign, is the sole member of each of the Operators, and in
such capacity on behalf of the Operators has entered into an Administrative
Services Agreement of even date herewith (as the same may be amended, restated
or replaced from time to time, the "ASA") with Mariner Health Care Management
Company ("MHC Management"), an affiliate of Payee. Until the Obligations shall
have been paid in full to Payee, Maker shall require, and cause the Lessee to
require, that in connection with each and every transfer of the operation of any
or all Facilities to operators other than the Operators (each, a "New Operator,"
and together, the "New Operators"), each such New Operator either (i) assume the
obligations of the transferring or replaced operator under the ASA with respect
to such Facility or Facilities (as applicable) or (ii) enter into an a separate
Administrative Services Agreement with MHC Management in substantially the same
form as the ASA, as then in effect. Notwithstanding anything to the contrary
contained herein, the foregoing provisions of this Section 7.3 shall cease to be
of any further force and effect with respect to any Facility or Facilities
described in clauses (a), (b) or (c) of this Section 7.3, upon the happening of
the events described in any of such clauses:

                  (a)      the Lessee is replaced by any New Operator other than
a Mariner-Provided Operator (as that term is defined in the Asset Purchase
Agreement referred to in Section 15 hereof) in accordance with the applicable
provisions of the Asset Purchase Agreement;

                                       5
<PAGE>

                  (b)      the ASA shall have been terminated for any reason; or

                  (c)      this Note shall have been assigned and transferred by
Payee to an unaffiliated third-party (excluding, however, any pledge,
hypothecation, security interest or collateral assignment).

Nothing contained in this Section 7.3, however, shall impair any claim or right
of action by Payee hereunder with respect to any previous operator.

                  7.4      Restricted Payments. So long as any Default shall
exist, or any fact or circumstance exists which, with notice or the passage of
time (or both) would constitute a Default, Maker shall not make (i) any
distribution, direct or indirect, on account of any equity interest in Maker now
or hereafter outstanding; (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any such equity interest in Maker; (iii) any payment made to retire, or to
obtain the surrender of, any warrants, options or other rights to acquire
membership interests in Maker now or hereafter outstanding; (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Debt of Maker or Purchaser,
other than obligations relating to the Senior Credit Facility; or (v) any
payment of any nature to any Affiliate (as hereinafter defined) of Maker. Any
and all payments and distributions made in violation of these provisions shall
be held by the recipient thereof in trust, and forthwith paid to Payee for
application to the Obligations. Maker shall provide written notice of the
provisions of this Section 7.4 to each of its members, and to each affiliate of
Maker now or hereafter entitled to receive fees referred to in clause (v) of
this paragraph. For purposes of this Note, the term "Affiliate" shall mean any
of Maker's members, or any other person or entity controlling, controlled by or
under common control with Maker or its members, whether such control is
exercised through ownership of equity interests, by contract or otherwise.

                  7.5      Restriction on Further Negative Pledges. Except with
respect to (a) restrictions contained in the Senior Loan Documents, this Note
and any Collateral Documents, and (b) restrictions by reason of customary
provisions restricting assignments, subletting or other transfers contained in
leases, licenses and similar agreements entered into in the ordinary course of
business (provided that such restrictions in clause (b) are limited to the
property or assets subject to such leases, licenses or similar agreements),
Maker shall not enter into any agreement prohibiting the creation or assumption
of any lien, mortgage, pledge, assignment, security interest, charge or
encumbrance of any kind.

                  7.6      Financial Reporting Requirements Maker shall deliver
to Payee copies of all financial reports (including for Maker, Purchaser and
Lessee) or documents required to be delivered by it or by Purchaser to the
Administrative Agent or the Senior Lenders under the provisions of the Senior
Loan Documents at the same time as such reports and documents are delivered to
administrative agent or such lenders. In addition, Maker shall deliver the
following to Payee:

                                       6
<PAGE>

                  (a)      within forty-five (45) days after the end of each
fiscal quarter of Maker, copies of Maker's internally prepared, consolidated and
consolidating balance sheets, income statements, statements of changes in cash
flow and statements of retained earnings for such quarter and for the period
commencing at the beginning of such fiscal year to the end of such fiscal
quarter, certified by the chief operating officer or chief financial officer (or
functional equivalent) of Maker as fairly representing the financial condition
and financial performance of Maker and the Purchaser, on a consolidated and
consolidating basis, as of such quarter end or for such quarterly period (as
applicable);

                  (b)      within twenty (20) days after the end of each
calendar month, an internally prepared report specifying Maker's working capital
reserve as at the end of such month, and the aggregate amount of (i) cash
distributions made to members of Maker and (ii) prepayments, if any, made during
such month to Payee pursuant to Section 4.2(c) of this Note, which reports shall
also set forth the aggregate amount of all payments made by Maker to its members
and to Payee referred to in clauses (i) and (ii) of this paragraph during the
calendar year in which such calendar month falls; and

                  (c)      as soon as practicable after they are prepared from
time to time, all capital and operating budgets of Maker, all cash flow or other
financial performance forecasts prepared by Maker, and all revisions to such
budgets and forecasts.

         Maker will permit any authorized representatives designated by Payee to
inspect, copy and take extracts from its and their financial and accounting
records, solely in connection with cash distributions, to audit Maker's
financial statements and to discuss its affairs, finances and accounts with its
officers, all upon reasonable notice and at such reasonable times during normal
business hours and as often as may reasonably be requested (except that physical
inspections and audits shall be limited to no more than twice within any
calendar year, except during the continuation of any Default, during which time
this parenthetical limitation shall not apply).

                  7.7      Limitations on Modifications to Senior Loan
Documents. Maker shall not, without the prior written consent of Payee (which
may be granted or withheld in its sole discretion), (a) modify, amend,
supplement, restate or replace the Senior Credit Facility or the Senior Loan
Documents in any manner which would, directly or indirectly, (i) affect the
priority of payments in respect of this Note in a manner adverse to Payee, (ii)
increase the amounts to be deposited in any reserve accounts required to be
funded (in whole or in part) prior to payments being made under this Note;
provided, however, that in the event the Senior Credit Facility is refinanced by
an institutional lender, the initial, reasonable reserves required by such
senior lender can be established without regard for such restriction; (iii)
extend the maturity date of the Senior Credit Facility beyond the Maturity Date
of this Note, unless the Intercreditor Agreement (or, as the case may be, any
replacement thereof in connection with a refinancing of the Senior Credit
Facility) shall, from and after the Maturity Date, no longer permit the Senior
Lenders or the Administrative Agent or other agent (or, in the case of a
refinancing, the lenders and agents thereunder, or any of them) to impose any
"standstill" or similar restriction on Payee's right to enforce Maker's
obligations hereunder and under the Collateral Documents; or (iv) make less
restrictive, suspend or eliminate any covenants contained therein regarding
Transfers of ownership interests in Maker; (b) modify, amend, supplement,
restate or replace the Master Lease to reduce,

                                       7
<PAGE>

suspend or defer Minimum Rent (as defined in the Master Lease) to the extent
that such Minimum Rent payments, in the normal course of applying the order of
priority of application pursuant to Section 2.12(b) of the Senior Loan Agreement
as in effect on the date hereof, would not be sufficient to make scheduled
monthly payments of interest on this Note; or (c) enter into or consent to any
document, instrument or agreement having the same substantive effect as an
action prohibited in clauses (a) or (b) of this Section 7.7, or consent to (or
permit the managing member of Purchaser to consent to) any of the foregoing or
on behalf of Purchaser. Any document, instrument or agreement entered into or
consented to in violation of this Section shall be null and void. Maker agrees
promptly to provide Payee with true, correct and complete copies of all
modifications, amendments, extensions, supplements, restatements, waivers,
consents and replacements of or relating to the Senior Loan Documents, the
Master Lease and the subleases thereunder entered into from time to time.

         Defaults.

                  8.1      Defaults. It shall be a default ("Default") under
this Note if any one or more of the following events or circumstances occurs:

                  (a)      any principal, interest or other amount of money due
under this Note is not paid in full when due, regardless of how such amount may
have become due; which failure to pay is not remedied within two (2) Business
Days after written notice by Payee to Maker of non-receipt of payment; provided,
however, that Maker shall not be entitled to avail itself of the benefits of the
notice and cure provision contained in this paragraph more than twice in any
period of twelve (12) consecutive calendar months; or

                  (b)      any warranty or representation of Maker contained in
this Note or in any Collateral Document or other document, instrument or
agreement executed and delivered in connection with this Note proves to be
untrue or misleading in any material respect when made; or

                  (c)      Maker fails to keep, observe or perform any covenant
contained in Section 7 of this Note (other than Section 7.6); or

                  (d)      Maker fails to keep, observe or perform any covenant
contained in this Note other than any covenant or agreement referred to in
Sections 8.1(a) or 8.1(c), and such failure is not cured to Payee's reasonable
satisfaction within thirty (30) days after the receipt by Maker of written
notice of such failure from Payee; or

                  (e)      Any event of default occurs and is continuing under
any Collateral Document which shall not have been cured within any applicable
grace or cure period thereunder;

                  (f)      the filing by Maker of a voluntary petition in
bankruptcy or the filing by Maker of any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, or Maker's seeking or
consenting to or acquiescing in the appointment of any trustee, receiver or
liquidator of Maker to take possession of all or any substantial part of the

                                       8
<PAGE>

Facilities or of any other property or assets of Maker, or of any or all of the
income, rents, issues, earnings, profits or revenues thereof, or the making by
Maker of any general assignment for the benefit of creditors, or the admission
in writing by Maker of its inability to pay its debts generally as they become
due or the commission by Maker of an act of bankruptcy; or

                  (g)      the filing of a petition against Maker seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal, state or other law or
regulation relating to bankruptcy, insolvency or other relief for debtors, or
the appointment of any trustee, receiver or liquidator of Maker or of all or any
substantial part of the assets of Maker or of any or all of the income, rents,
issues, profits or revenues thereof unless such petition shall be dismissed
within sixty (60) days after such filing, but in any event prior to the entry of
an order, judgment or decree approving such petition; or

                  (h)      Maker is liquidated, dissolved or partitioned or its
charter expires or is revoked for any reason other than administrative
dissolutions hereinafter described, or Maker is administratively dissolved in
its jurisdiction of organization (or its qualification to do business as a
foreign limited liability company in the State of Florida is revoked, if such
qualification is required by applicable law) for failure to make its annual
Secretary of State filings or to pay its franchise taxes; provided, however,
that in the case of administrative dissolution or revocation of foreign
qualification only, such administrative dissolution or revocation of foreign
qualification will not constitute a Default if Maker's charter or qualification
(as the case may be) is reinstated within 30 days after the earlier to occur of
(i) Maker's receipt of notice of such administrative dissolution or revocation
of foreign qualification from Payee or the applicable Secretary of State's
office, and (ii) Maker's otherwise obtaining actual knowledge of such
administrative dissolution or revocation or foreign qualification; or

                  (i)      The occurrence of an event of default by Maker under
any of the Senior Loan Documents which shall not have been cured within any
applicable grace or cure period thereunder; provided, however, that if such
event of default under the Senior Loan Documents is waived or otherwise
eliminated by the requisite Senior Lenders, then the corresponding Default under
this paragraph (i) shall automatically be deemed to have been waived or
eliminated to the same extent, unless the event of default under the Senior Loan
Documents constitutes an independent Default under any other provision of this
Section 8.1, without regard for this paragraph (i).

                  8.2      Remedies.

                  (a)      Upon the occurrence and during the continuation of a
Default, but subject in all events to the provisions of the Intercreditor
Agreement and the further provisions of Section 8.2(b), Payee shall have the
rights to declare the unpaid principal balance and accrued but unpaid interest
on this Note and all other Obligations at once due and payable (and upon such
declaration, the same shall be at once due and payable), and to exercise any and
all other rights and remedies available to Payee hereunder or under any
Collateral Document, or otherwise available to Payee at law or in equity

                                       9
<PAGE>

                  (b)      (i) Notwithstanding anything to the contrary
contained herein, but subject to the further provisions of this paragraph (b),
if (A) any scheduled installment of interest on this Note is not paid in full
when due, and (B) Payee shall have received an affidavit from the manager or
senior most officer of Maker stating that Maker lacks sufficient funds, and no
funds are available from the Collection Account (as defined in the Senior Loan
Agreement), to make such scheduled interest payment solely by reason of the
failure of Lessee to make its full rent payment for the calendar month in which
such interest installment is due and payable (each such notice being herein
referred to as an "Insufficient Funds Notice"), then and in such event Payee
shall forbear, during the applicable Forbearance Period (as hereinafter defined)
only, from accelerating the Obligations and from exercising any remedies under
the Collateral Documents and this Note. The term "Forbearance Period", as used
herein, shall mean the period commencing on the date Payee receives such
Insufficient Funds Notice and ending:

         (1)      if a Lease Termination Event (as hereinafter defined) occurs,
                  and Purchaser enters into an agreement with or otherwise
                  designates a New Operator, during or prior to the Forbearance
                  Period, then on the earliest to occur of the following: (aa)
                  the date on which any other Default shall occur hereunder,
                  except a future Default in the payment of accrued interest on
                  this Note; (bb) the date on which Maker shall have cured all
                  arrearages of accrued interest (including, without limitation,
                  interest at the Default Rate) and applicable late charges,
                  costs and expenses payable by Maker under this Note
                  (collectively, "Arrearages"); (cc) the date which is ten (10)
                  months after the commencement of such Forbearance Period; and
                  (dd) the date on which a Senior Loan Trigger Event occurs;

         (2)      if a Lease Termination Event occurs during or prior to the
                  Forbearance Period, and the initial New Operator is or is to
                  be a Mariner Designated Operator (as defined in the Asset
                  Purchase Agreement) and such Mariner Designated Operator is
                  unable to obtain all governmental approvals necessary to
                  operate the Purchased Facilities (as defined in Section 15
                  hereof), and Purchaser designates a successor operator, then
                  on the earliest to occur of the following: (aa) the date on
                  which any other Default shall occur, under, except a future
                  Default, in the payment of accrued interest on this Note; (bb)
                  the date on which Maker shall have cured all Arrearages; (cc)
                  the date which is one year after the commencement of such
                  Forbearance Period; and (dd) the date on which a Senior Loan
                  Trigger Event occurs; and

         (3)      in all other events, on the earliest to occur of the
                  following: (aa) the date on which any other Default shall
                  occur hereunder, except a future Default in the payment of
                  accrued interest on this Note; (bb) the date on which Maker
                  shall have cured all Arrearages; (cc) the date which is six
                  (6) months after the commencement of such Forbearance Period;
                  and (dd) the date on which a Senior Loan Trigger Event (as
                  hereinafter defined) occurs.

         The term "Lease Termination Event", as used in this Note, shall mean
either that Purchaser shall have given to Lessee (with a copy to Payee) written
notice of its intent to terminate the Master Lease, Lessee shall have given to
Purchaser written notice of its intent to terminate the Master Lease (and
Purchaser shall have provided a copy of such notice to Payee) or the Master
Lease shall

                                       10
<PAGE>

have otherwise terminated. The term "Senior Loan Trigger Event", as used in this
Note, shall mean, with respect to any Forbearance Period, (A) the expiration or
termination, for any reason, of the Senior Loan Forbearance Agreement (as
hereinafter defined) that is required to remain in effect in order for such
Forbearance Period to continue as hereinabove provided, or (B) the exercise of
any remedy or remedies by the Senior Lender with respect to an event of default
under the Senior Loan Documents

         Notwithstanding anything to the contrary contained in this Section
8.2(b):

                  (i)      No Forbearance Period shall continue for more than
         ninety (90) days from inception unless the Senior Lender shall have
         agreed in writing with Purchaser to a waiver of, or to forbear,
         standstill or otherwise refrain from enforcing or exercising its rights
         or remedies under the Senior Loan Documents with respect to any and all
         defaults and events of default then existing thereunder (each a "Senior
         Lender Forbearance Agreement").

                  (ii)     Maker shall be entitled to no more than one (1)
         Forbearance Period during any period of twelve (12) consecutive months.
         Furthermore, Maker shall be entitled to only two (2) Forbearance
         Periods of the duration described in either Section 8.2(b)(i)(1) or
         (b)(i)(2) during the term of this Note.

                  (iii)    Subject to clause (ii) above, if a Forbearance Period
         is instituted, but during that Forbearance Period a Lease Termination
         Event occurs and Purchaser is replacing the Operator with a Mariner
         Designated Operator (as defined in the Asset Purchase Agreement), the
         Forbearance Period shall, after such Lease Termination Event, have the
         duration described in Section 8.2(b)(i)(1) or (b)(i)(2) (commencing
         retroactively as of the date Payee received the Insufficient Funds
         Notice).

                  (iv)     No Forbearance Period shall extend beyond the
         Maturity Date of this Note.

                  (v)      The commencement of a Forbearance Period shall not
         operate or be construed to waive the Default under this Note resulting
         from the failure to make a timely payment of interest.

                           (ii)     If any Forbearance Period ends because Maker
has cured all Arrearages, this Note shall be reinstated, and Payee shall have no
right to exercise any remedies under this Note or the Collateral Documents with
respect to the interest payment Defaults relating to such Arrearages (and only
with respect to such Defaults).

                  8.3      Cumulative Rights; No Waivers. All of the rights,
remedies, powers and privileges (together, "Rights") of Payee provided for in
this Note and in any other Collateral Document are cumulative of each other and
of any and all other Rights at law or in equity. The resort to any Right shall
not prevent the concurrent or subsequent employment of any other appropriate
Right. No single or partial exercise of any Right shall exhaust it, or preclude
any other or further exercise thereof, and every Right may be exercised at any
time and from time to time. No failure by Payee to exercise, nor delay in
exercising any Right, including but not limited to the right to accelerate the
maturity of this Note, shall be construed as a waiver of any Default or as a

                                       11
<PAGE>

waiver of any Right. Without limiting the generality of the foregoing
provisions, the acceptance by Payee from time to time of any payment under this
Note which is past due or which is less than the payment in full of all amounts
due and payable at the time of such payment, shall not (i) constitute a waiver
of or impair or extinguish the right of Payee to accelerate the maturity of this
Note or to exercise any other Right at the time or at any subsequent time, or
nullify any prior exercise of any such Right, or (ii) constitute a waiver of the
requirement of punctual payment and performance or a novation in any respect.

                  8.4      Expenses. If Payee retains an attorney or firm of
attorneys in connection with any Default or at maturity or to collect, enforce
or defend this Note or any Collateral Document in any lawsuit or in any probate,
reorganization, bankruptcy, arbitration or other proceeding, or if Maker sues
Payee in connection with this Note or any Collateral Document and does not
prevail, then Maker agrees to pay to Payee, in addition to principal, interest
and any other sums owing to Payee hereunder and under the Collateral Documents,
all costs and expenses incurred by Payee in trying to collect this Note or in
any such suit or proceeding, including, without limitation, reasonable
attorneys' fees and expenses actually incurred by Payee, investigation costs and
all court costs, whether or not suit is filed hereon, whether before or after
the Maturity Date, or whether in connection with bankruptcy, insolvency or
appeal.

         9.       Commercial Purpose. Maker hereby represents and warrants that
the loan evidenced by this Note (the "Loan") is not primarily for personal,
family or household purposes, but is for the acquisition of the Facilities, and
Maker stipulates that the Loan shall be construed for all purposes as a
commercial loan.

         10.      Consent to Jurisdiction; Service of Process. MAKER HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION OF ANY GEORGIA
STATE COURT OR ANY FEDERAL COURT SITTING IN SAID STATE OVER ANY SUIT, ACTION, OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE COLLATERAL
DOCUMENTS. MAKER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION, OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION, OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
MAKER HEREBY FURTHER CONSENTS TO PROCESS BEING SERVED IN ANY SUIT, ACTION, OR
PROCEEDING INSTITUTED IN CONNECTION WITH THIS NOTE BY (A) THE RECEIPT BY MAKER
OF A COPY THEREOF BY NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, COURIER
CHARGES PREPAID, TO MAKER AT ITS ADDRESS SPECIFIED HEREINBELOW, OR (B) THE
RECEIPT OF A COPY THEREOF BY THE AGENT OF MAKER, IF ANY, DESIGNATED AND
APPOINTED BY MAKER IN WRITING TO PAYEE AS MAKER'S AGENT FOR SERVICE OF PROCESS.
MAKER IRREVOCABLY AGREES THAT SUCH SERVICE SHALL BE DEEMED TO BE SERVICE OF
PROCESS UPON MAKER IN ANY SUCH SUIT, ACTION, OR PROCEEDING. NOTHING IN THIS NOTE
SHALL AFFECT THE RIGHT OF PAYEE TO SERVE PROCESS IN ANY MANNER OTHERWISE
PERMITTED BY LAW AND NOTHING IN THIS NOTE WILL LIMIT THE RIGHT OF PAYEE
OTHERWISE TO BRING PROCEEDINGS AGAINST MAKER IN THE COURTS OF ANY JURISDICTION
OR JURISDICTIONS.

                                       12
<PAGE>

         11.      Successors and Assigns. The terms of this Note shall bind
Maker and its successors and permitted assigns, and shall inure to the benefit
of Payee and its successors and assigns. The foregoing sentence shall not be
construed to permit Maker to assign its obligations under this Note or any
Collateral Document to which it is a party. Notwithstanding anything to the
contrary contained herein, Payee may, at any time, pledge, hypothecate, sell,
transfer, or assign (collaterally or otherwise) this Note and any other
Collateral Document, including without limitation, the pledge, hypothecation or
assignment of this Note and the other Collateral Documents to Payee's senior
lenders, or any administrative agent or collateral agent therefor, as such
senior credit facility or senior credit facilities may exist from time to time,
and such pledgee or assignee may exercise its rights and remedies in connection
with any such pledge, transfer, hypothecation or assignment as provided in any
documentation pursuant to which such pledge, transfer, hypothecation or
assignment is made. Maker agrees to execute any and all consents, estoppels and
other documents reasonably required by such pledgee or assignee of Payee in
connection with effectuating such pledge, transfer, hypothecation or assignment.

         12.      General Provisions. Time is of the essence with respect to
Maker's obligations under this Note. Maker waives presentment for payment,
demand, notice of nonpayment, notice of dishonor, protest of any dishonor,
notice of protest, notice of intent to accelerate, notice of acceleration of
maturity, and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note, except as
otherwise expressly provided herein; and Maker consents to any and all
extensions of time, renewals, waivers or modifications that may be granted by
Payee with respect to the payment or other provisions of this Note, and to the
release of any collateral given to secure the payment hereof, or any part
thereof, with or without substitution. Payee shall not by any acts of omission
or commission be deemed to have waived any rights or remedies hereunder unless
such waiver is in writing and signed by Payee, and then only to the extent
specifically set forth therein; a waiver in respect of one event shall not be
construed as continuing or as a bar to the exercise or waiver of such right or
remedy in respect of a subsequent event. A determination that any provision of
this Note is unenforceable or invalid shall not affect the enforceability or
validity of any other provision and the determination that the application of
any provision of this Note to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances. This Note may not be amended
except in a writing specifically intended for such purpose and executed by the
party against whom enforcement of the amendment is sought. Captions and headings
in this Note are for convenience only and shall be disregarded in construing it.
THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED
BY GEORGIA LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND
APPLICABLE UNITED STATES FEDERAL LAW.

         13.      Notices; Time. (a) All notices, demands, requests, and other
communications desired or required to be given hereunder ("Notices"), shall be
in writing and shall be given by: (i) hand delivery to the address for Notices;
(ii) delivery by nationally recognized overnight courier service to the address
for Notices, with courier charges prepaid, or (iii) sending the same by United
States mail, postage prepaid, certified mail, return receipt requested,
addressed to the address for Notices. All Notices shall be deemed given and
effective upon the earlier to occur of: (i) the hand

                                       13
<PAGE>

delivery of such Notice to the address for Notices; (ii) one (1) business day
after the deposit of such Notice with a nationally recognized overnight courier
service by the time deadline for next day delivery addressed to the address for
Notices; or (iii) three (3) Business Days after depositing the Notice in the
United States mail as set forth in (a)(iii) above. All Notices shall be
addressed to the following addresses:

         Maker:                     FC Properties III, LLC
                                    1035 Powers Place
                                    Alpharetta, Georgia  30004
                                    Attention: Christopher Sertich, COO

         With a copy to:            Williams Mullen
                                    222 Central Park Avenue
                                    Suite 1700
                                    Virginia Beach, Virginia  23462-3035
                                    Attention: Lawrence R. Siegel, Esq.

         Payee:                     Mariner Health Care, Inc.
                                    One Ravinia Drive, Suite 1500
                                    Atlanta, Georgia  30346
                                    Attention: Chief Financial Officer

                                                and

                                    Mariner Health Care, Inc.
                                    One Ravinia Drive, Suite 1500
                                    Atlanta, Georgia  30346
                                    Attention: General Counsel

         With a copy to:            Powell Goldstein Frazer & Murphy LLP
                                    191 Peachtree Street, N.E., 16th Floor
                                    Atlanta, Georgia 30303
                                    Attention: Robert C. Lewinson, Esq.

or to such other persons or at such other place as any party hereto may by
Notice designate as a place for service of Notice; provided, however, that the
"copy to" Notice to be given as set forth above is a courtesy copy only, and a
Notice given to such person is not sufficient to effect giving a Notice to the
principal party, nor does a failure to give such a courtesy copy of a Notice
constitute a failure to give Notice to the principal party.

         14.      No Usury. It is expressly stipulated and agreed to be the
intent of Maker and Payee at all times to comply with applicable state law or
applicable United States federal law (to the extent that it permits Payee to
contract for, charge, take, reserve, or receive a greater amount of interest
than under state law) and that this Section shall control every other covenant
and agreement

                                       14
<PAGE>

in this Note and the Collateral Documents. If applicable state or federal law
should at any time be judicially interpreted so as to render usurious any amount
called for under this Note or under any of the Collateral Documents, or
contracted for, charged, taken, reserved, or received with respect to the Loan,
or if Payee's exercise of the option to accelerate the Maturity Date, or if any
prepayment by Maker results in Maker having paid any interest in excess of that
permitted by applicable law, then it is Payee's express intent that all excess
amounts theretofore collected by Payee shall be credited on the principal
balance of this Note and all other indebtedness evidenced by this Note and the
Collateral Documents shall immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new documents, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid or agreed to be paid to Payee for the use
or forbearance of the Loan shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Loan.

         THIS NOTE AND ANY COLLATERAL DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

         THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

         15.      Purchase Money Note. This Note is delivered pursuant to that
certain Asset Purchase Agreement dated as of August 19, 2003 (as amended, the
"Asset Purchase Agreement") by and among Maker, as purchaser, and Mariner Health
Care, Inc., Mariner Health of Florida, Inc., Tampa Medical Associates, Inc.,
MHC/LCA Florida, Inc., Mariner Healthcare of Orange County, Inc., Mariner
Healthcare of Port Orange, Inc., Mariner Healthcare of Palm City, Inc., Mariner
Healthcare of Lake Worth, Inc., Mariner Healthcare of Pinellas Point, Inc.,
MHC/CSI Florida, Inc., Mariner Health Care of Tuskawilla, Inc., Mariner Health
Care of Metrowest, Inc., Mariner Health Care of Inverness, Inc., Mariner Health
Care of MacClenny, Inc., Mariner Health Properties IV, Ltd., Mariner Health at
Bonifay, Inc., Mariner Health Care of Atlantic Shores, Inc., Mariner Health of
Orlando, Inc., Mariner Health of Palmetto, Inc., and Mariner Health of
Jacksonville, Inc., collectively as sellers (the "Sellers"), and evidences the
deferred portion of the purchase price payable by Maker to Sellers under the
Asset Purchase Agreement in connection with the sale by the Sellers to Maker of,
or transfer of leasehold interests in, the 19 skilled nursing facilities
identified in the Asset Purchase Agreement and related assets (the
"Facilities"). The 19 Facilities sold to Purchaser on the date hereof (i.e., all
Facilities other than Mariner Health of Tampa) are sometimes referred to herein
as the "Purchased Facilities." Payee alone shall have responsibility for the
allocation of amounts it receives from Maker hereunder and under any Collateral
Document to the other Sellers, and Maker shall have no responsibility for seeing
to the proper allocation of such amounts to the Sellers, beyond the payments
required to be made to Payee hereunder and under any Collateral Document.

                                       15
<PAGE>

         IN WITNESS WHEREOF, Maker has duly executed this Note under seal as of
the date first above written.

                                 MAKER:

                                 FC PROPERTIES III, LLC,
                                 a Delaware limited liability company

                                     By:  FC INVESTORS III, LLC,
                                      a Delaware limited liability company

                                         By:  /s/ Christopher M. Sertich
                                              Christopher M. Sertich, Manager

                                 The Federal Tax Identification Number of Maker:
                                 20-0222591

                                       16

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