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                                CREDIT AGREEMENT

                            Dated as of June 27, 2002

                                  by and among

                        SENIOR HOUSING PROPERTIES TRUST,
                                           as Borrower

                           WACHOVIA SECURITIES, INC.,
                                           as Joint Lead Arranger and Sole Book
                                            Runner,

              DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES,
                                           as Joint Lead Arranger,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                           as Administrative Agent,

                                ING CAPITAL LLC,
                                           as Syndication Agent,

                                     Each of

              DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES,

                                      and,

                                UBS WARBURG LLC,
                                           as Documentation Agent,

                                       and

                     THE FINANCIAL INSTITUTIONS PARTY HERETO
                    AND THEIR ASSIGNEES UNDER SECTION 12.5.,
                                            as Lenders

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<PAGE>

                               TABLE OF CONTENTS

Article I. Definitions.........................................................1

   Section 1.1.  Definitions...................................................1
   Section 1.2.  General; References to Times.................................26

Article II. Credit Facility...................................................26

   Section 2.1.  Revolving Loans..............................................26
   Section 2.2.  Swingline Loans..............................................27
   Section 2.3.  Letters of Credit............................................29
   Section 2.4.  Rates and Payment of Interest on Loans.......................33
   Section 2.5.  Number of Interest Periods...................................34
   Section 2.6.  Repayment of Loans...........................................34
   Section 2.7.  Prepayments..................................................34
   Section 2.8.  Continuation.................................................34
   Section 2.9.  Conversion...................................................35
   Section 2.10.  Notes.......................................................35
   Section 2.11.  Voluntary Reductions of the Commitment......................36
   Section 2.12.  Expiration or Maturity Date of Letters of Credit Past
                  Termination Date............................................36
   Section 2.13.  Amount Limitations..........................................36
   Section 2.14.  Increase of Commitments.....................................36
   Section 2.15.  Extension of Termination Date...............................37

Article III. Payments, Fees and Other General Provisions......................38

   Section 3.1.  Payments.....................................................38
   Section 3.2.  Pro Rata Treatment...........................................38
   Section 3.3.  Sharing of Payments, Etc.....................................39
   Section 3.4.  Several Obligations..........................................39
   Section 3.5.  Minimum Amounts..............................................40
   Section 3.6.  Fees.........................................................40
   Section 3.7.  Computations.................................................41
   Section 3.8.  Usury........................................................41
   Section 3.9.  Agreement Regarding Interest and Charges.....................41
   Section 3.10.  Statements of Account.......................................42
   Section 3.11.  Defaulting Lenders..........................................42
   Section 3.12.  Taxes.......................................................43

Article IV.  Yield Protection, Etc............................................45

   Section 4.1.  Additional Costs; Capital Adequacy...........................45
   Section 4.2.  Suspension of LIBOR Loans....................................46
   Section 4.3.  Illegality...................................................47
   Section 4.4.  Compensation.................................................47
   Section 4.5.  Affected Lenders.............................................47
   Section 4.6.  Treatment of Affected Loans..................................48
   Section 4.7.  Change of Lending Office.....................................48

                                      -i-
<PAGE>

   Section 4.8.  Assumptions Concerning Funding of LIBOR Loans................49

Article V. Conditions Precedent...............................................49

   Section 5.1.  Initial Conditions Precedent.................................49
   Section 5.2.  Conditions Precedent to All Loans and Letters of Credit......52
   Section 5.3.  Conditions as Covenants......................................52

Article VI. Representations and Warranties....................................52

   Section 6.1.  Representations and Warranties...............................52
   Section 6.2.  Survival of Representations and Warranties, Etc..............59

Article VII. Affirmative Covenants............................................59

   Section 7.1.  Preservation of Existence and Similar Matters................59
   Section 7.2.  Compliance with Applicable Law and Material Contracts........59
   Section 7.3.  Maintenance of Property......................................59
   Section 7.4.  Conduct of Business..........................................60
   Section 7.5.  Insurance....................................................60
   Section 7.6.  Payment of Taxes and Claims..................................60
   Section 7.7.  Visits and Inspections.......................................60
   Section 7.8.  Use of Proceeds; Letters of Credit...........................61
   Section 7.9.  Environmental Matters........................................61
   Section 7.10.  Books and Records...........................................61
   Section 7.11.  Further Assurances..........................................61
   Section 7.12.  New Subsidiaries/Guarantors.................................62
   Section 7.13.  REIT Status.................................................62
   Section 7.14.  Exchange Listing............................................62

Article VIII. Information.....................................................62

   Section 8.1.  Quarterly Financial Statements...............................63
   Section 8.2.  Year-End Statements..........................................63
   Section 8.3.  Compliance Certificate.......................................63
   Section 8.4.  Other Information............................................64

Article IX. Negative Covenants................................................67

   Section 9.1.  Financial Covenants..........................................67
   Section 9.2.  Indebtedness.................................................68
   Section 9.3.  Certain Permitted Investments................................68
   Section 9.4.  Investments Generally........................................69
   Section 9.5.  Liens; Negative Pledges; Other Matters.......................70
   Section 9.6.  Restricted Payments..........................................70
   Section 9.7.  Merger, Consolidation, Sales of Assets and Other
                 Arrangements.................................................71
   Section 9.8.  Fiscal Year..................................................71
   Section 9.9.  Modifications to Advisory Agreement and Other Material
                 Contracts....................................................72
   Section 9.10.  Transactions with Affiliates................................72
   Section 9.11.  ERISA Exemptions............................................72

                                     -ii-
<PAGE>

Article X. Default............................................................72

   Section 10.1.  Events of Default...........................................72
   Section 10.2.  Remedies Upon Event of Default..............................76
   Section 10.3.  Remedies Upon Default.......................................77
   Section 10.4.  Allocation of Proceeds......................................77
   Section 10.5.  Collateral Account..........................................78
   Section 10.6.  Performance by Agent........................................79
   Section 10.7.  Rights Cumulative...........................................79

Article XI. The Agent.........................................................79

   Section 11.1.  Authorization and Action....................................79
   Section 11.2.  Agent's Reliance, Etc.......................................80
   Section 11.3.  Notice of Defaults..........................................81
   Section 11.4.  Wachovia as Lender..........................................81
   Section 11.5.  Approvals of Lenders........................................81
   Section 11.6.  Lender Credit Decision, Etc.................................82
   Section 11.7.  Indemnification of Agent....................................82
   Section 11.8.  Successor Agent.............................................83
   Section 11.9.  Titled Agents...............................................84

Article XII.  Miscellaneous...................................................84

   Section 12.1.  Notices.....................................................84
   Section 12.2.  Expenses....................................................85
   Section 12.3.  Setoff......................................................85
   Section 12.4.  LITIGATION; JURISDICTION; OTHER MATTERS; WAIVERS............86
   Section 12.5.  Successors and Assigns......................................87
   Section 12.6.  Amendments..................................................89
   Section 12.7.  Nonliability of Agent and Lenders...........................90
   Section 12.8.  Confidentiality.............................................90
   Section 12.9.  Indemnification.............................................91
   Section 12.10.  Termination; Survival......................................93
   Section 12.11.  Severability of Provisions.................................93
   Section 12.12.  GOVERNING LAW..............................................93
   Section 12.13.  Counterparts...............................................93
   Section 12.14.  Obligations with Respect to Loan Parties...................93
   Section 12.15.  Limitation of Liability....................................94
   Section 12.16.  Entire Agreement...........................................94
   Section 12.17.  Construction...............................................94
   Section 12.18.  LIABILITY OF TRUSTEES, ETC.................................94

                                     -iii-
<PAGE>

SCHEDULE 1.1.(a)               Pricing
SCHEDULE 1.1.(b)               Acquired Property Lien Documents
SCHEDULE 1.1.(c)               Existing Ground Leases
SCHEDULE 1.1.(d)               List of Loan Parties
SCHEDULE 6.1.(b)               Ownership Structure
SCHEDULE 6.1.(f)               Title to Properties; Liens
SCHEDULE 6.1.(g)               Indebtedness and Guaranties
SCHEDULE 6.1.(h)               Material Contracts
SCHEDULE 6.1.(i)               Litigation
SCHEDULE 6.1.(k)               Financial Statements
SCHEDULE 6.1.(y)               List of Unencumbered Assets

EXHIBIT A                      Form of Assignment and Acceptance Agreement
EXHIBIT B                      Form of Guaranty
EXHIBIT C                      Form of Notice of Borrowing
EXHIBIT D                      Form of Notice of Continuation
EXHIBIT E                      Form of Notice of Conversion
EXHIBIT F                      Form of Notice of Swingline Borrowing
EXHIBIT G                      Form of Swingline Note
EXHIBIT H                      Form of Revolving Note
EXHIBIT I-1                    Form of Opinion of Counsel
EXHIBIT I-2                    Form of Opinion of Special Maryland Counsel
EXHIBIT J                      Form of Compliance Certificate

                                      -iv-

<PAGE>

         THIS CREDIT  AGREEMENT  dated as of June 27,  2002 by and among  Senior
Housing  Properties  Trust, a real estate  investment  trust organized under the
laws of the State of Maryland (the "Borrower"),  WACHOVIA  SECURITIES,  INC., as
Joint Lead  Arranger and Sole Book Runner,  DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, as Joint Lead Arranger, WACHOVIA BANK, NATIONAL ASSOCIATION, as
Agent, ING CAPITAL LLC, as Syndication Agent, each of DRESDNER BANK AG, NEW YORK
AND GRAND CAYMAN BRANCHES and UBS WARBURG LLC, as Documentation  Agent, and each
of the financial  institutions  initially a signatory hereto together with their
assignees pursuant to Section 12.5.(d).

         WHEREAS,  the Agent and the  Lenders  desire to make  available  to the
Borrower a revolving  credit  facility in the  initial  amount of  $250,000,000,
which will include a $50,000,000  letter of credit subfacility and a $25,000,000
swingline subfacility, on the terms and conditions contained herein.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby  acknowledged by the parties hereto, the parties
hereto agree as follows:

                             ARTICLE I. DEFINITIONS

Section 1.1.  Definitions.

         In addition to terms defined  elsewhere  herein,  the  following  terms
shall have the following meanings for the purposes of this Agreement:

         "Accession Agreement" means an Accession Agreement substantially in the
form of Annex I to the Guaranty.

         "Acquired  Encumbered  Properties"  means  the  Senior  Housing  Assets
subject,  as of the Agreement Date, to the Liens created under Acquired Property
Lien Documents.

         "Acquired  Property Lien Documents"  means those documents  relating to
the  Liens on the  Acquired  Encumbered  Properties  as  described  on  Schedule
1.1.(b),  each as amended,  supplemented or otherwise modified from time to time
(except that amendments,  supplements and modifications  which (x) result in the
Lien  created by such lease or mortgage  being spread to Senior  Housing  Assets
other than the Acquired  Encumbered  Properties  or (y) change any  non-recourse
provisions  of such  lease or  mortgage  applicable  to  lease or loan  payments
thereunder in a manner which is  materially  adverse to the lessee or mortgagor,
must, in each case, be approved by the Requisite Lenders).

         "Additional Costs" has the meaning given that term in Section 4.1.

         "Adjusted EBITDA" means, with respect to a Person for any given period,
EBITDA for such period less the Capital Expenditure Reserve for such period.
<PAGE>

         "Adjusted  Eurodollar Rate" means, with respect to each Interest Period
for any LIBOR Loan,  the rate  obtained by dividing (a) LIBOR for such  Interest
Period by (b) a percentage equal to 1 minus the stated maximum rate (stated as a
decimal)  of  all  reserves,   if  any,   required  to  be  maintained   against
"Eurocurrency  liabilities"  as  specified  in  Regulation  D of  the  Board  of
Governors  of the  Federal  Reserve  System (or  against  any other  category of
liabilities  which includes  deposits by reference to which the interest rate on
LIBOR  Loans is  determined  or any  category of  extensions  of credit or other
assets  which  includes  loans by an office of any Lender  outside of the United
States of America to residents of the United States of America).

         "Advisory  Agreement" means that certain Advisory Agreement dated as of
October 12, 1999 by and between the Borrower and RMR.

         "Affiliate" means any Person (other than the Agent or any Lender):  (a)
directly or indirectly controlling, controlled by, or under common control with,
the Borrower;  (b) directly or indirectly  owning or holding ten percent (10.0%)
or more of any Equity  Interest in the Borrower;  or (c) ten percent  (10.0%) or
more of whose voting stock or other  Equity  Interest is directly or  indirectly
owned  or held by the  Borrower.  For  purposes  of this  definition,  "control"
(including with correlative meanings,  the terms "controlling",  "controlled by"
and "under common control with") means the possession  directly or indirectly of
the power to direct or cause the direction of the  management  and policies of a
Person,  whether  through the  ownership of voting  securities or by contract or
otherwise.  The  Affiliates of a Person shall include any officer or director of
such Person. For purposes of this Agreement, Five Star shall not be deemed to be
an  Affiliate  of the  Borrower  so long as each of the board of trustees of the
Borrower and the board of  directors  of Five Star has at least one  independent
director  who does not serve as both a Trustee of the Borrower and a director of
Five Star. The term "independent director" has the meaning given such term under
the  listing  requirements  of the New York Stock  Exchange,  in the case of the
Borrower, and the American Stock Exchange, in the case of Five Star.

         "Agent" means  Wachovia  Bank,  National  Association,  as  contractual
representative for the Lenders under the terms of this Agreement, and any of its
successors.

         "Agreement Date" means the date as of which this Agreement is dated.

         "Ancillary  Agreement"  means,  with respect to any Lease, any material
incidental  agreement with respect to such Lease (including,  by way of example,
guarantees,  and management  agreements) to which the Borrower or any Subsidiary
is a party.

         "Applicable  Law" means all  applicable  provisions  of  constitutions,
statutes,  rules,  regulations  and  orders of all  governmental  bodies and all
orders and decrees of all courts, tribunals and arbitrators.

         "Applicable  Margin" means the percentage per annum determined,  at any
time, based on the range into which the Borrower's  Credit Rating then falls, in
accordance  with  Table I set  forth in  Schedule  1.1.(a).  Any  change  in the
Borrower's  Credit  Rating which would cause it to move to a different  Level in
such table shall effect a change in the Applicable Margin on the Business Day on
which such change  occurs.  During any period  that the  Borrower  has  received

                                      -2-
<PAGE>
Credit  Ratings  that  are  not  equivalent,  the  Applicable  Margin  shall  be
determined by the lower of such two Credit Ratings.  During any period for which
the Borrower has not received a Credit  Rating from a Rating  Agency equal to or
exceeding  the  minimum  Credit  Rating  specified  on Table I set forth in such
Schedule,  then the  Applicable  Margin shall be determined  in accordance  with
Table II set forth in such  Schedule.  As of the Agreement  Date, the Applicable
Margin is determined based on Level 1 of Table II on such Schedule.

         "Asset Under Development"  means, as of any date of determination,  any
Property  owned  by  the  Borrower  or  any of its  Subsidiaries  on  which  the
construction  of new  income-producing  improvements  has been  commenced and is
continuing,  both such land and improvements  under construction to be valued at
then-current  book value, as determined in accordance with GAAP. In the event of
construction  of an  addition  or  expansion  to an  existing  income  producing
Property,  only the addition or  expansion  shall be  considered  an Asset Under
Development.

         "Assignee" has the meaning given that term in Section 12.5.(d).

         "Assignment   and  Acceptance   Agreement"   means  an  Assignment  and
Acceptance Agreement among a Lender, an Assignee and the Agent, substantially in
the form of Exhibit A.

         "Base Rate"  means the per annum rate of interest  equal to the greater
of (a) the Prime Rate or (b) the Federal Funds Rate plus one-half of one percent
(0.5%). Any change in the Base Rate resulting from a change in the Prime Rate or
the Federal  Funds Rate shall become  effective as of 12:01 a.m. on the Business
Day on which each such change occurs.  The Base Rate is a reference rate used by
the Lender acting as the Agent in  determining  interest  rates on certain loans
and is not  intended  to be the lowest  rate of  interest  charged by the Lender
acting  as the  Agent or any  other  Lender  on any  extension  of credit to any
debtor.

         "Base Rate Loan" means a Loan  bearing  interest at a rate based on the
Base Rate.

         "Base  Rent"  means the  minimum  or base rent that a Lease  requires a
Lessee to pay.  The term  excludes:  (a)  payments  (such as real estate  taxes,
insurance premiums, and costs of maintenance) that the Lease requires the Lessee
to pay third parties;  (b) any element of rent that is conditional,  contingent,
or not yet capable of determination;  and (c) reserves for capital  expenditures
paid to the Borrower or a Subsidiary.  If a Lease for multiple  Properties  does
not separately  allocate Base Rent to such  Properties,  then Base Rent for such
Lease shall be reasonably allocated among such Properties (where necessary) in a
manner satisfactory to Agent.

         "Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise  contributed  to by any member of the ERISA
Group.

         "Borrower"  has the  meaning  set forth in the  introductory  paragraph
hereof and shall include the Borrower's successors and permitted assigns.

                                      -3-
<PAGE>

         "Business Day" means (a) any day other than a Saturday, Sunday or other
day on which  banks in  Charlotte,  North  Carolina  or New  York,  New York are
authorized or required to close and (b) with reference to a LIBOR Loan, any such
day that is also a day on which  dealings in Dollar  deposits are carried out in
the London interbank market.

         "Capital  Expenditure  Reserve" means an amount equal to $400 per annum
per bed, for a skilled  nursing  facility,  or other unit,  for any other Senior
Housing Asset, on which the applicable  lease does not require the Lessee to pay
for all capital expenditures.

         "Capitalization Rate" means 10.0%.

         "Capitalized  Lease Obligation" means obligations under a lease that is
required to be capitalized for financial  reporting  purposes in accordance with
GAAP. The amount of a Capitalized Lease Obligation is the capitalized  amount of
such  obligation  as would be required  to be  reflected  on the  balance  sheet
prepared in accordance  with GAAP of the applicable  Person as of the applicable
date.

         "Cash Equivalents" means: (a) securities issued,  guaranteed or insured
by the United  States of America or any of its agencies  with  maturities of not
more than one year from the date  acquired;  (b)  certificates  of deposit  with
maturities of not more than one year from the date  acquired  issued by a United
States federal or state chartered commercial bank of recognized  standing,  or a
commercial  bank organized under the laws of any other country which is a member
of the  Organization for Economic  Cooperation and  Development,  or a political
subdivision of any such country,  acting through a branch or agency,  which bank
at the time of the  acquisition  thereof has capital and  unimpaired  surplus in
excess of  $500,000,000.00  and which bank or its holding company at the time of
the acquisition thereof has a short-term commercial paper rating of at least A-2
or the  equivalent  by S&P or at least P-2 or the  equivalent  by  Moody's;  (c)
reverse  repurchase  agreements  with terms of not more than seven days from the
date  acquired,  for  securities  of the type  described in clause (a) above and
entered into only with commercial banks having the  qualifications  described in
clause (b) above; (d) commercial paper issued by any Person  incorporated  under
the laws of the United  States of America or any State  thereof and rated at the
time of the acquisition thereof at least A-2 or the equivalent thereof by S&P or
at least P-2 or the equivalent thereof by Moody's,  in each case with maturities
of not more than one year from the date acquired;  and (e)  investments in money
market funds registered under the Investment  Company Act of 1940, which have at
the time of the acquisition  thereof net assets of at least  $500,000,000.00 and
at least 85% of whose assets consist of securities and other  obligations of the
type described in clauses (a) through (d) above.

         "Collateral  Account"  means a  special  non-interest  bearing  deposit
account  maintained  by the  Agent at the  Principal  Office  and under its sole
dominion and control.

         "Commitment" means, as to each Lender, such Lender's obligation to make
Revolving Loans pursuant to Section 2.1., to issue (in the case of the Agent) or
participate  in (in the case of the  Lenders)  Letters  of  Credit  pursuant  to
Section 2.3.(a) and 2.3.(i), respectively, and to participate in Swingline Loans
pursuant to Section  2.2.(e),  to an aggregate  amount up to, but not  exceeding
(but in the case of the  Lender  acting as the  Agent  excluding  the  aggregate
amount of

                                      -4-
<PAGE>

participations  in the Letters of Credit held by other Lenders),  the amount set
forth for such Lender on its signature page hereto as such Lender's  "Commitment
Amount" or as set forth in the applicable  Assignment and Acceptance  Agreement,
as the  same  may be  reduced  from  time to time  pursuant  to  Section  2.11.,
increased   pursuant  to  Section  2.14.,  or  as  appropriate  to  reflect  any
assignments to or by such Lender effected in accordance with Section 12.5.

         "Commitment  Percentage" means, as to each Lender, the ratio, expressed
as a  percentage,  of (a) the  amount  of such  Lender's  Commitment  to (b) the
aggregate amount of the Commitments of all Lenders hereunder; provided, however,
that if at the time of  determination  the  Commitments  have terminated or been
reduced  to  zero,  the  "Commitment  Percentage"  of each  Lender  shall be the
Commitment  Percentage  of such  Lender  in  effect  immediately  prior  to such
termination or reduction.

         "Compliance  Certificate"  has the  meaning  given that term in Section
8.3.

         "Continue",   "Continuation"   and  "Continued"   each  refers  to  the
continuation of a LIBOR Loan from one Interest Period to another Interest Period
pursuant to Section 2.8.

         "Convert",  "Conversion"  and "Converted" each refers to the conversion
of a Loan of one Type into a Loan of another Type pursuant to Section 2.9.

         "Credit  Event" means any of the  following:  (a) the making (or deemed
making) of any Loan,  (b) the  Conversion  of a Loan and (c) the  issuance  of a
Letter of Credit.

         "Credit  Rating" means the lowest rating assigned by a Rating Agency to
each series of rated senior unsecured long term indebtedness of the Borrower.

         "Debt Service" means, for any period, the sum of : (a) Interest Expense
of the Borrower and its Subsidiaries determined on a consolidated basis for such
period and (b) all regularly  scheduled  principal payments made with respect to
Indebtedness of the Borrower and its Subsidiaries during such period, other than
any balloon,  bullet or similar principal payment which repays such Indebtedness
in full.

         "Default" means any of the events  specified in Section 10.1.,  whether
or not there has been satisfied any  requirement  for the giving of notice,  the
lapse of time, or both.

         "Defaulting Lender" has the meaning set forth in Section 3.11.

         "Developable  Property"  means (a) any  Property  on which there are no
improvements or (b) any Property (or portion  thereof)  acquired by the Borrower
or any Subsidiary for the purpose of being developed. Developable Property shall
not include any Property that is an Asset Under Development.

         "Dollars"  or "$" means the lawful  currency  of the  United  States of
America.

         "Due Diligence  Reports"  means, as to any Senior Housing Asset Pool or
individual

                                      -5-
<PAGE>

Senior Housing Asset not in a Senior  Housing Asset Pool, (a) a Lease  Abstract,
in the case of Senior Housing Assets that are leased pursuant to Leases, and (b)
such other information as the Agent may reasonably  request in order to evaluate
such Senior Housing Asset Pool or Senior Housing Asset.

         "EBITDA" means, with respect to a Person for any period: (a) net income
(or loss) of such Person for such period determined on a consolidated  basis, in
accordance  with  GAAP,  exclusive  of the  following  (but  only to the  extent
included in  determination  of such net income  (loss)):  (i)  depreciation  and
amortization  expense;  (ii) interest  expense;  (iii) income tax expense;  (iv)
extraordinary  or  non-recurring  gains  and  losses;  (v)  in the  case  of the
Borrower,  funds  received by the Borrower or a Subsidiary as rent but which are
reserved  for  capital   expenses  and  (vi)  in  the  case  of  the   Borrower,
distributions on the existing Trust Preferred Securities; plus (b) such Person's
pro rata share of EBITDA of its Unconsolidated  Affiliates.  Deferred percentage
rent adjustments  required under GAAP shall be disregarded in  determinations of
EBITDA  (to the extent  such  adjustments  otherwise  would be  included  in the
determination of EBITDA).

         "EBITDAR  Ratio" means,  with respect to any  separately  leased Senior
Housing Asset or any Senior  Housing Asset Pool, or any Senior  Housing Asset or
group of Senior Housing Assets securing a Mortgage Note, and for any period, the
ratio of (a) Property NOI for such Senior  Housing  Asset,  Senior Housing Asset
Pool or group of Senior Housing Assets for such period to (b) rental or mortgage
payments  due to the  Borrower or any  Subsidiary  for the same such period with
respect to such Senior  Housing  Asset,  Senior  Housing  Asset Pool or group of
Senior  Housing  Assets,  exclusive of the portion of such rent  received by the
Borrower or any Subsidiary which is escrowed for capital expenditures.

         "Effective  Date" means the later of: (a) the Agreement  Date;  and (b)
the date on which all of the  conditions  precedent  set forth in  Section  5.1.
shall have been fulfilled or waived in writing by the Requisite Lenders.

         "Eligible  Assignee"  means any Person who is: (i)  currently a Lender;
(ii) a commercial bank,  trust company,  insurance  company,  investment bank or
pension fund  organized  under the laws of the United States of America,  or any
state  thereof,  and having  total assets in excess of  $5,000,000,000;  (iii) a
savings and loan  association  or savings bank  organized  under the laws of the
United States of America, or any state thereof,  and having a tangible net worth
of at least $500,000,000;  or (iv) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic Cooperation
and  Development,  or a political  subdivision  of any such country,  and having
total  assets in excess of  $10,000,000,000,  provided  that such bank is acting
through a branch or agency  located in the  United  States of  America.  If such
Person is not  currently a Lender,  such  Person's  senior  unsecured  long term
indebtedness  must be rated BBB or higher by S&P, Baa2 or higher by Moody's,  or
the  equivalent  or higher of  either  such  rating  by  another  rating  agency
acceptable to the Agent.  Notwithstanding  the  foregoing,  during any period in
which an Event of Default  shall have  occurred and be  continuing  under any of
subsections (a), (b), (f) or (g) of Section 10.1., the term "Eligible  Assignee"
shall mean any Person that is not an individual.

                                      -6-
<PAGE>

         "Environmental Laws" means any Applicable Law relating to environmental
protection  or the  manufacture,  storage,  disposal or  clean-up  of  Hazardous
Materials  including,  without  limitation,  the  following:  Clean Air Act,  42
U.S.C.ss.7401 et seq.;  Federal Water Pollution Control Act, 33 U.S.C.ss.1251 et
seq.;  Solid Waste  Disposal  Act, as amended by the Resource  Conservation  and
Recovery Act, 42 U.S.C.ss.6901 et seq.;  Comprehensive  Environmental  Response,
Compensation   and  Liability   Act,  42  U.S.C.ss.   9601  et  seq.;   National
Environmental  Policy  Act,  42  U.S.C.ss.4321  et  seq.;   regulations  of  the
Environmental  Protection  Agency and any applicable  rule of common law and any
judicial  interpretation  thereof  relating  primarily  to  the  environment  or
Hazardous Materials.

         "Equity  Interest"  means,  with  respect to any  Person,  any share of
capital stock of (or other  ownership or profit  interests in) such Person,  any
warrant,  option or other right for the purchase or other  acquisition from such
Person of any share of capital stock of (or other ownership or profit  interests
in) such Person, any security (other than a security constituting  Indebtedness)
convertible  into or  exchangeable  for any share of capital  stock of (or other
ownership or profit  interests  in) such Person or warrant,  right or option for
the purchase or other acquisition from such Person of such shares (or such other
interests),   and  any  other  ownership  or  profit  interest  in  such  Person
(including, without limitation, partnership, member or trust interests therein),
whether  voting or nonvoting,  and whether or not such share,  warrant,  option,
right or other  interest  is  authorized  or  otherwise  existing on any date of
determination.

         "Equity Issuance" means any issuance by a Person of any Equity Interest
and shall in any event  include  the  issuance of any Equity  Interest  upon the
conversion  or  exchange  of any  security  constituting  Indebtedness  that  is
convertible  or  exchangeable,  or is being  converted or exchanged,  for Equity
Interests.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
in effect from time to time.

         "ERISA Group" means the Borrower,  any  Subsidiary and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under common  control  which,  together  with the Borrower or any
Subsidiary,  are treated as a single  employer under Section 414 of the Internal
Revenue Code.

         "Event of Default" means any of the events  specified in Section 10.1.,
provided that any requirement for notice or lapse of time or any other condition
has been satisfied.

         "Excluded  Subsidiary" means any Subsidiary (a) formed for the specific
purpose of holding title to assets which are collateral for Secured Indebtedness
of such Subsidiary;  (b) which is prohibited from  Guaranteeing the Indebtedness
of any other  Person  pursuant  to (i) any  document,  instrument  or  agreement
evidencing  such  Secured  Indebtedness  or (ii) a  provision  of such  Person's
Governing  Documents  which  provision was included in such  Person's  Governing
Documents as a condition to the extension of such Secured Indebtedness;  and (c)
for which none of the  Borrower,  any  Subsidiary  (other than another  Excluded
Subsidiary) or any other Loan Party has Guaranteed  any of the  Indebtedness  of
such  Subsidiary  or has any direct  obligation  to maintain  or  preserve  such
Subsidiary's  financial  condition  or to cause such

                                      -7-
<PAGE>

Subsidiary to achieve any specified levels of operating results,  except for (i)
customary   exceptions  for  fraud,   misapplication  of  funds,   environmental
indemnities,  and other  similar  exceptions  to  recourse  liability,  and (ii)
guaranties  of the refund of any Lessee  deposit.  In addition,  (x) each of SNH
Capital  Trust  Holdings,  SNH  Capital  Trust I, SNH  Capital  Trust II and SNH
Capital Trust III shall be deemed to be an Excluded Subsidiary so long as any of
the Trust Preferred  Securities  remains  outstanding,  (y) Leisure Park Venture
Limited  Partnership shall be deemed to be an Excluded Subsidiary so long as any
Indebtedness secured by the Acquired Property Lien Documents described in Part I
of Schedule  1.1.(b) remains  outstanding and (z) CCC of Kentucky Trust shall be
deemed to be an Excluded  Subsidiary so long as any Indebtedness  secured by the
Acquired  Property Lien  Documents  described in Part II or Part III of Schedule
1.1.(b) remains outstanding.

         "Existing Credit Agreement" means that certain Revolving Loan Agreement
dated as of  September  15,  1999,  by and among  the  Borrower,  the  financial
institutions party thereto as "Lenders", Dresdner Bank AG, as Agent, and certain
Subsidiaries of the Borrower.

         "Facility  Fee"  means  the per annum  percentage  in Table I or II set
forth in Schedule  1.1.(b),  as applicable,  corresponding to the Level at which
the "Applicable Margin" is determined in accordance with the definition thereof.
As of the Agreement  Date,  the Facility Fee is  determined  in accordance  with
Level 1 of Table II on such Schedule.

         "Fair Market Value" means,  with respect to (a) a security  listed on a
principal national securities  exchange,  the price of such security as reported
on such exchange by any widely recognized  reporting method  customarily  relied
upon by financial  institutions and (b) with respect to any other property,  the
price which could be negotiated in an arm's-length free market transaction,  for
cash,  between a willing seller and a willing  buyer,  neither of which is under
pressure or compulsion to complete the transaction.

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upward to the nearest 1/100th of 1%) equal to the weighted  average of the rates
on overnight  Federal  funds  transactions  with members of the Federal  Reserve
System  arranged  by Federal  funds  brokers on such day,  as  published  by the
Federal  Reserve Bank of New York on the Business Day next  succeeding such day,
provided  that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding  Business
Day, and (b) if no such rate is so published  on such next  succeeding  Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to the
Agent  by  federal  funds  dealers  selected  by the  Agent  on such day on such
transaction as determined by the Agent.

         "Fees"  means the fees and  commissions  provided for or referred to in
Section 3.6.  and any other fees payable by the Borrower  hereunder or under any
other Loan Document.

         "Fitch" means Fitch, Inc. and its successors.

         "Five Star" means Five Star Quality Care, Inc., a Maryland corporation,
and its successors.

                                      -8-
<PAGE>

         "Fixed Charges" means, for any period, the sum (without duplication) of
(a) Debt Service for such period and (b) Preferred Dividends for such period.

         "Floating  Rate Debt" means all  Indebtedness  of the  Borrower and its
Subsidiaries  which bears interest at fluctuating  rates (and in any event shall
include all Loans and other  Indebtedness  of the Borrower under any of the Loan
Documents)  and for which the Borrower or any such  Subsidiary  has not obtained
Interest Rate Agreements  which Interest Rate  Agreements (a) effectively  cause
such variable  rates to be equivalent  to, or to be capped at, fixed rates,  (b)
have scheduled  termination  dates later than the Termination  Date and (c) have
terms approved of by the Agent, such approval not to be unreasonably withheld.

         "Funds From Operations"  means,  for any period,  (a) net income of the
Borrower for such period  determined on a  consolidated  basis  exclusive of the
following (to the extent included in the determination of such net income):  (i)
depreciation  and  amortization;  (ii) gains and losses  from  extraordinary  or
non-recurring  items; (iii) gains and losses on sales of real estate; (iv) gains
and losses on investments in marketable securities;  (v) provisions/benefits for
income  taxes for such period;  and (vi)  distributions  on the  existing  Trust
Preferred Securities plus (b) the Borrower's share of Funds From Operations from
Unconsolidated Affiliates.  Straight line rent leveling adjustments and deferred
percentage  rent  adjustments  required  under  GAAP  shall  be  disregarded  in
determinations  of  Funds  From  Operations  (to  the  extent  such  adjustments
otherwise would be included in the determination of Funds From Operations).

         "GAAP" means generally accepted accounting  principles set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial  Accounting  Standards  Board or in such other  statements by such
other  entity as may be  approved  by a  significant  segment of the  accounting
profession, which are applicable to the circumstances as of the Agreement Date.

         "Governing  Documents"  of any Person means the  declaration  of trust,
certificate  or articles of  incorporation,  by-laws,  partnership  agreement or
operating or members agreement, as the case may be, and any other organizational
or governing documents, of such Person.

         "Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
Governmental Authorities.

         "Governmental  Authority" means any national, state or local government
(whether domestic or foreign),  any political  subdivision  thereof or any other
governmental,  quasi-governmental,  regulatory,  judicial,  public or  statutory
instrumentality,  authority, body, agency, bureau or entity (including,  without
limitation,  the Federal Deposit Insurance  Corporation,  the Comptroller of the
Currency or the  Federal  Reserve  Board,  any  central  bank or any  comparable
authority) or any arbitrator with authority to bind a party at law.

         "Ground  Lease"  means (x) each  ground  lease  set  forth on  Schedule
1.1.(c),  as  amended,  supplemented  or  otherwise  modified  from time to time
(provided that any amendment,  supplement or other modification thereof does not
(I) decrease the remaining  term thereof  unless a purchase  option or extension
option is granted in exchange  for such  decrease,  (II) change any

                                      -9-
<PAGE>

right of the lessee to mortgage and encumber its interest in the leased property
or the free  transferability  of the  lessee's  interest  under  such lease in a
manner which is materially adverse to the lessee, or (III) change any obligation
of the lessor to give the holder of any  mortgage  Lien on such leased  property
written  notice of any  defaults  on the part of the  lessee and that such lease
will not be  terminated  until such holder has had a reasonable  opportunity  to
cure or  complete  foreclosures,  and  fails to do so,  in each case in a manner
which is  materially  adverse to such holder) and (y) a ground lease  containing
the following terms and conditions: (a) either (i) a remaining term (taking into
account  extensions  which may be effected by the lessee  without the consent of
the lessor) of no less than 30 years from the Agreement  Date, or (ii) the right
of the lessee to purchase the  property on terms  reasonably  acceptable  to the
Agent;  (b) the right of the lessee to mortgage and encumber its interest in the
leased  property;  (c) the  obligation  of the  lessor to give the holder of any
mortgage Lien on such leased property written notice of any defaults on the part
of the lessee and that such lease will not be  terminated  until such holder has
had a reasonable opportunity to cure or complete  foreclosures,  and fails to do
so; and (d) free  transferability  of the  lessee's  interest  under such lease,
including ability to sublease, subject to only reasonable consent provisions.

         "Guarantor"  means  any  Person  that is a party to the  Guaranty  as a
"Guarantor" and in any event shall include each Material  Subsidiary  (unless an
Excluded Subsidiary).

         "Guaranty", "Guaranteed" or to "Guarantee" as applied to any obligation
means and  includes:  (a) a guaranty  (other than by  endorsement  of negotiable
instruments  for  collection in the ordinary  course of  business),  directly or
indirectly,  in any  manner,  of any part or all of such  obligation,  or (b) an
agreement,  direct or  indirect,  contingent  or  otherwise,  and whether or not
constituting a guaranty,  the practical effect of which is to assure the payment
or  performance  (or payment of damages in the event of  nonperformance)  of any
part or all of such  obligation  whether by: (i) the purchase of  securities  or
obligations,  (ii) the purchase, sale or lease (as lessee or lessor) of property
or the  purchase or sale of services  primarily  for the purpose of enabling the
obligor with respect to such  obligation to make any payment or performance  (or
payment of damages in the event of  nonperformance) of or on account of any part
or all of such  obligation,  or to assure the owner of such  obligation  against
loss,  (iii) the  supplying of funds to or in any other manner  investing in the
obligor with respect to such obligation, (iv) repayment of amounts drawn down by
beneficiaries  of letters of credit  (including  Letters of Credit),  or (v) the
supplying  of funds to or investing in a Person on account of all or any part of
such Person's  obligation  under a Guaranty of any obligation or indemnifying or
holding  harmless,  in any  way,  such  Person  against  any part or all of such
obligation. As the context requires,  "Guaranty" shall also mean the Guaranty to
which the Guarantors are parties substantially in the form of Exhibit B.

         "Hazardous Materials" means all or any of the following: (a) substances
that are  defined  or listed  in,  or  otherwise  classified  pursuant  to,  any
applicable Environmental Laws as "hazardous substances",  "hazardous materials",
"hazardous  wastes",  "toxic  substances" or any other  formulation  intended to
define, list or classify substances by reason of deleterious  properties such as
ignitability, corrosivity, reactivity,  carcinogenicity,  reproductive toxicity,
"TCLP"  toxicity or "EP  toxicity";  (b) oil,  petroleum  or  petroleum  derived
substances,  natural  gas,  natural gas liquids or  synthetic  gas and  drilling
fluids,  produced  waters  and other  wastes  associated  with the  exploration,
development or production of crude oil, natural gas or

                                      -10-
<PAGE>

geothermal  resources;  (c)  any  flammable  substances  or  explosives  or  any
radioactive  materials;  (d) asbestos in any form; and (e) electrical  equipment
which contains any oil or dielectric fluid containing levels of  polychlorinated
biphenyls in excess of fifty parts per million.

         "Indebtedness"  means,  with  respect  to a  Person,  at  the  time  of
computation  thereof,  all of  the  following  (without  duplication):  (a)  all
obligations of such Person in respect of money borrowed;  (b) all obligations of
such Person, whether or not for money borrowed (1) represented by notes payable,
or  drafts  accepted,  in each  case  representing  extensions  of  credit,  (2)
evidenced  by  bonds,   debentures,   notes  or  similar  instruments,   or  (3)
constituting  purchase money  indebtedness,  conditional sales contracts,  title
retention  debt  instruments or other similar  instruments,  upon which interest
charges  are  customarily  paid or that are issued or assumed as full or partial
payment for property or services rendered;  (c) Capitalized Lease Obligations of
such Person; (d) all reimbursement  obligations of such Person under any letters
of credit or  acceptances  (whether  or not the same  have  been  presented  for
payment); (e) all obligations, contingent or otherwise, of such Person under any
synthetic  lease,  tax  retention  operating  lease,  off balance  sheet loan or
similar off balance sheet financing  arrangement if the transaction  giving rise
to such  obligation  (1) is considered  indebtedness  for borrowed money for tax
purposes but is  classified  as an  operating  lease under GAAP and (2) does not
(and is not  required  pursuant to GAAP to) appear as a liability on the balance
sheet of such Person;  (f) all  obligations of such Person to purchase,  redeem,
retire,  defease or  otherwise  make any  payment in respect of any  Mandatorily
Redeemable  Stock  issued  by such  Person or any  other  Person,  valued at the
greater of its voluntary or involuntary  liquidation preference plus accrued and
unpaid dividends;  (g) all obligations of such Person in respect of any take-out
commitment or forward equity commitment (excluding,  in the case of the Borrower
and its  Subsidiaries,  any such obligation that can be satisfied  solely by the
issuance of Equity Interests (other than Mandatorily Redeemable Stock)); (h) all
Indebtedness  of other Persons which such Person has  Guaranteed or is otherwise
recourse to such Person (excluding guarantees required under Applicable Laws, or
by any  Governmental  Authority,  as a condition to ownership of Senior  Housing
Assets);  (i) all  Indebtedness  of another  Person secured by (or for which the
holder of such Indebtedness has an existing right,  contingent or otherwise,  to
be secured by) any Lien (other than  Permitted  Liens of the type  described  in
clauses (a) through (d) and (f) through (j) of the  definition  of such term) on
property or assets owned by such Person, even though such Person has not assumed
or  become  liable  for  the  payment  of such  Indebtedness  or  other  payment
obligation,  valued,  in the case of any such  Indebtedness as to which recourse
for the payment thereof is expressly  limited to the property or assets on which
such Lien is granted,  at the lesser of (1) the stated or determinable amount of
the  Indebtedness  that is so  secured  or, if not stated or  determinable,  the
maximum  reasonably  anticipated  liability in respect  thereof  (assuming  such
Person is required to perform  thereunder) and (2) the Fair Market Value of such
property or assets;  and (j) such Person's pro rata share of the Indebtedness of
any Unconsolidated Affiliate of such Person.

         "Intellectual  Property"  has the  meaning  given  that term in Section
6.1.(t).

         "Interest  Expense"  means,  with respect to a Person for any period of
time (a) the interest  expense  whether paid,  accrued or  capitalized  (without
deduction of consolidated  interest  income) of such Person for such period plus
(b) in the case of the  Borrower,  the  Borrower's  pro rata  share of  Interest
Expense of its  Unconsolidated  Affiliates.  Interest  Expense shall exclude any

                                      -11-
<PAGE>

amortization of (i) deferred financing fees and (ii) debt discounts (but only to
the extent  such  discounts  do not exceed 3.0% of the  initial  face  principal
amount of such debt).

         "Interest  Period"  means with  respect to any LIBOR Loan,  each period
commencing  on the  date  such  LIBOR  Loan is made or the  last day of the next
preceding  Interest  Period  for such  Loan  and  ending  7,  30,  60 or 90 days
thereafter,  as the  Borrower  may  select in a Notice of  Borrowing,  Notice of
Continuation  or  Notice of  Conversion,  as the case may be,  except  that each
Interest  Period  of 30,  60 or 90 day's  duration  that  commences  on the last
Business  Day of a  calendar  month  shall end on the last  Business  Day of the
appropriate subsequent calendar month. Notwithstanding the foregoing: (i) if any
Interest Period would  otherwise end after the  Termination  Date, such Interest
Period shall end on the  Termination  Date;  and (ii) each Interest  Period that
would  otherwise  end on a day which is not a Business Day shall end on the next
succeeding  Business Day (or, if such next succeeding  Business Day falls in the
next succeeding calendar month, on the next preceding Business Day).

         "Interest  Rate  Agreement"  means any  interest  rate swap  agreement,
interest rate cap  agreement,  interest  rate collar  agreement or other similar
contractual  agreement or arrangement entered into with a nationally  recognized
financial  institution then having an Investment Grade Rating for the purpose of
protecting against fluctuations in interest rates.

         "Internal  Revenue  Code" means the Internal  Revenue Code of 1986,  as
amended.

         "Investment"  means, (x) with respect to any Person, any acquisition or
investment  (whether or not of a controlling  interest) by such Person, by means
of any of the  following:  (a) the purchase or other  acquisition  of any Equity
Interest  in another  Person,  (b) a loan,  advance or  extension  of credit to,
capital  contribution  to,  Guaranty  of  Indebtedness  of, or purchase or other
acquisition of any Indebtedness of, another Person, including any partnership or
joint  venture  interest  in such other  Person,  or (c) the  purchase  or other
acquisition  (in one  transaction  or a series  of  transactions)  of  assets of
another  Person that  constitute the business or a division or operating unit of
another  Person  and (y)  with  respect  to any  Property  or other  asset,  the
acquisition  thereof.  Any commitment to make an Investment in any other Person,
as well as any option of another Person to require an Investment in such Person,
shall  constitute an Investment.  Except as expressly  provided  otherwise,  for
purposes  of  determining  compliance  with  any  covenant  contained  in a Loan
Document,  the amount of any Investment  shall be the amount actually  invested,
without  adjustment for  subsequent  increases or decreases in the value of such
Investment.

         "Investment  Grade  Rating"  means a Credit  Rating  of  BBB-/Baa3  (or
equivalent) or higher from the Rating Agencies.

         "Lease"  means a  (sub)lease  of a Property,  between the Borrower or a
Subsidiary, as Lessor, and a Lessee.

         "Lease Abstract" means, as to any Lease for a Senior Housing Asset Pool
or  individual  Senior  Housing  Asset not in a Senior  Housing  Asset Pool,  an
abstract of such Lease and Ancillary Agreements in form and substance reasonably
acceptable to the Agent, which shall

                                      -12-
<PAGE>

include a reasonably  detailed  description  of the following for such Lease and
Ancillary  Agreements:  (a) all rent  payable  under  such  Lease,  including  a
description of Base Rent and other  components of rent payable under such Lease,
(b) the term  (including  provisions for extension) of the Lease and any related
Ancillary Agreements,  (c) capital expenditure provisions, (d) security deposits
and other similar deposits required to made by the Lessee,  (e) the terms of any
Guaranty  of such  Lease,  including  without  limitation,  the  identity of the
guarantor(s),  any collateral  security for the obligations of such guarantor(s)
and any provisions providing for reduction or release of the obligations of such
guarantor(s) thereunder,  (f) termination events, (g) the terms of any Ancillary
Agreements  for the Senior Housing Asset Pool or Senior Housing Asset subject to
such Lease,  (h) a summary of any  restrictions on the Lessor's ability to sell,
encumber,  pledge,  mortgage or  otherwise  grant Liens upon the Senior  Housing
Assets subject to such Lease, (i) restrictions, requirements or other provisions
regarding  the brand  name,  trademark  or trade name under which the Lessee may
operate any Senior Housing Asset subject to such Lease,  (j) any materials terms
that are  unusual in nature or not  contained  in the  majority of the Leases or
Ancillary Agreement for the Unencumbered Senior Housing Assets at such time, (k)
expenses  that  are  expressly  subordinate  to  rent  payments,  (l)  financial
reporting  requirements of tenants (including whether tenants are required to be
audited  annually),  (m)  financial  covenants  applicable  to the tenants,  (n)
provisions   requiring   the  tenants  to  comply  with   applicable   licensing
requirements  and other health care regulatory  requirements  and (o) provisions
regarding  reporting of the results of reviews or  investigations  by applicable
regulatory authorities.

         "L/C Commitment Amount" equals $50,000,000.

         "Lender"  means  each  financial  institution  from time to time  party
hereto as a "Lender",  together  with its  respective  successors  and permitted
assigns.

         "Lending  Office" means, for each Lender and for each Type of Loan, the
office of such Lender  specified as such on its signature  page hereto or in the
applicable  Assignment  and Acceptance  Agreement,  or such other office of such
Lender as such Lender may notify the Agent in writing from time to time.

         "Lessee"  means the  (sub)lessee  of a  Property  pursuant  to a Lease,
provided that  (without the Agent's  approval) no such  (sub)lessee  shall be an
Affiliate of the Borrower (including,  without limitation,  RMR, or any Managing
Trustee, but, subject to compliance with Section 9.10.,  excluding Five Star and
any of its  Subsidiaries  at  anytime  Five  Star or any such  Subsidiary  is an
Affiliate),  except during an interim period for Properties which are foreclosed
upon or repossessed upon lease  terminations or otherwise by or on behalf of the
Borrower or a Subsidiary.

         "Letter of Credit" has the meaning given that term in Section 2.3.(a).

         "Letter  of Credit  Documents"  means,  with  respect  to any Letter of
Credit,  collectively,  any  application  therefor,  any  certificate  or  other
document  presented in connection with a drawing under such Letter of Credit and
any other agreement, instrument or other document

                                      -13-
<PAGE>

governing  or  providing  for (a) the  rights  and  obligations  of the  parties
concerned or at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations.

         "Letter of Credit Liabilities" means, without duplication,  at any time
and in respect of any Letter of Credit, the sum of (a) the Stated Amount of such
Letter  of  Credit  plus  (b)  the  aggregate  unpaid  principal  amount  of all
Reimbursement  Obligations  of the  Borrower  at such  time due and  payable  in
respect of all drawings  made under such Letter of Credit.  For purposes of this
Agreement,  a Lender (other than the Lender acting as the Agent) shall be deemed
to hold a Letter of Credit  Liability  in an amount  equal to its  participation
interest in the related Letter of Credit under Section  2.3.(i),  and the Lender
acting as the Agent shall be deemed to hold a Letter of Credit  Liability  in an
amount  equal to its  retained  interest in the related  Letter of Credit  after
giving effect to the  acquisition by the Lenders other than the Lender acting as
the Agent of their participation interests under such Section.

         "LIBOR" means, for any LIBOR Loan for any Interest Period therefor, the
rate per annum  (rounded  upwards,  if  necessary,  to the nearest  1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London  interbank
offered rate for deposits in Dollars at  approximately  11:00 a.m. (London time)
two  Business  Days  prior to the first day of such  Interest  Period for a term
comparable  to  such  Interest  Period.  If for  any  reason  such  rate  is not
available,  the term  "LIBOR"  shall mean,  for any LIBOR Loan for any  Interest
Period  therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the
nearest  1/100 of 1%)  appearing  on the Reuters  Screen LIBO Page as the London
interbank  offered  rate for  deposits  in Dollars at  approximately  11:00 a.m.
(London time) two Business  Days prior to the first day of such Interest  Period
for a term comparable to such Interest Period;  provided,  however, if more than
one rate is specified on the Reuters Screen LIBO Page, the applicable rate shall
be the arithmetic mean of all such rates.

         "LIBOR Loans" means Loans bearing interest at a rate based on LIBOR.

         "Lien" as applied to the property of any Person means: (a) any security
interest,  encumbrance,  mortgage,  deed to secure debt, deed of trust,  pledge,
lien, charge or lease  constituting a Capitalized Lease Obligation,  conditional
sale or other title retention agreement,  or other security title or encumbrance
of any kind in respect of any  property  of such  Person,  or upon the income or
profits  therefrom;  (b) any  arrangement,  express or implied,  under which any
property of such Person is transferred,  sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other  obligation  in priority to the payment of the  general,  unsecured
creditors of such Person;  (c) the filing of any financing  statement  under the
Uniform  Commercial  Code or its  equivalent in any  jurisdiction,  other than a
financing  statement  filed  (i)  in  respect  of a  lease  not  constituting  a
Capitalized  Lease  Obligation   pursuant  to  Section  9-505  (or  a  successor
provision)  of  the  Uniform  Commercial  Code  as in  effect  in an  applicable
jurisdiction or (ii) in connection with a sale or other  disposition of accounts
or other assets in a transaction not otherwise  constituting or giving rise to a
Lien;  and (d) any agreement by such Person to grant,  give or otherwise  convey
any of the foregoing.

         "Loan" means a Revolving Loan or a Swingline Loan.

                                      -14-
<PAGE>

         "Loan Document" means this Agreement,  each Note, each Letter of Credit
Document,  the Guaranty and each other  document or instrument  now or hereafter
executed  and  delivered  by a Loan Party in  connection  with,  pursuant  to or
relating to this Agreement.

         "Loan  Party"  means each of the  Borrower  and each  other  Person who
guarantees all or a portion of the Obligations and/or who pledges any collateral
security to secure all or a portion of the  Obligations.  Schedule  1.1.(d) sets
forth the Loan Parties in addition to the Borrower as of the Agreement Date.

         "Managing  Trustee"  means either Mr. Barry M. Portnoy or Mr. Gerard M.
Martin,  both having a business address c/o RMR, or any duly appointed successor
thereto.

         "Mandatorily  Redeemable Stock" means, with respect to any Person,  any
Equity Interest of such Person which by the terms of such Equity Interest (or by
the  terms of any  security  into  which it is  convertible  or for  which it is
exchangeable or  exercisable),  upon the happening of any event or otherwise (a)
matures or is mandatorily  redeemable,  pursuant to a sinking fund obligation or
otherwise (other than an Equity Interest which is redeemable  solely in exchange
for  common  stock  or  other  equivalent  common  Equity  Interests),   (b)  is
convertible  into or exchangeable or exercisable for Indebtedness or Mandatorily
Redeemable  Stock, or (c) is redeemable at the option of the holder thereof,  in
whole or in part (other than an Equity  Interest  which is redeemable  solely in
exchange for common stock or other equivalent common Equity Interests);  in each
case, on or prior to the date on which all  Revolving  Loans are scheduled to be
due and payable in full.

         "Managed  Property"  means  a  Senior  Housing  Asset  acquired  by the
Borrower or a Subsidiary as a result of, or in connection with, a foreclosure or
repossession (or consensual arrangement in lieu thereof).

         "Marketable  Securities"  means (a) one million  common  shares of HRPT
Properties  Trust  owned by the  Borrower  as of the  Agreement  Date;  (b) bank
deposits and certificates of deposit from a bank rated Baa1/BBB+ or better;  (c)
government obligations; and (d) commercial paper rated A1/P1.

         "Material Adverse Effect" means a materially  adverse effect on (a) the
business,  assets,  liabilities,  financial condition,  results of operations or
business  prospects of the Borrower and its  Subsidiaries  taken as a whole, (b)
the ability of the  Borrower or any other Loan Party to perform its  obligations
under  any  Loan  Document  to  which  it  is  a  party,  (c)  the  validity  or
enforceability of any of the Loan Documents,  (d) the rights and remedies of the
Lenders and the Agent under any of the Loan  Documents or (e) the timely payment
of the  principal  of or  interest  on the  Loans or other  amounts  payable  in
connection therewith.

         "Material Contract" means any contract or other arrangement (other than
Loan Documents),  whether written or oral, to which the Borrower, any Subsidiary
or any  other  Loan  Party is a party as to which  the  breach,  nonperformance,
cancellation  or  failure  to renew by any party  thereto  could  reasonably  be
expected to have a Material  Adverse Effect,  and in any event shall include the
Advisory Agreement.

                                      -15-
<PAGE>

         "Material  Plan"  means at any time a Plan or  Plans  having  aggregate
Unfunded Liabilities in excess of $10,000,000.

         "Material  Subsidiary"  means any  Subsidiary  to which 2.0% or more of
Total Asset Value is, directly or indirectly, attributable.

         "Moody's" means Moody's Investors Service, Inc. and its successors.

         "Mortgage Note" means a promissory note satisfying all of the following
requirements:  (a) such  promissory  note is owned  solely by the  Borrower or a
Subsidiary;  (b) such  promissory  note is secured by a Lien on a Senior Housing
Asset or another  Property  the  improvements  on which are of a type similar to
improvements  located on the Properties as of the Agreement  Date; (c) such real
property  and  related   improvements  are  not  subject  to  any  environmental
conditions or other matters  which,  individually  or  collectively,  materially
impair the value of such real property or related  improvements;  and (d) if the
Borrower  or any  Subsidiary  were to acquire  such real  property  and  related
improvements, no Default or Event of Default would result from such acquisition.

         "Multiemployer Plan" means at any time an employee pension benefit plan
within the  meaning of  Section  4001(a)(3)  of ERISA to which any member of the
ERISA Group is then making or accruing an  obligation to make  contributions  or
has within the preceding five plan years made contributions, including for these
purposes  any Person  which ceased to be a member of the ERISA Group during such
five year period.

         "Negative  Pledge" means a provision of any agreement  (other than this
Agreement or any other Loan  Document)  that prohibits or limits the creation or
assumption of any Lien on any assets of a Person or entitles  another  Person to
obtain or claim the  benefit of a Lien on any assets of such  Person;  provided,
however, that an agreement that establishes a maximum ratio of unsecured debt to
unencumbered  assets,  or of secured  debt to total  assets,  or that  otherwise
conditions a Person's ability to encumber its assets upon the maintenance of one
or more specified ratios that limit such Person's ability to encumber its assets
but  that do not  generally  prohibit  the  encumbrance  of its  assets,  or the
encumbrance of specific assets or that limits the encumbrance of specific assets
or pools or assets in  combination  with other assets or pools of assets,  shall
not constitute a Negative Pledge for purposes of this Agreement.

         "Net  Operating  Income" or "NOI" means the  following  (not to be less
than $0 in any  case):  (a) with  respect  to a Senior  Housing  Asset or Senior
Housing Asset Pool,  (i) Adjusted  EBITDA  attributable  to such Senior  Housing
Asset or Senior Housing Asset Pool (excluding  Non-Stabilized  Assets),  if such
Senior  Housing Asset or Senior  Housing Asset Pool has an EBITDAR Ratio of 1.00
or more or (ii) the Property NOI of such Senior  Housing Asset or Senior Housing
Asset Pool,  divided by 1.15, in any other case;  (b) with respect to a Mortgage
Note,  (i) Adjusted  EBITDA  attributable  to such  Mortgage  Note if the Senior
Housing Asset or group of Senior Housing Assets  securing such Mortgage Note has
an EBITDAR Ratio of 1.00 or more or (ii) the Property NOI of such Senior Housing
Asset or group of Senior  Housing  Assets

                                      -16-
<PAGE>

divided by 1.15 in any other case; and (c) for Non-Stabilized  Assets,  Adjusted
EBITDA  attributable to such Senior Housing Asset,  Senior Housing Asset Pool or
Mortgage Note.

         "Net Proceeds"  means with respect to any Equity  Issuance by a Person,
the aggregate amount of all cash and the Fair Market Value of all other property
received  by such Person in respect of such Equity  Issuance  net of  investment
banking  fees,  legal  fees,   accountants'  fees,  underwriting  discounts  and
commissions  and other  customary  fees and expenses  actually  incurred by such
Person in connection with such Equity Issuance.

         "Nonrecourse   Indebtedness"   means,   with   respect   to  a  Person,
Indebtedness for borrowed money in respect of which recourse for payment (except
for  customary  exceptions  for fraud,  misapplication  of funds,  environmental
indemnities,   and  other   similar   exceptions   to  recourse   liability)  is
contractually  limited to specific  assets of such Person  encumbered  by a Lien
securing such Indebtedness.

         "Non-Stabilized  Assets"  means  any  Senior  Housing  Asset  which (a)
although complete and operating, is still in the process of its initial lease-up
and has not achieved an EBITDAR  Ratio of 1.15 for any four  consecutive  fiscal
quarters,  or (b) has  undergone  substantial  redevelopment  causing a material
portion of such Property to be rendered unusable.  Senior Housing Assets will be
classified  as  Non-Stabilized  Assets  for a period not to exceed 24 months for
those Senior Housing Assets in (a) and 12 months for those Senior Housing Assets
described in the immediately preceding clause (b).

         "Note" means a Revolving Note or a Swingline Note.

         "Notice  of  Borrowing"  means a notice in the form of  Exhibit C to be
delivered to the Agent  pursuant to Section  2.1.(b)  evidencing  the Borrower's
request for a borrowing of Revolving Loans.

         "Notice of Continuation"  means a notice in the form of Exhibit D to be
delivered  to the Agent  pursuant  to Section  2.8.  evidencing  the  Borrower's
request for the Continuation of a LIBOR Loan.

         "Notice  of  Conversion"  means a notice in the form of Exhibit E to be
delivered  to the Agent  pursuant  to Section  2.9.  evidencing  the  Borrower's
request for the Conversion of a Loan from one Type to another Type.

         "Notice of Swingline Borrowing" means a notice in the form of Exhibit F
to be delivered to the Agent pursuant to Section 2.2.  evidencing the Borrower's
request for a borrowing of Swingline Loans.

         "Obligations" means,  individually and collectively:  (a) the aggregate
principal balance of, and all accrued and unpaid interest on, all Loans; (b) all
Reimbursement  Obligations and all other Letter of Credit  Liabilities;  and (c)
all other indebtedness,  liabilities,  obligations,  covenants and duties of the
Borrower and the other Loan Parties owing to the Agent,  the Swingline Lender or
any Lender of every kind,  nature and  description,  under or in respect of this
Agreement or any

                                      -17-
<PAGE>

of the  other  Loan  Documents,  including,  without  limitation,  the  Fees and
indemnification obligations, whether direct or indirect, absolute or contingent,
due or not due, contractual or tortious, liquidated or unliquidated, and whether
or not evidenced by any promissory note.

         "Participant" has the meaning given that term in Section 12.5.(c).

         "PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.

         "Permitted  Liens" means,  as to any Person:  (a) Liens securing taxes,
assessments  and other charges or levies imposed by any  Governmental  Authority
(excluding  any Lien imposed  pursuant to any of the provisions of ERISA) or the
claims of materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials,  supplies or rentals  incurred in the  ordinary  course of  business,
which (i) are not at the time  required to be paid or  discharged  under Section
7.6., or (ii) if such Lien is the  responsibility  of a financially  responsible
tenant,  mortgagor  or  manager to  discharge,  or (iii) in the case of a Senior
Housing  Asset or Senior  Housing Asset Pool,  when  considered in the aggregate
with all other Liens on such Senior Housing Asset (or Senior Housing Asset Pool)
does not materially detract from (A) if the Senior Housing Asset subject to such
Lien is part of a Senior  Housing Asset Pool,  the value of such Senior  Housing
Asset Pool, or (B) if the Senior  Housing Asset subject to such Lien is not part
of a Senior  Housing Asset Pool,  the value of such Senior  Housing  Asset;  (b)
Liens  consisting  of  deposits  or  pledges  made,  in the  ordinary  course of
business,  in  connection  with,  or to secure  payment  of,  obligations  under
workers'  compensation,  unemployment  insurance or similar Applicable Laws; (c)
Liens  consisting  of  encumbrances  in  the  nature  of  zoning   restrictions,
easements,  and rights or  restrictions  of record on the use of real  property,
which do not  materially  detract from the value of such  property or impair the
use thereof in the  business of such  Person;  (d) Liens in  existence as of the
Agreement  Date and set forth in Part II of Schedule  6.1.(f);  (e)  deposits to
secure trade contracts  (other than for  Indebtedness),  statutory  obligations,
surety and  appeal  bonds,  performance  bonds and other  obligations  of a like
nature incurred in the ordinary course of business; (f) the lessor's interest in
property leased to the Borrower or any of its  Subsidiaries  pursuant to a lease
permitted by this Agreement; (g) the interests of tenants, operators or managers
of  Properties;  (h) Liens in favor of the Agent for the benefit of the Lenders;
(i) Liens required under Applicable Law, or by any Governmental  Authority, as a
condition to ownership or  operation  of Senior  Housing  Assets;  and (j) Liens
which  are also  secured  by  restricted  cash or Cash  Equivalents  of equal or
greater value.

         "Person"  means  an  individual,   corporation,   partnership,  limited
liability  company,  association,  trust or  unincorporated  organization,  or a
government or any agency or political subdivision thereof.

         "Plan" means at any time an employee pension benefit plan (other than a
Multiemployer  Plan)  which is  covered  by Title IV of ERISA or  subject to the
minimum  funding  standards  under Section 412 of the Internal  Revenue Code and
either (a) is maintained,  or  contributed  to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (b) has at any time within the
preceding five years been maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for  employees  of any Person which was
at such time a member of the ERISA Group.

                                      -18-
<PAGE>

         "Post-Default  Rate" means,  in respect of any principal of any Loan or
any other Obligation that is not paid when due (whether at stated  maturity,  by
acceleration,  by optional or mandatory  prepayment  or  otherwise),  a rate per
annum equal to four percent  (4.0%) plus the Base Rate as in effect from time to
time.

         "Preferred   Dividends"   means,  for  any  given  period  and  without
duplication,  all  Restricted  Payments  accrued  or paid  (and  in the  case of
Restricted  Payments paid,  which were not accrued during a prior period) during
such period on Preferred Stock issued by the Borrower or a Subsidiary. Preferred
Dividends  shall not  include  dividends  or  distributions  paid or payable (a)
solely in Equity Interests (other than Mandatorily  Redeemable Stock) payable to
holders of such class of Equity Interests;  (b) to the Borrower or a Subsidiary;
or (c)  constituting  or resulting in the redemption of Preferred  Stock,  other
than  scheduled  redemptions  not  constituting   balloon,   bullet  or  similar
redemptions in full.  Payments made with respect to the existing Trust Preferred
Securities will be considered Preferred Dividends.

         "Preferred Stock" means,  with respect to any Person,  Equity Interests
in such Person  which are  entitled  to  preference  or priority  over any other
Equity  Interest  in such  Person in respect  of the  payment  of  dividends  or
distribution  of assets upon  liquidation or both,  including the existing Trust
Preferred Securities.

         "Prime Rate" means the rate of interest per annum announced publicly by
the Lender  acting as the Agent as its prime  rate from time to time.  The Prime
Rate is not necessarily  the best or the lowest rate of interest  offered by the
Lender acting as the Agent or any other Lender.

         "Principal  Office"  means  the  office  of the  Agent  located  at One
Wachovia Center, Charlotte, North Carolina, or such other office of the Agent as
the Agent may designate from time to time.

         "Property"  means any  parcel of real  property  and  related  personal
property, either owned in fee simple or leased pursuant to a Ground Lease by the
Borrower or any  consolidated  Subsidiary.  With  respect to a Mortgage  Note or
other  promissory  note secured by real  property,  the term Property means each
parcel of real property,  and related personal property,  securing such Mortgage
Note or other promissory note.

         "Property Net Operating  Income" or "Property NOI" means,  with respect
to a Property and for the four most recently ended fiscal  quarters,  the sum of
the following (without  duplication):  (a) all revenues received in the ordinary
course of operating such Property (including proceeds of rent loss insurance but
excluding pre-paid rents and revenues and security deposits except to the extent
applied in satisfaction of tenants' obligations for rent) minus (b) all expenses
(whether  paid or  accrued)  related to the  operation  or  maintenance  of such
Property,  including but not limited to payroll expenses, taxes, assessments and
other similar charges, insurance, utilities, maintenance, repair and landscaping
expenses,  other than expenses (if any)  subordinated  to the rental or mortgage
payment  receivable  by the Borrower or a Subsidiary  (according to the lease or
mortgage  documents for that  Property).  All amounts due to the

                                      -19-
<PAGE>

Borrower or any  Guarantor,  whether as rent or mortgage  payments in respect of
such Property, will be excluded from the calculation of (b) above.

         "Rating  Agencies"  means S&P and Moody's.  If either such  corporation
ceases to act as a securities  rating  agency or ceases to provide  ratings with
respect to the senior long-term unsecured debt obligations of the Borrower, then
the  Borrower  may  designate  as a  replacement  Fitch or any other  nationally
recognized securities rating agency acceptable to the Agent.

         "Register" has the meaning given that term in Section 12.5.(e).

         "Regulatory  Change"  means,  with  respect to any  Lender,  any change
effective  after  the  Agreement  Date  in  Applicable  Law  (including  without
limitation,  Regulation  D of the  Board of  Governors  of the  Federal  Reserve
System)  or the  adoption  or  making  after  such  date of any  interpretation,
directive or request applying to a class of banks,  including such Lender, of or
under any  Applicable Law (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful) by any Governmental Authority
or monetary authority charged with the interpretation or administration  thereof
or  compliance  by any Lender with any request or  directive  regarding  capital
adequacy.

         "Reimbursement  Obligation"  means  the  absolute,   unconditional  and
irrevocable  obligation  of the Borrower to reimburse  the Agent for any drawing
honored by the Agent under a Letter of Credit.

         "REIT"  means a  Person  qualifying  for  treatment  as a "real  estate
investment trust" under the Internal Revenue Code.

         "RMR"  means  REIT  Management  &  Research  LLC,   together  with  its
successors and permitted assigns.

         "Requisite  Lenders"  means,  as of any date,  Lenders  having at least
66-2/3% of the aggregate amount of the Commitments (excluding Defaulting Lenders
who,  accordingly,  are not entitled to vote),  or, if the Commitments have been
terminated or reduced to zero, Lenders holding at least 66-2/3% of the principal
amount of the Loans and  Letter  of  Credit  Liabilities  (excluding  Defaulting
Lenders who, accordingly, are not entitled to vote).

         "Responsible  Officer"  means (a) with  respect  to the  Borrower,  the
Borrower's  President or  Treasurer or any Managing  Trustee of the Borrower and
(b) with  respect to any other Loan Party,  such Loan  Party's  chief  executive
officer or chief financial officer.

         "Restricted  Payment"  means (a) any  dividend  or other  distribution,
direct or indirect,  on account of any Equity Interest of the Borrower or any of
its Subsidiaries now or hereafter outstanding,  except a dividend payable solely
in Equity  Interests  of identical  class to the holders of that class;  (b) any
redemption,  conversion,  exchange, retirement, sinking fund or similar payment,
purchase  or other  acquisition  for value,  direct or  indirect,  of any Equity
Interest  of  the  Borrower  or  any  of  its   Subsidiaries  now  or  hereafter
outstanding;  and (c) any payment made to

                                      -20-
<PAGE>

retire,  or to obtain the surrender  of, any  outstanding  warrants,  options or
other  rights to acquire  any Equity  Interests  of the  Borrower  or any of its
Subsidiaries now or hereafter outstanding.

         "Revolving Loan" means a loan made by a Lender to the Borrower pursuant
to Section 2.1.(a).

         "Revolving Note" has the meaning given that term in Section 2.10.(a).

         "Secured  Indebtedness" means, with respect to a Person as of any given
date,  the  aggregate  principal  amount  of all  Indebtedness  of  such  Person
outstanding  at such date and that is secured in any manner by any Lien,  and in
the case of the Borrower and the Guarantors, shall include (without duplication)
the Borrower's pro rata share of the Secured  Indebtedness of its Unconsolidated
Affiliates.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time, together with all rules and regulations issued thereunder.

         "Senior  Housing  Asset" means any  Property on which the  improvements
consist  only  of one or more  of the  following:  (a)  senior  residences,  (b)
independent living facilities,  (c) congregate communities,  (d) assisted living
facilities,  (e) nursing homes,  (f) hospitals and (g) other Property  primarily
used for senior citizen residences or health care services,  together with other
improvements incidental thereto.

         "Senior Housing Asset Pool" means any group of two or more  Properties,
substantially  all of the  value of  which is  attributable  to  Senior  Housing
Assets,  that are (a) leased to a Lessee pursuant to a single Lease,  (b) leased
pursuant to Leases that are cross-defaulted (as to defaults by Lessee) and which
the Borrower has designated in a notice to the Agent (which  designation has not
been  withdrawn  by the  Borrower)  to be a Senior  Housing  Asset Pool,  or (c)
Managed  Properties   managed  under  one  management   agreement  (or  multiple
management   agreements   with  the  same  or   affiliated   managers  that  are
cross-defaulted)  and which the Borrower has designated in a notice to the Agent
(which  designation  has not  been  withdrawn  by the  Borrower)  to be a Senior
Housing Asset Pool.

         "Solvent"  means,  when used with  respect to any Person,  that (a) the
fair value and the fair salable value of its assets  (excluding any Indebtedness
due from any affiliate of such Person) are each in excess of the fair  valuation
of its total liabilities  (including all contingent  liabilities computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that could  reasonably be expected to become an actual and
matured  liability);  (b)  such  Person  is  able  to pay  its  debts  or  other
obligations  in the  ordinary  course as they  mature;  and (c) such  Person has
capital not  unreasonably  small to carry on its  business  and all  business in
which it proposes to be engaged.

         "S&P"  means  Standard & Poor's  Rating  Services,  a  division  of The
McGraw-Hill Companies, Inc. and its successors.

                                      -21-
<PAGE>

         "Stated Amount" means the amount available to be drawn by a beneficiary
under a Letter of Credit from time to time,  as such amount may be  increased or
reduced from time to time in accordance with the terms of such Letter of Credit.

         "Subsidiary"  means, for any Person,  any  corporation,  partnership or
other entity of which at least a majority of the  securities or other  ownership
interests  having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons  performing similar functions of such
corporation,  partnership or other entity  (without  regard to the occurrence of
any  contingency)  is at the time directly or indirectly  owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person,  and shall include all Persons the accounts
of which consolidated with those of such Person pursuant to GAAP.

         "Supermajority  Lenders" means, as of any date, Lenders having at least
75% of the aggregate  amount of the Commitments  (excluding  Defaulting  Lenders
who,  accordingly,  are not entitled to vote),  or, if the Commitments have been
terminated  or reduced to zero,  Lenders  holding at least 75% of the  principal
amount of the Loans and  Letter  of  Credit  Liabilities  (excluding  Defaulting
Lenders who, accordingly, are not entitled to vote).

         "Swingline  Commitment" means the Swingline Lender's obligation to make
Swingline  Loans pursuant to Section 2.2. in an amount up to, but not exceeding,
$25,000,000,  as such amount may be reduced from time to time in accordance with
the terms hereof.

         "Swingline Lender" means Wachovia Bank, National Association,  together
with its respective successors and assigns.

         "Swingline  Loan"  means a loan  made by the  Swingline  Lender  to the
Borrower pursuant to Section 2.2.(a).

         "Swingline  Note" means the promissory note of the Borrower  payable to
the order of the Swingline  Lender in a principal  amount equal to the amount of
the Swingline  Commitment as originally in effect and otherwise duly  completed,
substantially in the form of Exhibit G.

         "Tangible  Net Worth" means,  as of any given time:  (a) the book value
(exclusive  of  depreciation)  of all real estate assets of the Borrower and its
Subsidiaries that constitute Properties at such time; plus (b) the book value of
other assets (excluding any assets described in the immediately preceding clause
(a)) of the Borrower and its Subsidiaries; less (c) all amounts appearing on the
assets  side  of a  consolidated  balance  sheet  of  the  Borrower  for  assets
separately  classified  as  intangible  assets  under  GAAP;  less (d) all Total
Indebtedness of the Borrower and its  Subsidiaries  determined on a consolidated
basis.

         "Taxes" has the meaning given that term in Section 3.12.

         "Termination Date" means November 30, 2005.

                                      -22-
<PAGE>

         "Titled  Agent"  means any of the Joint Lead  Arrangers,  the Sole Book
Runner, the Syndication Agent or the Documentation  Agents, and their respective
successors and permitted assigns.

         "Total  Asset  Value"   means  the  sum  of  the   following   (without
duplication)  of the Borrower and its  Subsidiaries  for the fiscal quarter most
recently ended:  (a) with respect to all Properties owned (or leased pursuant to
a Ground  Lease)  by the  Borrower  or any  Subsidiary  for such  entire  fiscal
quarter,  (i) Adjusted  EBITDA  attributable  to such Properties for such period
multiplied by (ii) 4 divided by (iii) the Capitalization  Rate; (b) the purchase
price paid for any  Property  acquired  during  such  fiscal  quarter  (less any
amounts  paid as a purchase  price  adjustment,  held in escrow,  retained  as a
contingency  reserve,  or  other  similar  arrangements);   (c)  all  Marketable
Securities,  cash and cash  equivalents;  (d) the book value of all Assets Under
Development  as of the end of such  fiscal  quarter;  (e) the book  value of all
Mortgage  Notes,  and  all  other  promissory  notes  secured  by a Lien  on any
Property,  as of the end of such fiscal quarter; and (f) the Borrower's pro rata
share of the preceding items of any Unconsolidated Affiliate of the Borrower.

         "Total  Indebtedness" means, as of a given date, all liabilities of the
Borrower and its Subsidiaries  which would, in conformity with GAAP, be properly
classified  as a liability on a  consolidated  balance sheet of the Borrower and
its  Subsidiaries  as of such  date,  and in any event  shall  include  (without
duplication):  (a) all Indebtedness of the Borrower and its Subsidiaries and (b)
the Borrower's pro rata share of Indebtedness of its Unconsolidated Affiliates.

         "Trust  Preferred  Securities"  means the  1,095,750  shares of 10.125%
trust  preferred  securities  having a liquidation  preference of $25 per share,
issued by SNH Capital  Trust I, a Subsidiary  of the  Borrower,  the proceeds of
which were used by such  Subsidiary  to acquire the  Borrower's  10.125%  junior
subordinated debentures due June 15, 2041.

         "Type" with respect to any Loan, refers to whether such Loan is a LIBOR
Loan or Base Rate Loan.

         "Unconsolidated Affiliate" means, with respect to any Person, any other
Person in whom such Person holds an  Investment,  which  Investment is accounted
for in the financial  statements of such Person on an equity basis of accounting
and whose  financial  results  would  not be  consolidated  under  GAAP with the
financial  results of such Person on the  consolidated  financial  statements of
such Person.

         "Unencumbered  Asset Value" means,  as of the end of a fiscal  quarter,
the  sum of:  (a)  unrestricted  cash  and  Cash  Equivalents  and  unencumbered
Marketable  Securities of the Borrower and its Subsidiaries;  (b) the product of
(i) Net Operating Income for the fiscal quarter most recently ended attributable
to  Unencumbered  Senior  Housing  Assets owned or leased by the Borrower or any
Subsidiary  for such  period,  multiplied  by (ii) 4 and  divided  by (iii)  the
Capitalization  Rate;  (c) the purchase price paid for any  Unencumbered  Senior
Housing Asset acquired  during such four fiscal quarter period (less any amounts
paid as a purchase price adjustment,  held in escrow,  retained as a contingency
reserve,  or  other  similar  arrangements);  and  (d)  the  book  value  of all
Unencumbered  Mortgage Notes (excluding any Unencumbered

                                      -23-
<PAGE>

Mortgage  Note where the  obligor is more than 60 days past due with  respect to
any  payment  obligation).  To the  extent  that  the sum of the  book  value of
Unencumbered Mortgage Notes would, in the aggregate, account for more than 15.0%
of Unencumbered Asset Value, such excess shall be excluded.  In addition, to the
extent that the value attributable to Senior Housing Assets leased pursuant to a
Ground Lease  constitutes more than 20.0% of the Unencumbered  Asset Value, such
excess  shall  be  excluded.   If  an  Unencumbered   Senior  Housing  Asset  or
Unencumbered  Mortgage  Note is not  owned  as of the  last  day of such  fiscal
quarter then such asset shall be excluded from the foregoing calculations.

         "Unencumbered  Mortgage  Note" means a Mortgage Note  satisfying all of
the following  requirements:  (a) such  Mortgage  Note is owned  directly by the
Borrower or a Guarantor; (b) neither such Mortgage Note, nor any interest of the
Borrower or such Guarantor therein, is subject to any Lien (other than Permitted
Liens of the types  described  in clauses (a) through (d) and (f) through (j) of
the  definition  thereof or Liens in favor of the Borrower or a Guarantor) or to
any Negative  Pledge;  (c) if such Mortgage  Note is owned by a Subsidiary,  (i)
none of the Borrower's direct or indirect  ownership interest in such Subsidiary
is subject to any Lien (other than  Permitted  Liens of the types  described  in
clauses (a) through (d) and (f) through (j) of the definition  thereof) or Liens
in favor of the Borrower or a Guarantor) or to any Negative  Pledge and (ii) the
Borrower directly,  or indirectly  through a Subsidiary,  has the right to sell,
transfer or otherwise  dispose of such  Mortgage Note without the need to obtain
the  consent  of any  Person;  (d) no  Senior  Housing  Asset  (nor any  related
improvements) securing such Mortgage Note is subject to any Lien (other than the
Lien securing  such Mortgage  Note,  Permitted  Liens of the types  described in
clauses  (a)  through  (d)  and  (f)  through  (j)  of the  definition  thereof,
subordinate  Liens,  and Liens in favor of the Borrower or Guarantor);  (e) each
Senior  Housing  Asset  securing such Mortgage Note is located in a state of the
United  States,  the District of Columbia or Puerto Rico;  and (f) such Mortgage
Note (i) has been designated by the Borrower as an "Unencumbered  Mortgage Note"
on Schedule  6.1.(y) or on an  Unencumbered  Senior  Housing  Asset  Certificate
delivered by the Borrower to the Agent pursuant to Section 8.3. or 8.4.(o),  and
(ii) has not been removed by the Borrower  from  "Unencumbered  Mortgage  Notes"
pursuant to Section 8.4.(p).

         "Unencumbered  NOI" means, for any given period,  (a) the aggregate NOI
attributable to Unencumbered  Senior Housing Assets (net of the NOI attributable
to the Acquired Encumbered Properties) for such period plus (b) NOI with respect
to  Unencumbered  Mortgage  Notes for such period  (excluding  any  Unencumbered
Mortgage  Note where the  obligor is more than 60 days past due with  respect to
any payment obligation).

         "Unencumbered  Senior  Housing  Asset" means each Senior  Housing Asset
that satisfies all of the following requirements:  (a) such Senior Housing Asset
is (i) owned in fee simple  solely by the Borrower or a Guarantor or (ii) leased
solely by the  Borrower or a  Guarantor  pursuant  to a Ground  Lease;  (b) such
Senior Housing Asset is not an Asset Under  Development  and is in service;  (c)
neither  such Senior  Housing  Asset,  nor any  interest of the Borrower or such
Guarantor  therein,  is subject to any Lien (other than  Permitted  Liens of the
types described in clauses (a) through (d) and (f) through (j) of the definition
thereof or Liens in favor of the  Borrower or a  Guarantor)  or to any  Negative
Pledge;  (d) if such Senior Housing Asset is owned by a Subsidiary,  (i) none of
the  Borrower's  direct or indirect  ownership  interest in such

                                      -24-
<PAGE>

Subsidiary  is  subject to any Lien  (other  than  Permitted  Liens of the types
described  in clauses (a)  through  (d) and (f)  through  (j) of the  definition
thereof or Liens in favor of the  Borrower or a  Guarantor)  or to any  Negative
Pledge and (ii) the Borrower directly,  or indirectly through a Subsidiary,  has
the right,  without the need to obtain the  consent of any Person,  to (x) sell,
transfer or  otherwise  dispose of such Senior  Housing  Asset and (y) to create
Liens on such Senior Housing Asset as security for  Indebtedness of the Borrower
or such Subsidiary, as applicable;  (e) such Senior Housing Asset is free of all
structural  defects  or  major   architectural   deficiencies,   title  defects,
environmental  conditions  or  other  adverse  matters  which,  individually  or
collectively, materially impair the value of such Senior Housing Asset; (f) such
Senior Housing Asset is located in a state of the United States, the District of
Columbia or Puerto  Rico;  (g) the Lessee is not more than 60 days past due with
respect  to any  payment  obligations  under any Lease for such  Senior  Housing
Asset; and (h) such Senior Housing Asset (x) has been designated by the Borrower
as  an  "Unencumbered  Senior  Housing  Asset"  on  Schedule  6.1.(y)  or  on an
Unencumbered  Senior Housing Asset Certificate  delivered by the Borrower to the
Agent  pursuant  to  Section  8.3.  or  8.4.(o),  and (y) has not  been  removed
voluntarily by the Borrower from  "Unencumbered  Senior Housing Assets" pursuant
to Section  8.4.(p).  In addition,  a Senior  Housing  Asset Pool or the portion
thereof  comprised of Senior Housing Assets which are individually  Unencumbered
Senior Housing Assets shall constitute an Unencumbered  Senior Housing Asset for
purposes of this Agreement.  For purposes of this definition,  the Liens granted
pursuant  to the  Acquired  Property  Lien  Documents  will  not  result  in the
exclusion  of the 31 Senior  Housing  Assets in the  Senior  Housing  Asset Pool
leased  to  Five  Star  as  an  Unencumbered  Senior  Housing  Asset  under  the
immediately  preceding  clause  (c) so long  as such  Liens  encumber  only  the
Acquired  Encumbered  Properties,  and the  value  of such  Unencumbered  Senior
Housing Asset shall be determined net of the value  attributable to the Acquired
Encumbered Properties.

         "Unencumbered  Senior Housing Asset  Certificate" has the meaning given
that term in Section 8.3.

         "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount  (if any) by which (a) the value of all  benefit  liabilities  under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for  purposes  of Section  4044 of ERISA,  exceeds  (b) the fair market
value of all Plan assets allocable to such  liabilities  under Title IV of ERISA
(excluding any accrued but unpaid contributions),  all determined as of the then
most  recent  valuation  date for such Plan,  but only to the  extent  that such
excess  represents  a potential  liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

         "Unsecured  Debt Service" means,  for a given period,  Debt Service for
such period with  respect to  Unsecured  Indebtedness  of the  Borrower  and its
Subsidiaries.

         "Unsecured  Indebtedness"  means,  with  respect  to a Person as of any
given date, the aggregate  principal  amount of all  Indebtedness of such Person
outstanding   at  such  date  that  is  not  Secured   Indebtedness   (excluding
Indebtedness associated with Unconsolidated Affiliates that is not Guaranteed by
a  Loan  Party)  and  in  the  case  of  the  Borrower  shall  include  (without
duplication) Indebtedness that does not constitute Secured Indebtedness.

                                      -25-
<PAGE>

         "Wachovia" means Wachovia Bank, National Association, together with its
successors and assigns.

         "Wholly Owned  Subsidiary"  means any Subsidiary of a Person in respect
of which all of the equity securities or other ownership  interests (other than,
in the case of a  corporation,  directors'  qualifying  shares)  are at the time
directly or  indirectly  owned or controlled by such Person or one or more other
Subsidiaries of such Person or by such Person and one or more other Subsidiaries
of such Person.

Section 1.2.  General; References to Times.

         Unless  otherwise   indicated,   all  accounting   terms,   ratios  and
measurements  shall be  interpreted  or determined  in  accordance  with GAAP in
effect as of the Agreement  Date.  References in this  Agreement to  "Sections",
"Articles",  "Exhibits" and "Schedules" are to sections,  articles, exhibits and
schedules  herein and hereto  unless  otherwise  indicated.  references  in this
Agreement  to any  document,  instrument  or  agreement  (a) shall  include  all
exhibits,  schedules  and  other  attachments  thereto,  (b) shall  include  all
documents,  instruments or agreements issued or executed in replacement thereof,
to the extent permitted  hereby and (c) shall mean such document,  instrument or
agreement,  or  replacement or predecessor  thereto,  as amended,  supplemented,
restated or otherwise modified as of the date of this Agreement and from time to
time  thereafter to the extent not prohibited  hereby and in effect at any given
time.  Wherever  from the  context it appears  appropriate,  each term stated in
either the  singular or plural  shall  include  the  singular  and  plural,  and
pronouns  stated in the  masculine,  feminine or neuter gender shall include the
masculine,  the  feminine  and the neuter.  Unless  explicitly  set forth to the
contrary,  a reference to  "Subsidiary"  means a Subsidiary of the Borrower or a
Subsidiary  of  such  Subsidiary  and a  reference  to an  "Affiliate"  means  a
reference  to an  Affiliate  of the  Borrower.  Titles and captions of Articles,
Sections,  subsections and clauses in this Agreement are for  convenience  only,
and neither limit nor amplify the provisions of this Agreement. Unless otherwise
indicated,  all references to time are  references to Charlotte,  North Carolina
time.

                           ARTICLE II. CREDIT FACILITY

Section 2.1.  Revolving Loans.

         (a) Generally.  Subject to the terms and conditions hereof,  during the
period from the  Effective  Date to but  excluding the  Termination  Date,  each
Lender  severally and not jointly agrees to make Revolving Loans to the Borrower
in an  aggregate  principal  amount at any one time  outstanding  up to, but not
exceeding,  the  amount of such  Lender's  Commitment.  Subject to the terms and
conditions of this  Agreement,  during the period from the Effective Date to but
excluding  the  Termination  Date,  the Borrower may borrow,  repay and reborrow
Revolving Loans hereunder.

         (b)  Requesting  Revolving  Loans.  The  Borrower  shall give the Agent
notice pursuant to a Notice of Borrowing or telephonic  notice of each borrowing
of Revolving  Loans.  Each Notice of  Borrowing  shall be delivered to the Agent
before  11:00 a.m. (i) in the case of LIBOR  Loans,  on the date three  Business
Days prior to the proposed  date of such  borrowing and (ii) in

                                      -26-
<PAGE>

the case of Base Rate Loans,  on the date one Business Day prior to the proposed
date of such borrowing. Any such telephonic notice shall include all information
to be specified in a written Notice of Borrowing and shall be promptly confirmed
in writing by the Borrower  pursuant to a Notice of Borrowing  sent to the Agent
by telecopy on the same day of the giving of such telephonic  notice.  The Agent
will transmit by telecopy the Notice of Borrowing (or the information  contained
in such Notice of Borrowing) or the information contained in a telephonic notice
of  borrowing  (if such  telephonic  notice  is  received  prior to a Notice  of
Borrowing)  to each Lender  promptly  upon receipt by the Agent.  Each Notice of
Borrowing or telephonic notice of each borrowing shall be irrevocable once given
and binding on the Borrower.

         (c)  Disbursements of Revolving Loan Proceeds.  No later than 1:00 p.m.
on the date  specified  in the  Notice  of  Borrowing,  each  Lender  will  make
available for the account of its  applicable  Lending Office to the Agent at the
Principal Office, in immediately  available funds, the proceeds of the Revolving
Loan to be made by such Lender. With respect to Revolving Loans to be made after
the  Effective  Date,  unless the Agent  shall have been  notified by any Lender
prior to the  specified  date of  borrowing  that such Lender does not intend to
make available to the Agent the Revolving Loan to be made by such Lender on such
date,  the Agent may assume  that such  Lender  will make the  proceeds  of such
Revolving Loan available to the Agent on the date of the requested  borrowing as
set  forth in the  Notice  of  Borrowing  and the  Agent  may (but  shall not be
obligated to), in reliance upon such assumption,  make available to the Borrower
the amount of such  Revolving  Loan to be  provided by such  Lender.  Subject to
satisfaction  of the  applicable  conditions  set forth in  Article  V. for such
borrowing,  the Agent will make the proceeds of such borrowing  available to the
Borrower no later than 2:00 p.m. on the date and at the account specified by the
Borrower in such Notice of Borrowing.

Section 2.2.  Swingline Loans.

         (a) Swing  Line  Loans.  Subject  to the terms and  conditions  hereof,
during the period from the Effective Date to but excluding the Termination Date,
the  Swingline  Lender  agrees to make  Swingline  Loans to the  Borrower  in an
aggregate principal amount at any one time outstanding up to, but not exceeding,
the amount of the Swingline  Commitment.  If at any time the aggregate principal
amount of the  Swingline  Loans  outstanding  at such time exceeds the Swingline
Commitment in effect at such time, the Borrower shall  immediately pay the Agent
for the account of the  Swingline  Lender the amount of such excess.  Subject to
the terms and conditions of this Agreement,  the Borrower may borrow,  repay and
reborrow Swingline Loans hereunder.

         (b) Procedure for Borrowing  Swingline  Loans.  The Borrower shall give
the Agent and the  Swingline  Lender  notice  pursuant to a Notice of  Swingline
Borrowing  or  telephonic  notice of each  borrowing of a Swingline  Loan.  Each
Notice of Swingline  Borrowing  shall be delivered  to the  Swingline  Lender no
later than 3:00 p.m. on the proposed date of such borrowing. Any such telephonic
notice shall  include all  information  to be  specified in a written  Notice of
Swingline  Borrowing and shall be promptly  confirmed in writing by the Borrower
pursuant to a Notice of  Swingline  Borrowing  sent to the  Swingline  Lender by
telecopy on the same day of the giving of such telephonic notice. On the date of
the  requested  Swingline  Loan and subject to  satisfaction  of the  applicable
conditions set forth in Article V. for such borrowing, the Swingline Lender will
make the proceeds of such  Swingline  Loan available to the Borrower

                                      -27-
<PAGE>

in Dollars,  in immediately  available  funds,  at the account  specified by the
Borrower in the Notice of Swingline  Borrowing not later than 11:00 a.m. on such
date if the Swingline Lender received such Notice of Swingline Borrowing by 9:00
a.m. on such date, and otherwise not later than 4:00 p.m. on such date.

         (c) Interest.  Swingline  Loans shall bear interest at a per annum rate
equal to the Base Rate plus the  Applicable  Margin  for Base Rate  Loans (or at
such other rate or rates as the Borrower and the Swingline Lender may agree from
time to time in writing).  Interest payable on Swingline Loans is solely for the
account of the Swingline  Lender.  All accrued and unpaid  interest on Swingline
Loans shall be payable on the dates and in the manner  provided in Section  2.4.
with respect to interest on Base Rate Loans (except as the Swingline  Lender and
the Borrower may otherwise  agree in writing in connection  with any  particular
Swingline Loan).

         (d) Swingline  Loan Amounts,  Etc. Each  Swingline Loan shall be in the
minimum  amount of $1,000,000  and integral  multiples of $500,000 or such other
minimum  amounts  agreed  to by the  Swingline  Lender  and  the  Borrower.  Any
voluntary  prepayment  of a  Swingline  Loan must be in  integral  multiples  of
$100,000 or the aggregate  principal  amount of all outstanding  Swingline Loans
(or such other minimum amounts upon which the Swingline  Lender and the Borrower
may agree) and in connection  with any such  prepayment,  the Borrower must give
the Swingline  Lender prior written  notice  thereof no later than 10:00 a.m. on
the date of such  prepayment.  The  Swingline  Loans shall,  in addition to this
Agreement, be evidenced by the Swingline Note.

         (e)  Repayment  and  Participations  of Swingline  Loans.  The Borrower
agrees to repay each Swingline  Loan within one Business Day of demand  therefor
by the Swingline Lender and in any event,  within 5 Business Days after the date
such Swingline Loan was made.  Notwithstanding the foregoing, the Borrower shall
repay the entire  outstanding  principal  amount of, and all  accrued but unpaid
interest on, the Swingline Loans on the  Termination  Date (or such earlier date
as the Swingline Lender and the Borrower may agree in writing). If the Agent has
neither (x) received a Notice of Borrowing  indicating  that such Swingline Loan
is to be repaid  with the  proceeds  thereof  nor (y)  received  notice from the
Borrower that it intends to repay such  Swingline  Loan on a specified date and,
in the case of this clause (y) only,  such Swingline Loan is not repaid by 11:30
a.m. on such date,  the Swingline  Lender may, on behalf of the Borrower  (which
hereby irrevocably directs the Swingline Lender to act on its behalf), request a
borrowing of  Revolving  Loans (which shall be Base Rate Loans) from the Lenders
in an  amount  equal  to the  principal  balance  of such  Swingline  Loan.  The
limitations  of Section  3.5.(a)  shall not apply to any  borrowing of Base Rate
Loans made pursuant to this  subsection.  The Swingline Lender shall give notice
to the Agent of any such  borrowing of Base Rate Loans not later than 12:00 noon
on the proposed date of such borrowing, and the Agent shall promptly give notice
to the Lenders of any such borrowing of Base Rate Loans. No later than 2:00 p.m.
on such date,  each Lender  will make  available  to the Agent at the  Principal
Office for the account of Swingline Lender, in immediately  available funds, the
proceeds  of the Base Rate Loan to be made by such  Lender.  The Agent shall pay
the proceeds of such Base Rate Loans to the Swingline Lender,  which shall apply
such proceeds to repay such Swingline  Loan. If the Lenders are prohibited  from
making Loans required to be made under this subsection for any reason, including
without limitation,  the occurrence of any of the Events of Default described in
Sections  10.1.(f) or

                                      -28-
<PAGE>

10.1.(g), each Lender shall purchase from the Swingline Lender, without recourse
or warranty,  an  undivided  interest  and  participation  to the extent of such
Lender's Commitment  Percentage of such Swingline Loan, by directly purchasing a
participation  in such Swingline Loan in such amount  (regardless of whether the
conditions  precedent  thereto  set forth in Section  5.2.  are then  satisfied,
whether or not the Borrower has  submitted a Notice of Borrowing  and whether or
not the Commitments  are then in effect,  any Event of Default exists or all the
Loans have been  accelerated)  and paying the proceeds  thereof to the Agent for
the  account of the  Swingline  Lender in Dollars and in  immediately  available
funds.  If such amount is not in fact made available to the Swingline  Lender by
any Lender,  the  Swingline  Lender  shall be entitled to recover such amount on
demand from such Lender,  together  with accrued  interest  thereon for each day
from the date of demand thereof,  at the Federal Funds Rate. If such Lender does
not pay such amount forthwith upon the Swingline  Lender's demand therefor,  and
until such time as such Lender makes the required payment,  the Swingline Lender
shall be deemed to continue to have outstanding Swingline Loans in the amount of
such unpaid  participation  obligation  for all  purposes of the Loan  Documents
(other  than  those  provisions  requiring  the  other  Lenders  to  purchase  a
participation  therein).  Further,  such Lender shall be deemed to have assigned
any and all payments made of principal and interest on its Loans,  and any other
amounts due to it hereunder,  to the Swingline Lender to fund Swingline Loans in
the amount of the  participation  in Swingline  Loans that such Lender failed to
purchase  pursuant to this Section  until such amount has been  purchased  (as a
result of such assignment or otherwise).  A Lender's obligation to purchase such
a  participation  in a Swingline  Loan shall be absolute and  unconditional  and
shall  not  be  affected  by  any  circumstance  whatsoever,  including  without
limitation, (i) any claim of setoff, counterclaim,  recoupment, defense or other
right which such Lender or any other Person may have or claim against the Agent,
the  Swingline  Lender or any other Person  whatsoever,  (ii) the  occurrence or
continuation of a Default or Event of Default (including without limitation, any
of the Defaults or Events of Default described in Sections 10.1.(f) or 10.1.(g))
or the termination of any Lender's  Commitment,  (iii) the existence (or alleged
existence)  of an event or  condition  which  has had or could  have a  Material
Adverse Effect, (iv) any breach of any Loan Document by the Agent, any Lender or
the  Borrower  or (v) any other  circumstance,  happening  or event  whatsoever,
whether or not similar to any of the foregoing.

Section 2.3.  Letters of Credit.

         (a)  Letters of Credit.  Subject  to the terms and  conditions  of this
Agreement,  the Agent, on behalf of the Lenders, agrees to issue for the account
of the Borrower  during the period from and including the Effective Date to, but
excluding, the date 30 days prior to the Termination Date one or more letters of
credit (each a "Letter of Credit") up to a maximum  aggregate  Stated  Amount at
any one time outstanding not to exceed the L/C Commitment Amount.

         (b) Terms of Letters of Credit.  At the time of  issuance,  the amount,
form,  terms and  conditions  of each  Letter of  Credit,  and of any  drafts or
acceptances  thereunder,  shall be  subject  to  approval  by the  Agent and the
Borrower.  Notwithstanding the foregoing, in no event may the expiration date of
any Letter of Credit extend beyond the earlier of (i) the date one year from its
date of issuance or (ii) the Termination Date.

                                      -29-
<PAGE>

         (c) Requests for Issuance of Letters of Credit. The Borrower shall give
the Agent written notice (or telephonic notice promptly confirmed in writing) at
least 5 Business  Days prior to the  requested  date of  issuance of a Letter of
Credit,  such notice to describe in reasonable detail the proposed terms of such
Letter of Credit and the nature of the  transactions or obligations  proposed to
be  supported  by such  Letter of Credit,  and in any event shall set forth with
respect to such Letter of Credit (i) the proposed  initial Stated  Amount,  (ii)
the beneficiary or  beneficiaries,  and (iii) the proposed  expiration date. The
Borrower  shall  also  execute  and  deliver  such  customary  letter  of credit
application  forms as  requested  from time to time by the Agent.  Provided  the
Borrower  has  given  the  notice  prescribed  by the  first  sentence  of  this
subsection  and subject to Section 2.13.  and the other terms and  conditions of
this  Agreement,   including,   without  limitation,  the  satisfaction  of  any
applicable  conditions  precedent set forth in Article V., the Agent shall issue
the requested Letter of Credit on the requested date of issuance for the benefit
of the  stipulated  beneficiary  and will notify each Lender of the  issuance of
such Letter of Credit within a reasonable time after the issuance thereof.  Upon
the written  request of the Borrower,  the Agent shall deliver to the Borrower a
copy of each issued Letter of Credit within a reasonable  time after the date of
issuance  thereof.  To the  extent  any term of a Letter of Credit  Document  is
inconsistent  with a term of any Loan  Document,  the term of such Loan Document
shall control.

         (d)  Reimbursement  Obligations.  Upon  receipt  by the Agent  from the
beneficiary of a Letter of Credit of any demand for payment under such Letter of
Credit, the Agent shall promptly notify the Borrower of the amount to be paid by
the Agent as a result of such demand and the date on which payment is to be made
by the Agent to such beneficiary in respect of such demand;  provided,  however,
the Agent's failure to give, or delay in giving, such notice shall not discharge
the Borrower in any respect from the applicable  Reimbursement  Obligation.  The
Borrower hereby  unconditionally and irrevocably agrees to pay and reimburse the
Agent for the amount of each demand for  payment  under such Letter of Credit on
or  prior  to the  date on  which  payment  is to be made  by the  Agent  to the
beneficiary   thereunder,   without  presentment,   demand,   protest  or  other
formalities of any kind.  Upon receipt by the Agent of any payment in respect of
any Reimbursement  Obligation,  the Agent shall promptly pay to each Lender that
has  acquired  a  participation  therein  under the second  sentence  of Section
2.3.(i) such Lender's Commitment Percentage of such payment.

         (e) Manner of  Reimbursement.  Upon its receipt of a notice referred to
in the immediately preceding subsection (d), the Borrower shall advise the Agent
whether  or not  the  Borrower  intends  to  borrow  hereunder  to  finance  its
obligation  to  reimburse  the Agent for the  amount of the  related  demand for
payment.  If the Borrower fails to so advise the Agent, or if the Borrower fails
to reimburse  the Agent for a demand for payment under a Letter of Credit by the
date of such payment, then (i) if the applicable conditions contained in Article
V. would permit the making of Revolving  Loans,  the Borrower shall be deemed to
have  requested a borrowing of Revolving  Loans (which shall be Base Rate Loans)
in an amount equal to the unpaid  Reimbursement  Obligation  and the Agent shall
give each Lender  prompt notice (which shall be no later than 12:00 p.m.) of the
amount of the  Revolving  Loan to be made  available to the Agent not later than
1:00 p.m. and (ii) if such  conditions  would not permit the making of Revolving
Loans,  the  provisions  of  subsection  (j) of this Section  shall  apply.  The
limitations  of Section  3.5.(a)  shall not apply to any  borrowing of Base Rate
Loans under this subsection.

                                      -30-
<PAGE>

         (f) Effect of Letters of Credit on  Commitments.  Upon the  issuance by
the Agent of any  Letter of Credit and until  such  Letter of Credit  shall have
expired or been terminated,  the Commitment of each Lender shall be deemed to be
utilized for all purposes of this Agreement in an amount equal to the product of
(i) such  Lender's  Commitment  Percentage  and  (ii) the sum of (A) the  Stated
Amount of such Letter of Credit plus (B) any related  Reimbursement  Obligations
then outstanding.

         (g) Agent's Duties Regarding Letters of Credit; Unconditional Nature of
Reimbursement  Obligation.  In examining  documents presented in connection with
drawings  under  Letters  of Credit and making  payments  under such  Letters of
Credit against such documents,  the Agent shall only be required to use the same
standard of care as it uses in connection with examining  documents presented in
connection  with  drawings  under  letters  of  credit  in which it has not sold
participations  and making  payments under such letters of credit.  The Borrower
assumes  all risks of the acts and  omissions  of, or misuse of the  Letters  of
Credit  by,  the  respective   beneficiaries  of  such  Letters  of  Credit.  In
furtherance and not in limitation of the foregoing, neither the Agent nor any of
the  Lenders  shall be  responsible  for (i) the  form,  validity,  sufficiency,
accuracy, genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of or any drawing honored under
any  Letter  of  Credit  even if it  should  in fact  prove  to be in any or all
respects  invalid,  insufficient,  inaccurate,  fraudulent  or forged;  (ii) the
validity  or  sufficiency  of  any  instrument   transferring  or  assigning  or
purporting to transfer or assign any Letter of Credit, or the rights or benefits
thereunder  or  proceeds  thereof,  in whole or in part,  which  may prove to be
invalid or ineffective  for any reason;  (iii) failure of the beneficiary of any
Letter of Credit to comply fully with conditions  required in order to draw upon
such  Letter of  Credit;  (iv)  errors,  omissions,  interruptions  or delays in
transmission or delivery of any messages,  by mail,  cable,  telex,  telecopy or
otherwise,  whether or not they be in cipher;  (v) errors in  interpretation  of
technical terms;  (vi) any loss or delay in the transmission or otherwise of any
document  required in order to make a drawing under any Letter of Credit,  or of
the proceeds thereof;  (vii) the misapplication by the beneficiary of any Letter
of Credit,  or the proceeds of any drawing under any Letter of Credit; or (viii)
any  consequences  arising  from  causes  beyond the control of the Agent or the
Lenders. None of the above shall affect, impair or prevent the vesting of any of
the Agent's or any  Lender's  rights or powers  hereunder.  Any action  taken or
omitted  to be taken by the  Agent  under or in  connection  with any  Letter of
Credit,  if taken or  omitted  in the  absence  of gross  negligence  or willful
misconduct,  shall not create  against the Agent or any Lender any  liability to
the Borrower or any Lender.  In this connection,  the obligation of the Borrower
to reimburse  the Agent for any drawing made under any Letter of Credit shall be
absolute, unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances  whatsoever,  including
without  limitation,  the following  circumstances:  (A) any lack of validity or
enforceability  of any  Letter  of  Credit  Document  or any term or  provisions
therein;  (B) any amendment or waiver of or any consent to departure from all or
any of the Letter of Credit Documents;  (C) the existence of any claim,  setoff,
defense or other  right  which the  Borrower  may have at any time  against  the
Agent,  any Lender,  any  beneficiary of a Letter of Credit or any other Person,
whether in connection with this Agreement, the transactions  contemplated hereby
or in the  Letter of Credit  Documents  or any  unrelated  transaction;  (D) any
breach of contract or dispute between the Borrower, the Agent, any Lender or any
other Person;

                                      -31-
<PAGE>

(E) any demand,  statement  or any other  document  presented  under a Letter of
Credit proving to be forged, fraudulent,  invalid or insufficient in any respect
or any  statement  therein  or made in  connection  therewith  being  untrue  or
inaccurate in any respect whatsoever;  (F) any non-application or misapplication
by the  beneficiary of a Letter of Credit or any other Person of the proceeds of
any  drawing  under such  Letter of Credit;  (G)  payment by the Agent under any
Letter of Credit against  presentation of a draft or certificate  which does not
strictly comply with the terms of such Letter of Credit;  and (H) any other act,
omission  to act,  delay or  circumstance  whatsoever  that  might,  but for the
provisions  of this  Section,  constitute  a legal or  equitable  defense  to or
discharge of the Borrower's Reimbursement Obligations.  Notwithstanding anything
to the  contrary  contained  in  this  Section  or  Section  12.9.,  but  not in
limitation of the Borrower's unconditional obligation to reimburse the Agent for
any  drawing  made under a Letter of Credit as  provided  in this  Section,  the
Borrower  shall  have no  obligation  to  indemnify  the Agent or any  Lender in
respect of any liability  incurred by the Agent arising  solely out of the gross
negligence  or willful  misconduct of the Agent in respect of a Letter of Credit
as actually and finally determined by a court of competent jurisdiction.  Except
as otherwise provided in this Section,  nothing in this Section shall affect any
rights the  Borrower may have with respect to the Agent's  gross  negligence  or
willful misconduct with respect to any Letter of Credit.

         (h)  Amendments,  Etc.  The  issuance  by the  Agent of any  amendment,
supplement or other modification to any Letter of Credit shall be subject to the
same conditions  applicable  under this Agreement to the issuance of new Letters
of Credit  (including,  without  limitation,  that the request  therefor be made
through the Agent),  and no such  amendment,  supplement  or other  modification
shall be issued  unless  either  (i) the  respective  Letter of Credit  affected
thereby would have complied with such  conditions had it originally  been issued
hereunder in such amended,  supplemented  or modified form or (ii) the Requisite
Lenders shall have consented  thereto.  In connection  with any such  amendment,
supplement  or other  modification,  the  Borrower  shall pay the Fees,  if any,
payable under the last sentence of Section 3.6.(b).

         (i) Lenders'  Participation in Letters of Credit.  Immediately upon the
issuance  by the Agent of any Letter of Credit  each  Lender  shall be deemed to
have  irrevocably  and  unconditionally  purchased  and received from the Agent,
without  recourse or warranty,  an undivided  interest and  participation to the
extent of such Lender's Commitment Percentage of the liability of the Agent with
respect  to such  Letter of Credit and each  Lender  thereby  shall  absolutely,
unconditionally  and irrevocably  assume,  as primary obligor and not as surety,
and shall be  unconditionally  obligated to the Agent to pay and discharge  when
due, such Lender's  Commitment  Percentage of the Agent's  liability  under such
Letter of Credit.  In  addition,  upon the making of each payment by a Lender to
the  Agent in  respect  of any  Letter  of Credit  pursuant  to the  immediately
following  subsection  (j),  such Lender  shall,  automatically  and without any
further  action  on  the  part  of the  Agent  or  such  Lender,  acquire  (i) a
participation in an amount equal to such payment in the Reimbursement Obligation
owing to the Agent by the  Borrower in respect of such Letter of Credit and (ii)
a participation in a percentage equal to such Lender's Commitment  Percentage in
any  interest  or other  amounts  payable  by the  Borrower  in  respect of such
Reimbursement  Obligation  (other than the Fees payable to the Agent pursuant to
the second and last sentences of Section 3.6.(b)).

                                      -32-
<PAGE>

         (j) Payment Obligation of Lenders.  Each Lender severally agrees to pay
to the Agent on demand in immediately  available  funds in Dollars the amount of
such Lender's Commitment Percentage of each drawing paid by the Agent under each
Letter of Credit to the extent such  amount is not  reimbursed  by the  Borrower
pursuant to Section 2.3.(d). Each such Lender's obligation to make such payments
to the Agent under this  subsection,  and the Agent's right to receive the same,
shall be absolute,  irrevocable and  unconditional  and shall not be affected in
any way by any circumstance  whatsoever,  including without limitation,  (i) the
failure of any other Lender to make its payment under this subsection,  (ii) the
financial condition of the Borrower or any other Loan Party, (iii) the existence
of any Default or Event of Default,  including any Event of Default described in
Section  10.1.(f) or 10.1.(g) or (iv) the termination of the  Commitments.  Each
such  payment  to the  Agent  shall  be  made  without  any  offset,  abatement,
withholding or deduction whatsoever.

         (k) Information to Lenders. Upon the request of any Lender from time to
time, the Agent shall deliver to such Lender information reasonably requested by
such Lender with respect to each Letter of Credit then  outstanding.  Other than
as set forth in this  subsection,  the Agent  shall  have no duty to notify  the
Lenders  regarding  the issuance or other  matters  regarding  Letters of Credit
issued  hereunder.  The failure of the Agent to perform its  requirements  under
this subsection shall not relieve any Lender from its obligations  under Section
2.3.(j).

Section 2.4.  Rates and Payment of Interest on Loans.

         (a) Rates. The Borrower promises to pay to the Agent for the account of
each Lender  interest on the unpaid  principal  amount of each Loan made by such
Lender for the period from and  including the date of the making of such Loan to
but  excluding  the date such Loan shall be paid in full,  at the  following per
annum rates:

                  (i) during such  periods as such Loan is a Base Rate Loan,  at
         the Base Rate (as in  effect  from  time to time)  plus the  Applicable
         Margin; and

                  (ii) during such periods as such Loan is a LIBOR Loan,  at the
         Adjusted Eurodollar Rate for such Loan for the Interest Period therefor
         plus the Applicable Margin.

Notwithstanding  the foregoing,  during the  continuance of an Event of Default,
the Borrower  shall pay to the Agent for the account of each Lender  interest at
the  Post-Default  Rate on the outstanding  principal amount of any Loan made by
such Lender, on all Reimbursement Obligations and on any other amount payable by
the  Borrower  hereunder  or under the Notes  held by such  Lender to or for the
account  of such  Lender  (including  without  limitation,  accrued  but  unpaid
interest to the extent permitted under Applicable Law).

         (b) Payment of Interest. Accrued interest on each Loan shall be payable
(i) in the case of a Base Rate Loan, monthly in arrears on the first day of each
calendar  month,  (ii) in the  case of a LIBOR  Loan,  on the  last  day of each
Interest Period  therefor,  and (iii) in the case of any Loan, upon the payment,
prepayment or  Continuation  thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal  amount so paid,  prepaid,  Continued or
Converted). Interest payable at the Post-Default Rate shall be payable from time
to time on

                                      -33-
<PAGE>

demand.  Promptly  after the  determination  of any interest  rate  provided for
herein or any change therein, the Agent shall give notice thereof to the Lenders
to which such interest is payable and to the Borrower. All determinations by the
Agent of an  interest  rate  hereunder  shall be  conclusive  and binding on the
Lenders and the Borrower for all purposes, absent manifest error.

Section 2.5.  Number of Interest Periods.

         There may be no more than 6 different  Interest Periods for LIBOR Loans
outstanding at the same time.

Section 2.6.  Repayment of Loans.

         The Borrower shall repay the entire  outstanding  principal  amount of,
and all  accrued  but unpaid  interest  on, the Loans,  together  with all other
amounts then outstanding under this Agreement, on the Termination Date.

Section 2.7.  Prepayments.

         (a) Optional. Subject to Section 4.4., the Borrower may prepay any Loan
at any time without  premium or penalty.  The  Borrower  shall give the Agent at
least one Business Day's prior written notice of the prepayment of any Revolving
Loan.

         (b)  Mandatory.  If at any time the aggregate  principal  amount of all
outstanding Revolving Loans, together with the aggregate amount of all Letter of
Credit  Liabilities  and  the  aggregate  principal  amount  of all  outstanding
Swingline  Loans,  exceeds the aggregate  amount of the Commitments in effect at
such time, the Borrower shall  immediately  pay to the Agent for the accounts of
the Lenders the amount of such excess.  Such payment shall be applied to pay all
amounts of principal outstanding on the Loans and any Reimbursement  Obligations
pro rata in  accordance  with  Section  3.2.  and if any  Letters  of Credit are
outstanding  at such time the  remainder,  if any,  shall be deposited  into the
Collateral  Account for  application to any  Reimbursement  Obligations.  If the
Borrower  is  required  to pay any  outstanding  LIBOR  Loans by  reason of this
Section  prior  to the  end of the  applicable  Interest  Period  therefor,  the
Borrower shall pay all amounts due under Section 4.4.

Section 2.8.  Continuation.

         So long as no Default or Event of Default  shall have  occurred  and be
continuing,  the  Borrower may on any  Business  Day,  with respect to any LIBOR
Loan,  elect to maintain such LIBOR Loan or any portion  thereof as a LIBOR Loan
by selecting a new Interest Period for such LIBOR Loan. Each new Interest Period
selected  under this Section shall  commence on the last day of the  immediately
preceding Interest Period. Each selection of a new Interest Period shall be made
by the  Borrower  giving to the Agent a Notice of  Continuation  not later  than
11:00 a.m. on the third Business Day prior to the date of any such Continuation.
Such notice by the Borrower of a Continuation shall be by telephone or telecopy,
confirmed  immediately  in writing if by  telephone,  in the form of a Notice of
Continuation,  specifying  (a) the proposed date of such  Continuation,  (b) the
LIBOR  Loans and  portions  thereof  subject  to such  Continuation  and (c) the
duration of the  selected  Interest  Period,  all of which shall be specified in
such manner as is

                                      -34-
<PAGE>

necessary to comply with all limitations on Loans  outstanding  hereunder.  Each
Notice of Continuation  shall be irrevocable by and binding on the Borrower once
given.  Promptly  after  receipt of a Notice of  Continuation,  the Agent  shall
notify each Lender by telecopy,  or other similar form of  transmission,  of the
proposed Continuation. If the Borrower shall fail to select in a timely manner a
new Interest Period for any LIBOR Loan in accordance with this Section,  or if a
Default or Event of Default  shall have  occurred and be  continuing,  such Loan
will  automatically,  on the last day of the current  Interest Period  therefor,
Convert into a Base Rate Loan notwithstanding the first sentence of Section 2.9.
or the Borrower's failure to comply with any of the terms of such Section.

Section 2.9.  Conversion.

         So long as no Default or Event of Default  shall have  occurred  and be
continuing,  the Borrower may on any Business Day, upon the Borrower's giving of
a Notice of Conversion  to the Agent,  Convert all or a portion of a Loan of one
Type into a Loan of another  Type.  Any  Conversion  of a LIBOR Loan into a Base
Rate Loan shall be made on, and only on, the last day of an Interest  Period for
such LIBOR Loan and, upon  Conversion of a Base Rate Loan into a LIBOR Loan, the
Borrower  shall pay accrued  interest to the date of Conversion on the principal
amount so  Converted.  Each such Notice of  Conversion  shall be given not later
than 11:00 a.m. on the Business Day prior to the date of any proposed Conversion
into Base Rate  Loans  and on the  third  Business  Day prior to the date of any
proposed  Conversion  into LIBOR Loans.  Promptly  after  receipt of a Notice of
Conversion,  the Agent shall  notify each Lender by telecopy,  or other  similar
form of transmission,  of the proposed  Conversion.  Subject to the restrictions
specified  above,  each Notice of  Conversion  shall be by telephone  (confirmed
immediately  in  writing)  or  telecopy  in the form of a Notice  of  Conversion
specifying (a) the requested date of such Conversion, (b) the Type of Loan to be
Converted, (c) the portion of such Type of Loan to be Converted, (d) the Type of
Loan  such Loan is to be  Converted  into and (e) if such  Conversion  is into a
LIBOR Loan,  the requested  duration of the Interest  Period of such Loan.  Each
Notice of Conversion  shall be  irrevocable  by and binding on the Borrower once
given.

Section 2.10.  Notes.

         (a) Revolving  Note. The Revolving  Loans made by each Lender shall, in
addition  to this  Agreement,  also be  evidenced  by a  promissory  note of the
Borrower  substantially  in the form of  Exhibit  H (each a  "Revolving  Note"),
payable to the order of such Lender in a principal amount equal to the amount of
its Commitment as originally in effect and otherwise duly completed.

         (b) Records.  The date,  amount,  interest  rate,  Type and duration of
Interest  Periods  (if  applicable)  of each  Loan  made by each  Lender  to the
Borrower,  and each payment made on account of the principal  thereof,  shall be
recorded  by such Lender on its books and such  entries  shall be binding on the
Borrower absent manifest error.

         (c) Lost,  Stolen,  Destroyed or Mutilated  Notes.  Upon receipt by the
Borrower of (i) written notice from a Lender that a Note of such Lender has been
lost, stolen, destroyed or mutilated, and (ii) (A) in the case of loss, theft or
destruction,  an  unsecured  agreement  of  indemnity  from such  Lender in form
reasonably satisfactory to the Borrower, or (B) in the case

                                      -35-
<PAGE>

of mutilation,  upon surrender and cancellation of such Note, the Borrower shall
at its own expense  execute and deliver to such Lender a new Note dated the date
of such lost, stolen, destroyed or mutilated Note.

Section 2.11.  Voluntary Reductions of the Commitment.

         The Borrower  shall have the right to terminate or reduce the aggregate
unused amount of the Commitments (for which purpose use of the Commitments shall
be deemed to include the aggregate  amount of Letter of Credit  Liabilities  and
the aggregate  principal amount of all outstanding  Swingline Loans) at any time
and from time to time without  penalty or premium upon not less than 15 Business
Days prior written  notice to the Agent of each such  termination  or reduction,
which notice shall specify the effective date thereof and the amount of any such
reduction and shall be irrevocable once given and effective only upon receipt by
the Agent.  The Agent will  promptly  transmit  such notice to each Lender.  The
Commitments may not be reduced below  $200,000,000  in the aggregate  unless the
Borrower  terminates the Commitments in their entirety,  and, once terminated or
reduced,  the Commitments  may not be increased or reinstated.  Any reduction in
the  aggregate  amount  of  the  Commitments  shall  result  in a  proportionate
reduction (rounded to the next lowest integral multiple of multiple of $100,000)
in the Swingline Commitment and the L/C Commitment Amount.

Section 2.12.  Expiration or Maturity Date of Letters of Credit Past Termination
               Date.

         If on the date (the "Facility  Termination  Date") the  Commitments are
terminated  (whether  voluntarily,  by reason of the  occurrence  of an Event of
Default or otherwise),  there are any Letters of Credit  outstanding  hereunder,
the Borrower shall, on the Facility Termination Date, pay to the Agent an amount
of money equal to the Stated Amount of such Letter(s) of Credit for deposit into
the  Collateral  Account.  If a drawing  pursuant  to any such  Letter of Credit
occurs on or prior to the expiration date of such Letter of Credit, the Borrower
authorizes the Agent to use the monies  deposited in the  Collateral  Account to
make payment to the  beneficiary  with respect to such drawing or the payee with
respect to such presentment.  If no drawing occurs on or prior to the expiration
date of such Letter of Credit,  the Agent shall withdraw the monies deposited in
the Collateral  Account with respect to such outstanding  Letter of Credit on or
before the date 15  Business  Days after the  expiration  date of such Letter of
Credit and apply such funds to the Obligations,  if any, then due and payable in
the order prescribed by Section 10.4.

Section 2.13.  Amount Limitations.

         Notwithstanding  any other  term of this  Agreement  or any other  Loan
Document,  at no time may the  aggregate  principal  amount  of all  outstanding
Revolving Loans, together with the aggregate principal amount of all outstanding
Swingline  Loans and the aggregate  amount of all Letter of Credit  Liabilities,
exceed the aggregate amount of the Commitments at such time.

Section 2.14.  Increase of Commitments.

         Subject to the approval of the Agent  (which shall not be  unreasonably
withheld or delayed),  the Borrower shall have the right to request increases in
the aggregate  amount of the

                                      -36-
<PAGE>

Commitments  (provided  that there shall be no more than three such increases in
the  Commitments  and the  aggregate  amount  of  increases  in the  Commitments
pursuant to this Section  shall not exceed  $250,000,000)  by providing  written
notice to the Agent,  which notice shall be  irrevocable  once given.  Each such
increase in the Commitments  must be an aggregate  minimum amount of $50,000,000
and integral multiples of $5,000,000 in excess thereof. The Agent shall promptly
notify each Lender of any such  request.  Each  existing  Lender  shall have the
right to increase its  Commitment by an amount so that such Lender's  Commitment
Percentage shall not be decreased as a result of such requested  increase in the
Commitments.  Each Lender shall  notify the Agent within 10 Business  Days after
receipt of the Agent's  notice whether such Lender wishes to increase the amount
of its  Commitment.  If a Lender  fails to deliver  any such notice to the Agent
within such time period,  then such Lender  shall be deemed to have  declined to
increase its Commitment.  No Lender shall be required to increase its Commitment
and any new Lender(s)  becoming a party to this Agreement in connection with any
such requested increase must be an Eligible Assignee.  In the event a new Lender
or Lenders become a party to this Agreement, or if any existing Lender agrees to
increase  its  Commitment,  such  Lender  shall on the date it  becomes a Lender
hereunder (or increases its Commitment,  in the case of an existing Lender) (and
as  a  condition  thereto)  purchase  from  the  other  Lenders  its  Commitment
Percentage (as determined after giving effect to the increase of Commitments) of
any  outstanding  Revolving  Loans,  by  making  available  to the Agent for the
account of such other Lenders at the  Principal  Office,  in same day funds,  an
amount equal to the sum of (A) the portion of the outstanding  principal  amount
of such  Revolving  Loans to be purchased by such Lender plus (B) the  aggregate
amount of payments  previously made by the other Lenders under Sections  2.2.(e)
or 2.3.(j)  which have not been repaid plus (C)  interest  accrued and unpaid to
and as of such date on such portion of the outstanding  principal amount of such
Revolving Loans. The Borrower shall pay to the Lenders amounts payable,  if any,
to such Lenders  under  Section 4.4. as a result of the  prepayment  of any such
Revolving  Loans.  No increase  of the  Commitments  may be effected  under this
Section if either (x) a Default or Event of Default shall be in existence on the
effective  date of such increase or (y) any  representation  or warranty made or
deemed  made by the  Borrower  or any other Loan Party in any Loan  Document  to
which any such Loan Party is a party is not (or would not be) true or correct on
the effective date of such increase  (except for  representations  or warranties
which  expressly  relate  solely to an earlier  date).  In  connection  with any
increase in the aggregate amount of the Commitments pursuant to this subsection,
(a) any  Lender  becoming  a party  hereto  shall  execute  such  documents  and
agreements as the Agent may  reasonably  request and (b) the Borrower shall make
appropriate  arrangements  so that  each new  Lender,  and any  existing  Lender
increasing its Commitment,  receives a new or replacement  Note, as appropriate,
in the  amount  of  such  Lender's  Commitment  within  2  Business  Days of the
effectiveness of the applicable increase in the aggregate amount of Commitments.

Section 2.15.  Extension of Termination Date.

         The  Borrower  may request  that the Agent and the  Lenders  extend the
current Termination Date by one year by executing and delivering to the Agent at
least 30 days but not more than 120 days prior to the current  Termination Date,
a written request for such  extension.  The Agent shall forward to each Lender a
copy of any such request  delivered to the Agent promptly upon receipt  thereof.
Subject to satisfaction of the following conditions,  the Termination Date shall
be extended for one year:  (a) no Default or Event of Default  shall exist as of
the date of the current Termination Date or would exist immediately after giving
effect to the requested  extension;

                                      -37-
<PAGE>

(b) the  representations  and warranties made or deemed made by the Borrower and
each  other  Loan  Party in the Loan  Documents  to which any of them is a party
would be true and  correct  immediately  after  giving  effect to the  requested
extension   of  the   Termination   Date,   except  to  the  extent   that  such
representations  and warranties  expressly  relate solely to an earlier date (in
which case such representations and warranties shall have been true and accurate
on and as of such earlier date) and except for changes in factual  circumstances
specifically and expressly  permitted  hereunder and (c) the Borrower shall have
paid the Fees payable under Section  3.6.(d).  The Termination  Date may only be
extended one time pursuant to this Section.

            ARTICLE III. PAYMENTS, FEES AND OTHER GENERAL PROVISIONS

Section 3.1.  Payments.

         Except  to the  extent  otherwise  provided  herein,  all  payments  of
principal,  interest  and other  amounts to be made by the  Borrower  under this
Agreement or any other Loan Document  shall be made in Dollars,  in  immediately
available funds, without deduction, set-off or counterclaim, to the Agent at its
Principal  Office,  not later than 2:00 p.m.  on the date on which such  payment
shall  become due (each such payment made after such time on such due date to be
deemed  to have been  made on the next  succeeding  Business  Day).  Subject  to
Sections 3.2. and 3.3.,  the Agent may (but shall not be obligated to) debit the
amount of any such  payment  which is not made by such time from any  special or
general  deposit  account of the  Borrower  with the Agent  (with  notice to the
Borrower).  The Borrower  shall,  at the time of making each payment  under this
Agreement or any Note,  specify to the Agent the amounts payable by the Borrower
hereunder to which such payment is to be applied.  Each payment  received by the
Agent for the account of a Lender under this Agreement or any Note shall be paid
to such  Lender at the  applicable  Lending  Office of such Lender no later than
5:00 p.m.  on the date of  receipt.  If the Agent  fails to pay such amount to a
Lender as provided in the  previous  sentence,  the Agent shall pay  interest on
such amount until paid at a rate per annum equal to the Federal  Funds Rate from
time to time in effect.  If the due date of any payment under this  Agreement or
any other Loan Document  would  otherwise  fall on a day which is not a Business
Day such date shall be extended to the next succeeding Business Day and interest
shall be payable for the period of such extension.

Section 3.2.  Pro Rata Treatment.

         Except to the extent otherwise provided herein: (a) each borrowing from
the Lenders under Section  2.1.(a) shall be made from the Lenders,  each payment
of the Fees under Section  3.6.(a),  the first  sentence of Section  3.6.(b) and
Sections 3.6.(c) and (d) shall be made for the account of the Lenders,  and each
termination  or reduction of the amount of the  Commitments  under Section 2.11.
shall  be  applied  to the  respective  Commitments  of the  Lenders,  pro  rata
according to the amounts of their  respective  Commitments;  (b) each payment or
prepayment of principal of Revolving Loans by the Borrower shall be made for the
account  of the  Lenders  pro  rata in  accordance  with the  respective  unpaid
principal  amounts  of the  Revolving  Loans  held  by  them,  provided  that if
immediately  prior to  giving  effect  to any such  payment  in  respect  of any
Revolving  Loans the outstanding  principal  amount of the Revolving Loans shall
not be  held by the  Lenders  pro  rata  in  accordance  with  their  respective
Commitments in effect at the time such Loans were made,  then such payment shall
be applied to the Revolving  Loans in

                                      -38-
<PAGE>

such manner as shall result,  as nearly as is  practicable,  in the  outstanding
principal  amount of the  Revolving  Loans being held by the Lenders pro rata in
accordance with their  respective  Commitments;  (c) each payment of interest on
Revolving Loans by the Borrower shall be made for the account of the Lenders pro
rata in  accordance  with the  amounts  of  interest  on such Loans then due and
payable to the respective Lenders;  (d) the making,  Conversion and Continuation
of Revolving Loans of a particular Type (other than Conversions  provided for by
Section 4.6.) shall be made pro rata among the Lenders  according to the amounts
of their  respective  Commitments  (in the case of  making  of  Loans)  or their
respective Loans (in the case of Conversions and Continuations of Loans) and the
then current Interest Period for each Lender's portion of each Loan of such Type
shall be coterminous; (e) the Lenders' participation in, and payment obligations
in  respect  of,  Letters of Credit  under  Section  2.3.,  shall be pro rata in
accordance with their respective Commitments; and (f) the Lenders' participation
in, and payment  obligations in respect of,  Swingline Loans under Section 2.2.,
shall be in  accordance  with their  respective  Commitments.  All  payments  of
principal,  interest,  fees and other amounts in respect of the Swingline  Loans
shall be for the account of the Swingline  Lender only (except to the extent any
Lender shall have acquired a  participating  interest in any such Swingline Loan
pursuant to Section 2.2.(e)).

Section 3.3.  Sharing of Payments, Etc.

         If a Lender shall obtain  payment of any  principal of, or interest on,
any Loan  made by it to the  Borrower  under  this  Agreement,  or shall  obtain
payment on any other  Obligation  owing by the Borrower or a Loan Party  through
the exercise of any right of set-off,  banker's lien or  counterclaim or similar
right or  otherwise  or through  voluntary  prepayments  directly to a Lender or
other payments made by the Borrower to a Lender not in accordance with the terms
of this Agreement and such payment should be distributed to the Lenders pro rata
in accordance  with Section 3.2. or Section 10.4.,  as  applicable,  such Lender
shall promptly purchase from the other Lenders  participations in (or, if and to
the extent specified by such Lender,  direct interests in) the Loans made by the
other Lenders or other  Obligations  owed to such other Lenders in such amounts,
and make such other adjustments from time to time as shall be equitable,  to the
end that all the Lenders  shall share the  benefit of such  payment  (net of any
reasonable  expenses  which  may be  incurred  by such  Lender in  obtaining  or
preserving  such  benefit) pro rata in  accordance  with Section 3.2. or Section
10.4.  To such end, all the Lenders  shall make  appropriate  adjustments  among
themselves (by the resale of  participations  sold or otherwise) if such payment
is rescinded or must otherwise be restored.  The Borrower agrees that any Lender
so  purchasing  a  participation  (or  direct  interest)  in the  Loans or other
Obligations  owed to such other  Lenders  may  exercise  all rights of  set-off,
banker's lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender  were a direct  holder of Loans in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to  exercise,  and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower.

Section 3.4.  Several Obligations.

         No Lender shall be  responsible  for the failure of any other Lender to
make a Loan or to perform any other  obligation  to be made or performed by such
other  Lender  hereunder,  and the  failure  of any  Lender to make a Loan or to
perform any other  obligation to be made or performed

                                      -39-
<PAGE>

by it hereunder shall not relieve the obligation of any other Lender to make any
Loan or to perform any other  obligation  to be made or  performed by such other
Lender.

Section 3.5.  Minimum Amounts.

         (a) Borrowings and Conversions. Each borrowing of Base Rate Loans shall
be in an  aggregate  minimum  amount of  $1,000,000  and  integral  multiples of
$500,000 in excess  thereof.  Each borrowing and each  Conversion of LIBOR Loans
shall be in an aggregate minimum amount of $1,000,000 and integral  multiples of
$1,000,000 in excess of that amount.

         (b) Prepayments.  Each voluntary prepayment of Revolving Loans shall be
in an aggregate minimum amount of $1,000,000 and integral  multiples of $500,000
in excess  thereof (or, if less,  the  aggregate  principal  amount of Revolving
Loans then outstanding).

         (c) Reductions of Commitments.  Each reduction of the Commitments under
Section  2.11.  shall be in an  aggregate  minimum  amount  of  $10,000,000  and
integral multiples of $5,000,000 in excess thereof.

         (d)  Letters of Credit.  The  initial  Stated  Amount of each Letter of
Credit shall be at least $500,000.

Section 3.6.  Fees.

         (a)  Facility  Fees.  The  Borrower  agrees to pay to the Agent for the
account of each Lender a facility  fee equal to the average  daily amount of the
Commitment of such Lender  (whether or not utilized)  times the Facility Fee for
the period from and including the Agreement  Date to but excluding the date such
Commitment is terminated or reduced to zero or the Termination Date, such fee to
be paid in arrears on (i) the last  Business Day of March,  June,  September and
December in each year, (ii) the date of each reduction in the  Commitments  (but
only on the amount of the reduction) and (iii) on the Termination Date.

         (b) Letter of Credit Fees. The Borrower  agrees to pay to the Agent for
the  account of each  Lender a letter of credit fee at a rate per annum equal to
the  Applicable  Margin for LIBOR Loans times the daily average Stated Amount of
each Letter of Credit for the period from and  including the date of issuance of
such  Letter  of Credit  (x) to and  including  the date  such  Letter of Credit
expires or is  terminated or (y) to but excluding the date such Letter of Credit
is drawn in full. In addition,  the Borrower  shall pay to the Agent for its own
account  and not the account of any  Lender,  a fronting  fee in respect of each
Letter of Credit at the rate equal to  one-eighth  of one percent  (0.125%)  per
annum on the daily average Stated Amount of such Letter of Credit for the period
from and  including  the date of  issuance  of such  Letter of Credit (A) to and
including the date such Letter of Credit  expires or is terminated or (B) to but
excluding the date such Letter of Credit is drawn in full. The fees provided for
in the immediately preceding two sentences shall be nonrefundable and payable in
arrears (i) on the last Business Day of March,  June,  September and December in
each year, (ii) on the Termination  Date,  (iii) on the date the Commitments are
terminated or reduced to zero and (iv) thereafter from time to time on demand of
the Agent.  The  Borrower  shall pay  directly to the Agent from time to time on
demand all commissions,  charges,  costs and expenses in the amounts customarily
charged by the Agent from

                                      -40-
<PAGE>

time to time in like  circumstances  with respect to the issuance of each Letter
of Credit, drawings, amendments and other transactions relating thereto.

         (c)  Administrative  and Other  Fees.  The  Borrower  agrees to pay the
administrative  and other fees of the Agent as may be agreed to in writing  from
time to time.

         (d) Extension Fees. If, pursuant to Section 2.15., the Termination Date
is  extended,  the  Borrower  agrees to pay to the Agent for the account of each
Lender an extension fee equal to 0.35% of each such  Lender's  Commitment at the
time of such extension.  Payment of such fees shall be a condition  precedent to
the effectiveness of any such extension.

Section 3.7.  Computations.

         Unless  otherwise  expressly set forth herein,  any accrued interest on
any Loan, any Fees or any other  Obligations  due hereunder shall be computed on
the basis of a year of 360 days and the actual number of days elapsed.

Section 3.8.  Usury.

         In no event shall the amount of interest due or payable on the Loans or
other Obligations  exceed the maximum rate of interest allowed by Applicable Law
and, if any such payment is paid by the Borrower or received by any Lender, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the respective  Lender in writing that the Borrower  elects to have
such  excess sum  returned  to it  forthwith.  It is the  express  intent of the
parties  hereto that the Borrower not pay and the Lenders not receive,  directly
or indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Borrower under Applicable Law.

Section 3.9.  Agreement Regarding Interest and Charges.

         The parties  hereto  hereby  agree and  stipulate  that the only charge
imposed upon the Borrower for the use of money in connection with this Agreement
is and shall be the interest  specifically  described in Section  2.4.(a)(i) and
(ii) and in Section 2.2.(c).  Notwithstanding the foregoing,  the parties hereto
further agree and stipulate  that all agency fees,  syndication  fees,  facility
fees,  closing fees, letter of credit fees,  underwriting fees, default charges,
late charges, funding or "breakage" charges, increased cost charges,  attorneys'
fees and reimbursement for costs and expenses paid by the Agent or any Lender to
third parties or for damages  incurred by the Agent or any Lender,  or any other
similar  amounts are charges made to compensate the Agent or any such Lender for
underwriting  or  administrative  services  and  costs or  losses  performed  or
incurred,  and to be  performed  or  incurred,  by the Agent and the  Lenders in
connection with this Agreement and shall under no  circumstances be deemed to be
charges  for the use of money.  All  charges  other than  charges for the use of
money shall be fully earned and nonrefundable when due.

                                      -41-
<PAGE>

Section 3.10.  Statements of Account.

         The Agent will  account to the  Borrower  monthly  with a statement  of
Loans,  Letters of Credit,  accrued interest and Fees, charges and payments made
pursuant  to this  Agreement  and the other  Loan  Documents,  and such  account
rendered by the Agent shall be deemed  conclusive  upon Borrower absent manifest
error.  The failure of the Agent to deliver such a statement  of accounts  shall
not relieve or discharge the Borrower from any of its obligations hereunder.

Section 3.11.  Defaulting Lenders.

         (a)  Generally.  If for any reason any Lender (a  "Defaulting  Lender")
shall fail or refuse to perform any of its  obligations  under this Agreement or
any other Loan Document to which it is a party within the time period  specified
for performance of such  obligation or, if no time period is specified,  if such
failure or refusal continues for a period of two Business Days after notice from
the Agent, then, in addition to the rights and remedies that may be available to
the  Agent  or the  Borrower  under  this  Agreement  or  Applicable  Law,  such
Defaulting  Lender's right to participate  in the  administration  of the Loans,
this Agreement and the other Loan Documents,  including without limitation,  any
right to vote in respect  of, to consent to or to direct any action or  inaction
of the Agent or to be taken into  account in the  calculation  of the  Requisite
Lenders, shall be suspended during the pendency of such failure or refusal. If a
Lender is a Defaulting  Lender  because it has failed to make timely  payment to
the Agent of any  amount  required  to be paid to the Agent  hereunder  (without
giving  effect to any notice or cure  periods),  in addition to other rights and
remedies  which  the  Agent or the  Borrower  may  have  under  the  immediately
preceding  provisions or  otherwise,  the Agent shall be entitled (i) to collect
interest from such Defaulting  Lender on such delinquent  payment for the period
from the date on which the  payment  was due until the date on which the payment
is made at the Federal  Funds  Rate,  (ii) to withhold or setoff and to apply in
satisfaction  of the  defaulted  payment and any related  interest,  any amounts
otherwise  payable to such  Defaulting  Lender under this Agreement or any other
Loan  Document  and  (iii) to bring an action or suit  against  such  Defaulting
Lender in a court of competent  jurisdiction to recover the defaulted amount and
any  related  interest.  Any  amounts  received  by the  Agent in  respect  of a
Defaulting  Lender's Loans shall not be paid to such Defaulting Lender and shall
be held uninvested by the Agent and either applied against the purchase price of
such Loans under the following  subsection (b) or paid to such Defaulting Lender
upon the Defaulting Lender's curing of its default.

         (b) Purchase or Cancellation  of Defaulting  Lender's  Commitment.  Any
Lender  who is not a  Defaulting  Lender  shall  have  the  right,  but  not the
obligation,  in its sole  discretion,  to acquire all of a  Defaulting  Lender's
Commitment. Any Lender desiring to exercise such right shall give written notice
thereof to the Agent and the  Borrower  no sooner  than 2 Business  Days and not
later than 5 Business  Days after such  Defaulting  Lender  became a  Defaulting
Lender.  If more than one Lender  exercises  such right,  each such Lender shall
have the right to acquire an amount of such  Defaulting  Lender's  Commitment in
proportion to the  Commitments of the other Lenders  exercising  such right.  If
after such 5th Business Day, the Lenders have not elected to purchase all of the
Commitment of such Defaulting  Lender,  then the Borrower may, by giving written
notice  thereof  to the Agent,  such  Defaulting  Lender and the other  Lenders,
either (i) demand  that such  Defaulting  Lender  assign  its  Commitment  to an
Eligible  Assignee  subject to and in accordance  with the provisions of Section
12.5.(d)  for the  purchase  price  provided  for

                                      -42-
<PAGE>

below or (ii) terminate the Commitment of such Defaulting Lender, whereupon such
Defaulting  Lender  shall no  longer  be a party  hereto  or have any  rights or
obligations  hereunder  or under  any of the other  Loan  Documents  (except  as
expressly  provided in this  subsection  (b)).  No party  hereto  shall have any
obligation  whatsoever to initiate any such  replacement or to assist in finding
an Eligible  Assignee.  Upon any such  purchase or  assignment,  the  Defaulting
Lender's  interest in the Loans and its rights  hereunder (but not its liability
in respect  thereof or under the Loan  Documents or this Agreement to the extent
the same relate to the period prior to the effective date of the purchase) shall
terminate  on the date of purchase,  and the  Defaulting  Lender shall  promptly
execute all  documents  reasonably  requested  to surrender  and  transfer  such
interest  to  the  purchaser  or  assignee  thereof,  including  an  appropriate
Assignment and Acceptance Agreement and, notwithstanding Section 12.5.(d), shall
pay to the Agent an assignment  fee in the amount of $7,000.  The purchase price
for the  Commitment  of a Defaulting  Lender shall be equal to the amount of the
principal  balance  of the Loans  outstanding  and owed by the  Borrower  to the
Defaulting  Lender.  Prior to payment  of such  purchase  price to a  Defaulting
Lender,  the Agent shall apply against such purchase price any amounts  retained
by the  Agent  pursuant  to the  last  sentence  of  the  immediately  preceding
subsection (a). The Defaulting  Lender shall be entitled to receive amounts owed
to it by the Borrower under the Loan  Documents  which accrued prior to the date
of the default by the Defaulting  Lender, to the extent the same are received by
the Agent from or on behalf of the Borrower.  There shall be no recourse against
any Lender or the Agent for the payment of such sums except to the extent of the
receipt of payments from any other party or in respect of the Loans.

Section 3.12.  Taxes.

         (a) Taxes Generally.  All payments by the Borrower of principal of, and
interest on, the Loans and all other Obligations shall be made free and clear of
and without  deduction for any present or future  excise,  stamp or other taxes,
fees,  duties,  levies,  imposts,  charges,  deductions,  withholdings  or other
charges of any nature whatsoever imposed by any taxing authority,  but excluding
(i) franchise taxes,  (ii) any taxes (other than  withholding  taxes) that would
not be  imposed  but for a  connection  between  the  Agent or a Lender  and the
jurisdiction  imposing  such taxes  (other than a connection  arising  solely by
virtue of the  activities of the Agent or such Lender  pursuant to or in respect
of this  Agreement or any other Loan  Document),  (iii) any taxes  imposed on or
measured by any Lender's assets,  net income,  receipts or branch profits,  (iv)
any taxes arising after the Agreement Date solely as a result of or attributable
to a Lender  changing its  designated  Lending Office after the date such Lender
becomes a party  hereto,  and (v) any  taxes,  fees,  duties,  levies,  imposts,
charges,  deductions,  withholdings  or other charges to the extent imposed as a
result of the failure of the Agent or a Lender,  as  applicable,  to provide and
keep current (to the extent legally able) any  certificates,  documents or other
evidence required to qualify for an exemption from, or reduced rate of, any such
taxes fees, duties, levies, imposts, charges, deductions,  withholdings or other
charges or required by the immediately  following subsection (c) to be furnished
by the Agent or such  Lender,  as  applicable  (such  non-excluded  items  being
collectively  called "Taxes").  If any withholding or deduction from any payment
to be made by the  Borrower  hereunder  is  required  in  respect  of any  Taxes
pursuant to any Applicable Law, then the Borrower will:

                  (i) pay directly to the relevant  Governmental  Authority  the
         full amount required to be so withheld or deducted;

                                      -43-
<PAGE>

                  (ii)  promptly  forward  to the Agent an  official  receipt or
         other  documentation  satisfactory to the Agent evidencing such payment
         to such Governmental Authority; and

                  (iii) pay to the Agent for its  account or the  account of the
         applicable  Lender,  as the  case may be,  such  additional  amount  or
         amounts as is necessary to ensure that the net amount actually received
         by the Agent or such  Lender  will equal the full amount that the Agent
         or such Lender would have received had no such withholding or deduction
         been required.

         (b) Tax  Indemnification.  If the Borrower  fails to pay any Taxes when
due to the  appropriate  Governmental  Authority or fails to remit to the Agent,
for its account or the account of the respective Lender, as the case may be, the
required  receipts or other required  documentary  evidence,  the Borrower shall
indemnify  the Agent and the  Lenders  for any  incremental  Taxes,  interest or
penalties  that may become payable by the Agent or any Lender as a result of any
such failure.  For purposes of this  Section,  a  distribution  hereunder by the
Agent or any  Lender  to or for the  account  of any  Lender  shall be  deemed a
payment by the Borrower.

         (c) Tax  Forms.  Prior  to the  date  that any  Lender  or  participant
organized under the laws of a jurisdiction  outside the United States of America
becomes a party hereto,  such Person shall deliver to the Borrower and the Agent
such  certificates,  documents  or other  evidence,  as required by the Internal
Revenue Code or Treasury Regulations issued pursuant thereto (including Internal
Revenue Service Forms W-8ECI and W-8BEN, as applicable, or appropriate successor
forms), properly completed, currently effective and duly executed by such Lender
or  participant  establishing  that payments to it hereunder and under the Notes
are (i) not subject to United States Federal backup  withholding tax or (ii) not
subject to United States Federal withholding tax under the Internal Revenue Code
because such payment is either  effectively  connected  with the conduct by such
Lender or  participant  of a trade or business  in the United  States or totally
exempt from United States Federal  withholding  tax by reason of the application
of the  provisions  of a treaty  to which the  United  States is a party or such
Lender is otherwise wholly exempt.  In addition,  any such Lender or participant
shall  deliver  to the  Borrower  and  the  Agent  further  copies  of any  such
certificate,  document  or other  evidence  on or before  the date that any such
certificate,  document or other evidence  expires or becomes  obsolete and after
the  occurrence  of any  event  requiring  a  change  in the  most  recent  form
previously  delivered  by it,  in each case  establishing  that  payments  to it
hereunder  and  under the Notes are (i) not  subject  to United  States  Federal
backup withholding tax or (ii) not subject to United States Federal  withholding
tax under the Internal  Revenue Code because such payment is either  effectively
connected  with the conduct by such Lender or participant of a trade or business
in the United States or totally  exempt from United States  Federal  withholding
tax by  reason of the  application  of the  provisions  of a treaty to which the
United  States  is a party or such  Lender or  participant,  as  applicable,  is
otherwise wholly exempt,  unless an event (including,  without  limitation,  any
change  in  Applicable  Law) has  occurred  prior to the date on which  any such
delivery  would  otherwise  be required  which  renders  all such  certificates,
documents and other  evidence  wholly  inapplicable  or which would prevent such
Lender or  participant,  as applicable,  from duly completing and delivering any
such certificates, documents or other evidence form with respect

                                      -44-
<PAGE>

to it, and such Lender or  participant,  as applicable,  so advises the Borrower
and the Agent in writing.

                       ARTICLE IV. YIELD PROTECTION, ETC.

Section 4.1.  Additional Costs; Capital Adequacy.

         (a) Additional  Costs. The Borrower shall promptly pay to the Agent for
the  account  of a Lender  from time to time such  amounts  as such  Lender  may
determine to be necessary to  compensate  such Lender for any costs  incurred by
such Lender that it determines are  attributable to its making or maintaining of
any  LIBOR  Loans or its  obligation  to make any  LIBOR  Loans  hereunder,  any
reduction in any amount receivable by such Lender under this Agreement or any of
the other Loan  Documents in respect of any of such Loans or such  obligation or
the  maintenance  by such  Lender  of  capital  in  respect  of its Loans or its
Commitment  (such increases in costs and reductions in amounts  receivable being
herein called  "Additional  Costs"),  resulting from any Regulatory Change that:
(i) changes the basis of  taxation of any amounts  payable to such Lender  under
this  Agreement  or any of the other  Loan  Documents  in respect of any of such
Loans or its  Commitment  (other  than taxes,  fees,  duties,  levies,  imposts,
charges,  deductions,  withholdings or other charges which are excluded from the
definition of Taxes pursuant to the first sentence of Section 3.12.(a)); or (ii)
imposes or modifies any reserve,  special deposit or similar requirements (other
than  Regulation D of the Board of Governors  of the Federal  Reserve  System or
other reserve  requirement to the extent  utilized in the  determination  of the
Adjusted  Eurodollar Rate for such Loan) relating to any extensions of credit or
other assets of, or any deposits with or other  liabilities of, such Lender,  or
any commitment of such Lender (including, without limitation, the Commitments of
such Lender  hereunder);  or (iii) has or would have the effect of reducing  the
rate of return on capital of such Lender to a level below that which such Lender
could have achieved but for such  Regulatory  Change (taking into  consideration
such Lender's policies with respect to capital adequacy).

         (b) Lender's Suspension of LIBOR Loans.  Without limiting the effect of
the provisions of the immediately preceding subsection (a), if, by reason of any
Regulatory  Change,  any Lender either (i) incurs  Additional  Costs based on or
measured by the excess  above a  specified  level of the amount of a category of
deposits or other liabilities of such Lender that includes deposits by reference
to which the  interest  rate on LIBOR  Loans is  determined  as provided in this
Agreement or a category of  extensions  of credit or other assets of such Lender
that includes LIBOR Loans or (ii) becomes  subject to restrictions on the amount
of such a category  of  liabilities  or assets that it may hold,  then,  if such
Lender  so elects by notice  to the  Borrower  (with a copy to the  Agent),  the
obligation  of such Lender to make or Continue,  or to Convert any other Type of
Loans into,  LIBOR Loans  hereunder  shall be  suspended  until such  Regulatory
Change  ceases to be in effect (in which  case the  provisions  of Section  4.6.
shall apply).

         (c) Additional Costs in Respect of Letters of Credit.  Without limiting
the obligations of the Borrower under the preceding  subsections of this Section
(but  without  duplication),  if as a result  of any  Regulatory  Change  or any
risk-based capital guideline or other requirement heretofore or hereafter issued
by any  Governmental  Authority  there  shall be  imposed,  modified  or  deemed
applicable  any tax,  reserve,  special  deposit,  capital  adequacy  or similar
requirement

                                      -45-
<PAGE>

against or with respect to or measured by reference to Letters of Credit and the
result  shall be to increase  the cost to the Agent of issuing (or any Lender of
purchasing  participations in) or maintaining its obligation  hereunder to issue
(or  purchase  participations  in) any  Letter of Credit  or reduce  any  amount
receivable  by the Agent or any  Lender  hereunder  in  respect of any Letter of
Credit,  then,  upon demand by the Agent or such Lender,  the Borrower shall pay
promptly,  and in any event within 3 Business  Days of demand,  to the Agent for
its account or the account of such Lender,  as applicable,  from time to time as
specified  by the  Agent  or a  Lender,  such  additional  amounts  as  shall be
sufficient to compensate  the Agent or such Lender for such  increased  costs or
reductions in amount.

         (d) Notification and  Determination  of Additional  Costs.  Each of the
Agent and each Lender agrees to notify the Borrower of any event occurring after
the Agreement Date entitling the Agent or such Lender to compensation  under any
of the  preceding  subsections  of this  Section  as  promptly  as  practicable;
provided,  however,  the  failure of the Agent or any Lender to give such notice
shall not release the Borrower from any of its obligations hereunder;  provided,
however,  that  notwithstanding  the foregoing  provisions of this Section,  the
Agent or a Lender, as the case may be, shall not be entitled to compensation for
any such amount  relating to any period ending more than six months prior to the
date that the Agent or such Lender,  as applicable,  first notifies the Borrower
in writing  thereof or for any amounts  resulting from a change by any Lender of
its Lending  Office (other than changes  required by Applicable  Law). The Agent
and or such Lender agrees to furnish to the Borrower a certificate setting forth
the  basis  and  amount  of  each  request  by the  Agent  or  such  Lender  for
compensation  under this Section.  Absent manifest error,  determinations by the
Agent or any Lender of the effect of any Regulatory  Change shall be conclusive,
provided  that such  determinations  are made on a reasonable  basis and in good
faith.

Section 4.2.  Suspension of LIBOR Loans.

         Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any Adjusted Eurodollar Rate for any Interest Period:

                  (a) the Agent reasonably determines (which determination shall
         be conclusive) that by reason of  circumstances  affecting the relevant
         market, adequate and reasonable means do not exist for ascertaining the
         Adjusted Eurodollar Rate for such Interest Period, or

                  (b) the Agent reasonably determines (which determination shall
         be conclusive)  that the Adjusted  Eurodollar  Rate will not adequately
         and fairly  reflect  the cost to the  Lenders of making or  maintaining
         LIBOR Loans for such Interest Period;

then the Agent shall give the Borrower  and each Lender  prompt  notice  thereof
and, so long as such condition remains in effect,  the Lenders shall be under no
obligation to, and shall not, make additional LIBOR Loans,  Continue LIBOR Loans
or Convert  Loans into LIBOR Loans and the  Borrower  shall,  on the last day of
each current Interest Period for each outstanding  LIBOR Loan, either repay such
Loan or Convert such Loan into a Base Rate Loan.

                                      -46-
<PAGE>

Section 4.3.  Illegality.

         Notwithstanding  any other provision of this  Agreement,  if it becomes
unlawful for any Lender to honor its  obligation to make or maintain LIBOR Loans
hereunder,  then such Lender shall promptly notify the Borrower  thereof (with a
copy to the Agent)  and such  Lender's  obligation  to make or  Continue,  or to
Convert Loans of any other Type into,  LIBOR Loans shall be suspended until such
time as such Lender may again make and  maintain  LIBOR Loans (in which case the
provisions of Section 4.6. shall be applicable).

Section 4.4.  Compensation.

         The  Borrower  shall pay to the Agent for the  account of each  Lender,
upon the  request of such Lender  through  the Agent,  such amount or amounts as
shall be sufficient (in the reasonable  opinion of such Lender) to compensate it
for any loss, cost or expense that such Lender determines is attributable to:

                  (a) any payment or prepayment  (whether mandatory or optional)
         of a LIBOR Loan, or Conversion of a LIBOR Loan, made by such Lender for
         any reason  (including,  without  limitation,  acceleration)  on a date
         other than the last day of the Interest Period for such Loan; or

                  (b) any  failure by the  Borrower  for any reason  (including,
         without  limitation,  the failure of any of the  applicable  conditions
         precedent  specified in Article V. to be  satisfied)  to borrow a LIBOR
         Loan from such Lender on the date for such  borrowing,  or to Convert a
         Base  Rate  Loan  into a LIBOR  Loan or  Continue  a LIBOR  Loan on the
         requested date of such Conversion or Continuation.

Upon the  Borrower's  request,  any Lender  requesting  compensation  under this
Section shall provide the Borrower with a statement  setting forth the basis for
requesting such  compensation and the method for determining the amount thereof.
Absent manifest error,  determinations by any Lender in any such statement shall
be conclusive,  provided that such determinations are made on a reasonable basis
and in good faith.

Section 4.5.  Affected Lenders.

         If (a) a Lender  requests  compensation  pursuant to Section  3.12.  or
4.1.,  and the  Requisite  Lenders  are not  also  doing  the  same,  or (b) the
obligation of any Lender to make LIBOR Loans or to Continue,  or to Convert Base
Rate Loans into,  LIBOR Loans shall be suspended  pursuant to Section 4.1.(b) or
4.3. but the  obligation of the Requisite  Lenders shall not have been suspended
under such  Sections,  then, so long as there does not then exist any Default or
Event of  Default,  the  Borrower  may either (i) demand  that such  Lender (the
"Affected  Lender"),  and upon such demand the Affected  Lender shall  promptly,
assign its Commitments to an Eligible Assignee subject to and in accordance with
the  provisions of Section  12.5.(d) for a purchase price equal to the aggregate
principal  balance of Loans then owing to the  Affected  Lender plus any accrued
but unpaid  interest  thereon and accrued but unpaid fees

                                      -47-
<PAGE>

owing to the Affected  Lender,  or (ii) pay to the Affected Lender the aggregate
principal  balance of Loans then owing to the  Affected  Lender plus any accrued
but unpaid  interest  thereon and accrued but unpaid fees owing to the  Affected
Lender,  whereupon the Affected Lender shall no longer be a party hereto or have
any rights or  obligations  hereunder or under any of the other Loan  Documents.
Each  of the  Agent  and the  Affected  Lender  shall  reasonably  cooperate  in
effectuating the replacement of such Affected Lender under this Section,  but at
no time shall the Agent,  such Affected Lender nor any other Lender be obligated
in any way  whatsoever to initiate any such  replacement or to assist in finding
an Eligible  Assignee.  The  exercise by the  Borrower of its rights  under this
Section  shall be at the  Borrower's  sole cost and  expenses  and at no cost or
expense to the Agent, the Affected Lender or any of the other Lenders. The terms
of this Section shall not in any way limit the  Borrower's  obligation to pay to
any Affected  Lender  compensation  owing to such  Affected  Lender  pursuant to
Section 3.12. or 4.1.

Section 4.6.  Treatment of Affected Loans.

         If the obligation of any Lender to make LIBOR Loans or to Continue,  or
to Convert  Base Rate Loans into,  LIBOR Loans  shall be  suspended  pursuant to
Section  4.1.(b),  4.2.  or  4.3.,  then  such  Lender's  LIBOR  Loans  shall be
automatically  Converted  into  Base Rate  Loans on the last  day(s) of the then
current  Interest  Period(s)  for LIBOR Loans (or,  in the case of a  Conversion
required by Section  4.1.(b) or 4.3.,  on such  earlier  date as such Lender may
specify to the  Borrower  with a copy to the Agent)  and,  unless and until such
Lender  gives  notice as  provided  below that the  circumstances  specified  in
Section 4.1. or 4.3. that gave rise to such Conversion no longer exist:

                  (a) to the extent that such Lender's  LIBOR Loans have been so
         Converted,  all  payments  and  prepayments  of  principal  that  would
         otherwise  be applied to such  Lender's  LIBOR  Loans  shall be applied
         instead to its Base Rate Loans; and

                  (b) all Loans that would  otherwise  be made or  Continued  by
         such Lender as LIBOR Loans shall be made or  Continued  instead as Base
         Rate Loans, and all Base Rate Loans of such Lender that would otherwise
         be Converted into LIBOR Loans shall remain as Base Rate Loans.

If such Lender gives notice to the Borrower  (with a copy to the Agent) that the
circumstances specified in Section 4.1. or 4.3. that gave rise to the Conversion
of such  Lender's  LIBOR Loans  pursuant to this  Section no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when LIBOR Loans made by other Lenders are outstanding,  then such Lender's
Base Rate Loans shall be  automatically  Converted,  on the first  day(s) of the
next  succeeding  Interest  Period(s) for such  outstanding  LIBOR Loans, to the
extent  necessary so that,  after giving effect  thereto,  all Loans held by the
Lenders  holding  LIBOR  Loans  and by such  Lender  are  held  pro  rata (as to
principal  amounts,  Types  and  Interest  Periods)  in  accordance  with  their
respective Commitments.

Section 4.7.  Change of Lending Office.

         Each Lender agrees that it will use reasonable  efforts to designate an
alternate  Lending  Office  with  respect  to any of its Loans  affected  by the
matters or circumstances described in Sections 3.12., 4.1. or 4.3. to reduce the
liability of the Borrower or avoid the results provided  thereunder,  so long as
such  designation  is not  disadvantageous  to such Lender as determined by

                                      -48-
<PAGE>

such  Lender in its sole  discretion,  except  that such  Lender  shall  have no
obligation  to  designate  a Lending  Office  located  in the  United  States of
America.

Section 4.8.  Assumptions Concerning Funding of LIBOR Loans.

         Calculation  of all amounts  payable to a Lender under this Article IV.
shall be made as though such Lender had actually  funded LIBOR Loans through the
purchase  of  deposits  in the  relevant  market  bearing  interest  at the rate
applicable  to such  LIBOR  Loans in an amount  equal to the amount of the LIBOR
Loans  and  having  a  maturity  comparable  to the  relevant  Interest  Period;
provided,  however,  that each  Lender  may fund each of its LIBOR  Loans in any
manner  it  sees  fit and the  foregoing  assumption  shall  be  used  only  for
calculation of amounts payable under this Article IV.

                         ARTICLE V. CONDITIONS PRECEDENT

Section 5.1.  Initial Conditions Precedent.

         The obligation of the Lenders to effect or permit the occurrence of the
first Credit Event hereunder, whether as the making of a Loan or the issuance of
a Letter of Credit, is subject to the following conditions precedent:

         (a) The Agent shall have  received each of the  following,  in form and
substance satisfactory to the Agent:

                  (i)  Counterparts  of this  Agreement  executed by each of the
         parties hereto;

                  (ii) Revolving Notes executed by the Borrower, payable to each
         Lender and complying with the  applicable  provisions of Section 2.10.,
         and the Swingline Note executed by the Borrower;

                  (iii) The Guaranty  executed by each Guarantor  existing as of
         the Effective Date;

                  (iv) An opinion of (x)  Sullivan & Worcester  LLP,  counsel to
         the Loan Parties, addressed to the Agent, the Lenders and the Swingline
         Lender, substantially in the form of Exhibit I-1, and (y) Ballard Spahr
         Andrews & Ingersoll, LLP, special Maryland counsel to the Loan Parties,
         addressed  to  the  Agent,  the  Lenders  and  the  Swingline   Lender,
         substantially in the form of Exhibit I-2;

                  (v) The declaration of trust of the Borrower certified as of a
         recent date by the Department of Assessments  and Taxation of the State
         of Maryland;

                  (vi) A good standing  certificate with respect to the Borrower
         issued  as of a  recent  date  by the  Department  of  Assessments  and
         Taxation of the State of Maryland and  certificates of qualification to
         transact  business  or  other  comparable  certificates  issued  by the
         Secretary  of  State  (and  any  state   department  of  taxation,   as
         applicable)  of each state in

                                      -49-
<PAGE>

         which the Borrower is required to be so qualified and where the failure
         to be so qualified  would have, in each  instance,  a Material  Adverse
         Effect;

                  (vii) A certificate  of incumbency  signed by the Secretary or
         Assistant  Secretary  of the  Borrower  with  respect  to  each  of the
         officers  of the  Borrower  authorized  to execute and deliver the Loan
         Documents  to which the  Borrower  is a party and the  officers  of the
         Borrower then  authorized to deliver  Notices of Borrowing,  Notices of
         Swingline Borrowings, Notices of Continuation and Notices of Conversion
         and to request the issuance of Letters of Credit;

                  (viii)  Copies,   certified  by  the  Secretary  or  Assistant
         Secretary of the  Borrower,  of all corporate  (or  comparable)  action
         taken  by  the  Borrower  to  authorize  the  execution,  delivery  and
         performance of the Loan Documents to which the Borrower is a party;

                  (ix) The Governing Documents of each Guarantor certified as of
         a recent date by the  Secretary  of State of the State of  formation of
         such Guarantor;

                  (x) A certificate  of good standing or  certificate of similar
         meaning  with respect to each  Guarantor  issued as of a recent date by
         the Secretary of State of the State of formation of each such Guarantor
         and  certificates  of  qualification  to  transact  business  or  other
         comparable  certificates  issued by each  Secretary  of State  (and any
         state  department of taxation,  as  applicable)  of each state in which
         such  Guarantor is required to be so qualified and where the failure to
         be so  qualified  would  have,  in each  instance,  a Material  Adverse
         Effect;

                  (xi) A certificate  of  incumbency  signed by the Secretary or
         Assistant Secretary (or other individual  performing similar functions)
         of  each  Guarantor  with  respect  to  each  of the  officers  of such
         Guarantor authorized to execute and deliver the Loan Documents to which
         such Guarantor is a party;

                  (xii) Copies certified by the Secretary or Assistant Secretary
         of each Guarantor (or other individual performing similar functions) of
         (i) the by-laws of such  Guarantor,  if a  corporation,  the  operating
         agreement,  if a limited liability company, the partnership  agreement,
         if a limited or general  partnership,  or other comparable  document in
         the case of any  other  form of legal  entity  and (ii) all  corporate,
         partnership,  member or other necessary  action taken by such Guarantor
         to  authorize  the  execution,  delivery  and  performance  of the Loan
         Documents to which it is a party;

                  (xiii) A copy of (x) each of the  documents,  instruments  and
         agreements  evidencing  any of the  Indebtedness  described on Schedule
         6.1.(g),  (y)  all  Leases,  all  Ancillary  Agreements,  the  Advisory
         Agreement,  and each other Material Contract, in each case certified as
         true,  correct  and  complete by the chief  operating  officer or chief
         financial  officer  of the  Borrower,  and  (z) a Lease  Abstract  with
         respect to each Lease for the Unencumbered Senior Housing Assets;

                                      -50-
<PAGE>

                  (xiv) The Fees then due and payable under  Section  3.6.,  and
         any other Fees  payable to the Agent and the Lenders on or prior to the
         Effective Date;

                  (xv) A Compliance Certificate calculated as of March 31, 2002;

                  (xvii) A letter  from the  agent  under  the  Existing  Credit
         Agreement to the effect that such  agreement will be terminated and all
         amounts outstanding  thereunder shall have been paid upon giving effect
         to the  disbursement  of the initial  Revolving Loans hereunder to such
         agent; and

                  (xvi) Such other documents,  agreements and instruments as the
         Agent on behalf of the Lenders may reasonably request; and

         (b)      In the good faith judgment of the Agent and the Lenders:

                  (i) There shall not have occurred or become known to the Agent
         or any of the Lenders any event,  condition,  situation or status since
         the date of the  information  contained in the  financial  and business
         projections,  budgets,  pro forma  data and  forecasts  concerning  the
         Borrower  and its  Subsidiaries  delivered to the Agent and the Lenders
         prior  to the  Agreement  Date  that  has had or  could  reasonably  be
         expected to result in a Material Adverse Effect;

                  (ii) No  litigation,  action,  suit,  investigation  or  other
         arbitral,  administrative  or judicial  proceeding  shall be pending or
         threatened  which  could  reasonably  be  expected  to (1)  result in a
         Material  Adverse Effect or (2) restrain or enjoin,  impose  materially
         burdensome  conditions on, or otherwise materially and adversely affect
         the  ability of the  Borrower  or any other  Loan Party to fulfill  its
         obligations under the Loan Documents to which it is a party;

                  (iii) The Borrower and its  Subsidiaries  shall have  received
         all approvals,  consents and waivers,  and shall have made or given all
         necessary  filings and notices as shall be required to  consummate  the
         transactions  contemplated hereby without the occurrence of any default
         under,  conflict with or violation of (1) any Applicable Law or (2) any
         agreement,  document or  instrument  to which the Borrower or any other
         Loan  Party  is a party or by  which  any of them or  their  respective
         properties  is bound,  except for such  approvals,  consents,  waivers,
         filings and notices  the  receipt,  making or giving of which would not
         reasonably  be likely to (A) have a  Material  Adverse  Effect,  or (B)
         restrain or enjoin,  impose  materially  burdensome  conditions  on, or
         otherwise  materially and adversely  affect the ability of the Borrower
         or any other  Loan  Party to  fulfill  its  obligations  under the Loan
         Documents to which it is a party; and

                  (iv) There shall not have occurred or exist any other material
         disruption  of financial or capital  markets that could  reasonably  be
         expected  to   materially   and  adversely   affect  the   transactions
         contemplated by the Loan Documents.

                                      -51-
<PAGE>

Section 5.2.  Conditions Precedent to All Loans and Letters of Credit.

         The obligations of the Lenders to make any Loans, of the Agent to issue
Letters of Credit,  and of the Swingline  Lender to make any Swingline  Loan are
all subject to the further condition  precedent that: (a) no Default or Event of
Default  shall have  occurred and be  continuing as of the date of the making of
such  Loan or  date of  issuance  of  such  Letter  of  Credit  or  would  exist
immediately after giving effect thereto;  (b) the representations and warranties
made or  deemed  made by the  Borrower  and each  other  Loan  Party in the Loan
Documents  to which any of them is a party,  shall be true and correct on and as
of the date of the  making of such Loan or date of  issuance  of such  Letter of
Credit  with the same force and effect as if made on and as of such date  except
to the extent that such  representations and warranties  expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date) and except for changes in
factual circumstances  specifically and expressly permitted hereunder and (c) in
the case of the  borrowing of Revolving  Loans,  the Agent shall have received a
timely Notice of Borrowing.  Each Credit Event shall  constitute a certification
by the Borrower to the effect set forth in the  preceding  sentence  (both as of
the date of the giving of notice  relating to such Credit Event and,  unless the
Borrower otherwise notifies the Agent prior to the date of such Credit Event, as
of the date of the occurrence of such Credit Event). In addition, if such Credit
Event is the making of a Loan, the Borrower shall be deemed to have  represented
to the Agent and the Lender at the time such Loan is made that all conditions to
the making of such Loan contained in Article V. have been satisfied.

Section 5.3.  Conditions as Covenants.

         If the Lenders make any Loans,  or the Agent issues a Letter of Credit,
prior to the satisfaction of all conditions precedent set forth in Sections 5.1.
and 5.2., the Borrower shall  nevertheless cause such condition or conditions to
be satisfied  within 5 Business  Days after the date of the making of such Loans
or the  issuance  of such  Letter of Credit.  Unless set forth in writing to the
contrary,  the  making  of its  initial  Loan by a  Lender  shall  constitute  a
certification  by such  Lender  to the  Agent  and the  other  Lenders  that the
Borrower has satisfied the  conditions  precedent for initial Loans set forth in
Sections  5.1.  and 5.2.  The Agent will  notify  each Lender when the Agent has
determined for itself that the Borrower has satisfied such conditions.

                   ARTICLE VI. REPRESENTATIONS AND WARRANTIES

Section 6.1.  Representations and Warranties.

         In order to  induce  the  Agent  and each  Lender  to enter  into  this
Agreement and to make Loans and issue Letters of Credit, the Borrower represents
and warrants to the Agent and each Lender as follows:

         (a) Organization;  Power;  Qualification.  Each of the Borrower and its
Subsidiaries is a corporation, partnership or other legal entity, duly organized
or formed,  validly  existing and in good standing under the jurisdiction of its
incorporation  or  formation,  has the power and  authority  to own or lease its
respective  properties and to carry on its respective  business as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as a foreign  corporation,  partnership or other legal entity, and authorized to
do business,  in each

                                      -52-
<PAGE>

jurisdiction  in which the  character  of its  properties  or the  nature of its
business  requires such  qualification or authorization and where the failure to
be so qualified or authorized  would have, in each instance,  a Material Adverse
Effect.

         (b) Ownership  Structure.  As of the Agreement  Date Part I of Schedule
6.1.(b) is a complete  and  correct  list of all  Subsidiaries  of the  Borrower
setting forth for each such Subsidiary,  (i) the jurisdiction of organization of
such  Subsidiary,  (ii)  each  Person  holding  any  Equity  Interests  in  such
Subsidiary,  (iii) the nature of the Equity  Interests held by each such Person,
(iv) the percentage of ownership of such  Subsidiary  represented by such Equity
Interests  and (v) whether such  Subsidiary is a Material  Subsidiary  and/or an
Excluded Subsidiary.  Except as disclosed in such Schedule,  as of the Agreement
Date (i) each of the Borrower and its  Subsidiaries  owns, free and clear of all
Liens, and has the unencumbered  right to vote, all outstanding Equity Interests
in each Person shown to be held by it on such  Schedule,  (ii) all of the issued
and outstanding  capital stock of each such Person organized as a corporation is
validly issued,  fully paid and nonassessable and (iii) there are no outstanding
subscriptions,  options, warrants, commitments,  preemptive rights or agreements
of any kind (including,  without  limitation,  any stockholders' or voting trust
agreements)  for the issuance,  sale,  registration or voting of, or outstanding
securities  convertible  into,  any  additional  shares of capital  stock of any
class,  or  partnership  or other  ownership  interests of any type in, any such
Person.  As of the Agreement  Date Part II of Schedule  6.1.(b)  correctly  sets
forth all Unconsolidated Affiliates of the Borrower, including the correct legal
name of such Person, the type of legal entity which each such Person is, and all
Equity Interests in such Person held directly or indirectly by the Borrower.

         (c)  Authorization  of  Agreement,  Etc. The Borrower has the right and
power,  and has taken all necessary action to authorize it, to borrow and obtain
other extensions of credit hereunder. The Borrower and each other Loan Party has
the right and power,  and has taken all  necessary  action to  authorize  it, to
execute,  deliver and perform each of the Loan  Documents to which it is a party
in accordance  with their  respective  terms and to consummate the  transactions
contemplated hereby and thereby. The Loan Documents to which the Borrower or any
other Loan Party is a party have been duly  executed  and  delivered by the duly
authorized  officers  of such  Person  and each is a legal,  valid  and  binding
obligation of such Person enforceable against such Person in accordance with its
respective  terms except as the same may be limited by  bankruptcy,  insolvency,
and other  similar  laws  affecting  the rights of creditors  generally  and the
availability of equitable  remedies for the  enforcement of certain  obligations
(other than the payment of principal) contained herein or therein may be limited
by equitable principles generally.

         (d)  Compliance  of Loan  Documents  with  Laws,  Etc.  The  execution,
delivery  and  performance  of this  Agreement,  the Notes  and the  other  Loan
Documents to which the Borrower or any other Loan Party is a party in accordance
with their  respective  terms and the borrowings and other  extensions of credit
hereunder do not and will not, by the passage of time, the giving of notice,  or
both:  (i) require any  Governmental  Approval  or violate  any  Applicable  Law
(including  all  Environmental  Laws) relating to the Borrower or any other Loan
Party;  (ii) conflict with,  result in a breach of or constitute a default under
the  organizational  documents of the  Borrower or any other Loan Party,  or any
indenture, agreement or other instrument to which the

                                      -53-
<PAGE>

Borrower  or any  other  Loan  Party  is a party  or by  which  it or any of its
respective  properties may be bound;  or (iii) result in or require the creation
or  imposition  of any Lien upon or with  respect to any  property  now owned or
hereafter acquired by the Borrower or any other Loan Party.

         (e) Compliance with Law;  Governmental  Approvals.  The Borrower,  each
Subsidiary  and each other Loan Party is in  compliance  with each  Governmental
Approval  applicable  to it and in  compliance  with all  other  Applicable  Law
(including without limitation,  Environmental Laws) relating to the Borrower,  a
Subsidiary  or such other  Loan  Party  except  for  noncompliances  which,  and
Governmental  Approvals the failure to possess which, would not, individually or
in the aggregate, cause a Default or Event of Default or have a Material Adverse
Effect.

         (f) Title to Properties;  Liens;  Title Insurance.  As of the Agreement
Date,  Part I of Schedule  6.1.(f) sets forth all of the real property  owned or
leased by the Borrower,  each other Loan Party and each other  Subsidiary.  Each
such  Person  has  good,  marketable  and legal  title to, or a valid  leasehold
interest in, its respective assets. As of the Agreement Date, there are no Liens
against  any  assets of the  Borrower,  any  Subsidiary  or any other Loan Party
except for Permitted Liens. As to all or substantially all of the Senior Housing
Assets,  the Borrower or a  Subsidiary  is the named  insured  under a policy of
title  insurance  issued  by a title  insurer  licensed  to do  business  in the
jurisdiction where such Senior Housing Asset is located.  As to each such policy
of title  insurance (i) the coverage  amount  equals or exceeds the  acquisition
cost of the  related  Senior  Housing  Asset;  (ii)  exceptions  to title do not
include any Liens,  except for Permitted Liens and Liens that have been released
prior to the  Effective  Date;  (iii) no claims are pending  that,  if adversely
determined,  could reasonably be expected to have a Material Adverse Effect; and
(iv) no title insurer has given notice to the insured Person that such policy of
title  insurance is no longer in effect.  Except for  Permitted  Liens,  neither
Borrower  nor any  Subsidiary  has  knowledge of any defect in title that could,
individually or in the aggregate, have a Material Adverse Effect.

         (g) Existing Indebtedness. Schedule 6.1.(g) is, as of March 31, 2002, a
complete  and  correct  listing  of all  Indebtedness  of the  Borrower  and its
Subsidiaries,  including without limitation,  Guarantees of the Borrower and its
Subsidiaries,  and indicating whether such Indebtedness is Secured  Indebtedness
or  Unsecured  Indebtedness.  During the period from such date to the  Agreement
Date, neither the Borrower nor any Subsidiary incurred any material Indebtedness
except as set forth on such  Schedule.  The Borrower and its  Subsidiaries  have
performed and are in compliance with all of the terms of such  Indebtedness  and
all  instruments  and agreements  relating  thereto,  and no default or event of
default,  or event or  condition  which with the giving of notice,  the lapse of
time, or both, would constitute such a default or event of default,  exists with
respect to any such Indebtedness.

         (h) Material  Contracts and Leases and Ancillary  Agreements.  Schedule
6.1.(h) is, as of the Agreement  Date, a true,  correct and complete  listing of
all Material Contracts,  Leases and Ancillary Agreements.  Each of the Borrower,
its  Subsidiaries  and the other Loan  Parties  that is a party to any  Material
Contract is in compliance with all of the terms of such Material  Contract,  and
no default or event of default,  or event or condition  which with the giving of
notice,  the lapse of time, or both, would constitute such a default or event of
default,  exists with respect to any

                                      -54-
<PAGE>

such  Material  Contract.  All Lease  Abstracts  provided by the Borrower to the
Agent accurately  summarize the relevant provisions of the Leases required to be
described  therein,  and  such  Lease  Abstracts  are  correct  in all  material
respects.

         (i) Litigation.  Except as set forth on Schedule 6.1.(i),  there are no
actions,  suits or  proceedings  pending (nor, to the knowledge of the Borrower,
are there any actions, suits or proceedings  threatened,  nor is there any basis
therefor)  against or in any other way relating  adversely  to or affecting  the
Borrower,  any  Subsidiary  or any  other  Loan  Party or any of its  respective
property in any court or before any  arbitrator  of any kind or before or by any
other  Governmental  Authority  which  could  reasonably  be  expected to have a
Material  Adverse Effect.  There are no strikes,  slow downs,  work stoppages or
walkouts or other labor  disputes  in  progress  or  threatened  relating to the
Borrower,  any  Subsidiary  or any other Loan Party  which could  reasonably  be
expected to have a Material Adverse Effect.

         (j) Taxes.  All federal,  state and other tax returns of the  Borrower,
any  Subsidiary or any other Loan Party  required by Applicable  Law to be filed
have been duly filed,  and all federal,  state and other taxes,  assessments and
other governmental charges or levies upon the Borrower,  any Subsidiary and each
other Loan Party and its respective properties, income, profits and assets which
are due and payable have been paid,  except any such nonpayment  which is at the
time permitted  under Section 7.6. As of the Agreement  Date, none of the United
States income tax returns of the Borrower,  its  Subsidiaries  or any other Loan
Party is under  audit.  All  charges,  accruals and reserves on the books of the
Borrower  and  each  of its  Subsidiaries  in  respect  of any  taxes  or  other
governmental charges are in accordance with GAAP.

         (k)  Financial  Statements.  The Borrower has  furnished to each Lender
copies of (i) the audited  consolidated  balance  sheet of the  Borrower and its
consolidated  Subsidiaries for the fiscal year ending December 31, 2001, and the
related audited consolidated statements of income, shareholders' equity and cash
flow for the fiscal year ending on such date,  with the opinion thereon of Ernst
& Young LLP, and (ii) the unaudited  consolidated  balance sheet of the Borrower
and its consolidated  Subsidiaries for the fiscal quarter ending March 31, 2002,
and the related consolidated  statements of income, and cash flow for the fiscal
quarter ending on such date. Such financial  statements  (including in each case
related  schedules  and notes) are complete and correct and present  fairly,  in
accordance with GAAP consistently  applied throughout the periods involved,  the
consolidated   financial   position  of  the  Borrower   and  its   consolidated
Subsidiaries as at their  respective dates and the results of operations and the
cash flow for such  periods  (subject,  as to  interim  statements,  to  changes
resulting from normal year-end audit adjustments).  Neither the Borrower nor any
of  its  Subsidiaries  has  on  the  Agreement  Date  any  material   contingent
liabilities,   liabilities,   liabilities   for  taxes,   unusual  or  long-term
commitments  or unrealized or forward  anticipated  losses from any  unfavorable
commitments,  except  as  referred  to or  reflected  or  provided  for in  said
financial statements or except as set forth on Schedule 6.1.(k).

         (l) No Material Adverse Change. Since December 31, 2001, there has been
no material adverse change in the consolidated  financial condition,  results of
operations,   business  or  prospects  of  the  Borrower  and  its  consolidated
Subsidiaries  taken as a whole.  Each of the Borrower,  its Subsidiaries and the
other Loan Parties is Solvent.

                                      -55-
<PAGE>

         (m) ERISA.  Each  member of the ERISA Group is in  compliance  with its
obligations  under the  minimum  funding  standards  of ERISA  and the  Internal
Revenue Code with respect to each Plan and is in  compliance  with the presently
applicable  provisions  of ERISA and the  Internal  Revenue Code with respect to
each Plan, except in each case for noncompliances  which could not reasonably be
expected to have a Material Adverse Effect.  As of the Agreement Date, no member
of the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal  Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any  Benefit  Arrangement,  or made  any  amendment  to any  Plan or  Benefit
Arrangement,  which has resulted or could result in the  imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii)  incurred any liability  under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.

         (n) Not Plan Assets; No Prohibited  Transaction.  None of the assets of
the Borrower,  any Subsidiary or any other Loan Party  constitute  "plan assets"
within the  meaning  of ERISA,  the  Internal  Revenue  Code and the  respective
regulations promulgated thereunder.  The execution,  delivery and performance of
this Agreement and the other Loan Documents,  and the borrowing and repayment of
amounts  hereunder,  do not and will not  constitute  "prohibited  transactions"
under ERISA or the Internal Revenue Code.

         (o) Absence of Defaults.  Neither the Borrower,  any Subsidiary nor any
other Loan Party is in default under its Governing  Documents,  and no event has
occurred,  which has not been remedied, cured or waived: (i) which constitutes a
Default or an Event of  Default;  or (ii) which  constitutes,  or which with the
passage of time,  the giving of notice,  a  determination  of  materiality,  the
satisfaction  of any  condition,  or any  combination  of the  foregoing,  would
constitute, a default or event of default by the Borrower, any Subsidiary or any
other Loan Party under any  agreement  (other than this  Agreement) or judgment,
decree or order to which the Borrower or any Subsidiary or other Loan Party is a
party or by which the Borrower or any  Subsidiary  or other Loan Party or any of
their respective  properties may be bound where such default or event of default
could, individually or in the aggregate, have a Material Adverse Effect.

         (p) Environmental Laws. Each of the Borrower,  its Subsidiaries and the
other Loan Parties has obtained all  Governmental  Approvals  which are required
under  Environmental  Laws and is in compliance with all terms and conditions of
such Governmental  Approvals which the failure to obtain or to comply with could
reasonably be expected to have a Material Adverse Effect.  Except for any of the
following  matters  that  could not be  reasonably  expected  to have a Material
Adverse  Effect,  (i) the Borrower is not aware of, and has not received  notice
of, any past, present, or future events, conditions, circumstances,  activities,
practices, incidents, actions, or plans which, with respect to the Borrower, its
Subsidiaries and each other Loan Party, may interfere with or prevent compliance
or  continued  compliance  with  Environmental  Laws,  or may  give  rise to any
common-law or legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study, or investigation,  based on or related
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or the emission, discharge, release or threatened release
into the environment,  of any pollutant,

                                      -56-
<PAGE>

contaminant,  chemical, or industrial,  toxic, or other Hazardous Material;  and
(ii) there is no civil, criminal, or administrative action, suit, demand, claim,
hearing,  notice,  or demand  letter,  notice of  violation,  investigation,  or
proceeding   pending  or,  to  the  Borrower's   knowledge  after  due  inquiry,
threatened,  against the Borrower,  its  Subsidiaries  and each other Loan Party
relating in any way to Environmental Laws.

         (q) Investment  Company;  Public Utility Holding  Company.  Neither the
Borrower  nor any  Subsidiary  nor any other  Loan  Party is (i) an  "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary  company" of a "holding  company",  or an  "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended,  or (iii) subject
to any other  Applicable  Law which purports to regulate or restrict its ability
to borrow money or to consummate the transactions contemplated by this Agreement
or to perform its obligations under any Loan Document to which it is a party.

         (r) Margin Stock.  Neither the Borrower,  any  Subsidiary nor any other
Loan Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose,  whether immediate,  incidental or
ultimate,  of buying or carrying "margin stock" within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System.

         (s)  Affiliate  Transactions.  Except as  permitted  by Section  9.10.,
neither the Borrower,  any  Subsidiary nor any other Loan Party is a party to or
bound by any  agreement or  arrangement  (whether  oral or written) to which any
Affiliate of the Borrower, any Subsidiary or any other Loan Party is a party.

         (t)  Intellectual  Property.  Each of the Borrower and each  Subsidiary
owns or has the right to use, under valid license  agreements or otherwise,  all
material patents,  licenses,  franchises,  trademarks,  trademark rights,  trade
names,   trade  name  rights,   trade  secrets  and  copyrights   (collectively,
"Intellectual  Property") used in the conduct of its businesses as now conducted
and as  contemplated  by the Loan  Documents,  without  known  conflict with any
patent, license,  franchise,  trademark, trade secret, trade name, copyright, or
other  proprietary  right of any  other  Person,  except  for such  Intellectual
Property,  the  absence  of which,  and for  conflicts  which,  would not have a
Material  Adverse  Effect.  The Borrower and each such Subsidiary have taken all
such steps as they deem reasonably  necessary to protect their respective rights
under and with respect to such Intellectual Property. No material claim has been
asserted by any Person with respect to the use of any  Intellectual  Property by
the Borrower or any  Subsidiary,  or challenging or questioning  the validity or
effectiveness  of  any  Intellectual  Property.  The  use of  such  Intellectual
Property by the Borrower,  its Subsidiaries and the other Loan Parties, does not
infringe on the rights of any Person,  subject to such claims and  infringements
as do not, in the  aggregate,  give rise to any  liabilities  on the part of the
Borrower  and its  Subsidiaries  that could  reasonably  be  expected  to have a
Material Adverse Effect.

         (u)  Business.   As  of  the  Agreement  Date,  the  Borrower  and  its
Subsidiaries  are engaged  substantially  in the  business  of the  acquisition,
financing (including mortgage

                                      -57-
<PAGE>

financing),  and  ownership  of  Senior  Housing  Assets  and  other  businesses
activities incidental thereto.

         (v) Broker's  Fees. No broker's or finder's fee,  commission or similar
compensation  will be  payable  with  respect to the  transactions  contemplated
hereby.  No other similar fees or commissions  will be payable by any Loan Party
for any other  services  rendered  to the  Borrower  or any of its  Subsidiaries
ancillary to the transactions contemplated hereby.

         (w) Accuracy and Completeness of Information.  No written  information,
report  or other  papers  or data  (excluding  financial  projections  and other
forward looking  statements)  furnished to the Agent or any Lender by, on behalf
of, or at the direction of, the Borrower, any Subsidiary or any other Loan Party
in  connection  with or relating  in any way to this  Agreement,  contained  any
untrue statement of a fact material to the creditworthiness of the Borrower, any
Subsidiary or any other Loan Party or omitted to state a material fact necessary
in  order  to  make  such  statements   contained  therein,   in  light  of  the
circumstances  under  which  they  were  made,  not  misleading.  All  financial
statements  furnished  to the Agent or any  Lender  by, on behalf  of, or at the
direction of, the Borrower, any Subsidiary or any other Loan Party in connection
with or relating in any way to this  Agreement,  present  fairly,  in accordance
with GAAP consistently  applied  throughout the periods involved,  the financial
position  of the  Persons  involved  as at the date  thereof  and the results of
operations for such periods. All financial projections and other forward looking
statements prepared by or on behalf of the Borrower, any Subsidiary or any other
Loan Party that have been or may hereafter be made available to the Agent or any
Lender were or will be prepared in good faith based on  reasonable  assumptions.
No fact is known to the  Borrower  which has had,  or may in the future have (so
far as the Borrower can reasonably foresee), a Material Adverse Effect which has
not been set forth in the financial statements referred to in Section 6.1.(k) or
in such information,  reports or other papers or data or otherwise  disclosed in
writing to the Agent and the Lenders prior to the Effective Date.

         (x) REIT Status. The Borrower qualifies,  and has since 1999 qualified,
as a REIT and is in compliance  with all  requirements  and  conditions  imposed
under the Internal  Revenue Code to allow the Borrower to maintain its status as
a REIT.

         (y) Unencumbered  Assets. As of the Agreement Date, Schedule 6.1.(y) is
a correct  and  complete  list of all  Unencumbered  Senior  Housing  Assets and
Unencumbered  Mortgage  Notes.  Each  of the  Properties  and  promissory  notes
included by the Borrower in calculations  of Unencumbered  Asset Value satisfies
all of the  requirements  contained in the definition of an Unencumbered  Senior
Housing Asset and Unencumbered Mortgage Note, as applicable.

         (z) Insurance.  All Leases  require the Lessees  thereunder to maintain
with respect to the Senior Housing Assets commercially reasonable insurance with
financially sound and reputable insurance  companies.  As of the Agreement Date,
neither  the  Borrower  nor any  Subsidiary  has  received  notice that any such
insurance has been cancelled, nonrenewed, or impaired in any way.

                                      -58-
<PAGE>

Section 6.2.  Survival of Representations and Warranties, Etc.

         All statements  contained in any  certificate,  financial  statement or
other  instrument  delivered by or on behalf of the Borrower,  any Subsidiary or
any other  Loan Party to the Agent or any Lender  pursuant  to or in  connection
with this  Agreement  or any of the other  Loan  Documents  (including,  but not
limited  to, any such  statement  made in or in  connection  with any  amendment
thereto or any statement  contained in any certificate,  financial  statement or
other  instrument  delivered  by or on  behalf  of  the  Borrower  prior  to the
Agreement  Date and  delivered  to the Agent or any  Lender in  connection  with
closing the transactions  contemplated hereby) shall constitute  representations
and warranties  made by the Borrower under this Agreement.  All  representations
and warranties  made under this Agreement and the other Loan Documents  shall be
deemed to be made at and as of the Agreement  Date,  the Effective  Date and the
date of the  occurrence  of any Credit  Event,  except to the  extent  that such
representations  and warranties  expressly  relate solely to an earlier date (in
which case such representations and warranties shall have been true and accurate
on and as of such earlier date) and except for changes in factual  circumstances
specifically permitted hereunder.  All such representations and warranties shall
survive the  effectiveness of this Agreement,  the execution and delivery of the
Loan  Documents  and the making of the Loans and the  issuance of the Letters of
Credit.

                       ARTICLE VII. AFFIRMATIVE COVENANTS

         For so  long as this  Agreement  is in  effect,  unless  the  Requisite
Lenders (or, if required  pursuant to Section  12.6.,  all of the Lenders) shall
otherwise  consent in the manner  provided  for in Section  12.6.,  the Borrower
shall comply with the following covenants:

Section 7.1.  Preservation of Existence and Similar Matters.

         Except as otherwise  permitted  under Section 9.7.,  the Borrower shall
preserve and maintain,  and cause each  Subsidiary  and each other Loan Party to
preserve and maintain, its respective existence,  rights,  franchises,  licenses
and privileges in the jurisdiction of its incorporation or formation and qualify
and remain qualified and authorized to do business in each jurisdiction in which
the  character of its  properties  or the nature of its business  requires  such
qualification  and  authorization  and where the failure to be so authorized and
qualified could reasonably be expected to have a Material Adverse Effect.

Section 7.2.  Compliance with Applicable Law and Material Contracts.

         The Borrower  shall comply,  and cause each  Subsidiary  and each other
Loan Party to comply,  with (a) all Applicable  Law,  including the obtaining of
all Governmental Approvals, the failure with which to comply could reasonably be
expected  to have a Material  Adverse  Effect,  and (b) all  material  terms and
conditions of all Material Contracts to which it is a party.

Section 7.3.  Maintenance of Property.

         In addition to the requirements of any of the other Loan Documents, the
Borrower  shall,  and shall cause each  Subsidiary  and other Loan Party to, (a)
protect and preserve all of its material properties or cause to be protected and
preserved,  and maintain or cause to be

                                      -59-
<PAGE>

maintained in good repair,  working order and condition all tangible properties,
ordinary wear and tear excepted, and (b) make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such properties, so
that the  business  carried  on in  connection  therewith  may be  properly  and
advantageously conducted at all times.

Section 7.4.  Conduct of Business.

         The  Borrower  shall at all times carry on, and cause its  Subsidiaries
and the other Loan Parties to carry on, its  respective  businesses as described
in Section 6.1.(u).

Section 7.5.  Insurance.
         In addition to the requirements of any of the other Loan Documents, the
Borrower  shall,  and shall  cause  each  Subsidiary  and other  Loan  Party to,
maintain  or cause  to be  maintained  commercially  reasonable  insurance  with
financially  sound  and  reputable  insurance  companies,  and from time to time
deliver to the Agent or any Lender  upon its request a detailed  list,  together
with copies of all policies of the insurance  then in effect,  stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.

Section 7.6.  Payment of Taxes and Claims.

         The  Borrower  shall,  and shall cause each  Subsidiary  and other Loan
Party to, pay and discharge or cause to be paid and discharged  when due (a) all
taxes,  assessments and  governmental  charges or levies imposed upon it or upon
its income or profits or upon any properties belonging to it, and (b) all lawful
claims of  materialmen,  mechanics,  carriers,  warehousemen  and  landlords for
labor, materials,  supplies and rentals which, if unpaid, might become a Lien on
any properties of such Person;  provided,  however,  that this Section shall not
require the payment or discharge of any such tax,  assessment,  charge,  levy or
claim which is being  contested in good faith by appropriate  proceedings  which
operate to suspend the collection  thereof and for which adequate  reserves have
been  established  on the books of the Borrower,  such  Subsidiary or such other
Loan Party, as applicable, in accordance with GAAP.

Section 7.7.  Visits and Inspections.

         The  Borrower  shall,  and shall cause each  Subsidiary  and other Loan
Party to, permit representatives or agents of any Lender or the Agent, from time
to time  after  reasonable  prior  notice  if no  Event of  Default  shall be in
existence,  as often as may be  reasonably  requested,  but only  during  normal
business  hours and at the expense of such Lender or the Agent (unless a Default
or Event of Default shall be continuing, in which case the exercise by the Agent
or such Lender of its rights under this  Section  shall be at the expense of the
Borrower),  as the case may be, to: (a) visit and inspect all  properties of the
Borrower or such  Subsidiary or other Loan Party to the extent any such right to
visit or inspect is within the  control of such  Person;  (b)  inspect  and make
extracts from their respective  books and records,  including but not limited to
management letters prepared by independent accountants; and (c) discuss with its
principal officers, and its independent accountants,  its business,  properties,
condition  (financial or otherwise),  results of operations and performance.  If
requested  by the Agent,  the Borrower  shall  execute an

                                      -60-
<PAGE>

authorization  letter addressed to its accountants  authorizing the Agent or any
Lender to discuss the  financial  affairs of the Borrower and any  Subsidiary or
any other Loan Party with its accountants.

Section 7.8.  Use of Proceeds; Letters of Credit.

         The  Borrower  shall use the  proceeds  of all Loans and all Letters of
Credit for general business purposes only. The Borrower shall not, and shall not
permit any  Subsidiary  or other Loan Party to, use any part of such proceeds or
Letters of Credit to purchase or carry,  or to reduce or retire or refinance any
credit  incurred to purchase or carry,  any margin stock  (within the meaning of
Regulation  U of the Board of  Governors  of the Federal  Reserve  System) or to
extend  credit to others for the  purpose of  purchasing  or  carrying  any such
margin stock.

Section 7.9.  Environmental Matters.

         The Borrower  shall,  and shall cause all of its  Subsidiaries  and the
other Loan Parties to, comply or cause to be complied  with,  all  Environmental
Laws the failure  with which to comply  could  reasonably  be expected to have a
Material Adverse Effect. If the Borrower, any Subsidiary or any other Loan Party
shall (a) receive  notice that any violation of any  Environmental  Law may have
been  committed or is about to be committed by such Person,  (b) receive  notice
that any  administrative  or  judicial  complaint  or order has been filed or is
about to be filed against the Borrower,  any  Subsidiary or any other Loan Party
alleging  violations of any  Environmental  Law or requiring  the Borrower,  any
Subsidiary  or any other Loan Party to take any  action in  connection  with the
release of  Hazardous  Materials  or (c) receive any notice from a  Governmental
Authority or private party  alleging that the  Borrower,  any  Subsidiary or any
other  Loan  Party may be  liable or  responsible  for costs  associated  with a
response to or cleanup of a release of Hazardous Materials or any damages caused
thereby, and such notices, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, the Borrower shall provide the Agent
and each  Lender  with a copy of such  notice  within 30 days after the  receipt
thereof by the Borrower,  any  Subsidiary or any other Loan Party.  The Borrower
shall,  and shall cause its  Subsidiaries and the other Loan Parties to, take or
cause to be taken  promptly all actions  necessary to prevent the  imposition of
any Liens on any of their respective properties arising out of or related to any
Environmental Laws.

Section 7.10.  Books and Records.

         The Borrower shall,  and shall cause each of its  Subsidiaries  and the
other Loan Parties to,  maintain books and records  pertaining to its respective
business  operations in such detail,  form and scope as is consistent  with good
business practice and in accordance with GAAP.

Section 7.11.  Further Assurances.

         The Borrower shall, at the Borrower's cost and expense and upon request
of the Agent, execute and deliver or cause to be executed and delivered,  to the
Agent such further instruments,  documents and certificates, and do and cause to
be done such further acts that may be  reasonably  necessary or advisable in the
reasonable opinion of the Agent to carry out more effectively the provisions and
purposes of this Agreement and the other Loan Documents.

                                      -61-
<PAGE>

Section 7.12.  New Subsidiaries/Guarantors.

         (a)  Requirement  to Become  Guarantor.  Within  30 days of any  Person
(other than an Excluded  Subsidiary)  becoming a Material  Subsidiary  after the
Effective  Date,  the Borrower  shall deliver to the Agent each of the following
items,  each in form and substance  satisfactory to the Agent:  (a) an Accession
Agreement executed by such Material Subsidiary and (b) the items that would have
been delivered under Sections 5.1.(a)(v) and (x) through (xiii) if such Material
Subsidiary had been one on the Effective Date; provided,  however, promptly (and
in any event within 5 Business Days) upon any Excluded  Subsidiary ceasing to be
subject to the  restriction  which  prevented  it from  delivering  an Accession
Agreement  pursuant  to this  Section,  such  Subsidiary  shall  comply with the
provisions of this  Section.  The Agent shall send to each Lender copies of each
of the  foregoing  items once the Agent has received all such items with respect
to a Material Subsidiary.

         (b) Release of a  Guarantor.  The  Borrower may request in writing that
the Agent  release,  and upon  receipt of such  request the Agent shall  release
(subject to the terms of the  Guaranty),  a Guarantor  from the Guaranty so long
as: (i) such Guarantor meets, or will meet  simultaneously with its release from
the  Guaranty,  all of the  provisions of the  definition of the term  "Excluded
Subsidiary"  or has ceased to be, or  simultaneously  with its release  from the
Guaranty  will cease to be, a Material  Subsidiary;  (ii) such  Guarantor is not
otherwise required to be a party to the Guaranty under the immediately preceding
subsection  (a); (iii) no Default or Event of Default shall then be in existence
or would occur as a result of such  release,  including  without  limitation,  a
Default or Event of Default  resulting  from a violation of any of the covenants
contained in Section  9.1.;  and (iv) the Agent shall have received such written
request  at least 10  Business  Days  prior to the  requested  date of  release.
Delivery by the  Borrower to the Agent of any such  request  shall  constitute a
representation  by the  Borrower  that the  matters  set forth in the  preceding
sentence  (both as of the date of the giving of such  request and as of the date
of the  effectiveness of such request) are true and correct with respect to such
request.

Section 7.13.  REIT Status.

         The Borrower shall at all times maintain its status as a REIT.

Section 7.14.  Exchange Listing.

         The Borrower  shall maintain at least one class of common shares of the
Borrower  having  trading  privileges  on the New  York  Stock  Exchange  or the
American  Stock  Exchange  or which is the  subject of price  quotations  in the
over-the-counter  market as reported by the National  Association  of Securities
Dealers Automated Quotation System.

                            ARTICLE VIII. INFORMATION

         For so  long as this  Agreement  is in  effect,  unless  the  Requisite
Lenders (or, if required  pursuant to Section  12.6.,  all of the Lenders) shall
otherwise  consent in the manner set forth in Section 12.6.,  the Borrower shall
furnish to each  Lender (or to the Agent if so  provided  below) at its  Lending
Office:

                                      -62-
<PAGE>

Section 8.1.  Quarterly Financial Statements.

         As soon as available and in any event within 45 days after the close of
each of the  first,  second  and third  fiscal  quarters  of the  Borrower,  the
unaudited  consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such  period and the related  unaudited  consolidated  statements  of
income,  and cash flows of the  Borrower and its  Subsidiaries  for such period,
setting forth in each case in comparative  form the figures as of the end of and
for the corresponding periods of the previous fiscal year, all of which shall be
certified by the chief financial officer of the Borrower, in his or her opinion,
to present fairly,  in accordance with GAAP as then in effect,  the consolidated
financial  position of the Borrower and its  Subsidiaries as at the date thereof
and the results of operations for such period  (subject to normal year-end audit
adjustments).  Together  with such  financial  statements,  the  Borrower  shall
deliver a report,  in form and detail  satisfactory to the Agent,  setting forth
(a) a statement of Funds From Operations for the fiscal quarter then ending; (b)
a listing of capital  expenditures made by the Borrower or any Subsidiary during
the fiscal  quarter then ended;  and (c) a listing of all Senior  Housing Assets
acquired during such fiscal quarter, including their minimum rent, net operating
income, cost and related mortgage debt, if any.

Section 8.2.  Year-End Statements.

         Within 90 days after the end of each fiscal year of the  Borrower,  the
audited  consolidated  balance sheet of the Borrower and its  Subsidiaries as at
the end of such fiscal year and the related audited  consolidated  statements of
income, shareholders' equity and cash flows of the Borrower and its Subsidiaries
for such fiscal year,  setting forth in  comparative  form the figures as at the
end of and for the previous  fiscal year, all of which shall be certified by (a)
the chief financial officer of the Borrower,  in his or her opinion,  to present
fairly,  in accordance with GAAP as then in effect,  the consolidated  financial
position of the  Borrower  and its  Subsidiaries  as at the date thereof and the
results of  operations  for such  period and (b)  independent  certified  public
accountants  of  recognized  national  standing,   whose  certificate  shall  be
unqualified and who shall have authorized the Borrower to deliver such financial
statements and  certification  thereof to the Agent and the Lenders  pursuant to
this  Agreement.  Together with such  financial  statements,  the Borrower shall
deliver a report,  in form and  detail  reasonably  satisfactory  to the  Agent,
setting forth (a) a statement of Funds From  Operations for the fiscal year then
ending;  (b) a listing  of  capital  expenditures  made by the  Borrower  or any
Subsidiary  during such  fiscal  year;  and (c) a listing of all Senior  Housing
Assets  acquired  during such fiscal year,  including  their minimum  rent,  net
operating income, cost and related mortgage debt, if any.

Section 8.3.  Compliance Certificate.

         At the time  financial  statements  are furnished  pursuant to Sections
8.1. and 8.2.,  and within 10 Business Days of the Agent's  request with respect
to any other fiscal period, a certificate substantially in the form of Exhibit J
(a  "Compliance  Certificate")  executed by the chief  financial  officer of the
Borrower: (a) setting forth in reasonable detail as at the end of such quarterly
accounting period,  fiscal year, or other fiscal period, as the case may be, the
calculations required to establish whether or not the Borrower was in compliance
with the  covenants  contained in Sections 9.1.  through 9.3. and 9.6.,  and (b)
stating that, to the best of his

                                      -63-
<PAGE>

or her knowledge,  information and belief after due inquiry, no Default or Event
of Default exists, or, if such is not the case, specifying such Default or Event
of Default and its nature,  when it occurred,  whether it is continuing  and the
steps being taken by the  Borrower  with  respect to such  event,  condition  or
failure.  With  each  Compliance  Certificate,  Borrower  shall  also  deliver a
certificate (an "Unencumbered Senior Housing Asset Certificate") executed by the
chief  financial  officer  of the  Borrower  that:  (i) sets forth a list of all
Unencumbered  Senior Housing Assets and  Unencumbered  Mortgage Notes;  and (ii)
certifies that all Unencumbered Senior Housing Assets and Unencumbered  Mortgage
Notes so  listed  fully  qualify  as such  under  the  applicable  criteria  for
inclusion as a Unencumbered Senior Housing Asset or Unencumbered  Mortgage Note.
Together  with  each  Compliance   Certificate   delivered  with  the  financial
statements furnished pursuant to Sections 8.1. and 8.2., the Borrower also shall
provide  information,  to the  extent  obtained  from  tenants,  indicating  the
underlying  occupancy,  Property Net Operating Income and EBITDAR Ratio for each
Senior  Housing Asset or Senior  Housing Asset Pool, as the case may be, for the
fiscal quarter most recently ended.

Section 8.4.  Other Information.

         (a) Management  Reports.  Promptly upon receipt thereof,  copies of all
management  reports,  if any, submitted to the Borrower or its Board of Trustees
by its independent public accountants;

         (b) Securities  Filings.  Within 5 Business Days of the filing thereof,
copies of all  registration  statements  (excluding the exhibits thereto (unless
requested  by the  Agent)  and any  registration  statements  on Form S-8 or its
equivalent),  reports on Forms 10-K, 10-Q and 8-K (or their equivalents) and all
other  periodic  reports  which the Borrower,  any  Subsidiary or any other Loan
Party  shall  file  with  the  Securities   and  Exchange   Commission  (or  any
Governmental   Authority   substituted  therefor)  or  any  national  securities
exchange;

         (c) Shareholder  Information.  Promptly upon the mailing thereof to the
shareholders  of the Borrower  generally,  copies of all  financial  statements,
reports and proxy  statements so mailed and promptly  upon the issuance  thereof
copies of all press releases issued by the Borrower, any Subsidiary or any other
Loan Party;

         (d) ERISA.  If and when any  member of the ERISA  Group (i) gives or is
required  to give  notice to the PBGC of any  "reportable  event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might  constitute  grounds
for a termination  of such Plan under Title IV of ERISA,  or knows that the plan
administrator  of any Plan has given or is  required  to give notice of any such
reportable  event,  a copy of the  notice  of such  reportable  event  given  or
required to be given to the PBGC;  (ii)  receives  notice of complete or partial
withdrawal  liability  under Title IV of ERISA or notice that any  Multiemployer
Plan is in reorganization,  is insolvent or has been terminated,  a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate,  impose  liability  (other than for premiums under Section 4007 of
ERISA) in respect  of, or appoint a trustee to  administer  any Plan,  a copy of
such notice;  (iv) applies for a waiver of the minimum  funding  standard  under
Section 412 of the Internal Revenue Code, a copy of such application;  (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such  notice and other  information  filed with the PBGC;  (vi) gives  notice of
withdrawal  from any Plan  pursuant  to  Section  4063 of ERISA,  a copy of such

                                      -64-
<PAGE>

notice;  or (vii)  fails  to make any  payment  or  contribution  to any Plan or
Multiemployer  Plan or in  respect  of any  Benefit  Arrangement  or  makes  any
amendment to any Plan or Benefit  Arrangement which has resulted or could result
in the  imposition  of a Lien or the  posting  of a bond or  other  security,  a
certificate of the chief financial officer of the Borrower setting forth details
as to such  occurrence and the action,  if any, which the Borrower or applicable
member of the ERISA Group is required or proposes to take;

         (e)  Litigation.  To the extent the Borrower or any Subsidiary is aware
of  the  same,   prompt  notice  of  the   commencement  of  any  proceeding  or
investigation  by or  before  any  Governmental  Authority  and  any  action  or
proceeding in any court or other tribunal or before any arbitrator against or in
any other way relating adversely to, or adversely affecting, the Borrower or any
Subsidiary or any of their  respective  properties,  assets or businesses  which
could  reasonably  be expected  to have a Material  Adverse  Effect,  and prompt
notice of the receipt of notice that any United States income tax returns of the
Borrower or any of its Subsidiaries are being audited;

         (f) Modification of Governing  Documents.  A copy of any amendment to a
Governing Document of the Borrower or any other Loan Party promptly upon, and in
any event within 15 Business Days of, the effectiveness thereof;

         (g) Change of Management or Financial  Condition.  Prompt notice of any
change in the senior  management  of the Borrower,  any  Subsidiary or any other
Loan  Party  and any  change in the  business,  assets,  liabilities,  financial
condition,  results of  operations or business  prospects of the  Borrower,  any
Subsidiary or any other Loan Party which has had or could reasonably be expected
to have Material Adverse Effect;

         (h) Default.  Notice of the occurrence of any of the following promptly
upon a Responsible Officer obtaining knowledge thereof: (i) any Default or Event
of  Default or (ii) any event  which  constitutes  or which with the  passage of
time, the giving of notice, or otherwise, would constitute a default or event of
default by the  Borrower,  any  Subsidiary  or any other  Loan  Party  under any
Material  Contract,  or  any  Lease  or  Ancillary  Agreement  relating  to  any
Unencumbered  Senior  Housing  Asset,  to which any such Person is a party or by
which any such Person or any of its respective properties may be bound;

         (i) Judgments. Prompt notice of any order, judgment or decree in excess
of $5,000,000  having been entered  against the Borrower,  any Subsidiary or any
other Loan Party or any of their respective properties or assets;

         (j) Notice of  Violations of Law.  Prompt  notice if the Borrower,  any
Subsidiary  or any other Loan Party  shall  receive  any  notification  from any
Governmental Authority alleging a violation of any Applicable Law or any inquiry
which could reasonably be expected to have a Material Adverse Effect;

         (k)  Material  Subsidiary.  Prompt  notice  of any  Person  becoming  a
Material Subsidiary;

                                      -65-
<PAGE>

         (l) Material Asset Sales.  Prompt notice of the sale, transfer or other
disposition of any material assets of the Borrower,  any Subsidiary or any other
Loan Party to any Person other than the  Borrower,  any  Subsidiary or any other
Loan Party;

         (m) Material  Contracts.  Promptly  upon (i) entering into any Material
Contract  after  the  Agreement  Date,  a copy to the  Agent  of  such  Material
Contract,  together  with a copy of all related or ancillary  documentation  and
(ii) the giving or receipt  thereof by the  Borrower or any  Subsidiary,  notice
alleging that any party to any Material Contract, Unencumbered Mortgage Note, or
any Lease or Ancillary  Agreement  relating to an  Unencumbered  Senior  Housing
Asset, is in default of its obligations thereunder;

         (n)  Financial  Information   Regarding  Lessees  and  Mortgagors.   If
requested  by the Agent and  available to the  Borrower or any  Subsidiary  on a
nonconfidential  basis, the Borrower shall deliver to the Agent the same reports
and information with respect to each mortgagor under any  Unencumbered  Mortgage
Note and with  respect to each Lessee as is required by Sections  8.1.  and 8.2.
with respect to the Borrower,  except that: (i) every  reference to the Borrower
and its  Subsidiaries  shall be deemed to refer to such  material  mortgagor  or
Lessee;  and (ii) the time periods  within which the Borrower shall deliver such
reports as to material  mortgagors and Lessees shall each be 30 days longer than
the time periods set forth in Sections 8.1. and 8.2.;

         (o) Additions to Unencumbered  Senior Housing  Assets.  In order to add
any Senior  Housing Asset or Senior  Housing Asset Pool to  Unencumbered  Senior
Housing Assets or add any promissory  note to Unencumbered  Mortgage Notes,  the
Borrower  must  deliver  to the  Agent  an  Unencumbered  Senior  Housing  Asset
Certificate  reflecting  such  addition,  together  with a statement of: (i) the
acquisition  cost of such Senior  Housing  Asset,  Senior Housing Asset Pool, or
promissory  note;  and (ii)  the same  information  that the  Borrower  would be
required to include in a Compliance Certificate.  The Borrower shall provide the
Agent with Due Diligence  Reports for any Senior Housing Asset or Senior Housing
Asset Pool added to  Unencumbered  Senior  Housing  Assets within 20 days of its
delivery to the Agent of the Unencumbered  Senior Housing Asset Certificate that
added such Senior  Housing Asset or Senior  Housing  Asset Pool to  Unencumbered
Senior Housing Assets;

         (p) Removals from  Unencumbered  Assets.  Within 10 Business Days after
any  Loan  Party's  disposition  of any  Unencumbered  Senior  Housing  Asset or
Unencumbered  Mortgage Note, or after any  Unencumbered  Senior Housing Asset or
Unencumbered Mortgage Note ceases to qualify as such, the Borrower shall deliver
to the Agent an Unencumbered  Senior Housing Asset  Certificate  reflecting such
removal or  disqualification,  together with a statement of: (i) the identity of
the  Unencumbered  Senior  Housing  Asset or  Unencumbered  Mortgage  Note being
disposed of or disqualified,  and (ii) the Unencumbered Asset Value attributable
to such  Unencumbered  Senior Housing Asset or  Unencumbered  Mortgage Note. The
Borrower also may voluntarily  remove any Senior Housing Asset or Senior Housing
Asset Pool from  Unencumbered  Senior Housing Assets or any promissory note from
Unencumbered  Mortgage Notes by delivering to the Agent an  Unencumbered  Senior
Housing Asset Certificate reflecting such removal, together with a statement (a)
that no Default or Event of Default then exists or would, upon the occurrence of
such event or with the passage of time, result from such removal, and (b)

                                      -66-
<PAGE>

of (i) the identity of the  Unencumbered  Senior  Housing Asset or  Unencumbered
Mortgage Note being removed,  and (ii) the Unencumbered Asset Value attributable
to such Unencumbered Senior Housing Asset or Unencumbered Mortgage Note;

         (q) Regulatory Matters. To the extent the Borrower or any Subsidiary is
aware of the same and only if the same could  reasonably  be  expected to have a
Material Adverse Effect,  prompt notice of the commencement of any proceeding or
investigation of a Lessee,  any Unencumbered  Senior Housing Asset or any Senior
Housing  Asset  securing  an  Unencumbered  Mortgage  Note,  by  or  before  any
Governmental Authority (including,  without limitation, the United States Health
Care Financing Administration,  the United States Department of Health and Human
Services,  the United States Occupational Safety and Health  Administration,  or
any other  federal,  state or local  agency  responsible  for  health and safety
matters) or any  accreditation  body regarding alleged  non-compliance  with (i)
Medicare,  Medicaid or any other  federal,  state or local hear care  program or
(ii) federal, state or local health care licensing requirements; and

         (r)  Other  Information.  From  time to time  and  promptly  upon  each
request,  such data,  certificates,  reports,  statements,  opinions of counsel,
documents or further information  regarding the business,  assets,  liabilities,
financial condition, results of operations or business prospects of the Borrower
or any of its  Subsidiaries  as the Agent or any Lender may reasonably  request;
provided that neither the Borrower nor any Subsidiary  shall have any obligation
to  disclose  to  the  Agent  or any  Lender  any  document,  record,  or  other
information that constitutes  individually  identifiable health care information
the privacy or  confidentiality of which is protected or the disclosure of which
is prohibited by the Health  Insurance  Portability  and  Accountability  Act of
1996, or regulations  adopted  thereunder,  as either may be amended,  or by any
other  federal or state law that protects the privacy or  confidentiality  of or
prohibits the disclosure of such information.

                         ARTICLE IX. NEGATIVE COVENANTS

         For so  long as this  Agreement  is in  effect,  unless  the  Requisite
Lenders (or, if required  pursuant to Section  12.6.,  all of the Lenders) shall
otherwise  consent in the manner set forth in Section 12.6.,  the Borrower shall
comply with the following covenants:

Section 9.1.  Financial Covenants.

         The Borrower shall not permit:

         (a) Leverage Ratio.  The ratio of (i) Total  Indebtedness to (ii) Total
Asset Value, to exceed 0.55 to 1.00 at any time.

         (b) Minimum  Fixed  Charge  Coverage  Ratio.  The ratio of (i) Adjusted
EBITDA of the Borrower and its Subsidiaries  determined on a consolidated  basis
for the fiscal  quarter  most  recently  ending to (ii) Fixed  Charges  for such
period, to be less than 1.75 to 1.0 at any time.

         (c) Secured Indebtedness.  The ratio of (i) Secured Indebtedness of the
Borrower and its Subsidiaries to (ii) Total Asset Value, to be greater than 0.25
to 1.00 at any time. In addition,  the Borrower will not permit the ratio of (x)
Secured  Indebtedness (other than Nonrecourse

                                      -67-
<PAGE>

Indebtedness)  of the Borrower and its Subsidiaries to (y) Total Asset Value, to
be greater than 0.10 to 1.00 at any time.

         (d) Unencumbered  Leverage Ratio.  The ratio of (i) Unencumbered  Asset
Value to (ii) Unsecured Indebtedness of the Borrower and its Subsidiaries, to be
less than 2.0 to 1.0 at any time.

         (e) Unencumbered Interest Coverage Ratio. The ratio of (i) Unencumbered
NOI to (ii)  Unsecured  Debt  Service for the  Borrower's  fiscal  quarter  most
recently ending, to be less than 2.25 to 1.00 at any time.

         (f) Minimum  Tangible  Net Worth.  Tangible Net Worth at any time to be
less than (i)  $700,000,000  plus  (ii) 75% of the Net  Proceeds  of all  Equity
Issuances  effected  by  the  Borrower  or any  Subsidiary  (other  than  Equity
Issuances to the Borrower or any Subsidiary) after the Agreement Date.

         (g)  Floating  Rate  Debt.  The  aggregate   principal  amount  of  all
outstanding Floating Rate Debt to exceed 25% of Total Asset Value at any time.

         (h) Total Assets Owned by Borrower and Guarantors.  The amount of Total
Asset Value  directly  owned by the Borrower and the  Guarantors to be less than
95.0% of Total Asset Value  (excluding the amount of Total Asset Value,  if any,
then attributable to Excluded Subsidiaries).

Section 9.2.  Indebtedness.

         The  Borrower  shall not,  and shall not permit any  Subsidiary  or any
other Loan Party to, create,  incur,  assume,  or permit or suffer to exist, any
Indebtedness other than the following:

         (a)      the Obligations;

         (b)      Indebtedness set forth on Schedule 6.1.(g);

         (c) intercompany  Indebtedness  among the Borrower and its Wholly Owned
Subsidiaries;  provided,  however, that the obligations of the Borrower and each
Guarantor in respect of such intercompany  Indebtedness  shall be subordinate to
the Obligations; and

         (d) any  other  Indebtedness  of a type  not  described  above  in this
Section and created,  incurred or assumed  after the  Agreement  Date so long as
immediately  prior  to  the  creation,  incurring  or  assumption  thereof,  and
immediately  thereafter and after giving effect thereto,  no Default or Event of
Default is or would be in existence,  including without limitation, a Default or
Event of Default resulting from a violation of any of the covenants contained in
Section 9.1.

Section 9.3. Certain Permitted Investments.

         The  Borrower  shall not,  and shall not permit any  Subsidiary  or any
other  Loan  Party  to,  make any  Investment  in or  otherwise  own or hold the
following  items which would cause the

                                      -68-
<PAGE>

aggregate value of such holdings of the Borrower and such other  Subsidiaries to
exceed 20.0% of Total Asset Value at any time:

                  (a) Investments in Persons which are not  Subsidiaries  (other
         than Mortgage Notes);

                  (b)  Assets  Under  Development   measured  by  the  aggregate
         Construction Budget for all such Assets Under Development. For purposes
         of this subsection,  (i) "Construction Budget" means the fully-budgeted
         costs for the  acquisition  and  construction  of a given piece of real
         property  (including  without  limitation,  the cost of acquiring  such
         piece  of  real  property,   reserves  for  construction  interest  and
         operating  deficits,  tenant  improvements,  leasing  commissions,  and
         infrastructure  costs) as reasonably determined by the Borrower in good
         faith and (ii) real  property  under  construction  to be (but not yet)
         acquired  by  the  Borrower  or  a  Subsidiary   upon   completion   of
         construction  pursuant  to a contract  in which the seller of such real
         property  is  required  to  complete  construction  prior to,  and as a
         condition  precedent  to,  such  acquisition,  shall be subject to this
         subsection; and

                  (c) Real property  leased by the Borrower or any Subsidiary as
         lessee pursuant to a ground lease, including any Ground Lease.

Section 9.4.  Investments Generally.

         The Borrower  shall not, and shall not permit any  Subsidiary  or other
Loan Party to, directly or indirectly, acquire, make or purchase any Investment,
or permit  any  Investment  of such  Person to be  outstanding  on and after the
Agreement Date, other than the following:

         (a)  Investments in Subsidiaries in existence on the Agreement Date and
disclosed on Part I of Schedule 6.1.(b);

         (b)  Investments  to acquire  Equity  Interests of a Subsidiary  or any
other Person who after giving effect to such acquisition  would be a Subsidiary,
so long as in each  case (i)  immediately  prior to such  Investment,  and after
giving  effect  thereto,  no  Default  or  Event  of  Default  is or would be in
existence  and  (ii) if such  Subsidiary  is (or  after  giving  effect  to such
Investment  would  become)  a  Material   Subsidiary  and  is  not  an  Excluded
Subsidiary, the terms and conditions set forth in Section 7.12. are satisfied;

         (c) Investments permitted under Section 9.3.;

         (d) Investments in Cash Equivalents;

         (e) intercompany  Indebtedness  among the Borrower and its Wholly Owned
Subsidiaries  provided  that  such  Indebtedness  is  permitted  by the terms of
Section 9.2.;

         (f)  loans  and  advances  to  officers  and   employees   for  moving,
entertainment,  travel and other  similar  expenses  in the  ordinary  course of
business consistent with past practices; and

                                      -69-
<PAGE>

         (g) any other  Investment so long as  immediately  prior to making such
Investment,  and  immediately  thereafter  and after giving effect  thereto,  no
Default  or Event of  Default  is or would be in  existence,  including  without
limitation,  a Default or Event of Default resulting from a violation of Section
7.4.

Section 9.5.  Liens; Negative Pledges; Other Matters.

         (a) The  Borrower  shall not,  and shall not permit any  Subsidiary  or
other Loan Party to,  create,  assume,  or incur any Lien (other than  Permitted
Liens) upon any of its  properties,  assets,  income or profits of any character
whether now owned or hereafter  acquired if  immediately  prior to the creation,
assumption or incurring of such Lien, or  immediately  thereafter,  a Default or
Event of Default is or would be in existence,  including without  limitation,  a
Default or Event of Default  resulting  from a violation of any of the covenants
contained in Section 9.1.;

         (b) The  Borrower  shall not,  and shall not permit any  Subsidiary  or
other Loan Party to,  enter into,  assume or  otherwise be bound by any Negative
Pledge except for a Negative  Pledge  contained in any agreement (i)  evidencing
Indebtedness which the Borrower or such Subsidiary may create, incur, assume, or
permit or suffer to exist under Section 9.2.; (ii) which Indebtedness is secured
by a Lien permitted to exist and (iii) which prohibits the creation of any other
Lien on only  the  property  securing  such  Indebtedness  as of the  date  such
agreement was entered into;

         (c) The  Borrower  shall not,  and shall not permit any  Subsidiary  or
other  Loan  Party to,  create or  otherwise  cause or suffer to exist or become
effective any  consensual  encumbrance or restriction of any kind on the ability
of any Subsidiary  (other than an Excluded  Subsidiary) to: (i) pay dividends or
make any other  distribution on any of such Subsidiary's  capital stock or other
equity  interests  owned  by  the  Borrower  or any  Subsidiary;  (ii)  pay  any
Indebtedness  owed to the  Borrower  or any  Subsidiary;  (iii)  make  loans  or
advances to the Borrower or any Subsidiary; or (iv) transfer any of its property
or assets to the Borrower or any Subsidiary.

Section 9.6.  Restricted Payments.

         The Borrower  shall not, and shall not permit any  Subsidiary  or other
Loan Party to, declare or make any Restricted Payment; provided, however, that:

(a) the  Borrower  may declare or make cash  distributions  to its  shareholders
during any fiscal year in an  aggregate  amount not to exceed the greater of (i)
the sum of (x) 90.0% of Funds From  Operations  of the  Borrower for such period
plus (y) 25.0% of the cash Net  Proceeds  of Equity  Issuances  effected  by the
Borrower or any  Subsidiary  during such period (other than Equity  Issuances to
the Borrower or any  Subsidiary),  or (ii) the minimum amount  necessary for the
Borrower to remain in compliance with Section 7.13.;

         (b) the Borrower may make cash  distributions  to its  shareholders  of
capital  gains  resulting  from gains  from  certain  asset  sales to the extent
necessary to avoid payment of taxes on such asset sales  imposed under  Sections
857(b)(3) and 4981 of the Internal Revenue Code; and

                                      -70-
<PAGE>

         (c)  Subsidiaries  may pay  Restricted  Payments to the Borrower or any
other Subsidiary.

Notwithstanding  the  foregoing,  but subject to the  following  sentence,  if a
Default or Event of Default shall have occurred and be continuing,  the Borrower
may only  declare  or make cash  distributions  to its  shareholders  during any
fiscal year in an aggregate  amount not to exceed the minimum  amount  necessary
for the  Borrower to remain in  compliance  with Section  7.13.  If a Default or
Event of Default  specified  in Section  10.1.(a),  Section  10.1.(f) or Section
10.1.(g)  shall  have  occurred  and be  continuing,  or if as a  result  of the
occurrence of any other Event of Default the Obligations  have been  accelerated
pursuant to Section  10.2.(a),  the Borrower shall not, and shall not permit any
Subsidiary  or other Loan Party to, make any  Restricted  Payments to any Person
whatsoever other than to the Borrower or any Subsidiary.

Section 9.7.  Merger, Consolidation, Sales of Assets and Other Arrangements.

         The Borrower  shall not, and shall not permit any  Subsidiary  or other
Loan Party to: (i) enter into any transaction of merger or  consolidation;  (ii)
liquidate,   wind  up  or  dissolve   itself  (or  suffer  any   liquidation  or
dissolution);  or (iii) convey,  sell,  lease,  sublease,  transfer or otherwise
dispose  of,  in  one  transaction  or a  series  of  transactions,  all  or any
substantial  part of its  business  or assets,  whether  now owned or  hereafter
acquired; provided, however, that:

         (a) any of the actions  described in the immediately  preceding clauses
(i) through (iii) may be taken with respect to any  Subsidiary or any other Loan
Party (other than the  Borrower) so long as  immediately  prior to the taking of
such action,  and  immediately  thereafter and after giving effect  thereto,  no
Default or Event of Default is or would be in existence;

         (b) the Borrower, its Subsidiaries and the other Loan Parties may lease
and sublease their  respective  assets,  as lessor or sublessor (as the case may
be), in the ordinary course of their business;

         (c) a Person  may merge with and into the  Borrower  so long as (i) the
Borrower is the survivor of such merger,  (ii) immediately prior to such merger,
and immediately  thereafter and after giving effect thereto, no Default or Event
of Default is or would be in existence;  and (iii) the Borrower shall have given
the Agent and the Lenders at least 10 Business  Days'  prior  written  notice of
such merger  (except that such prior notice shall not be required in the case of
the merger of a Subsidiary with and into the Borrower); and

         (d) the Borrower and each  Subsidiary may sell,  transfer or dispose of
assets among themselves.

Section 9.8.  Fiscal Year.

         The Borrower shall not change its fiscal year from that in effect as of
the Agreement Date.

                                      -71-
<PAGE>

Section 9.9.  Modifications to Advisory Agreement and Other Material Contracts.

         The  Borrower  shall  not  default  in  any  material  respect  in  the
performance of any of its obligations under the Advisory Agreement or permit the
Advisory  Agreement to be canceled or terminated  prior to its stated  maturity.
The Borrower shall not enter into any material amendment, modification or waiver
of or with  respect to any of the terms of the  Advisory  Agreement,  except for
extensions  thereof.  With respect to Material Contracts other than the Advisory
Agreement,  the Borrower shall not, and shall not permit any Subsidiary or other
Loan Party to, enter into any  amendment or  modification  to any such  Material
Contract which could  reasonably be expected to have a Material  Adverse Effect.
With respect to any Lease or Ancillary  Agreement  relating to any  Unencumbered
Senior  Housing  Asset,  the  Borrower  shall  not,  and  shall not  permit  any
Subsidiary or other Loan Party to, enter into any amendment or  modification  to
any such agreement if (a) such  amendment or  modification  could  reasonably be
expected to have a Material  Adverse Effect or (b) after giving pro forma effect
to such  amendment  or  modification,  a  Default  or  Event  of  Default  could
reasonably  be expected to occur,  including  without  limitation,  a Default or
Event of Default resulting from a violation of any of the covenants contained in
Section 9.1. In connection  with any amendment or  modification  to any Lease or
Ancillary  Agreement  relating to any  Unencumbered  Senior Housing  Asset,  the
Borrower  shall  deliver to the Agent,  within 10 Business  Days' of the Agent's
request, a Compliance  Certificate calculated on a pro forma basis giving effect
to such amendment or modification.

Section 9.10.  Transactions with Affiliates.

         The Borrower shall not, and shall not permit any of its Subsidiaries or
any  other  Loan  Party  to,  permit  to exist or enter  into,  any  transaction
(including  the  purchase,  sale,  lease  or  exchange  of any  property  or the
rendering  of any  service)  with  any  Affiliate,  except  transactions  in the
ordinary  course of and pursuant to the reasonable  requirements of the business
of the Borrower or any of its  Subsidiaries  and upon fair and reasonable  terms
which are no less  favorable  to the Borrower or such  Subsidiary  than would be
obtained in a comparable  arm's length  transaction with a Person that is not an
Affiliate.

Section 9.11.  ERISA Exemptions.

         The Borrower  shall not, and shall not permit any Subsidiary to, permit
any of its  respective  assets to become or be deemed to be "plan assets" within
the meaning of ERISA, the Internal  Revenue Code and the respective  regulations
promulgated thereunder.

                               ARTICLE X. DEFAULT

Section 10.1.  Events of Default.

         Each of the following  shall  constitute an Event of Default,  whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of Applicable  Law or pursuant to any judgment or order of
any Governmental Authority:

                                      -72-
<PAGE>

         (a) Default in Payment of  Principal.  The  Borrower  shall fail to pay
when due  (whether  upon  demand,  at  maturity,  by reason of  acceleration  or
otherwise) the principal of any of the Loans, or any Reimbursement Obligation.

         (b) Default in Payment of Interest and Other Obligations.  The Borrower
shall fail to pay when due any  interest on any of the Loans or any of the other
payment Obligations owing by the Borrower under this Agreement or any other Loan
Document,  or any  other  Loan  Party  shall  fail to pay when  due any  payment
Obligation owing by such other Loan Party under any Loan Document to which it is
a party, and such failure shall continue for a period of 5 Business Days.

         (c) Default in  Performance.  (i) The Borrower shall fail to perform or
observe any term, covenant,  condition or agreement contained in Section 8.4.(h)
or in Article  IX. or (ii) the  Borrower  or any other Loan Party  shall fail to
perform or observe any term, covenant,  condition or agreement contained in this
Agreement  or any other Loan  Document to which it is a party and not  otherwise
mentioned  in this Section and such  failure  shall  continue for a period of 30
days after the earlier of (x) the date upon which a  Responsible  Officer of the
Borrower or such Loan Party  obtains  knowledge  of such failure or (y) the date
upon which the  Borrower has  received  written  notice of such failure from the
Agent.

         (d)  Misrepresentations.   Any  written  statement,  representation  or
warranty  made or deemed made by or on behalf of the  Borrower or any other Loan
Party under this  Agreement or under any other Loan  Document,  or any amendment
hereto or thereto, or in any other writing or statement at any time furnished or
made or deemed  made by or on behalf of the  Borrower or any other Loan Party to
the  Agent or any  Lender,  shall at any time  prove to have been  incorrect  or
misleading,  in light of the  circumstances in which made or deemed made, in any
material respect when furnished or made or deemed made.

         (e)      Indebtedness Cross-Default.

                  (i) The Borrower, any Subsidiary or any other Loan Party shall
         fail to pay when due and payable the  principal of, or interest on, any
         Indebtedness   (other  than  the   Obligations)   having  an  aggregate
         outstanding  principal  amount greater than or equal to (A) $10,000,000
         in the case of Indebtedness that is not Nonrecourse Indebtedness or (B)
         $20,000,000   in  the  case  of   Indebtedness   that  is   Nonrecourse
         Indebtedness (all such Indebtedness being "Material Indebtedness"); or

                  (ii) (x) The maturity of any Material  Indebtedness shall have
         been  accelerated  in accordance  with the provisions of any indenture,
         contract or  instrument  evidencing,  providing  for the creation of or
         otherwise  concerning  such Material  Indebtedness  or (y) any Material
         Indebtedness  shall have been  required  to be  prepaid or  repurchased
         prior to the stated maturity thereof; or

                  (iii) Any other event shall have  occurred  and be  continuing
         which,  with or without the passage of time,  the giving of notice,  or
         both, would permit any holder or holders of Material Indebtedness,  any
         trustee  or agent  acting on behalf of such  holder or  holders  or any
         other  Person,   to  accelerate  the  maturity  of  any  such  Material
         Indebtedness

                                      -73-
<PAGE>

         or require any such Material  Indebtedness to be prepaid or repurchased
         prior to its stated maturity.

         (f) Voluntary Bankruptcy Proceeding. The Borrower, any other Loan Party
or any  Subsidiary  (other than (x) a Guarantor  that,  together  with all other
Guarantors  then  subject to a  bankruptcy  proceeding  or other  proceeding  or
condition described in this subsection or the immediately  following subsection,
does not  account  for more than  $10,000,000  of Total  Asset  Value,  or (y) a
Subsidiary  that,  together  with  all  other  Subsidiaries  then  subject  to a
bankruptcy  proceeding  or  other  proceeding  or  condition  described  in this
subsection or the immediately  following  subsection,  does not account for more
than  $20,000,000  of Total Asset Value)  shall:  (i) commence a voluntary  case
under the Bankruptcy Code of 1978, as amended,  or other federal bankruptcy laws
(as now or hereafter in effect);  (ii) file a petition seeking to take advantage
of any other  Applicable  Laws,  domestic  or foreign,  relating to  bankruptcy,
insolvency,  reorganization,  winding-up, or composition or adjustment of debts;
(iii)  consent to, or fail to contest in a timely and  appropriate  manner,  any
petition filed against it in an involuntary  case under such  bankruptcy laws or
other  Applicable  Laws or consent to any proceeding or action  described in the
immediately  following  subsection;  (iv)  apply for or  consent  to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver,  custodian,  trustee, or liquidator of itself or of a
substantial part of its property,  domestic or foreign; (v) admit in writing its
inability  to pay its debts as they become due;  (vi) make a general  assignment
for the benefit of creditors; (vii) make a conveyance fraudulent as to creditors
under any Applicable Law; or (viii) take any corporate or partnership action for
the purpose of effecting any of the foregoing.

         (g) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against the Borrower, any other Loan Party or any Subsidiary (other
than (x) a Guarantor that,  together with all other Guarantors then subject to a
bankruptcy  proceeding  or  other  proceeding  or  condition  described  in this
subsection or the immediately  preceding  subsection,  does not account for more
than $10,000,000 of Total Asset Value, or (y) a Subsidiary  that,  together with
all  other  Subsidiaries  then  subject  to a  bankruptcy  proceeding  or  other
proceeding  or  condition  described  in  this  subsection  or  the  immediately
preceding subsection,  does not account for more than $20,000,000 of Total Asset
Value) in any court of  competent  jurisdiction  seeking:  (i) relief  under the
Bankruptcy Code of 1978, as amended, or other federal bankruptcy laws (as now or
hereafter in effect) or under any other  Applicable  Laws,  domestic or foreign,
relating to bankruptcy, insolvency,  reorganization,  winding-up, or composition
or  adjustment  of  debts;  or (ii)  the  appointment  of a  trustee,  receiver,
custodian,  liquidator or the like of such Person,  or of all or any substantial
part of the  assets,  domestic  or  foreign,  of such  Person,  and such case or
proceeding shall continue undismissed or unstayed for a period of 60 consecutive
calendar days, or an order granting the remedy or other relief requested in such
case or  proceeding  against the  Borrower,  such  Subsidiary or such other Loan
Party (including,  but not limited to, an order for relief under such Bankruptcy
Code or such other federal bankruptcy laws) shall be entered.

         (h)  Litigation;  Enforceability.  The Borrower or any other Loan Party
shall  disavow,  revoke or terminate (or attempt to terminate) any Loan Document
to which it is a party or shall  otherwise  challenge  or contest in any action,
suit or  proceeding  in any  court or  before  any

                                      -74-
<PAGE>

Governmental  Authority the validity or  enforceability  of this Agreement,  any
Note or any other Loan Document or this Agreement, any Note, the Guaranty or any
other Loan  Document  shall  cease to be in full  force and effect  (except as a
result of the express terms thereof).

         (i)  Judgment.  A judgment  or order for the payment of money or for an
injunction  shall be entered  against the Borrower,  any Subsidiary or any other
Loan Party,  by any court or other tribunal and (i) such judgment or order shall
continue for a period of 30 days without being paid, stayed or dismissed through
appropriate  appellate  proceedings  and  (ii)  either  (A) the  amount  of such
judgment or order (x) for which  insurance has not been  acknowledged in writing
by the applicable  insurance  carrier (or the amount as to which the insurer has
denied   liability)  or  (y)  not  otherwise  subject  to   indemnification   or
reimbursement on reasonable terms and conditions by Persons reasonably likely to
honor such indemnification or reimbursement obligations,  exceeds,  individually
or together with all other such outstanding  judgments or orders entered against
(1) the Borrower or any Guarantor,  $10,000,000,  or (2) any other Subsidiaries,
$20,000,000, or (B) in the case of an injunction or other non-monetary judgment,
such judgment could reasonably be expected to have a Material Adverse Effect.

         (j)  Attachment.  A warrant,  writ of attachment,  execution or similar
process shall be issued against any property of the Borrower,  any Subsidiary or
any other Loan Party which exceeds, individually or together with all other such
warrants,  writs,  executions  and  processes,  (1)  for  the  Borrower  or  any
Guarantor, $10,000,000, or (2) for any other Subsidiaries, $20,000,000, and such
warrant, writ, execution or process shall not be discharged,  vacated, stayed or
bonded  for a period  of 30  days;  provided,  however,  that if a bond has been
issued in favor of the claimant or other Person  obtaining  such warrant,  writ,
execution  or  process,  the  issuer  of such  bond  shall  execute  a waiver or
subordination agreement in form and substance satisfactory to the Agent pursuant
to which  the  issuer  of such bond  subordinates  its  right of  reimbursement,
contribution or subrogation to the  Obligations  and waives or subordinates  any
Lien it may have on the assets of any Loan Party.

         (k) ERISA.  Any member of the ERISA Group shall fail to pay when due an
amount or  amounts  aggregating  in excess of  $10,000,000  which it shall  have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material  Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan  administrator or any combination of the foregoing;  or the PBGC
shall  institute  proceedings  under Title IV of ERISA to  terminate,  to impose
liability  (other than for premiums  under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to  administer,  any Material  Plan;  or a
condition  shall exist by reason of which the PBGC would be entitled to obtain a
decree  adjudicating  that any Material Plan must be terminated;  or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section  4219(c)(5) of ERISA, with respect to, one or more  Multiemployer  Plans
which  could  cause one or more  members  of the ERISA  Group to incur a current
payment obligation in excess of $10,000,000.

         (l) Loan  Documents.  An Event of Default  (as defined  therein)  shall
occur under any of the other Loan Documents.

                                      -75-
<PAGE>

         (m)      Change of Control.

                  (i) 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 more  than 15% of the  total  voting  power of the then
         outstanding voting stock of the Borrower; or

                  (ii) during any period of 12  consecutive  months ending after
         the  Agreement  Date,  individuals  who at the  beginning  of any  such
         12-month  period  constituted  the Board of  Trustees  of the  Borrower
         (together with any new directors  whose election by such Board or whose
         nomination  for  election  by  the  shareholders  of the  Borrower  was
         approved by a vote of a majority of the directors  then still in office
         who were  either  directors  at the  beginning  of such period or whose
         election or nomination for election was  previously so approved)  cease
         for any reason to  constitute  a majority of the Board of  Directors of
         the Borrower then in office;

                  (iii)  RMR  shall  cease  for any  reason  to act as the  sole
         investment advisor to the Borrower; or

                  (iv) any two of Barry M. Portnoy,  Gerard M. Martin,  David J.
         Hegarty or John R. Hoadley (or a substitute elected by the directors or
         trustees  of RMR or the  Borrower,  as the  case may be,  and  which is
         reasonably  satisfactory to the Requisite Lenders) shall cease to serve
         as an  officer,  director  or  trustee  of  RMR or  the  Borrower  in a
         position,  in the case of an officer,  of equal or greater seniority to
         the respective offices each holds with RMR or the Borrower, as the case
         may be as of the Agreement Date.

Section 10.2.  Remedies Upon Event of Default.

         Upon the  occurrence  of an Event of Default the  following  provisions
shall apply:

         (a)      Acceleration; Termination of Facilities.

                  (i)  Automatic.  Upon the  occurrence  of an Event of  Default
         specified in Sections  10.1.(f) or 10.1.(g),  (A)(i) the  principal of,
         and all  accrued  interest  on,  the  Loans  and the  Notes at the time
         outstanding,  (ii) an amount equal to the Stated  Amount of all Letters
         of Credit outstanding as of the date of the occurrence of such Event of
         Default  and  (iii)  all  of the  other  Obligations  of the  Borrower,
         including,  but not limited to, the other  amounts owed to the Lenders,
         the Swingline  Lender and the Agent under this Agreement,  the Notes or
         any  of  the  other  Loan  Documents   shall  become   immediately  and
         automatically  due and  payable by the  Borrower  without  presentment,
         demand,  protest,  or  other  notice  of any  kind,  all of  which  are
         expressly  waived by the Borrower and (B) all of the  Commitments,  the
         obligation  of the  Lenders  to make  Revolving  Loans,  the  Swingline
         Commitment,  the  obligation of the Swingline  Lender to make Swingline
         Loans,  and the

                                      -76-
<PAGE>

         obligation of the Agent to issue Letters of Credit hereunder, shall all
         immediately and automatically terminate.

                  (ii)  Optional.  If any  other  Event of  Default  shall  have
         occurred and be  continuing,  the Agent shall,  at the direction of the
         Requisite  Lenders:  (A)  declare  (1) the  principal  of, and  accrued
         interest  on, the Loans and the Notes at the time  outstanding,  (2) an
         amount equal to the Stated Amount of all Letters of Credit  outstanding
         as of the date of the occurrence of such other Event of Default and (3)
         all of the other Obligations,  including, but not limited to, the other
         amounts  owed to the Lenders and the Agent  under this  Agreement,  the
         Notes  or any of the  other  Loan  Documents  to be  forthwith  due and
         payable,  whereupon the same shall  immediately  become due and payable
         without presentment,  demand,  protest or other notice of any kind, all
         of which are  expressly  waived by the Borrower and (B)  terminate  the
         Commitments  and the obligation of the Lenders to make Loans  hereunder
         and the  obligation of the Agent to issue Letters of Credit  hereunder.
         Further,  if the Agent has exercised any of the rights  provided  under
         the preceding  sentence,  the Swingline  Lender shall:  (x) declare the
         principal  of, and accrued  interest  on, the  Swingline  Loans and the
         Swingline  Note  at  the  time  outstanding,   and  all  of  the  other
         Obligations  owing to the  Swingline  Lender,  to be forthwith  due and
         payable,  whereupon the same shall  immediately  become due and payable
         without presentment,  demand,  protest or other notice of any kind, all
         of which are  expressly  waived by the Borrower and (y)  terminate  the
         Swingline Commitment and the obligation of the Swingline Lender to make
         Swingline Loans.

         (b) Loan Documents.  The Requisite Lenders may direct the Agent to, and
the Agent if so directed shall, exercise any and all of its rights under any and
all of the other Loan Documents.

         (c) Applicable Law. The Requisite  Lenders may direct the Agent to, and
the Agent if so directed  shall,  exercise  all other rights and remedies it may
have under any Applicable Law.

         (d) Appointment of Receiver. To the extent permitted by Applicable Law,
the Agent and the Lenders shall be entitled to the appointment of a receiver for
the assets and properties of the Borrower and its  Subsidiaries,  without notice
of any kind  whatsoever  and without  regard to the adequacy of any security for
the  Obligations  or the  solvency of any party bound for its  payment,  to take
possession of all or any portion of the business  operations of the Borrower and
its  Subsidiaries and to exercise such power as the court shall confer upon such
receiver.

Section 10.3.  Remedies Upon Default.

         Upon the  occurrence  of a Default  specified  in Sections  10.1.(f) or
10.1.(g), the Commitments shall immediately and automatically terminate.

Section 10.4.  Allocation of Proceeds.

         If an Event of  Default  shall  have  occurred  and be  continuing  and
maturity of any of the Obligations has been  accelerated,  all payments received
by the Agent under any of the Loan Documents,  in respect of any principal of or
interest  on the  Obligations  or any  other  amounts

                                      -77-
<PAGE>

payable  by the  Borrower  hereunder  or  thereunder,  shall be  applied  in the
following order and priority:

                  (a)  amounts  due to the Agent and the  Lenders  in respect of
         fees and expenses due under Section 12.2.;

                  (b) payments of interest on Swingline Loans;

                  (c) payments of interest on all other Loans and  Reimbursement
         Obligations, to be applied for the ratable benefit of the Lenders;

                  (d) payments of principal of Swingline Loans;

                  (e) payments of principal of all other Loans and Reimbursement
         Obligations, to be applied for the ratable benefit of the Lenders;

                  (f) amounts to be  deposited  into the  Collateral  Account in
         respect of Letters of Credit;

                  (g) amounts due the Agent and the Lenders pursuant to Sections
         11.7. and 12.9.;

                  (h)  payments  of all  other  amounts  due  and  owing  by the
         Borrower under any of the Loan Documents, if any, to be applied for the
         ratable benefit of the Lenders; and

                  (i) any amount remaining after  application as provided above,
         shall be paid to the Borrower or whomever else may be legally  entitled
         thereto.

Section 10.5.  Collateral Account.

         (a) As collateral  security for the prompt  payment in full when due of
all Letter of Credit Liabilities and the other Obligations,  the Borrower hereby
pledges and grants to the Agent, for the benefit of the Agent and the Lenders as
provided herein, a security interest in all of its right,  title and interest in
and to the  Collateral  Account  and  the  balances  from  time  to  time in the
Collateral Account (including the investments and reinvestments therein provided
for below).  The balances from time to time in the Collateral  Account shall not
constitute  payment of any  Letter of Credit  Liabilities  until  applied by the
Agent  as  provided   herein.   Anything  in  this  Agreement  to  the  contrary
notwithstanding,  funds  held in the  Collateral  Account  shall be  subject  to
withdrawal only as provided in this Section and in Section 2.12.

         (b) Amounts on deposit in the Collateral  Account shall be invested and
reinvested by the Agent in such Cash Equivalents as the Agent shall determine in
its sole discretion. All such investments and reinvestments shall be held in the
name of and be under the sole dominion and control of the Agent. The Agent shall
exercise  reasonable  care in the custody and  preservation of any funds held in
the  Collateral  Account and shall be deemed to have exercised such care if such
funds are accorded  treatment  substantially  equivalent to that which the Agent
accords other funds deposited with the Agent, it being understood that the Agent
shall not have any

                                      -78-
<PAGE>

responsibility  for taking any necessary  steps to preserve  rights  against any
parties with respect to any funds held in the Collateral Account.

         (c) If an Event of Default shall have occurred and be  continuing,  the
Requisite Lenders may, in their  discretion,  at any time and from time to time,
instruct the Agent to  liquidate  any such  investments  and  reinvestments  and
credit the proceeds  thereof to the Collateral  Account and apply or cause to be
applied such proceeds and any other  balances in the  Collateral  Account to the
payment of any of the Letter of Credit Liabilities due and payable.

         (d)  If (i)  no  Default  or  Event  of  Default  has  occurred  and is
continuing  and (ii) all of the Letter of Credit  Liabilities  have been paid in
full,  the Agent  shall,  from time to time,  at the  request  of the  Borrower,
deliver to the Borrower,  against receipt but without any recourse,  warranty or
representation  whatsoever,  such of the balances in the  Collateral  Account as
exceed the aggregate amount of Letter of Credit Liabilities at such time.

         (e) The Borrower  shall pay to the Agent from time to time such fees as
the Agent normally  charges for similar  services in connection with the Agent's
administration  of the Collateral  Account and investments and  reinvestments of
funds therein.

Section 10.6.  Performance by Agent.

         If the Borrower  shall fail to perform any covenant,  duty or agreement
contained  in any of the Loan  Documents,  the Agent may  perform  or attempt to
perform such  covenant,  duty or  agreement on behalf of the Borrower  after the
expiration  of any cure or grace periods set forth  herein.  In such event,  the
Borrower shall, at the request of the Agent,  promptly pay any amount reasonably
expended by the Agent in such performance or attempted performance to the Agent,
together with interest thereon at the applicable Post-Default Rate from the date
of such expenditure until paid. Notwithstanding the foregoing, neither the Agent
nor any Lender shall have any  liability or  responsibility  whatsoever  for the
performance  of any obligation of the Borrower under this Agreement or any other
Loan Document.

Section 10.7.  Rights Cumulative.

         The  rights  and  remedies  of the Agent  and the  Lenders  under  this
Agreement  and each of the other  Loan  Documents  shall be  cumulative  and not
exclusive of any rights or remedies  which any of them may otherwise  have under
Applicable Law. In exercising their respective rights and remedies the Agent and
the Lenders may be selective  and no failure or delay by the Agent or any of the
Lenders in  exercising  any right shall operate as a waiver of it, nor shall any
single or partial  exercise of any power or right  preclude its other or further
exercise or the exercise of any other power or right.

                              ARTICLE XI. THE AGENT

Section 11.1.  Authorization and Action.

         Each  Lender  hereby  appoints  and  authorizes  the Agent to take such
action as  contractual  representative  on such Lender's  behalf and to exercise
such  powers  under  this   Agreement  and

                                      -79-
<PAGE>

the other Loan Documents as are specifically delegated to the Agent by the terms
hereof and  thereof,  together  with such  powers as are  reasonably  incidental
thereto. Not in limitation of the foregoing,  each Lender authorizes and directs
the Agent to enter into the Loan Documents for the benefit of the Lenders.  Each
Lender  hereby agrees that,  except as otherwise  set forth  herein,  any action
taken  by the  Requisite  Lenders  in  accordance  with the  provisions  of this
Agreement or the Loan  Documents,  and the exercise by the Requisite  Lenders of
the powers set forth herein or therein,  together  with such other powers as are
reasonably  incidental thereto,  shall be authorized and binding upon all of the
Lenders.  Nothing  herein  shall be  construed  to deem the Agent a  trustee  or
fiduciary for any Lender nor to impose on the Agent duties or obligations  other
than those expressly  provided for herein. At the request of a Lender, the Agent
will  forward to such Lender  copies or,  where  appropriate,  originals  of the
documents  delivered to the Agent  pursuant to this  Agreement or the other Loan
Documents.  The Agent will also furnish to any Lender,  upon the request of such
Lender,  a copy of any  certificate  or  notice  furnished  to the  Agent by the
Borrower,  any Loan Party or any other  Affiliate of the  Borrower,  pursuant to
this  Agreement or any other Loan Document not already  delivered to such Lender
pursuant to the terms of this Agreement or any such other Loan  Document.  As to
any matters not expressly provided for by the Loan Documents (including, without
limitation,  enforcement  or  collection of any of the  Obligations),  the Agent
shall not be required to exercise any  discretion or take any action,  but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Requisite Lenders
(or all of the Lenders if explicitly  required under any other provision of this
Agreement),  and such  instructions  shall be binding  upon all  Lenders and all
holders of any of the  Obligations;  provided,  however,  that,  notwithstanding
anything in this  Agreement to the contrary,  the Agent shall not be required to
take any  action  which  exposes  the Agent to  personal  liability  or which is
contrary to this Agreement or any other Loan Document or Applicable  Law. Not in
limitation of the foregoing, the Agent shall not exercise any right or remedy it
or the Lenders may have under any Loan Document upon the occurrence of a Default
or an Event of Default  unless the Requisite  Lenders have so directed the Agent
to exercise such right or remedy.

Section 11.2.  Agent's Reliance, Etc.

         Notwithstanding  any other  provisions  of this  Agreement or any other
Loan Documents,  neither the Agent nor any of its directors,  officers,  agents,
employees or counsel shall be liable for any action taken or omitted to be taken
by it or them  under or in  connection  with this  Agreement,  except for its or
their  own  gross  negligence  or  willful  misconduct.   Without  limiting  the
generality of the foregoing,  the Agent:  (a) may treat the payee of any Note as
the holder thereof until the Agent receives  written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent; (b)
may consult  with legal  counsel  (including  its own counsel or counsel for the
Borrower or any other Loan  Party),  independent  public  accountants  and other
experts  reasonably  selected by it and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of such
counsel,  accountants or experts; (c) makes no warranty or representation to any
Lender or any other  Person  and shall not be  responsible  to any Lender or any
other  Person for any  statements,  warranties  or  representations  made by any
Person in or in connection  with this Agreement or any other Loan Document;  (d)
shall not have any duty to  ascertain  or to  inquire as to the  performance  or
observance of any of the terms, covenants or conditions of any of this Agreement
or any other Loan Document or the satisfaction of any conditions precedent under
this Agreement or any

                                      -80-
<PAGE>

Loan  Document  on the part of the  Borrower  or other  Persons or  inspect  the
property, books or records of the Borrower or any other Person; (e) shall not be
responsible   to  any  Lender  for  the  due  execution,   legality,   validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document,  any other instrument or document  furnished  pursuant thereto or
any  collateral  covered  thereby or the  perfection  or priority of any Lien in
favor of the Agent on  behalf of the  Lenders  in any such  collateral;  and (f)
shall incur no liability under or in respect of this Agreement or any other Loan
Document by acting upon any notice, consent,  certificate or other instrument or
writing (which may be by telephone or telecopy) believed by it to be genuine and
signed, sent or given by the proper party or parties.

Section 11.3.  Notice of Defaults.

         The  Agent  shall  not be  deemed  to have  knowledge  or notice of the
occurrence of a Default or Event of Default unless the Agent has received notice
from a Lender or the  Borrower  referring  to this  Agreement,  describing  with
reasonable  specificity  such  Default or Event of Default and stating that such
notice is a "notice of  default." If any Lender  (excluding  the Lender which is
also serving as the Agent) becomes aware of any Default or Event of Default,  it
shall  promptly  send to the Agent such a "notice of default."  Further,  if the
Agent  receives  such a "notice of default",  the Agent shall give prompt notice
thereof to the Lenders.

Section 11.4.  Wachovia as Lender.

         Wachovia, as a Lender, shall have the same rights and powers under this
Agreement  and any other Loan  Document as any other Lender and may exercise the
same as though it were not the Agent;  and the term "Lender" or "Lenders" shall,
unless  otherwise  expressly  indicated,  include  Wachovia  in each case in its
individual capacity.  Wachovia and its affiliates may each accept deposits from,
maintain  deposits  or credit  balances  for,  invest in,  lend money to, act as
trustee under indentures of, serve as financial advisor to, and generally engage
in any kind of business  with,  the Borrower,  any other Loan Party or any other
affiliate  thereof as if it were any other bank and  without any duty to account
therefor to the other Lenders.  Further,  the Agent and any affiliate may accept
fees and other  consideration  from the Borrower for services in connection with
this Agreement and otherwise without having to account for the same to the other
Lenders.

Section 11.5.  Approvals of Lenders.

         All  communications  from  the  Agent  to any  Lender  requesting  such
Lender's determination,  consent,  approval or disapproval (a) shall be given in
the form of a written  notice to such  Lender,  (b)  shall be  accompanied  by a
description  of the  matter or issue as to which such  determination,  approval,
consent  or  disapproval  is  requested,  or  shall  advise  such  Lender  where
information,  if any, regarding such matter or issue may be inspected,  or shall
otherwise  describe the matter or issue to be resolved,  (c) shall  include,  if
reasonably requested by such Lender and to the extent not previously provided to
such Lender, written materials and a summary of all oral information provided to
the Agent by the Borrower in respect of the matter or issue to be resolved,  and
(d) shall include the Agent's  recommended  course of action or determination in
respect  thereof.  Each Lender shall reply promptly,  but in any event within 10
Business Days (or such lesser or greater period as may be specifically  required
under the Loan Documents) of

                                      -81-
<PAGE>

receipt of such  communication.  Except as otherwise  provided in this Agreement
and except with respect to items requiring the unanimous  consent or approval of
the Lenders under Section  12.6.,  unless a Lender shall give written  notice to
the Agent that it specifically objects to the recommendation or determination of
the Agent  (together  with a written  explanation  of the  reasons  behind  such
objection)  within the  applicable  time period for reply,  such Lender shall be
deemed to have conclusively  approved of or consented to such  recommendation or
determination.

Section 11.6.  Lender Credit Decision, Etc.

         Each Lender  expressly  acknowledges  and agrees that neither the Agent
nor   any   of   its   officers,   directors,    employees,   agents,   counsel,
attorneys-in-fact or other affiliates has made any representations or warranties
as to the financial condition, operations,  creditworthiness,  solvency or other
information  concerning the business or affairs of the Borrower,  any other Loan
Party,  any Subsidiary or any other Person to such Lender and that no act by the
Agent  hereafter  taken,  including  any review of the affairs of the  Borrower,
shall be deemed to constitute any such  representation  or warranty by the Agent
to any Lender. Each Lender  acknowledges that it has,  independently and without
reliance  upon the Agent,  any other  Lender or counsel to the Agent,  or any of
their respective  officers,  directors,  employees and agents,  and based on the
financial  statements of the Borrower,  the  Subsidiaries or any other Affiliate
thereof,  and inquiries of such Persons,  its  independent  due diligence of the
business and affairs of the Borrower,  the Loan Parties,  the  Subsidiaries  and
other Persons, its review of the Loan Documents,  the legal opinions required to
be  delivered  to it  hereunder,  the advice of its own  counsel  and such other
documents and information as it has deemed appropriate,  made its own credit and
legal  analysis and decision to enter into this  Agreement  and the  transaction
contemplated  hereby. Each Lender also acknowledges that it will,  independently
and without reliance upon the Agent, any other Lender or counsel to the Agent or
any of their respective officers, directors,  employees and agents, and based on
such review,  advice,  documents and information as it shall deem appropriate at
the time,  continue  to make its own  decisions  in taking or not taking  action
under the Loan  Documents.  Except for notices,  reports and other documents and
information expressly required to be furnished to the Lenders by the Agent under
this Agreement or any of the other Loan Documents,  the Agent shall have no duty
or  responsibility  to provide any Lender  with any credit or other  information
concerning the business, operations,  property, financial and other condition or
creditworthiness  of the Borrower,  any other Loan Party or any other  Affiliate
thereof  which may come  into  possession  of the Agent or any of its  officers,
directors, employees, agents, attorneys-in-fact or other Affiliates. Each Lender
acknowledges  that the Agent's legal counsel in connection with the transactions
contemplated by this Agreement is only acting as counsel to the Agent and is not
acting as counsel to such Lender.

Section 11.7.  Indemnification of Agent.

         Each Lender agrees to indemnify the Agent (to the extent not reimbursed
by the Borrower and without  limiting the  obligation  of the Borrower to do so)
pro rata in accordance with such Lender's respective Commitment Percentage, from
and against any and all liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits,  costs,  expenses or  disbursements  of any kind or
nature  whatsoever which may at any time be imposed on, incurred by, or asserted
against  the Agent  (in its  capacity  as Agent but not as a Lender)  in any way

                                      -82-
<PAGE>

relating to or arising out of the Loan Documents,  any transaction  contemplated
hereby or  thereby or any  action  taken or omitted by the Agent  under the Loan
Documents (collectively,  "Indemnifiable Amounts");  provided,  however, that no
Lender  shall be liable  for any  portion of such  Indemnifiable  Amounts to the
extent resulting from the Agent's gross  negligence or willful  misconduct or if
the Agent fails to follow the written  direction of the Requisite Lenders unless
such  failure  is  pursuant  to the  reasonable  advice of  counsel of which the
Lenders have received  notice.  Without limiting the generality of the foregoing
but subject to the preceding proviso,  each Lender agrees to reimburse the Agent
(to  the  extent  not  reimbursed  by the  Borrower  and  without  limiting  the
obligation  of the Borrower to do so) promptly upon demand for its ratable share
of  any  out-of-pocket  expenses  (including  reasonable  counsel  fees  of  the
counsel(s) of the Agent's own choosing) incurred by the Agent in connection with
the preparation, negotiation, execution, or enforcement of, or legal advice with
respect  to the  rights  or  responsibilities  of the  parties  under,  the Loan
Documents,  any suit or action  brought by the Agent to enforce the terms of the
Loan Documents  and/or collect any Obligations,  any "lender  liability" suit or
claim  brought  against  the Agent  and/or  the  Lenders,  and any claim or suit
brought  against the Agent and/or the Lenders  arising  under any  Environmental
Laws. Such out-of-pocket  expenses (including  reasonable counsel fees) shall be
advanced by the Lenders on the request of the Agent notwithstanding any claim or
assertion  that the Agent is not  entitled  to full or  partial  indemnification
hereunder  upon  receipt  of an  undertaking  by the Agent  that the Agent  will
reimburse  the Lenders to the extent that it is actually and finally  determined
by a court of  competent  jurisdiction  that the  Agent  is not so  entitled  to
indemnification. The agreements in this Section shall survive the payment of the
Loans and all other amounts payable  hereunder or under the other Loan Documents
and the termination of this Agreement. If the Borrower shall reimburse the Agent
for any  Indemnifiable  Amount  following  payment by any Lender to the Agent in
respect of such Indemnifiable  Amount pursuant to this Section,  the Agent shall
share such  reimbursement  on a ratable  basis with each Lender  making any such
payment.

Section 11.8.  Successor Agent.

         The Agent may resign at any time as Agent under the Loan  Documents  by
giving written notice thereof to the Lenders and the Borrower.  The Agent may be
removed as Agent under the Loan  Documents  for good cause by the  Supermajority
Lenders  (determined  without regard to the Lender then acting as Agent) upon 30
days' prior notice. Upon any such resignation or removal,  the Requisite Lenders
(other than the Lender  then acting as Agent,  in the case of the removal of the
Agent under the immediately  preceding sentence) shall have the right to appoint
a  successor  Agent  which  appointment  shall,  provided no Default or Event of
Default  shall have  occurred and be  continuing,  be subject to the  Borrower's
approval,  which approval shall not be unreasonably  withheld or delayed (except
that the Borrower shall,  in all events,  be deemed to have approved each Lender
and its affiliates as a successor  Agent). If no successor Agent shall have been
so appointed in accordance with the immediately  preceding  sentence,  and shall
have  accepted  such  appointment,  within 30 days after the  resigning  Agent's
giving of notice of resignation or the Lenders'  removal of the resigning Agent,
then the  resigning or removed  Agent may, on behalf of the  Lenders,  appoint a
successor  Agent,  which  shall be a Lender,  if any Lender  shall be willing to
serve,  and otherwise shall be a commercial bank having total combined assets of
at  least  $50,000,000,000.  Upon the  acceptance  of any  appointment  as Agent
hereunder by a successor Agent,  such successor Agent shall thereupon succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
retiring  Agent,  and the retiring Agent shall be discharged

                                      -83-
<PAGE>

from its duties and  obligations  under the Loan  Documents.  After any  Agent's
resignation  or removal  hereunder as Agent,  the provisions of this Article XI.
shall  continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.

Section 11.9.  Titled Agents.

         Each of the Titled Agents in each such respective capacity,  assumes no
responsibility or obligations  hereunder,  including,  without  limitation,  for
servicing  enforcement  or collection of any of the Loans,  nor any duties as an
agent hereunder for the Lenders. The titles of "Joint Lead Arranger", "Sole Book
Runner",  "Syndication Agent" and "Documentation Agent" are solely honorific and
imply no fiduciary responsibility on the part of the Titled Agents to the Agent,
the  Borrower  or any Lender and the use of such  titles  does not impose on the
Titled Agents any duties or  obligations  greater than those of any other Lender
or entitle the Titled  Agents to any rights  other than those to which any other
Lender is entitled.

                           ARTICLE XII. MISCELLANEOUS

Section 12.1.  Notices.

         Unless otherwise provided herein, communications provided for hereunder
shall be in writing and shall be mailed, telecopied or delivered as follows:

         If to the Borrower:

                  Senior Housing Properties Trust
                  400 Centre Street
                  Newton, Massachusetts  02458
                  Attention:  John R. Hoadley
                  Telecopy Number:   (617) 796-8370
                  Telephone Number:  (617) 796-8124

         If to the Agent:

                  Wachovia Bank, National Association
                  One Wachovia Center, NC0172
                  Charlotte, North Carolina 28288
                  Attention: Rex E. Rudy
                  Telecopy Number:   (704) 383-6205
                  Telephone Number:  (704) 383-6506

         If to a Lender:

                  To such Lender's  address or telecopy  number,  as applicable,
                  set forth on its  signature  page hereto or in the  applicable
                  Assignment and Acceptance Agreement.

                                      -84-
<PAGE>

or, as to each party at such other  address as shall be designated by such party
in a written  notice to the other  parties  delivered  in  compliance  with this
Section.  All such notices and other  communications  shall be effective  (i) if
mailed, when received;  (ii) if telecopied,  when transmitted;  or (iii) if hand
delivered,  when delivered.  Notwithstanding the immediately preceding sentence,
all notices or communications to the Agent or any Lender under Article II. shall
be effective only when actually received. Neither the Agent nor any Lender shall
incur any  liability to the Borrower (nor shall the Agent incur any liability to
the Lenders) for acting upon any telephonic notice referred to in this Agreement
which the Agent or such  Lender,  as the case may be,  believes in good faith to
have been given by a Person  authorized  to deliver such notice or for otherwise
acting in good faith hereunder.

Section 12.2.  Expenses.

         The Borrower  agrees (a) to pay or  reimburse  the Agent for all of its
reasonable  out-of-pocket  costs and expenses  incurred in  connection  with the
preparation,  negotiation  and  execution of, and any  amendment,  supplement or
modification to, any of the Loan Documents (including due diligence expenses and
travel expenses  relating to closing),  and the consummation of the transactions
contemplated thereby, including the reasonable fees and disbursements of counsel
to the Agent,  (b) to pay or  reimburse  the Agent and the Lenders for all their
costs and expenses  incurred in connection  with the enforcement or preservation
of any  rights  under the Loan  Documents,  including  the  reasonable  fees and
disbursements  of their  respective  counsel  (including  the allocated fees and
expenses of in-house counsel) and any payments in  indemnification  or otherwise
payable by the Lenders to the Agent pursuant to the Loan Documents,  (c) to pay,
and  indemnify  and hold  harmless the Agent and the Lenders  from,  any and all
recording  and  filing  fees and any and all  liabilities  with  respect  to, or
resulting from any failure to pay or delay in paying, documentary, stamp, excise
and other  similar  taxes,  if any,  which may be  payable or  determined  to be
payable  in  connection  with  the  execution  and  delivery  of any of the Loan
Documents,  or consummation of any amendment,  supplement or modification of, or
any waiver or consent  under or in respect of, any Loan  Document and (d) to the
extent  not  already  covered  by any of the  preceding  subsections,  to pay or
reimburse the Agent and the Lenders for all their costs and expenses incurred in
connection  with any  bankruptcy or other  proceeding  of the type  described in
Sections  10.1.(f) or 10.1.(g),  including the reasonable fees and disbursements
of counsel  to the Agent and any  Lender,  whether  such fees and  expenses  are
incurred prior to, during or after the  commencement  of such  proceeding or the
confirmation or conclusion of any such proceeding. If the Borrower shall fail to
pay any amounts  required to be paid by it pursuant to this  Section,  the Agent
and/or the Lenders  may pay such  amounts on behalf of the  Borrower  and either
deem the same to be Loans outstanding  hereunder or otherwise  Obligations owing
hereunder.

Section 12.3.  Setoff.

         Subject to Section  3.3. and in addition to any rights now or hereafter
granted  under  Applicable  Law and not by way of limitation of any such rights,
the  Agent,  each  Lender  and each  Participant  is  hereby  authorized  by the
Borrower, at any time or from time to time during the continuance of an Event of
Default,  without prior notice to the Borrower or to any other Person,  any such
notice being hereby expressly waived, but in the case of a Lender or Participant
subject to receipt of the prior  written  consent of the Agent  exercised in its
sole discretion, to set

                                      -85-
<PAGE>

off and to  appropriate  and to apply any and all deposits  (general or special,
including,  but not  limited  to,  indebtedness  evidenced  by  certificates  of
deposit,  whether  matured or unmatured) and any other  indebtedness at any time
held or owing by the Agent,  such Lender or any  affiliate  of the Agent or such
Lender,  to or for the credit or the  account  of the  Borrower  against  and on
account of any of the Obligations,  irrespective of whether or not any or all of
the Loans and all other  Obligations have been declared to be, or have otherwise
become,  due and  payable as  permitted  by Section  10.2.,  and  although  such
obligations  shall be  contingent  or  unmatured.  Promptly  following  any such
set-off the Agent shall notify the Borrower  thereof and of the  application  of
such set-off, provided that the failure to give such notice shall not invalidate
such set-off.

Section 12.4.  LITIGATION; JURISDICTION; OTHER MATTERS; WAIVERS.

         (a) EACH PARTY  HERETO  ACKNOWLEDGES  THAT ANY  DISPUTE OR  CONTROVERSY
BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON
DIFFICULT  AND  COMPLEX  ISSUES  OF LAW AND FACT AND  WOULD  RESULT IN DELAY AND
EXPENSE TO THE PARTIES.  ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE  LENDERS,  THE AGENT AND THE BORROWER  HEREBY  WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR  PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR
TRIBUNAL  IN WHICH AN ACTION MAY BE  COMMENCED  BY OR AGAINST  ANY PARTY  HERETO
ARISING  OUT OF THIS  AGREEMENT,  THE NOTES,  OR ANY OTHER LOAN  DOCUMENT  OR BY
REASON OF ANY OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR AMONG
THE BORROWER, THE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE.

         (b) EACH OF THE BORROWER,  THE AGENT AND EACH LENDER HEREBY AGREES THAT
THE  FEDERAL  DISTRICT  COURT OF THE  SOUTHERN  DISTRICT  OF NEW YORK OR, AT THE
OPTION OF THE AGENT,  ANY STATE COURT LOCATED IN NEW YORK, NEW YORK,  SHALL HAVE
JURISDICTION  TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES  BETWEEN OR AMONG THE
BORROWER, THE AGENT OR ANY OF THE LENDERS,  PERTAINING DIRECTLY OR INDIRECTLY TO
THIS  AGREEMENT,  THE LOANS AND  LETTERS OF CREDIT,  THE NOTES OR ANY OTHER LOAN
DOCUMENT OR TO ANY MATTER ARISING  HEREFROM OR THEREFROM.  THE BORROWER AND EACH
OF THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. EACH PARTY FURTHER WAIVES ANY
OBJECTION  THAT IT MAY NOW OR HEREAFTER  HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME. THE CHOICE OF
FORUM SET FORTH IN THIS SECTION  SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF
ANY  ACTION BY THE AGENT OR ANY  LENDER OR THE  ENFORCEMENT  BY THE AGENT OR ANY
LENDER  OF  ANY  JUDGMENT  OBTAINED  IN  SUCH  FORUM  IN ANY  OTHER  APPROPRIATE
JURISDICTION.

                                      -86-
<PAGE>

         (c) THE  PROVISIONS OF THIS SECTION HAVE BEEN  CONSIDERED BY EACH PARTY
WITH  THE  ADVICE  OF  COUNSEL  AND  WITH A  FULL  UNDERSTANDING  OF  THE  LEGAL
CONSEQUENCES  THEREOF,  AND SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER
AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS,  THE TERMINATION OR
EXPIRATION OF ALL LETTERS OF CREDIT AND THE TERMINATION OF THIS AGREEMENT.

Section 12.5.  Successors and Assigns.

         (a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective  successors and permitted
assigns,  except that the Borrower  may not assign or otherwise  transfer any of
its rights or obligations under this Agreement without the prior written consent
of all Lenders  and any such  assignment  or other  transfer to which all of the
Lenders have not so consented shall be null and void.

         (b) Any  Lender  may make,  carry or  transfer  Loans at, to or for the
account of any of its  branch  offices  or the  office of an  affiliate  of such
Lender except to the extent such transfer would result in increased costs to the
Borrower.

         (c) Any  Lender  may at any time  grant  to one or more  banks or other
financial  institutions  (each a "Participant")  participating  interests in its
Commitment or the Obligations owing to such Lender;  provided,  however, (i) any
such participating  interest must be for a constant and not a varying percentage
interest,  (ii) no Lender may grant a participating  interest in its Commitment,
or if the Commitments have been terminated,  the aggregate outstanding principal
balance of Notes held by it, in an amount less than  $5,000,000  and (iii) after
giving  effect  to  any  such  participation  by a  Lender,  the  amount  of its
Commitment,   or  if  the  Commitments  have  been  terminated,   the  aggregate
outstanding  principal  balance of Notes held by it, in which it has not granted
any participating  interests must be equal to $5,000,000 and integral  multiples
of $1,000,000 in excess thereof.  Except as otherwise provided in Section 12.3.,
no  Participant  shall have any rights or benefits  under this  Agreement or any
other  Loan  Document.  In  the  event  of  any  such  grant  by a  Lender  of a
participating  interest to a Participant,  such Lender shall remain  responsible
for the performance of its obligations hereunder, and the Borrower and the Agent
shall  continue to deal solely and directly with such Lender in connection  with
such  Lender's  rights and  obligations  under  this  Agreement.  Any  agreement
pursuant  to which any  Lender  may grant such a  participating  interest  shall
provide  that such  Lender  shall  retain the sole right and  responsibility  to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment,  modification  or waiver of any provision of
this Agreement;  provided,  however,  such Lender may agree with the Participant
that it will not, without the consent of the Participant, agree to (i) increase,
or extend the term or extend the time or waive any requirement for the reduction
or termination of, such Lender's Commitment,  (ii) extend the date fixed for the
payment of  principal of or interest on the Loans or portions  thereof  owing to
such  Lender,  (iii) reduce the amount of any such  payment of  principal,  (iv)
reduce  the rate at  which  interest  is  payable  thereon  or (v)  release  any
Guarantor (except as otherwise permitted under Section 7.12.(b)).  An assignment
or other transfer which is not permitted by subsection (d) or (e) below shall be
given  effect  for  purposes  of  this   Agreement  only  to  the  extent  of  a
participating  interest  granted in

                                      -87-
<PAGE>

accordance  with this  subsection (c). The selling Lender shall notify the Agent
and the Borrower of the sale of any participation hereunder and, if requested by
the Agent, certify to the Agent that such participation is permitted hereunder.

         (d) Any Lender may with the prior written  consent of the Agent and, so
long as no Default or Event of Default  shall have  occurred and be  continuing,
the Borrower (which consent, in each case, shall not be unreasonably withheld or
delayed), assign to one or more Eligible Assignees (each an "Assignee") all or a
portion  of its  Commitment  and its other  rights  and  obligations  under this
Agreement and the Notes; provided,  however, (i) no such consent by the Borrower
shall be  required  in the  case of any  assignment  to  another  Lender  or any
affiliate  of such  Lender or another  Lender  and no such  consent by the Agent
shall be required in the case of any  assignment by a Lender to any affiliate of
such Lender; (ii) any partial assignment shall be in an amount at least equal to
$5,000,000  and integral  multiples of  $1,000,000  in excess  thereof and after
giving effect to such assignment the assigning  Lender retains a Commitment,  or
if the  Commitments  have been  terminated,  holds  Notes  having  an  aggregate
outstanding  principal balance, of at least $5,000,000 and integral multiples of
$1,000,000 in excess thereof;  and (iii) each such assignment  shall be effected
by means of an Assignment and Acceptance Agreement.  Upon execution and delivery
of such instrument and payment by such Assignee to such transferor  Lender of an
amount equal to the purchase  price agreed  between such  transferor  Lender and
such  Assignee,  such  Assignee  shall be  deemed  to be a Lender  party to this
Agreement as of the effective date of the  Assignment  and Acceptance  Agreement
and shall have all the rights and  obligations  of a Lender with a Commitment as
set forth in such Assignment and Acceptance Agreement, and the transferor Lender
shall be released from its obligations  hereunder to a corresponding extent, and
no  further  consent  or  action  by any  party  shall  be  required.  Upon  the
consummation  of any assignment  pursuant to this subsection (d), the transferor
Lender,  the Agent and the Borrower shall make appropriate  arrangements so that
new Notes are issued to the Assignee and such transferor Lender, as appropriate.
In connection with any such assignment  (other than an assignment by a Lender to
an affiliate of such Lender),  the  transferor  Lender shall pay to the Agent an
administrative fee for processing such assignment in the amount of $3,500.

         (e) The Agent  shall  maintain at the  Principal  Office a copy of each
Assignment  and  Acceptance  Agreement  delivered  to and  accepted  by it and a
register for the  recordation  of the names and addresses of the Lenders and the
Commitment  of each Lender from time to time (the  "Register").  The Agent shall
give each Lender and the Borrower  notice of the assignment by any Lender of its
rights as contemplated by this Section. The Borrower,  the Agent and the Lenders
may treat  each  Person  whose  name is  recorded  in the  Register  as a Lender
hereunder  for all purposes of this  Agreement.  The Register and copies of each
Assignment  and  Acceptance  Agreement  shall be available for inspection by the
Borrower  or any  Lender  at any  reasonable  time  and from  time to time  upon
reasonable  prior  notice to the Agent.  Upon its receipt of an  Assignment  and
Acceptance  Agreement  executed by an assigning Lender,  together with each Note
subject to such  assignment,  the Agent shall, if such Assignment and Acceptance
Agreement  has been  completed  and if the Agent  receives  the  processing  and
recording fee described in subsection (d) above,  (i) accept such Assignment and
Acceptance  Agreement,  (ii)  record the  information  contained  therein in the
Register and (iii) give prompt notice thereof to the Borrower.

                                      -88-
<PAGE>

         (f) In addition to the assignments and  participations  permitted under
the foregoing  provisions of this Section,  any Lender may assign and pledge all
or any  portion  of its  Loans  and its  Notes to any  Federal  Reserve  Bank as
collateral  security pursuant to Regulation A and any Operating  Circular issued
by such  Federal  Reserve  Bank,  and  such  Loans  and  Notes  shall  be  fully
transferable as provided therein. No such assignment shall release the assigning
Lender from its obligations hereunder.

         (g) A Lender may furnish any information  concerning the Borrower,  any
other Loan Party or any of their  respective  Subsidiaries  or Affiliates in the
possession  of such  Lender  from  time to time to  Assignees  and  Participants
(including  prospective  Assignees and Participants)  subject to compliance with
Section 12.8.

         (h) Anything in this Section to the contrary notwithstanding, no Lender
may assign or  participate  any interest in any Loan held by it hereunder to the
Borrower,  any  other  Loan  Party  or any of  their  respective  Affiliates  or
Subsidiaries.

         (i) Each Lender agrees that,  without the prior written  consent of the
Borrower and the Agent, it will not make any assignment  hereunder in any manner
or under any circumstances that would require  registration or qualification of,
or filings in respect of, any Loan or Note under the Securities Act or any other
securities laws of the United States of America or of any other jurisdiction.

Section 12.6.  Amendments.

         Except as otherwise  expressly provided in this Agreement,  any consent
or approval  required or permitted by this  Agreement or any other Loan Document
to be given by the Lenders may be given,  and any term of this  Agreement  or of
any other Loan Document may be amended, and the performance or observance by the
Borrower  or any  other  Loan  Party  or any  Subsidiary  of any  terms  of this
Agreement or such other Loan Document or the continuance of any Default or Event
of Default may be waived  (either  generally  or in a  particular  instance  and
either  retroactively or prospectively) with, but only with, the written consent
of the Requisite Lenders (and, in the case of an amendment to any Loan Document,
the  written  consent  of  the  Borrower).  Notwithstanding  the  foregoing,  no
amendment,  waiver or consent shall, unless in writing, and signed by all of the
Lenders (or the Agent at the written  direction of the  Lenders),  do any of the
following:  (i) increase the  Commitments of the Lenders (except as contemplated
by Section  2.14.) or subject the Lenders to any  additional  obligations;  (ii)
reduce the  principal  of, or interest  rates that have  accrued or that will be
charged  on the  outstanding  principal  amount  of,  any Loans or Fees or other
Obligations;  (iii)  reduce  the  amount  of any Fees  payable  hereunder;  (iv)
postpone any date fixed for any payment of any principal of, or interest on, any
Loans or any other  Obligations,  or extend the expiration date of any Letter of
Credit  beyond the  Termination  Date;  (v) change  the  Commitment  Percentages
(except as a result of any increase in the aggregate  amount of the  Commitments
contemplated  by Section 2.14.,  3.11.(b) or 4.5.) or amend or otherwise  modify
the  provisions  of  Section  3.2.;  (vi)  modify  the  definition  of the  term
"Requisite Lenders",  "Supermajority  Lenders", or, except as otherwise provided
in clauses (a) through (c) of the immediately following sentence,  modify in any
other  manner the  number or  percentage  of the  Lenders  required  to make any
determinations  or waive any rights hereunder or

                                      -89-
<PAGE>

to modify any provision hereof,  including without limitation,  any modification
of this Section if such modification  would have such effect;  (vii) release any
Guarantor from its obligations under the Guaranty (except as otherwise permitted
under Section  7.12.(b));  (viii) amend Section  9.1.(d) or waive any Default or
Event of Default occurring under Section 10.1.(c)  resulting from a violation of
such Section; (ix) amend the definition of "Unencumbered Asset Value" (or any of
the definitions  used in such definition for purposes of the use thereof in such
definition, or the percentages or rates used in the calculation thereof); or (x)
amend or otherwise  modify the  provisions  of Section  2.13.  In  addition,  no
amendment,  waiver or  consent  shall,  unless  in  writing,  and  signed by the
Supermajority   Lenders  (or  the  Agent  at  the  written   direction   of  the
Supermajority  Lenders), do any of the following:  (a) amend or otherwise modify
the  provisions  of, or waive  any Event of  Default  occurring  under,  Section
10.1.(m);  or (b) amend Section 9.1.(e) or waive any Default or Event of Default
occurring  under Section  10.1.(c)  resulting  from a violation of such Section.
Further,  no  amendment,  waiver or consent  unless in writing and signed by the
Agent,  in addition to the Lenders  required  hereinabove  to take such  action,
shall  affect the rights or duties of the Agent under this  Agreement  or any of
the other Loan Documents.  Any amendment,  waiver or consent relating to Section
2.2. or the  obligations  of the  Swingline  Lender under this  Agreement or any
other Loan Document  shall, in addition to the Lenders  required  hereinabove to
take such action, require the written consent of the Swingline Lender. No waiver
shall  extend to or affect any  obligation  not  expressly  waived or impair any
right consequent thereon and any amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose set forth therein. No
course of dealing or delay or omission on the part of the Agent or any Lender in
exercising  any  right  shall  operate  as a  waiver  thereof  or  otherwise  be
prejudicial  thereto.  Except as otherwise  explicitly provided for herein or in
any other Loan Document,  no notice to or demand upon the Borrower shall entitle
the  Borrower  to any other or  further  notice or  demand in  similar  or other
circumstances.

Section 12.7.  Nonliability of Agent and Lenders.

         The  relationship  between the  Borrower  and the Lenders and the Agent
shall be solely  that of borrower  and lender.  Neither the Agent nor any Lender
shall have any  fiduciary  responsibilities  to the Borrower and no provision in
this Agreement or in any of the other Loan  Documents,  and no course of dealing
between  or among any of the  parties  hereto,  shall be  deemed  to create  any
fiduciary duty owing by the Agent or any Lender to any Lender, the Borrower, any
Subsidiary or any other Loan Party.  Neither the Agent nor any Lender undertakes
any  responsibility  to the  Borrower  to review or inform the  Borrower  of any
matter in connection with any phase of the Borrower's business or operations.

Section 12.8.  Confidentiality.

         Except as  otherwise  provided by  Applicable  Law,  the Agent and each
Lender  shall  utilize  all  non-public  information  obtained  pursuant  to the
requirements  of this Agreement  which has been  identified as  confidential  or
proprietary  by the Borrower in  accordance  with its  customary  procedure  for
handling confidential information of this nature and in accordance with safe and
sound  banking  practices  but in any event may make  disclosure:  (a) to any of
their respective  affiliates (provided they shall agree to keep such information
confidential  in accordance  with the terms of this Section);  (b) as reasonably
requested  by any  bona  fide  Assignee,  Participant  or  other  transferee  in
connection with the  contemplated  transfer of any Commitment or

                                      -90-
<PAGE>

participations therein as permitted hereunder (provided they shall agree to keep
such information confidential in accordance with the terms of this Section); (c)
as required or requested by any Governmental Authority or representative thereof
or pursuant to legal process or in connection with any legal proceedings; (d) to
the  Agent's  or such  Lender's  independent  auditors  and  other  professional
advisors  (provided  they shall be  notified of the  confidential  nature of the
information);  (e) after the happening and during the continuance of an Event of
Default,  to any other Person,  in connection  with the exercise by the Agent or
the Lenders of rights  hereunder or under any of the other Loan  Documents;  and
(f) to the extent such information (x) becomes publicly  available other than as
a result of a breach of this  Section or (y) becomes  available  to the Agent or
any Lender on a  nonconfidential  basis from a source other than the Borrower or
any Affiliate.

Section 12.9.  Indemnification.

         (a) The Borrower shall and hereby agrees to indemnify,  defend and hold
harmless the Agent, any affiliate of the Agent and each of the Lenders and their
respective  directors,  officers,  shareholders,  agents,  employees and counsel
(each referred to herein as an "Indemnified Party") from and against any and all
losses, costs, claims, damages, liabilities, deficiencies, judgments or expenses
of  every  kind and  nature  (including,  without  limitation,  amounts  paid in
settlement,  court costs and the fees and  disbursements  of counsel incurred in
connection with any litigation, investigation, claim or proceeding or any advice
rendered in connection therewith,  but excluding losses, costs, claims, damages,
liabilities,  deficiencies,  judgments or expenses indemnification in respect of
which is  specifically  covered by Section 3.12.  or 4.1. or expressly  excluded
from  the  coverage  of such  Sections)  incurred  by an  Indemnified  Party  in
connection  with,  arising  out of, or by reason of, any suit,  cause of action,
claim,  arbitration,  investigation  or  settlement,  consent  decree  or  other
proceeding (the foregoing referred to herein as an "Indemnity Proceeding") which
is in any way related directly or indirectly to: (i) this Agreement or any other
Loan Document or the transactions  contemplated  thereby; (ii) the making of any
Loans or issuance of Letters of Credit  hereunder;  (iii) any actual or proposed
use by the Borrower of the proceeds of the Loans or Letters of Credit;  (iv) the
Agent's or any  Lender's  entering  into this  Agreement;  (v) the fact that the
Agent and the Lenders have  established the credit facility  evidenced hereby in
favor of the  Borrower;  (vi)  the  fact  that the  Agent  and the  Lenders  are
creditors of the Borrower and have or are alleged to have information  regarding
the financial condition,  strategic plans or business operations of the Borrower
and the Subsidiaries; (vii) the fact that the Agent and the Lenders are material
creditors of the Borrower  and are alleged to influence  directly or  indirectly
the business  decisions or affairs of the Borrower and the Subsidiaries or their
financial condition; (viii) the exercise of any right or remedy the Agent or the
Lenders may have under this  Agreement  or the other Loan  Documents;  provided,
however,  that the Borrower shall not be obligated to indemnify any  Indemnified
Party for any acts or omissions of such  Indemnified  Party in  connection  with
matters  described  in this  clause  (viii)  to the  extent  that  such  acts or
omissions  constitute  gross  negligence  or  willful  misconduct;  or (ix)  any
violation or  non-compliance by the Borrower or any Subsidiary of any Applicable
Law  (including  any  Environmental  Law)  including,  but not  limited  to, any
Indemnity  Proceeding  commenced  by (A) the Internal  Revenue  Service or state
taxing  authority  or (B) any  Governmental  Authority or other Person under any
Environmental   Law,   including  any  Indemnity   Proceeding   commenced  by  a
Governmental Authority or other Person seeking remedial or other action to cause
the

                                      -91-
<PAGE>

Borrower or its Subsidiaries (or its respective properties) (or the Agent and/or
the  Lenders  as  successors  to the  Borrower)  to be in  compliance  with such
Environmental Laws.

         (b) The Borrower's indemnification obligations under this Section shall
apply to all Indemnity  Proceedings arising out of, or related to, the foregoing
whether  or  not an  Indemnified  Party  is a  named  party  in  such  Indemnity
Proceeding.  In this connection,  this indemnification shall cover all costs and
expenses of any  Indemnified  Party in  connection  with any  deposition  of any
Indemnified  Party or  compliance  with any  subpoena  (including  any  subpoena
requesting the production of documents). This indemnification shall, among other
things,  apply to any Indemnity  Proceeding  commenced by other creditors of the
Borrower or any  Subsidiary,  any  shareholder of the Borrower or any Subsidiary
(whether such shareholder(s) are prosecuting such Indemnity  Proceeding in their
individual  capacity or  derivatively  on behalf of the  Borrower),  any account
debtor of the Borrower or any Subsidiary or by any Governmental Authority.

         (c)  This  indemnification  shall  apply  to any  Indemnity  Proceeding
arising during the pendency of any bankruptcy proceeding filed by or against the
Borrower and/or any Subsidiary.

         (d) All  out-of-pocket  fees and  expenses  of, and all amounts paid to
third-persons  by, an Indemnified Party shall be advanced by the Borrower at the
request of such Indemnified Party  notwithstanding any claim or assertion by the
Borrower  that  such  Indemnified  Party  is  not  entitled  to  indemnification
hereunder  upon receipt of an undertaking  by such  Indemnified  Party that such
Indemnified  Party will  reimburse  the  Borrower if it is actually  and finally
determined by a court of competent  jurisdiction  that such Indemnified Party is
not so entitled to indemnification hereunder.

         (e) An Indemnified  Party may conduct its own investigation and defense
of,  and may  formulate  its own  strategy  with  respect  to,  any  Indemnified
Proceeding  covered  by this  Section  and,  as  provided  above,  all costs and
expenses incurred by such Indemnified Party shall be reimbursed by the Borrower.
No action taken by legal counsel chosen by an Indemnified Party in investigating
or defending against any such Indemnified Proceeding shall vitiate or in any way
impair the  obligations  and duties of the Borrower  hereunder to indemnify  and
hold harmless each such Indemnified Party;  provided,  however,  that (i) if the
Borrower is required to indemnify an Indemnified  Party pursuant hereto and (ii)
the Borrower has provided evidence  reasonably  satisfactory to such Indemnified
Party  that  the  Borrower  has the  financial  wherewithal  to  reimburse  such
Indemnified  Party for any amount paid by such Indemnified Party with respect to
such  Indemnified  Proceeding,  such  Indemnified  Party  shall  not  settle  or
compromise any such Indemnified  Proceeding without the prior written consent of
the Borrower (which consent shall not be unreasonably withheld or delayed).

         (f) If and to the extent that the obligations of the Borrower hereunder
are unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution  to the  payment  and  satisfaction  of such  obligations  which is
permissible under Applicable Law.

         (g) The Borrower's  obligations hereunder shall survive any termination
of this  Agreement and the other Loan  Documents and the payment in full in cash
of the  Obligations,

                                      -92-
<PAGE>

and  are in  addition  to,  and not in  substitution  of,  any  other  of  their
obligations  set forth in this  Agreement or any other Loan Document to which it
is a party.

Section 12.10.  Termination; Survival.

         At such time as (a) all of the Commitments  have been  terminated,  (b)
all Letters of Credit have terminated, (c) none of the Lenders nor the Swingline
Lender is obligated  any longer  under this  Agreement to make any Loans and (d)
all  Obligations  (other  than  obligations  which  survive as  provided  in the
following  sentence) have been paid and satisfied in full,  this Agreement shall
terminate.  The  indemnities  to which the Agent,  the Lenders and the Swingline
Lender are entitled under the provisions of Sections 3.12.,  4.1., 4.4.,  11.7.,
12.2.  and 12.9.  and any other  provision of this  Agreement and the other Loan
Documents, and the provisions of Section 12.4., shall continue in full force and
effect and shall  protect the Agent,  the Lenders and the  Swingline  Lender (i)
notwithstanding  any  termination  of  this  Agreement,  or of  the  other  Loan
Documents,  against events arising after such  termination as well as before and
(ii) at all times  after any such party  ceases to be a party to this  Agreement
with  respect to all  matters  and events  existing on or prior to the date such
party ceased to be a party to this Agreement.

Section 12.11.  Severability of Provisions.

         Any provision of this Agreement which is prohibited or unenforceable in
any  jurisdiction  shall, as to such  jurisdiction,  be ineffective  only to the
extent  of  such  prohibition  or  unenforceability   without  invalidating  the
remainder  of such  provision  or the  remaining  provisions  or  affecting  the
validity or enforceability of such provision in any other jurisdiction.

Section 12.12.  GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO CONTRACTS  EXECUTED,  AND TO BE
FULLY PERFORMED, IN SUCH STATE.

Section 12.13.  Counterparts.

         This Agreement and any amendments, waivers, consents or supplements may
be executed in any number of  counterparts  and by different  parties  hereto in
separate  counterparts,  each of which when so executed and  delivered  shall be
deemed an original,  but all of which counterparts together shall constitute but
one and the same instrument.

Section 12.14.  Obligations with Respect to Loan Parties.

         The  obligations  of the  Borrower to direct or prohibit  the taking of
certain actions by the other Loan Parties as specified  herein shall be absolute
and not subject to any defense the Borrower may have that the Borrower  does not
control such Loan Parties.

                                      -93-
<PAGE>

Section 12.15.  Limitation of Liability.

         Neither the Agent nor any Lender, nor any affiliate, officer, director,
employee, attorney, or agent of the Agent or any Lender shall have any liability
with respect to, and the Borrower hereby waives, releases, and agrees not to sue
any  of  them  upon,  any  claim  for  any  special,  indirect,  incidental,  or
consequential  damages  suffered or incurred by the Borrower in connection with,
arising out of, or in any way related  to,  this  Agreement  or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents.  The Borrower hereby waives,  releases,  and agrees
not to sue  the  Agent  or any  Lender  or any of the  Agent's  or any  Lender's
affiliates,  officers, directors,  employees,  attorneys, or agents for punitive
damages in respect of any claim in  connection  with,  arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or financed hereby.

Section 12.16.  Entire Agreement.

         This  Agreement,  the Notes,  and the other Loan Documents  referred to
herein embody the final, entire agreement among the parties hereto and supersede
any and all prior commitments, agreements,  representations, and understandings,
whether  written or oral,  relating to the subject matter hereof and thereof and
may not be  contradicted  or varied by  evidence of prior,  contemporaneous,  or
subsequent oral  agreements or discussions of the parties  hereto.  There are no
oral agreements among the parties hereto.

Section 12.17.  Construction.

         The Agent,  the Borrower and each Lender  acknowledge that each of them
has had the benefit of legal  counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel and that this Agreement and the other Loan Documents  shall be construed
as if jointly drafted by the Agent, the Borrower and each Lender.

Section 12.18.  LIABILITY OF TRUSTEES, ETC.

         THE PARTIES HERETO ACKNOWLEDGE AND AGREE AS FOLLOWS:

         THE  AMENDED  AND  RESTATED   DECLARATION  OF  TRUST  ESTABLISHING  THE
BORROWER,  DATED  SEPTEMBER  20,  1999,  A COPY  OF  WHICH,  TOGETHER  WITH  ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE STATE
DEPARTMENT  OF  ASSESSMENTS  AND  TAXATION OF MARYLAND,  PROVIDES  THAT THE NAME
"SENIOR HOUSING  PROPERTIES  TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY  AS  TRUSTEES,  BUT NOT  INDIVIDUALLY  OR  PERSONALLY,  AND THAT NO
TRUSTEE, OFFICER,  SHAREHOLDER,  EMPLOYEE OR AGENT OF THE BORROWER SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE BORROWER.  ALL PERSONS DEALING WITH THE BORROWER, IN ANY WAY, SHALL
LOOK  ONLY TO THE  ASSETS  OF THE  BORROWER  FOR THE  PAYMENT  OF ANY SUM OR THE
PERFORMANCE  OF ANY

                                      -94-
<PAGE>

OBLIGATION.  THE PROVISIONS OF THIS SECTION SHALL NOT LIMIT
ANY OBLIGATIONS OF ANY LOAN PARTY OTHER THAN THE BORROWER.

                         [Signatures on Following Pages]

                                      -95-
<PAGE>

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Credit
Agreement to be executed by their authorized officers all as of the day and year
first above written.

                                      BORROWER:

                                      SENIOR HOUSING PROPERTIES TRUST

                                      By: /s/ John R. Hoadley
                                          Name:  John R. Hoadley
                                          Title: Treasurer

                                      Attest: /s/ David J. Hegarty
                                           Name: David J. Hegarty
                                           Title: President/Secretary

                       [Signatures Continued on Next Page]

                                      -96-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
               June 27, 2002 with Senior Housing Properties Trust]

                                      WACHOVIA BANK, NATIONAL ASSOCIATION, as
                                      Agent, as a Lender and as Swingline Lender

                                      By: /s/ Daniel J. Sullivan
                                          Name:  Daniel J. Sullivan
                                          Title: Managing Director

                                      Commitment Amount:

                                      $82,000,000

                                      Lending Office (all Types of Loans):

                                      Wachovia Bank, National Association
                                      One Wachovia Center, NC0172
                                      301 South College Street
                                      Charlotte, North Carolina  28288
                                      Attn:  Rex E. Rudy
                                      Telecopier:       (704) 383-6205
                                      Telephone:        (704) 383-6506

                       [Signatures Continued on Next Page]

                                      -97-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
               June 27, 2002 with Senior Housing Properties Trust]

                                      DRESDNER BANK AG, NEW YORK AND GRAND
                                        CAYMAN BRANCHES

                                      By: /s/ Michael Leffler
                                         Name: Michael Leffler
                                         Title: Vice President

                                      By: /s/ Stephen Kovach
                                         Name: Stephen Kovach
                                         Title: Vice President

                                      Commitment Amount:

                                      $40,000,000

                                      Lending Office (all Types of Loans):

                                      Dresdner Bank AG, New York and Grand
                                        Cayman Branches
                                      1301 Avenue of the Americas
                                      New York, New York 10019-6163
                                      Attn: Michael Leffler
                                      Telecopier: 212-895-1766
                                      Telephone: 212-895-1772

                       [Signatures Continued on Next Page]

                                      -98-

<PAGE>

                 [Signature Page to Credit Agreement dated as of
               June 27, 2002 with Senior Housing Properties Trust]

                                      ING CAPITAL LLC

                                      By: /s/
                                           Name:______________________________
                                           Title: Vice President

                                      Commitment Amount:

                                      $50,000,000

                                      Lending Office (all Types of Loans):

                                      ING Capital LLC
                                      1325 Avenue of the Americas, 7th Floor
                                      New York, New York 10019
                                      Attn: David J. Lattimer
                                      Telecopier:       (646) 424-6210
                                      Telephone:        (646) 424-6209

                       [Signatures Continued on Next Page]

                                      -99-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
               June 27, 2002 with Senior Housing Properties Trust]

                                      UBS AG, STAMFORD BRANCH

                                      By: /s/ Wilfred V. Saint
                                           Name:  Wilfred V. Saint
                                           Title: Associate Director

                                      By: /s/ Luke Goldsworthy
                                           Name:  Luke Goldsworthy
                                           Title: Associate Director

                                      Commitment Amount:

                                      $25,000,000

                                      Lending Office (all Types of Loans):

                                      UBS AG, Stamford Branch
                                      677 Washington Blvd.
                                      6th Floor Tower
                                      Stamford, CT 06902
                                      Attn: Deborah Porter
                                      Telecopier: 203-719-3888
                                      Telephone: 203-719-6391

                       [Signatures Continued on Next Page]

                                     -100-

<PAGE>

                 [Signature Page to Credit Agreement dated as of
               June 27, 2002 with Senior Housing Properties Trust]

                                      CITIZENS BANK OF MASSACHUSETTS

                                      By: /s/ Daniel Ouellette
                                           Name:  Daniel Ouellette
                                           Title: Senior Vice President

                                      Commitment Amount:

                                      $28,000,000

                                      Lending Office (all Types of Loans):

                                      Citizens Bank of Massachusetts
                                      28 State Street MS 1410
                                      Boston, Massachusetts 02109
                                      Attn: Daniel R. Ouellette
                                      Telecopier: 617-725-5695
                                      Telephone: 617-725-5602

                       [Signatures Continued on Next Page]

                                     -101-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
               June 27, 2002 with Senior Housing Properties Trust]

                                      KEY CORPORATE CAPITAL INC.

                                      By: /s/ Charles J. Shoop
                                           Name:  Charles J. Shoop
                                           Title: Vice President

                                      Commitment Amount:

                                      $25,000,000

                                      Lending Office (all Types of Loans):

                                      Key Corporate Capital Inc.
                                      66 South Pearl Street
                                      Albany, NY 12207
                                      Attn: Wayne Horvath
                                      Telecopier: 518-257-8952
                                      Telephone: 518-257-8678

                                     -102-

<PAGE>

                                SCHEDULE 1.1.(a)

                                 Pricing Tables
<TABLE>
<CAPTION>

Table I -- Investment Grade Pricing

                 Borrower's Credit Rating         Applicable Margin for     Applicable Margin for      Facility
  Level           (S&P/Moody's (other))                LIBOR Loans             Base Rate Loans           Fee
----------------------------------------------------------------------------------------------------------------
<S>       <C>                                          <C>                        <C>                <C>

    1      BBB+/Baa1 (or equivalent) or                 1.00%                      0.0%               0.20%
           higher
----------------------------------------------------------------------------------------------------------------
    2      BBB/Baa2 (or equivalent)                     1.15%                      0.0%               0.20%
----------------------------------------------------------------------------------------------------------------
    3      BBB-/Baa3 (or equivalent)                    1.30%                      0.0%               0.20%
----------------------------------------------------------------------------------------------------------------

<CAPTION>
Table II -- Non-Investment Grade Pricing

  Level     Ratio of Total Indebtedness to      Applicable Margin for     Applicable Margin for      Facility
                   Total Asset Value                 LIBOR Loans             Base Rate Loans           Fee
----------------------------------------------------------------------------------------------------------------
<S>                 <C>                                <C>                        <C>                <C>
    1                   < 0.35                          1.45%                      0.0%               0.25%
----------------------------------------------------------------------------------------------------------------
    2              > 0.35 but < 0.45                    1.55%                      0.0%               0.25%
                   -
----------------------------------------------------------------------------------------------------------------
    3                   > 0.45                          1.65%                     0.15%               0.25%
                        -
----------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>

                                 Schedule 1.1(b)

                     Documents Relating to the Liens on the
                         Acquired Encumbered Properties

[This  schedule  contains a list of documents  relating to Liens on the Acquired
Encumbered Properties.]

                                 Schedule 1.1(c)

                                  Ground Leases

[This schedule  includes a list of leases and lease documents which the Borrower
and certain of its Subsidiaries are subject to.]

                                 Schedule 1.1(d)

             List of All Loan Parties and Jurisdiction of Formation

[This  schedule  includes a list of the Borrower and the  Guarantors  indicating
their respective states of formation.]

                                 Schedule 6.1(b)

                               Ownership Structure

[This  schedule  contains  an  organizational  chart  of the  Borrower  and  its
subsidiaries.]

                                 Schedule 6.1(f)

                           Title to Properties; Liens

[Part I of this schedule  includes a list of  properties  owned or leased by the
Borrower,  each  other  Loan  Party and each  other  Subsidiary  and then  cross
references the list of unencumbered properties attached to Schedule 6.1(y).]

[Part II of this schedule lists  Permitted Liens and cross  references  Schedule
1.1(b).]
<PAGE>

                                 Schedule 6.1(g)

                        Documents Evidencing Indebtedness

[This schedule  contains a list of the  Indebtedness  of the Borrower  excluding
Indebtedness under Leases and Ancillary Documents.]

                                 Schedule 6.1(h)

                               Material Contracts

[Part I of this schedule lists all Material Contracts  (excluding  contracts and
agreements relating to indebtedness, leases and ancillary documents).]

[Part II of this schedule lists lease documents and ancillary documents.]

                                 Schedule 6.1(i)

                                   Litigation

                                      None.

                                 Schedule 6.1(k)

            Certain Liabilities not disclosed on Financial Statements

                                      None.

                                 Schedule 6.1(y)

                           List of Unencumbered Assets

           [This schedule contains a list of the unencumbered assets
                   and mortgage notes owned by the Borrower.]

<PAGE>
                                    EXHIBIT A

                   FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

         THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT dated as of ____________, 200_
(the  "Agreement") by and among (the "Assignor"),  _______________________  (the
"Assignee"), and WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent (the "Agent").

         WHEREAS,  the Assignor is a Lender under that certain Credit  Agreement
dated as of June 27,  2002 (as  amended,  restated,  supplemented  or  otherwise
modified from time to time, the "Credit Agreement"), by and among Senior Housing
Properties Trust (the "Borrower"),  the financial institutions party thereto and
their assignees under Section 12.5 thereof (the  "Lenders"),  the Agent, and the
other parties thereto;

         WHEREAS,  the Assignor  desires to assign to the Assignee,  among other
things,  all  or a  portion  of  the  Assignor's  Commitment  under  the  Credit
Agreement, all on the terms and conditions set forth herein; and

         WHEREAS,  the  Agent  consents  to such  assignment  on the  terms  and
conditions set forth herein;

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which hereby are acknowledged by the parties hereto,  the parties
hereto hereby agree as follows:

         Section 1. Assignment.

         (a)  Subject  to the  terms and  conditions  of this  Agreement  and in
consideration of the payment to be made by the Assignee to the Assignor pursuant
to Section 2 of this  Agreement,  effective  as of  ________________,  200_ (the
"Assignment Date"), the Assignor hereby irrevocably sells, transfers and assigns
to the Assignee,  without recourse,  a $__________ interest (such interest being
the "Assigned  Commitment")  in and to the Assignor's  Commitment and all of the
other rights and  obligations of the Assignor under the Credit  Agreement,  such
Assignor's Revolving Note and the other Loan Documents  (representing ______% in
respect of the aggregate amount of all Lenders' Commitments),  including without
limitation,  a principal amount of outstanding Revolving Loans equal to $_______
and all voting rights of the Assignor  associated with the Assigned  Commitment,
all  rights  to  receive  interest  on such  amount of  Revolving  Loans and all
commitment  and other Fees with  respect to the  Assigned  Commitment  and other
rights of the Assignor  under the Credit  Agreement and the other Loan Documents
with respect to the Assigned Commitment, all as if the Assignee were an original
Lender under and signatory to the Credit  Agreement having a Commitment equal to
the amount of the Assigned  Commitment.  The Assignee,  subject to the terms and
conditions  hereof,  hereby assumes all obligations of the Assignor with respect
to the Assigned  Commitment as if the Assignee were an original Lender under and
signatory  to the Credit  Agreement  having a  Commitment  equal to the Assigned
Commitment,  which obligations  shall include,  but shall not be limited to, the
obligation of the Assignor to make Revolving  Loans to the Borrower with respect
to the  Assigned  Commitment,  the  obligation  to pay the Agent  amounts due in
respect of draws under  Letters of Credit as required  under  Section 2.3 of the
Credit  Agreement and the obligation to indemnify the Agent as provided  therein
(the  foregoing  enumerated   obligations,   together  with  all  other  similar

                                      A-1
<PAGE>
obligations  more  particularly  set forth in the Credit Agreement and the other
Loan Documents, shall be referred to hereinafter, collectively, as the "Assigned
Obligations").  The Assignor shall have no further  duties or  obligations  with
respect to, and shall have no further  interest in, the Assigned  Obligations or
the Assigned Commitment from and after the Assignment Date.

(b) The assignment by the Assignor to the Assignee hereunder is without recourse
to the Assignor. The Assignee makes and confirms to the Agent, the Assignor, and
the other  Lenders all of the  representations,  warranties  and  covenants of a
Lender  under  Article XI. of the Credit  Agreement.  Not in  limitation  of the
foregoing,  the Assignee  acknowledges  and agrees that,  except as set forth in
Section 4 below,  the Assignor is making no  representations  or warranties with
respect to, and the Assignee hereby releases and discharges the Assignor for any
responsibility or liability for: (i) the present or future solvency or financial
condition of the  Borrower,  any  Subsidiary  or any other Loan Party,  (ii) any
representations,  warranties, statements or information made or furnished by the
Borrower,  any Subsidiary or any other Loan Party in connection  with the Credit
Agreement  or  otherwise,  (iii)  the  validity,   efficacy,   sufficiency,   or
enforceability  of the Credit  Agreement,  any other Loan  Document or any other
document or instrument executed in connection  therewith,  or the collectibility
of the Assigned  Obligations,  (iv) the perfection,  priority or validity of any
Lien with respect to any collateral at any time securing the  Obligations or the
Assigned  Obligations  under  the  Notes  or the  Credit  Agreement  and (v) the
performance or failure to perform by the Borrower or any other Loan Party of any
obligation  under the Credit Agreement or any other Loan Document to which it is
a party.  Further,  the Assignee  acknowledges  that it has,  independently  and
without reliance upon the Agent, or on any affiliate or subsidiary thereof,  the
Assignor or any other Lender and based on the financial  statements  supplied by
the  Borrower  and  such  other  documents  and  information  as it  has  deemed
appropriate,  made its own credit analysis and decision to become a Lender under
the Credit Agreement. The Assignee also acknowledges that it will, independently
and without  reliance upon the Agent, the Assignor or any other Lender and based
on such  documents and  information  as it shall deem  appropriate  at the time,
continue to make its own credit  decisions in taking or not taking  action under
the  Credit  Agreement  or any other Loan  Documents  or  pursuant  to any other
obligation.  Except as  expressly  provided in the Credit  Agreement,  the Agent
shall  have no duty  or  responsibility  whatsoever,  either  initially  or on a
continuing  basis, to provide the Assignee with any credit or other  information
with  respect to the  Borrower or any other Loan Party or to notify the Assignee
of any Default or Event of Default.  The Assignee has not relied on the Agent as
to any legal or factual matter in connection therewith or in connection with the
transactions contemplated thereunder.

         Section 2. Payment by Assignee. In consideration of the assignment made
pursuant  to  Section 1 of this  Agreement,  the  Assignee  agrees to pay to the
Assignor on the Assignment  Date, an amount equal to $________  representing (i)
the aggregate  principal  amount  outstanding of the Loans owing to the Assignor
under the Credit  Agreement and the other Loan Documents  being assigned  hereby
plus (ii) the aggregate  amount of payments  previously  made by Assignor  under
Section 2.3(j) of the Credit  Agreement which have not been repaid and which are
being assigned hereby.

         Section 3.  Payments by  Assignor.  The  Assignor  agrees to pay to the
Agent on the Assignment Date the  administration  fee, if any, payable under the
applicable provisions of the Credit Agreement.

                                      A-2
<PAGE>
         Section 4.  Representations  and  Warranties of Assignor.  The Assignor
hereby  represents  and warrants to the Assignee  that (a) as of the  Assignment
Date (i) the Assignor is a Lender under the Credit Agreement having a Commitment
under the Credit Agreement (without  reduction by any assignments  thereof which
have not yet become effective), equal to $ ________ and that the Assignor is not
in  default  of its  obligations  under  the  Credit  Agreement;  and  (ii)  the
outstanding  balance of Revolving Loans owing to the Assignor (without reduction
by any assignments  thereof which have not yet become effective) is $__________;
and (b) it is the legal and beneficial owner of the Assigned Commitment which is
free and clear of any adverse claim created by the Assignor.

         Section 5. Representations,  Warranties and Agreements of Assignee. The
Assignee (a) represents and warrants that it is (i) legally  authorized to enter
into this  Agreement,  (ii) an  "accredited  investor"  (as such term is used in
Regulation D of the Securities Act) and (iii) an Eligible Assignee; (b) confirms
that it has received a copy of the Credit Agreement, together with copies of the
most  recent  financial  statements  delivered  pursuant  thereto and such other
documents and information  (including  without limitation the Loan Documents) as
it has deemed  appropriate to make its own credit analysis and decision to enter
into this  Agreement;  (c) appoints and authorizes the Agent to take such action
as  contractual  representative  on its behalf and to exercise such powers under
the Loan  Documents as are delegated to the Agent by the terms thereof  together
with such powers as are reasonably  incidental  thereto;  and (d) agrees that it
will become a party to and shall be bound by the Credit  Agreement and the other
Loan Documents to which the other Lenders are a party on the Assignment Date and
will perform in accordance  therewith all of the obligations  which are required
to be performed by it as a Lender.

         Section 6.  Recording and  Acknowledgment  by the Agent.  Following the
execution of this  Agreement,  the Assignor will deliver to the Agent (a) a duly
executed copy of this  Agreement for  acknowledgment  and recording by the Agent
and (b) the Assignor's  Revolving Note. Upon such  acknowledgment and recording,
from and after the Assignment Date, the Agent shall make all payments in respect
of the interest assigned hereby (including payments of principal, interest, Fees
and other  amounts) to the  Assignee.  The Assignor and Assignee  shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Assignment Date directly between themselves.

         Section 7. Addresses. The Assignee specifies as its address for notices
and its Lending Office for all Loans, the offices set forth below:

         Notice Address:  ___________________________
                          ___________________________
                          ___________________________
                          Telephone No.: ____________
                          Telecopy No.:  ____________

         Lending Office:  ___________________________
                          ___________________________
                          ___________________________
                          Telephone No.: ____________
                          Telecopy No.:  ____________

                                      A-3
<PAGE>

         Section  8.  Payment  Instructions.  All  payments  to be  made  to the
Assignee  under this  Agreement by the Assignor,  and all payments to be made to
the Assignee under the Credit Agreement, shall be made as provided in the Credit
Agreement in accordance with the following instructions:

                       ___________________________
                       ___________________________

         Section  9.  Effectiveness  of  Assignment.  This  Agreement,  and  the
assignment and assumption  contemplated herein, shall not be effective until (a)
this Agreement is executed and delivered by each of the Assignor,  the Assignee,
the Agent, and if required under Section 12.5.(d) of the Credit  Agreement,  the
Borrower,  and (b) the payment to the Assignor of the amounts,  if any, owing by
the  Assignee  pursuant  to Section 2 hereof and (c) the payment to the Agent of
the amounts,  if any, owing by the Assignor  pursuant to Section 3 hereof.  Upon
recording and  acknowledgment of this Agreement by the Agent, from and after the
Assignment  Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this  Agreement,  have the rights and obligations of a
Lender  thereunder and (ii) the Assignor  shall,  to the extent provided in this
Agreement,  relinquish its rights (except as otherwise provided in Section 12.10
of the Credit  Agreement) and be released from its obligations  under the Credit
Agreement;  provided,  however,  that if the Assignor does not assign its entire
interest under the Loan  Documents,  it shall remain a Lender entitled to all of
the benefits and subject to all of the  obligations  thereunder  with respect to
its Commitment.

         Section 10.  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

         Section 11. Counterparts.  This Agreement may be executed in any number
of counterparts each of which, when taken together, shall constitute one and the
same agreement.

         Section 12.  Headings.  Section  headings have been inserted herein for
convenience only and shall not he construed to be a part hereof.

         Section 13.  Amendments;  Waivers.  This  Agreement may not be amended,
changed, waived or modified except by a writing executed by the Assignee and the
Assignor; provided, however, any amendment, waiver or consent which shall affect
the rights or duties of the Agent under this  Agreement  shall not be  effective
unless signed by the Agent.

         Section  14.  Entire  Agreement.  This  Agreement  embodies  the entire
agreement  between the  Assignor  and the  Assignee  with respect to the subject
matter hereof and supersedes  all other prior  arrangements  and  understandings
relating to the subject matter hereof.

         Section 15. Binding  Effect.  This Agreement  shall be binding upon and
inure to the benefit of the parties hereto and their  respective  successors and
permitted assigns.

                                      A-4
<PAGE>

         Section 16.  Definitions.  Terms not otherwise  defined herein are used
herein with the respective meanings given them in the Credit Agreement.

         [Include  this Section  only if  Borrower's  consent is required  under
Section 12.5(d)

         Section 17. Agreements of the Borrower. The Borrower hereby agrees that
the Assignee  shall be a Lender under the Credit  Agreement  having a Commitment
equal to the Assigned  Commitment.  The Borrower  agrees that the Assignee shall
have all of the rights and remedies of a Lender under the Credit  Agreement  and
the other Loan  Documents as if the Assignee  were an original  Lender under and
signatory to the Credit Agreement, including, but not limited to, the right of a
Lender to  receive  payments  of  principal  and  interest  with  respect to the
Assigned  Obligations,  and to the Revolving Loans made by the Lenders after the
date hereof and to receive the  commitment and other Fees payable to the Lenders
as provided in the Credit Agreement.  Further, the Assignee shall be entitled to
the  indemnification  provisions  from the  Borrower  in favor of the Lenders as
provided in the Credit  Agreement  and the other Loan  Documents.  The  Borrower
further agrees, upon the execution and delivery of this Agreement, to execute in
favor of the  Assignee  Notes as  required  by  Section  12.5(d)  of the  Credit
Agreement.  Upon receipt by the  Assignor of the amounts due the Assignor  under
Section 2, the Assignor  agrees to surrender  to the  Borrower  such  Assignor's
Notes.]

                         [Signatures on Following Pages]

                                      A-5
<PAGE>

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Assignment and Acceptance Agreement as of the date and year first written above.

                                    ASSIGNOR:

                                    [NAME OF ASSIGNOR]

                                    By:
                                       ----------------------------------------
                                         Name:
                                              ---------------------------------
                                         Title:
                                               --------------------------------

                                    ASSIGNEE:

                                    [NAME OF ASSIGNEE]

                                    By:
                                       ----------------------------------------
                                         Name:
                                              ---------------------------------
                                         Title:
                                               --------------------------------

[Include signature of the Borrower only
   if required under Section 12.5(d) of
   the Credit Agreement]
Agreed and consented to as of the
   date first written above.

BORROWER:

SENIOR HOUSING PROPERTIES TRUST

By:
   --------------------------------------------------
     Name:
          -------------------------------------------
     Title:
           ------------------------------------------

                            [Signatures Continued on Following Page]

                                      A-6
<PAGE>

Accepted as of the date first written above.
AGENT:

WACHOVIA BANK, NATIONAL
   ASSOCIATION, as Agent

By:
   --------------------------------------------------
     Name:
          -------------------------------------------
     Title:
           ------------------------------------------

                                      A-7
<PAGE>
                                    EXHIBIT B

                                FORM OF GUARANTY

         THIS GUARANTY dated as of June 27, 2002, executed and delivered by each
of the undersigned and the other Persons from time to time party hereto pursuant
to the execution  and delivery of an Accession  Agreement in the form of Annex I
hereto  (all  of the  undersigned,  together  with  such  other  Persons  each a
"Guarantor" and  collectively,  the "Guarantors") in favor of (a) WACHOVIA BANK,
NATIONAL  ASSOCIATION,  in its  capacity as Agent (the  "Agent") for the Lenders
under that  certain  Credit  Agreement  dated as of June 27,  2002 (as  amended,
restated,  supplemented  or otherwise  modified  from time to time,  the "Credit
Agreement"), by and among Senior Housing Properties Trust (the "Borrower"),  the
financial  institutions  party  thereto and their  assignees  under Section 12.5
thereof (the "Lenders"),  the Agent, and the other parties thereto,  and (b) the
Lenders and the Swingline Lender.

         WHEREAS,  pursuant to the Credit Agreement,  the Agent, the Lenders and
the  Swingline  Lender have agreed to make  available  to the  Borrower  certain
financial  accommodations  on the terms and  conditions  set forth in the Credit
Agreement;

         WHEREAS, the Borrower owns, directly or indirectly, at least a majority
of the issued and outstanding Equity Interests in each Guarantor;

         WHEREAS, the Borrower and each of the Guarantors, though separate legal
entities,  are  mutually  dependent  on  each  other  in the  conduct  of  their
respective businesses as an integrated operation and have determined it to be in
their mutual best interests to obtain  financing from the Agent, the Lenders and
the Swingline Lender through their collective efforts;

         WHEREAS,  each Guarantor  acknowledges  that it will receive direct and
indirect  benefits from the Agent,  the Lenders and the Swingline  Lender making
such  financial  accommodations  available  to the  Borrower  under  the  Credit
Agreement  and,  accordingly,   each  Guarantor  is  willing  to  guarantee  the
Borrower's obligations to the Agent, the Lenders and the Swingline Lender on the
terms and conditions contained herein; and

         WHEREAS,  each Guarantor's execution and delivery of this Guaranty is a
condition  to the Agent and the  Lenders  making and  continuing  to make,  such
financial accommodations to the Borrower.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby  acknowledged by each Guarantor,  each Guarantor
agrees as follows:

         Section 1. Guaranty. Each Guarantor hereby absolutely,  irrevocably and
unconditionally  guaranties the due and punctual  payment and  performance  when
due,  whether at stated  maturity,  by acceleration or otherwise,  of all of the
following  (collectively referred to as the "Guarantied  Obligations"):  (a) all
indebtedness and obligations owing by the Borrower to any Lender,  the Swingline
Lender or the Agent under or in  connection  with the Credit  Agreement  and any
other  Loan  Document,  including  without  limitation,  the  repayment  of  all
principal  of  the  Revolving  Loans,  Swingline  Loans  and  the  Reimbursement
Obligations, and the payment of all interest, Fees, charges, attorneys' fees and
other  amounts  payable to any Lender or the Agent  thereunder

                                      B-1
<PAGE>

or in connection therewith; (b) any and all extensions, renewals, modifications,
amendments or  substitutions  of the  foregoing;  (c) all  expenses,  including,
without  limitation,  reasonable  attorneys'  fees and  disbursements,  that are
incurred by the Lenders and the Agent in the enforcement of any of the foregoing
or any obligation of such Guarantor hereunder; and (d) all other Obligations.

         Section 2. Guaranty of Payment and Not of Collection.  This Guaranty is
a guaranty of payment,  and not of collection,  and a debt of each Guarantor for
its own account.  Accordingly,  none of the Lenders, the Swingline Lender or the
Agent shall be obligated or required before  enforcing this Guaranty against any
Guarantor:  (a) to pursue any right or remedy any of them may have  against  the
Borrower,  any other Guarantor or any other Person or commence any suit or other
proceeding against the Borrower,  any other Guarantor or any other Person in any
court or other tribunal; (b) to make any claim in a liquidation or bankruptcy of
the Borrower,  any other Guarantor or any other Person; or (c) to make demand of
the Borrower,  any other  Guarantor or any other Person or to enforce or seek to
enforce  or  realize  upon any  collateral  security  held by the  Lenders,  the
Swingline   Lender  or  the  Agent  which  may  secure  any  of  the  Guarantied
Obligations.

         Section  3.  Guaranty  Absolute.  Each  Guarantor  guarantees  that the
Guarantied Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any Applicable Law now or hereafter
in effect in any  jurisdiction  affecting any of such terms or the rights of the
Agent, the Lenders or the Swingline  Lender with respect thereto.  The liability
of each  Guarantor  under  this  Guaranty  shall be  absolute,  irrevocable  and
unconditional  in  accordance  with its terms and shall remain in full force and
effect  without  regard to, and shall not be  released,  suspended,  discharged,
terminated or otherwise affected by, any circumstance or occurrence  whatsoever,
including  without  limitation,  the  following  (whether or not such  Guarantor
consents thereto or has notice thereof):

         (a) (i) any change in the  amount,  interest  rate or due date or other
term of any of the Guarantied Obligations, (ii) any change in the time, place or
manner of payment of all or any portion of the Guarantied Obligations, (iii) any
amendment  or waiver of, or consent to the  departure  from or other  indulgence
with respect to, the Credit  Agreement,  any other Loan  Document,  or any other
document or instrument evidencing or relating to any Guarantied Obligations,  or
(iv) any waiver,  renewal,  extension,  addition,  or supplement to, or deletion
from,  or any other  action or  inaction  under or in  respect  of,  the  Credit
Agreement, any of the other Loan Documents, or any other documents,  instruments
or agreements relating to the Guarantied  Obligations or any other instrument or
agreement  referred to therein or evidencing any  Guarantied  Obligations or any
assignment or transfer of any of the foregoing;

         (b) any lack of validity or enforceability of the Credit Agreement, any
of the other Loan  Documents,  or any other  document,  instrument  or agreement
referred to therein or evidencing any  Guarantied  Obligations or any assignment
or transfer of any of the foregoing;

         (c) any furnishing to the Agent, the Lenders or the Swingline Lender of
any security for the Guarantied Obligations,  or any sale, exchange,  release or
surrender of, or realization on, any collateral securing any of the Obligations;

                                      B-2
<PAGE>

         (d) any settlement or compromise of any of the Guarantied  Obligations,
any security  therefor,  or any liability of any other party with respect to the
Guarantied  Obligations,  or any  subordination of the payment of the Guarantied
Obligations  to the payment of any other  liability of the Borrower or any other
Loan Party;

         (e)   any   bankruptcy,   insolvency,   reorganization,    composition,
adjustment,  dissolution,  liquidation or other like proceeding relating to such
Guarantor, the Borrower, any other Loan Party or any other Person, or any action
taken with respect to this Guaranty by any trustee or receiver, or by any court,
in any such proceeding;

         (f) any act or failure to act by the Borrower,  any other Loan Party or
any other Person which may adversely affect such Guarantor's subrogation rights,
if any, against the Borrower to recover payments made under this Guaranty;

         (g) any  nonperfection or impairment of any security  interest or other
Lien on any collateral, if any, securing in any way any of the Obligations;

         (h) any  application of sums paid by the Borrower,  any other Guarantor
or any other  Person  with  respect to the  liabilities  of the  Borrower to the
Agent,  the Lenders or the Swingline  Lender,  regardless of what liabilities of
the Borrower remain unpaid;

         (i) any defect,  limitation or insufficiency in the borrowing powers of
the Borrower or in the exercise thereof; or

         (j) any other circumstance  which might otherwise  constitute a defense
available to, or a discharge of, a Guarantor  hereunder (other than indefeasible
payment in full).

         Section 4. Action with Respect to Guarantied  Obligations.  The Lenders
and the Agent may, at any time and from time to time, without the consent of, or
notice to,  any  Guarantor,  and  without  discharging  any  Guarantor  from its
obligations  hereunder,  take any and all actions described in Section 3 and may
otherwise:  (a)  amend,  modify,  alter or  supplement  the  terms of any of the
Guarantied Obligations,  including,  but not limited to, extending or shortening
the  time of  payment  of any of the  Guarantied  Obligations  or  changing  the
interest rate that may accrue on any of the Guarantied  Obligations;  (b) amend,
modify, alter or supplement the Credit Agreement or any other Loan Document; (c)
sell,  exchange,  release  or  otherwise  deal  with all,  or any  part,  of any
collateral securing any of the Obligations;  (d) release any other Loan Party or
other  Person  liable  in any  manner  for  the  payment  or  collection  of the
Guarantied  Obligations;  (e) exercise,  or refrain from exercising,  any rights
against the Borrower, any other Guarantor or any other Person: and (f) apply any
sum by whomsoever  paid or however  realized,  to the Guarantied  Obligations in
such order as the Lenders shall elect.

         Section 5. Representations and Warranties.  Each Guarantor hereby makes
to the Agent,  the Lenders and the Swingline  Lender all of the  representations
and  warranties  made by the Borrower  with respect to or in any way relating to
such Guarantor in the Credit  Agreement and the other Loan Documents,  as if the
same were set forth herein in full.

                                      B-3
<PAGE>

         Section 6.  Covenants.  Each  Guarantor  will comply with all covenants
which the Borrower is to cause such  Guarantor to comply with under the terms of
the Credit Agreement or any of the other Loan Documents.

         Section 7. Waiver.  Each Guarantor,  to the fullest extent permitted by
Applicable  Law, hereby waives notice of acceptance  hereof or any  presentment,
demand,  protest or notice of any kind, and any other act or thing,  or omission
or delay to do any  other  act or thing,  which in any  manner or to any  extent
might  vary the risk of such  Guarantor  or which  otherwise  might  operate  to
discharge such Guarantor from its obligations hereunder.

         Section 8.  Inability to Accelerate  Loan. If the Agent,  the Swingline
Lender and/or the Lenders are prevented  under  Applicable Law or otherwise from
demanding or accelerating payment of any of the Guarantied Obligations by reason
of any automatic stay or otherwise,  the Agent,  the Swingline Lender and/or the
Lenders shall be entitled to receive from each Guarantor,  upon demand therefor,
the sums which  otherwise  would have been due had such  demand or  acceleration
occurred.

         Section 9.  Reinstatement of Guarantied  Obligations.  If claim is ever
made on the Agent,  any Lender or the Swingline Lender for repayment or recovery
of any  amount or  amounts  received  in  payment  or on  account  of any of the
Guarantied  Obligations,  and the Agent,  such  Lender or the  Swingline  Lender
repays all or part of said amount by reason of (a) any judgment, decree or order
of any  court  or  administrative  body of  competent  jurisdiction,  or (b) any
settlement or compromise of any such claim effected by the Agent, such Lender or
the Swingline Lender with any such claimant (including the Borrower or a trustee
in bankruptcy  for the Borrower),  then and in such event each Guarantor  agrees
that any such judgment, decree, order, settlement or compromise shall be binding
on it,  notwithstanding  any revocation  hereof,  any release  herefrom,  or the
cancellation  of the Credit  Agreement,  any of the other Loan  Documents or any
other  instrument  evidencing any liability of the Borrower,  and such Guarantor
shall be and remain liable to the Agent, such Lender or the Swingline Lender for
the  amounts so repaid or  recovered  to the same  extent as if such  amount had
never originally been paid to the Agent, such Lender or the Swingline Lender.

         Section  10.  Subrogation.  Upon the  making  by any  Guarantor  of any
payment  hereunder  for the account of the  Borrower,  such  Guarantor  shall be
subrogated to the rights of the payee against the Borrower;  provided,  however,
that such Guarantor shall not enforce any right or receive any payment by way of
subrogation  or otherwise take any action in respect of any other claim or cause
of action such Guarantor may have against the Borrower  arising by reason of any
payment or performance by such Guarantor  pursuant to this Guaranty,  unless and
until  all of  the  Guarantied  Obligations  have  been  indefeasibly  paid  and
performed in full.  If any amount shall be paid to such  Guarantor on account of
or in respect of such  subrogation  rights or other  claims or causes of action,
such Guarantor shall hold such amount in trust for the benefit of the Agent, the
Lenders  and the  Swingline  Lender and shall  forthwith  pay such amount to the
Agent to be credited and applied  against the  Guarantied  Obligations,  whether
matured or unmatured, in accordance with the terms of the Credit Agreement or to
be held by the  Agent as  collateral  security  for any  Guarantied  Obligations
existing.

                                      B-4
<PAGE>

         Section 11. Payments Free and Clear. All sums payable by each Guarantor
hereunder,   whether  of  principal,   interest,  Fees,  expenses,  premiums  or
otherwise,  shall  be paid in  full,  without  set-off  or  counterclaim  or any
deduction or withholding  whatsoever (including any Taxes), and if any Guarantor
is required by Applicable  Law or by a  Governmental  Authority to make any such
deduction or withholding, such Guarantor shall pay to the Agent, the Lenders and
the Swingline Lender such additional amount as will result in the receipt by the
Agent, the Lenders and the Swingline Lender of the full amount payable hereunder
had such deduction or withholding not occurred or been required.

         Section 12. Set-off. In addition to any rights now or hereafter granted
under  any of the  other  Loan  Documents  or  Applicable  Law and not by way of
limitation of any such rights,  each Guarantor  hereby  authorizes the Agent and
each Lender, at any time during the continuance of an Event of Default,  without
any prior notice to such Guarantor or to any other Person, any such notice being
hereby expressly  waived,  but in the case of a Lender subject to receipt of the
prior written consent of the Agent exercised in its sole discretion,  to set off
and to  appropriate  and to apply  any and all  deposits  (general  or  special,
including,  but not  limited  to,  indebtedness  evidenced  by  certificates  of
deposit,  whether  matured or unmatured) and any other  indebtedness at any time
held or owing by the Agent,  such Lender,  or any affiliate of the Agent or such
Lender,  to or for the credit or the  account of such  Guarantor  against and on
account of any of the Guarantied Obligations, although such obligations shall be
contingent or unmatured.  Each Guarantor agrees, to the fullest extent permitted
by  Applicable  Law,  that any  Participant  may  exercise  rights  of setoff or
counterclaim  and other rights with respect to its  participation as fully as if
such  Participant were a direct creditor of such Guarantor in the amount of such
participation.

         Section 13.  Subordination.  Each Guarantor hereby expressly  covenants
and agrees for the benefit of the Agent,  the Lenders and the  Swingline  Lender
that all  obligations  and  liabilities  of the  Borrower to such  Guarantor  of
whatever description, including without limitation, all intercompany receivables
of such Guarantor from the Borrower (collectively, the "Junior Claims") shall be
subordinate and junior in right of payment to all Guarantied Obligations.  If an
Event of Default shall have occurred and be continuing,  then no Guarantor shall
accept any direct or indirect  payment  (in cash,  property  or  securities,  by
setoff or otherwise) from the Borrower on account of or in any manner in respect
of  any  Junior  Claim  until  all  of  the  Guarantied  Obligations  have  been
indefeasibly paid in full.

         Section 14. Avoidance  Provisions.  It is the intent of each Guarantor,
the Agent,  the Lenders and the Swingline  Lender that in any  Proceeding,  such
Guarantor's  maximum  obligation  hereunder  shall  equal,  but not exceed,  the
maximum amount which would not otherwise cause the obligations of such Guarantor
hereunder (or any other  obligations of such Guarantor to the Agent, the Lenders
and  the  Swingline  Lender)  to be  avoidable  or  unenforceable  against  such
Guarantor in such  Proceeding as a result of Applicable Law,  including  without
limitation,  (a) Section 548 of the  Bankruptcy  Code of 1978,  as amended  (the
"Bankruptcy  Code")  and  (b)  any  state  fraudulent   transfer  or  fraudulent
conveyance  act or  statute  applied  in such  Proceeding,  whether by virtue of
Section 544 of the Bankruptcy Code or otherwise. The Applicable Laws under which
the possible avoidance or  unenforceability of the obligations of such Guarantor
hereunder (or any other  obligations of such Guarantor to the Agent, the Lenders
and the  Swingline  Lender)  shall  be  determined  in any such  Proceeding  are
referred to as the "Avoidance

                                      B-5
<PAGE>

Provisions".  Accordingly,  to the extent that the  obligations of any Guarantor
hereunder   would   otherwise  be  subject  to  avoidance  under  the  Avoidance
Provisions, the maximum Guarantied Obligations for which such Guarantor shall be
liable  hereunder  shall be reduced to that amount which,  as of the time any of
the Guarantied  Obligations are deemed to have been incurred under the Avoidance
Provisions,  would not cause the obligations of such Guarantor hereunder (or any
other  obligations of such Guarantor to the Agent, the Lenders and the Swingline
Lender), to be subject to avoidance under the Avoidance Provisions. This Section
is  intended  solely to  preserve  the rights of the Agent,  the Lenders and the
Swingline  Lender  hereunder  to the  maximum  extent  that  would not cause the
obligations  of any  Guarantor  hereunder to be subject to  avoidance  under the
Avoidance Provisions,  and no Guarantor or any other Person shall have any right
or claim under this Section as against the Agent,  the Lenders and the Swingline
Lender that would not  otherwise be available to such Person under the Avoidance
Provisions.

         Section 15. Information.  Each Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition of the Borrower and
the other Guarantors,  and of all other  circumstances  bearing upon the risk of
nonpayment of any of the Guarantied Obligations and the nature, scope and extent
of the risks that such Guarantor assumes and incurs  hereunder,  and agrees that
none of the Agent,  the  Lenders  or the  Swingline  Lender  shall have any duty
whatsoever to advise any Guarantor of information  regarding such  circumstances
or risks.

         Section 16.  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

         Section 17. WAIVER OF JURY TRIAL.

         (a) EACH PARTY  HERETO  ACKNOWLEDGES  THAT ANY  DISPUTE OR  CONTROVERSY
BETWEEN OR AMONG ANY  GUARANTOR,  THE AGENT OR ANY OF THE LENDERS WOULD BE BASED
ON  DIFFICULT  AND COMPLEX  ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND
EXPENSE TO THE PARTIES.  ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE LENDERS,  THE AGENT AND EACH GUARANTOR  HEREBY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR  PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR
TRIBUNAL  IN WHICH AN ACTION MAY BE  COMMENCED  BY OR AGAINST  ANY PARTY  HERETO
ARISING  OUT OF THIS  AGREEMENT  OR ANY OTHER LOAN  DOCUMENT OR BY REASON OF ANY
OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR AMONG THE BORROWER,
THE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE.

         (b) EACH OF THE  GUARANTORS,  THE AGENT AND EACH LENDER  HEREBY  AGREES
THAT THE FEDERAL DISTRICT COURT OF THE SOUTHERN  DISTRICT OF NEW YORK OR, AT THE
OPTION OF THE AGENT,  ANY STATE COURT LOCATED IN NEW YORK, NEW YORK,  SHALL HAVE
JURISDICTION  TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES  BETWEEN OR AMONG ANY
GUARANTOR, THE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY

                                      B-6
<PAGE>

TO THIS AGREEMENT, THE LOANS, THE LETTERS OF CREDIT, THE NOTES OR ANY OTHER LOAN
DOCUMENT OR TO ANY MATTER ARISING HEREFROM OR THEREFROM. EACH GUARANTOR AND EACH
OF THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. EACH PARTY FURTHER WAIVES ANY
OBJECTION  THAT IT MAY NOW OR HEREAFTER  HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT  FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME THE CHOICE OF
FORUM SET FORTH IN THIS SECTION  SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF
ANY  ACTION BY THE AGENT OR ANY  LENDER OR THE  ENFORCEMENT  BY THE AGENT OR ANY
LENDER  OF  ANY  JUDGMENT  OBTAINED  IN  SUCH  FORUM  IN ANY  OTHER  APPROPRIATE
JURISDICTION.

         (c) THE  PROVISIONS OF THIS SECTION HAVE BEEN  CONSIDERED BY EACH PARTY
WITH  THE  ADVICE  OF  COUNSEL  AND  WITH A  FULL  UNDERSTANDING  OF  THE  LEGAL
CONSEQUENCES  THEREOF,  AND SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER
AMOUNTS PAYABLE  HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS AND THE TERMINATION
OF THIS GUARANTY.

         Section 18. Loan  Accounts.  The Agent,  each Lender and the  Swingline
Lender may maintain  books and accounts  setting forth the amounts of principal,
interest  and  other  sums  paid and  payable  with  respect  to the  Guarantied
Obligations,  and in the case of any dispute  relating to any of the outstanding
amount,  payment or receipt of any of the  Guarantied  Obligations or otherwise,
the entries in such books and accounts  shall be deemed prima facie  evidence of
the amounts and other  matters set forth herein.  The failure of the Agent,  any
Lender or the Swingline  Lender to maintain such books and accounts shall not in
any way relieve or discharge any Guarantor of any of its obligations hereunder.

         Section 19. Waiver of Remedies.  No delay or failure on the part of the
Agent, any Lender or the Swingline Lender in the exercise of any right or remedy
it may have against any  Guarantor  hereunder or  otherwise  shall  operate as a
waiver thereof,  and no single or partial  exercise by the Agent,  any Lender or
the  Swingline  Lender of any such right or remedy  shall  preclude any other or
further exercise thereof or the exercise of any other such right or remedy.

         Section 20.  Termination.  This Guaranty shall remain in full force and
effect until indefeasible payment in full of the Guarantied  Obligations and the
other Obligations and the termination or cancellation of the Credit Agreement in
accordance with its terms.

         Section 21. Successors and Assigns.  Each reference herein to the Agent
or the Lenders  shall be deemed to include such Person's  respective  successors
and  assigns  (including,  but not  limited  to,  any  holder of the  Guarantied
Obligations)  in whose favor the  provisions  of this Guaranty also shall inure,
and each  reference  herein to each  Guarantor  shall be deemed to include  such
Guarantor's  successors  and  assigns,  upon whom this  Guaranty  also  shall be
binding.  The Lenders and the  Swingline  Lender  may,  in  accordance  with the
applicable  provisions  of the Credit  Agreement,  assign,  transfer or sell any
Guarantied  Obligation,  or  grant

                                      B-7
<PAGE>

or sell participations in any Guarantied Obligations,  to any Person without the
consent of, or notice to, any Guarantor and without  releasing,  discharging  or
modifying any Guarantor's obligations hereunder.  Each Guarantor hereby consents
to the  delivery by the Agent or any Lender to any Assignee or  Participant  (or
any prospective  Assignee or Participant) of any financial or other  information
regarding the Borrower or any Guarantor. No Guarantor may assign or transfer its
obligations  hereunder to any Person  without the prior  written  consent of all
Lenders and any such  assignment  or other  transfer to which all of the Lenders
have not so consented shall be null and void.

         Section  22.  JOINT AND SEVERAL  OBLIGATIONS.  THE  OBLIGATIONS  OF THE
GUARANTORS HEREUNDER SHALL BE JOINT AND SEVERAL, AND ACCORDINGLY, EACH GUARANTOR
CONFIRMS THAT IT IS LIABLE FOR THE FULL AMOUNT OF THE  "GUARANTIED  OBLIGATIONS"
AND ALL OF THE  OBLIGATIONS  AND  LIABILITIES  OF EACH OF THE  OTHER  GUARANTORS
HEREUNDER.

         Section 23.  Amendments.  This  Guaranty  may not be amended  except in
writing signed by the Requisite Lenders (or all of the Lenders if required under
the terms of the Credit Agreement), the Agent and each Guarantor.

         Section 24. Payments. All payments to be made by any Guarantor pursuant
to this Guaranty shall be made in Dollars, in immediately available funds to the
Agent at the  Principal  Office,  not later than 2:00 p.m. on the date of demand
therefor.

         Section 25.  Notices.  All notices,  requests and other  communications
hereunder  shall be in  writing  (including  facsimile  transmission  or similar
writing) and shall be given (a) to each Guarantor at its address set forth below
its signature  hereto,  (b) to the Agent,  any Lender or the Swingline Lender at
its respective address for notices provided for in the Credit Agreement,  or (c)
as to each such party at such other  address as such party shall  designate in a
written  notice  to the  other  parties.  Each  such  notice,  request  or other
communication  shall  be  effective  (i)  if  mailed,  when  received;  (ii)  if
telecopied,  when  transmitted;  or (iii)  if hand  delivered,  when  delivered;
provided,  however, that any notice of a change of address for notices shall not
be effective until received.

         Section 26. Severability.  In case any provision of this Guaranty shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining  provisions shall not in any way be affected
or impaired thereby.

         Section 27.  Headings.  Section  headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.

         Section 28. Trustees Etc. Not Liable.

         IN THE CASE OF ANY  GUARANTOR  THAT IS A TRUST,  NO  TRUSTEE,  OFFICER,
SHAREHOLDER,  EMPLOYEE OR AGENT OF SUCH GUARANTOR  SHALL BE HELD TO ANY PERSONAL
LIABILITY,  JOINTLY OR SEVERALLY,  FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH
GUARANTOR.  ALL PERSONS DEALING WITH SUCH GUARANTOR, IN ANY WAY, SHALL LOOK ONLY
TO THE ASSETS OF SUCH GUARANTOR FOR THE PAYMENT OF ANY SUM OR THE

                                      B-8
<PAGE>

PERFORMANCE OF ANY OBLIGATION OWING BY SUCH GUARANTOR HEREUNDER.  THE PROVISIONS
OF THIS SECTION SHALL NOT LIMIT ANY OBLIGATIONS OF ANY LOAN PARTY.

         Section 29. Limitation of Liability.

         Neither the Agent nor any Lender, nor any affiliate, officer, director,
employee,  attorney,  or  agent  of the  Agent  or any  Lender,  shall  have any
liability  with respect to, and each  Guarantor  hereby  waives,  releases,  and
agrees  not to sue any of them  upon,  any  claim  for  any  special,  indirect,
incidental,  or  consequential  damages  suffered or incurred by a Guarantor  in
connection with,  arising out of, or in any way related to, this Guaranty or any
of the other Loan  Documents,  or any of the  transactions  contemplated by this
Guaranty,  the  Credit  Agreement  or any  of the  other  Loan  Documents.  Each
Guarantor hereby waives, releases, and agrees not to sue the Agent or any Lender
or  any  of  the  Agent's  or  any  Lender's  affiliates,  officers,  directors,
employees,  attorneys, or agents for punitive damages in respect of any claim in
connection  with,  arising out of, or in any way related to, this Guaranty,  the
Credit Agreement or any of the other Loan Documents,  or any of the transactions
contemplated by Credit Agreement or financed thereby.

         Section 30. Definitions. (a) For the purposes of this Guaranty:

         "Proceeding" means any of the following: (i) a voluntary or involuntary
case  concerning any Guarantor  shall be commenced  under the Bankruptcy Code of
1978, as amended;  (ii) a custodian (as defined in such  Bankruptcy  Code or any
other  applicable  bankruptcy laws) is appointed for, or takes charge of, all or
any  substantial  part  of  the  property  of any  Guarantor;  (iii)  any  other
proceeding  under  any  Applicable  Law,   domestic  or  foreign,   relating  to
bankruptcy, insolvency, reorganization, winding-up or composition for adjustment
of debts,  whether now or  hereafter  in effect,  is  commenced  relating to any
Guarantor;  (iv) any  Guarantor is  adjudicated  insolvent or bankrupt;  (v) any
order of relief or other order  approving any such case or proceeding is entered
by a court  of  competent  jurisdiction;  (vi)  any  Guarantor  makes a  general
assignment for the benefit of creditors;  (vii) any Guarantor shall fail to pay,
or shall  state that it is unable to pay,  or shall be unable to pay,  its debts
generally as they become due;  (viii) any Guarantor  shall call a meeting of its
creditors  with a view to arranging a  composition  or  adjustment of its debts;
(ix) any  Guarantor  shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or (x) any corporate action
shall  be  taken  by any  Guarantor  for the  purpose  of  effecting  any of the
foregoing.

         (b)  Terms  not  otherwise  defined  herein  are used  herein  with the
respective meanings given them in the Credit Agreement.

                            [Signature on Next Page]

                                      B-9
<PAGE>

         IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this
Guaranty as of the date and year first written above.

                             [signed by Guarantors]

                                      B-10
<PAGE>

                                     ANNEX I

                           FORM OF ACCESSION AGREEMENT

         THIS ACCESSION AGREEMENT dated as of ______________, ________, executed
and delivered by ______________,  a ______________  (the "New  Subsidiary"),  in
favor of (a) WACHOVIA BANK, NATIONAL ASSOCIATION,  in its capacity as Agent (the
"Agent") for the Lenders under that certain  Credit  Agreement  dated as of June
27, 2002 (as amended, restated,  supplemented or otherwise modified from time to
time, the "Credit Agreement"), by and among Senior Housing Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the "Lenders"),  the Agent, and the other parties thereto,
and (b) the Lenders and the Swingline Lender.

         WHEREAS,  pursuant to the Credit Agreement,  the Agent, the Lenders and
the  Swingline  Lender have agreed to make  available  to the  Borrower  certain
financial  accommodations  on the terms and  conditions  set forth in the Credit
Agreement;

         WHEREAS, the Borrower owns, directly or indirectly, at least a majority
of the issued and outstanding Equity Interests in the New Subsidiary;

         WHEREAS, the Borrower, the New Subsidiary, and the existing Guarantors,
though  separate  legal  entities,  are mutually  dependent on each other in the
conduct of their  respective  businesses  as an  integrated  operation  and have
determined it to be in their mutual best interests to obtain  financing from the
Agent, the Lenders and the Swingline Lender through their collective efforts;

         WHEREAS,  the New Subsidiary  acknowledges  that it will receive direct
and  indirect  benefits  from the Agent,  the Lenders and the  Swingline  Lender
making such financial  accommodations available to the Borrower under the Credit
Agreement  and,  accordingly,  the New  Subsidiary  is willing to guarantee  the
Borrower's obligations to the Agent, the Lenders and the Swingline Lender on the
terms and conditions contained herein; and

         WHEREAS, the New Subsidiary's  execution and delivery of this Agreement
is a condition to the Agent, the Lenders and the Swingline Lender  continuing to
make such financial accommodations to the Borrower.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are hereby  acknowledged  by the New  Subsidiary,  the New
Subsidiary agrees as follows:

         Section 1. Accession to Guaranty. The New Subsidiary hereby agrees that
it is a "Guarantor"  under that certain  Guaranty  dated as of June 27, 2002 (as
amended,  supplemented,  restated or otherwise  modified from time to time,  the
"Guaranty"), made by each Subsidiary of the Borrower a party thereto in favor of
the Agent, the Lenders and the Swingline Lender and assumes all obligations of a
"Guarantor"  thereunder,  all as if the New  Subsidiary  had  been  an  original
signatory to the Guaranty. Without limiting the generality of the foregoing, the
New Subsidiary hereby:

                                      B-11
<PAGE>

         (a)  irrevocably  and  unconditionally  guarantees the due and punctual
payment and performance when due, whether at stated maturity, by acceleration or
otherwise, of all Guarantied Obligations (as defined in the Guaranty);

         (b) makes to the Agent,  the Lenders and the Swingline Lender as of the
date hereof each of the representations and warranties contained in Section 5 of
the  Guaranty  and  agrees  to be bound by each of the  covenants  contained  in
Section 6 of the Guaranty; and

         (c)  consents and agrees to each provision set forth in the Guaranty.

         SECTION 2.  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED  AND ENFORCED IN  ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

         Section 3. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have their  respective  defined  meanings given them in the
Credit Agreement.

                            [Signatures on Next Page]

                                      B-12
<PAGE>

         IN  WITNESS  WHEREOF,  the New  Subsidiary  has caused  this  Accession
Agreement to be duly  executed and delivered  under seal by its duly  authorized
officers as of the date first written above.

                                         [NEW SUBSIDIARY]

                                         By:
                                            -----------------------------------
                                              Name:
                                                   ----------------------------
                                              Title:
                                                    ---------------------------

                                         Address for Notices:

                                         c/o Senior Housing Properties Trust
                                         400 Centre Street
                                         Newton, Massachusetts 02458
                                         Attention: John R. Hoadley
                                         Telecopy Number:  (617) 796-8370
                                         Telephone Number: (617) 796-8124

Accepted:

 WACHOVIA BANK, NATIONAL ASSOCIATION,
 as Agent

By:
   --------------------------------------------------
     Name:
          -------------------------------------------
     Title:
           ------------------------------------------

                                      B-13
<PAGE>

                                    EXHIBIT C

                           FORM OF NOTICE OF BORROWING

                                                _________, 200_

Wachovia Bank, National Association, as
Agent
One Wachovia Center, NC0172
Charlotte, North Carolina 28288
Attention:  _________________

 Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of June 27,
2002 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time, the "Credit Agreement"), by and among Senior Housing Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the "Lenders"),  Wachovia Bank, National  Association,  as
Agent (the  "Agent"),  and the other  parties  thereto.  Capitalized  terms used
herein, and not otherwise defined herein,  have their respective  meanings given
them in the Credit Agreement.

         1.       Pursuant  to  Section  2.1.(b) of the  Credit  Agreement,  the
                  Borrower hereby requests that the Lenders make Revolving Loans
                  to   the   Borrower   in  an   aggregate   amount   equal   to
                  $_________________.

         2.       The  Borrower  requests  that  such  Revolving  Loans  be made
                  available to the Borrower on __________, 200__ .

         3.       The Borrower  hereby  requests  that the  requested  Revolving
                  Loans all be of the following Type:

                  [Check one box only]

                   / /     Base Rate Loans
                   / /     LIBOR Loans, each with an initial Interest Period for
                           a duration of:

                  [Check one box only]          / /      7 days
                                                / /      30 days
                                                / /      60 days
                                                / /      90 days

         4.       The proceeds of this borrowing of Revolving Loans will be used
                  for the following purpose:

                  __________________________________________________.

         5.       The Borrower  requests that the proceeds of this  borrowing of
                  Revolving   Loans  be  made   available  to  the  Borrower  by
                  _____________________________________.

                                      C-1
<PAGE>

         The Borrower  hereby  certifies to the Agent and the Lenders that as of
the date  hereof  and as of the date of the  making of the  requested  Revolving
Loans and after giving effect thereto, (a) no Default or Event of Default has or
shall  have  occurred  and  be  continuing,  and  (b)  the  representations  and
warranties  made or deemed made by the Borrower and each other Loan Party in the
Loan Documents to which any of them is a party are and shall be true and correct
in all material  respects,  except to the extent that such  representations  and
warranties  expressly  relate  solely to an  earlier  date (in  which  case such
representations  and warranties were true and accurate on and as of such earlier
date) and except for changes in factual circumstances specifically and expressly
permitted under the Credit Agreement. In addition, the Borrower certifies to the
Agent  and the  Lenders  that all  conditions  to the  making  of the  requested
Revolving Loans  contained in Article V. of the Credit  Agreement will have been
satisfied at the time such Revolving Loans are made.

         If notice of the requested  borrowing of Revolving Loans was previously
given by telephone,  this notice is to be considered the written confirmation of
such telephone notice required by Section 2.1(b) of the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Borrowing as of the date first written above.

                                        SENIOR HOUSING PROPERTIES TRUST

                                       By:
                                          -------------------------------------
                                            Name:
                                                 ------------------------------
                                            Title:
                                                  -----------------------------

                                      C-2

<PAGE>
                                    EXHIBIT D

                         FORM OF NOTICE OF CONTINUATION

                              ______________, 200__

Wachovia Bank, National Association, as
 Agent
One Wachovia Center, NC0172
Charlotte, North Carolina 28288
Attention:  _________________

 Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of June 27,
2002 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time, the "Credit Agreement"), by and among Senior Housing Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the "Lenders"),  Wachovia Bank, National  Association,  as
Agent (the  "Agent"),  and the other  parties  thereto.  Capitalized  terms used
herein, and not otherwise defined herein,  have their respective  meanings given
them in the Credit Agreement.

         Pursuant to Section 2.8. of the Credit  Agreement,  the Borrower hereby
requests a Continuation of a borrowing of Loans under the Credit Agreement,  and
in  that  connection   sets  forth  below  the  information   relating  to  such
Continuation as required by such Section of the Credit Agreement:

         1.       The  proposed  date of such  Continuation  is  ______________,
                  ____.

         2.       The  aggregate  principal  amount  of  Loans  subject  to  the
                  requested  Continuation  is  $__________  and  was  originally
                  borrowed by the Borrower on _________, 200_.

         3.       The  portion  of  such   principal   amount  subject  to  such
                  Continuation is $_______.

         4.       The current  Interest  Period for each of the Loans subject to
                  such Continuation ends on _______________, 200_.

         5.       The duration of the new Interest Period for each of such Loans
                  or portion thereof subject to such Continuation is:

                  [Check one box only]               / /      7 days
                                                     / /      30 days
                                                     / /      60 days
                                                     / /      90 days

         The Borrower  hereby  certifies to the Agent and the Lenders that as of
the date hereof,  as of the proposed  date of the  requested  Continuation,  and
after giving effect to such Continuation,  no Default or Event of Default has or
shall have occurred and be continuing.

                                      D-1
<PAGE>

         If  notice  of the  requested  Continuation  was  given  previously  by
telephone,  this notice is to be  considered  the written  confirmation  of such
telephone notice required by Section 2.8. of the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Continuation as of the date first written above.

                                      SENIOR HOUSING PROPERTIES TRUST

                                      By:
                                         --------------------------------------
                                           Name:
                                                -------------------------------
                                           Title:
                                                 ------------------------------

                                      D-2

<PAGE>
                                    EXHIBIT E

                          FORM OF NOTICE OF CONVERSION

                            _________________, 200__

Wachovia Bank, National Association, as
 Agent
One Wachovia Center, NC0172
Charlotte, North Carolina 28288
Attention:  _________________

 Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of June 27,
2002 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time, the "Credit Agreement"), by and among Senior Housing Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the "Lenders"),  Wachovia Bank, National  Association,  as
Agent (the  "Agent"),  and the other  parties  thereto.  Capitalized  terms used
herein, and not otherwise defined herein,  have their respective  meanings given
them in the Credit Agreement.

         Pursuant to Section 2.9, of the Credit  Agreement,  the Borrower hereby
requests a Conversion  of a borrowing of Loans of one Type into Loans of another
Type under the Credit  Agreement,  and in that  connection  sets forth below the
information  relating to such  Conversion  as  required  by such  Section of the
Credit Agreement:

         1.       The proposed date of such Conversion is __________, 200_.

         2.       The Loans to be Converted pursuant hereto are currently:

                  [Check one box only]             / /      Base Rate Loans
                                                   / /      LIBOR Loans

         3.       The  aggregate  principal  amount  of  Loans  subject  to  the
                  requested   Conversion  is  $__________   and  was  originally
                  borrowed by the Borrower on _____________, 200_.

         4.       The  portion  of  such   principal   amount  subject  to  such
                  Conversion is $__________.

         5.       The amount of such Loans to be so Converted is to be converted
                  into Loans of the following Type:

                  [Check one box only]

                            / /  Base Rate Loans

                            / /  LIBOR  Loans,  each  with an  initial  Interest
                                 Period for a duration of:

                                      E-1
<PAGE>

                  [Check one box only]      / /      7 days
                                            / /      30 days
                                            / /      60 days
                                            / /      90 days

         The Borrower  hereby  certifies to the Agent and the Lenders that as of
the date hereof and as of the date of the requested  Conversion and after giving
effect  thereto,  (a) no Default or Event of Default has or shall have  occurred
and be continuing,  and (b) the  representations  and warranties  made or deemed
made by the  Borrower  and each other Loan Party in the Loan  Documents to which
any of them is a party  are and  shall  be  true  and  correct  in all  material
respects,  except  to  the  extent  that  such  representations  and  warranties
expressly  relate solely to an earlier date (in which case such  representations
and warranties were true and accurate on and as of such earlier date) and except
for changes in factual circumstances  specifically and expressly permitted under
the Credit Agreement.

         If  notice  of  the  requested   Conversion  was  given  previously  by
telephone,  this notice is to be  considered  the written  confirmation  of such
telephone notice required by Section 2.9. of the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Conversion as of the date first written above.

                                       SENIOR HOUSING PROPERTIES TRUST

                                       By:
                                          -------------------------------------
                                            Name:
                                                 ------------------------------
                                            Title:
                                                  -----------------------------

                                      E-2

<PAGE>

                                    EXHIBIT F

                      FORM OF NOTICE OF SWINGLINE BORROWING

                             __________________, __

Wachovia Bank, National Association, as
 Agent
One Wachovia Center, NC0172
Charlotte, North Carolina 28288
Attention:  _________________

Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of June 27,
2002 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time, the "Credit Agreement"), by and among Senior Housing Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the "Lenders"),  Wachovia Bank, National  Association,  as
Agent (the  "Agent"),  and the other  parties  thereto.  Capitalized  terms used
herein, and not otherwise defined herein,  have their respective  meanings given
them in the Credit Agreement.

         1.       Pursuant  to  Section  2.2.(b) of the  Credit  Agreement,  the
                  Borrower  hereby  requests  that the  Swingline  Lender make a
                  Swingline   Loan  to  the  Borrower  in  an  amount  equal  to
                  $___________.

         2.       The  Borrower  requests  that  such  Swingline  Loan  be  made
                  available to the Borrower on ___________, 200_.

         3.       The  proceeds  of this  Swingline  Loan  will be used  for the
                  following purpose:

                  __________________________________________________.

         4.       The Borrower requests that the proceeds of such Swingline Loan
                  be    made     available     to    the     Borrower    by

                  __________________________________________________.

         The Borrower hereby  certifies to the Agent,  the Swingline  Lender and
the  Lenders  that as of the date  hereof,  as of the date of the  making of the
requested  Swingline  Loan, and after making such Swingline Loan, (a) no Default
or Event of Default has or shall have  occurred and be  continuing,  and (b) the
representations  and  warranties  made or deemed made by the  Borrower  and each
other Loan Party in the Loan  Documents  to which any of them is a party are and
shall be true and correct in all  material  respects,  except to the extent that
such  representations and warranties  expressly relate solely to an earlier date
(in which case such representations and warranties were true and accurate on and
as of such  earlier  date) and  except  for  changes  in  factual  circumstances
specifically and expressly  permitted under the Credit  Agreement.  In addition,
the Borrower  certifies to the Agent and the Lenders that all  conditions to the
making of

<PAGE>

the requested  Swingline  Loan  contained in Article V. of the Credit  Agreement
will have been satisfied at the time such Swingline Loan is made.

         If  notice  of the  requested  borrowing  of this  Swingline  Loan  was
previously  given by  telephone,  this  notice is to be  considered  the written
confirmation of such telephone  notice required by Section 2.2.(b) of the Credit
Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Swingline Borrowing as of the date first written above.

                                       SENIOR HOUSING PROPERTIES TRUST

                                       By:
                                          -------------------------------------
                                            Name:
                                                 ------------------------------
                                            Title:
                                                  -----------------------------

                                      F-2

<PAGE>
                                    EXHIBIT G

                             FORM OF SWINGLINE NOTE

$25,000,000.00                                                   June 27, 2002

         FOR VALUE RECEIVED, the undersigned, SENIOR HOUSING PROPERTIES TRUST, a
Maryland real estate investment trust (the  "Borrower"),  hereby promises to pay
to the order of WACHOVIA BANK, NATIONAL  ASSOCIATION (the "Swingline Lender") to
its address at One Wachovia Center, NC0172, Charlotte,  North Carolina 28288, or
at such other address as may be specified in writing by the Swingline  Lender to
the  Borrower,  the  principal  sum of  TWENTY-FIVE  MILLION AND NO/100  DOLLARS
($25,000,000.00)  (or such  lesser  amount as shall equal the  aggregate  unpaid
principal amount of Swingline Loans made by the Swingline Lender to the Borrower
under the Credit Agreement),  on the dates and in the principal amounts provided
in the Credit  Agreement,  and to pay  interest on the unpaid  principal  amount
owing hereunder, at the rates and on the dates provided in the Credit Agreement.

         The date,  amount of each  Swingline  Loan,  and each  payment  made on
account of the principal  thereof,  shall be recorded by the Swingline Lender on
its books and,  prior to any  transfer of this Note,  endorsed by the  Swingline
Lender on the schedule  attached hereto or any  continuation  thereof,  provided
that the  failure  of the  Swingline  Lender  to make any  such  recordation  or
endorsement  shall not affect the  obligations of the Borrower to make a payment
when due of any amount owing under the Credit  Agreement or hereunder in respect
of the Swingline Loans.

         This Note is the  Swingline  Note  referred to in the Credit  Agreement
dated as of June 27,  2002 (as  amended,  restated,  supplemented  or  otherwise
modified from time to time, the "Credit Agreement"),  by and among the Borrower,
the financial  institutions party thereto and their assignees under Section 12.5
thereof (the "Lenders"),  Wachovia Bank, National Association, as Agent, and the
other  parties  thereto,  and  evidences  Swingline  Loans made to the  Borrower
thereunder.  Terms  used  but not  otherwise  defined  in  this  Note  have  the
respective meanings assigned to them in the Credit Agreement.

         The Credit  Agreement  provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Swingline
Loans upon the terms and conditions specified therein.

         THIS NOTE SHALL BE GOVERNED BY, AND  CONSTRUED IN  ACCORDANCE  WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED,  AND TO BE FULLY
PERFORMED, IN SUCH STATE.

         The Borrower hereby waives presentment for payment,  demand,  notice of
demand, notice of non-payment,  protest, notice of protest and all other similar
notices.

         Time is of the essence for this Note.

                                      G-1
<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  has executed and delivered this
Swingline Note under seal as of the date first written above.

                                   SENIOR HOUSING PROPERTIES TRUST

                                   By:
                                      -----------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------

                                   Attest:
                                          -------------------------------------
                                            Name:
                                                 ------------------------------
                                            Title:
                                                  -----------------------------

                                   [CORPORATE SEAL]

                                      G-2

<PAGE>

                           SCHEDULE OF SWINGLINE LOANS

         This Note  evidences  Swingline  Loans made under the  within-described
Credit Agreement to the Borrower,  on the dates and in the principal amounts set
forth  below,  subject to the payments and  prepayments  of principal  set forth
below:
                         Principal                       Unpaid
                          Amount        Amount Paid      Principal    Notation
Date of Loan             of Loan        or Prepaid        Amount       Made By
------------             -------        ----------        ------       -------

                                      G-3
<PAGE>
                                    EXHIBIT H

                             FORM OF REVOLVING NOTE

$________________                                       ________________, 200_

         FOR VALUE RECEIVED, the undersigned, SENIOR HOUSING PROPERTIES TRUST, a
Maryland real estate investment trust (the  "Borrower"),  hereby promises to pay
to the order of  _________________________  (the "Lender"),  in care of Wachovia
Bank,  National  Association,  as Agent (the  "Agent") to, One Wachovia  Center,
NC0172,  Charlotte,  North  Carolina  28288,  or at such other address as may be
specified  in  writing  by the  Agent  to the  Borrower,  the  principal  sum of
________________  AND ____/100 DOLLARS  ($___________) (or such lesser amount as
shall equal the aggregate unpaid principal amount of Revolving Loans made by the
Lender to the Borrower under the Credit Agreement (as herein  defined)),  on the
dates and in the principal amounts provided in the Credit Agreement,  and to pay
interest on the unpaid principal amount owing hereunder, at the rates and on the
dates provided in the Credit Agreement.

         The date,  amount  of each  Revolving  Loan  made by the  Lender to the
Borrower,  and each payment made on account of -the principal thereof,  shall be
recorded  by the Lender on its books and,  prior to any  transfer  of this Note,
endorsed  by the  Lender on the  schedule  attached  hereto or any  continuation
thereof, provided that the failure of the Lender to make any such recordation or
endorsement  shall not affect the  obligations of the Borrower to make a payment
when due of any amount owing under the Credit  Agreement or hereunder in respect
of the Revolving Loans made by the Lender.

         This  Note is one of the  Revolving  Notes  referred  to in the  Credit
Agreement  dated as of June 27,  2002 (as  amended,  restated,  supplemented  or
otherwise modified from time to time, the "Credit Agreement'),  by and among the
Borrower,  the financial  institutions  party thereto and their  assignees under
Section 12.5 thereof (the "Lenders"),  the Agent, and the other parties thereto.
Capitalized  terms used herein,  and not otherwise  defined  herein,  have their
respective meanings given them in the Credit Agreement.

         The Credit  Agreement  provides for the acceleration of the maturity of
this Note upon the  occurrence of certain  events and for  prepayments  of Loans
upon the terns and conditions specified therein.

         Except as permitted by Section 12.5.(d) of the Credit  Agreement,  this
Note may not he assigned by the Lender to any other Person.

         THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED,  AND TO BE FULLY
PERFORMED, IN SUCH STATE.

         The Borrower hereby waives presentment for payment,  demand,  notice of
demand, notice of non-payment,  protest, notice of protest and all other similar
notices.

         Time is of the essence for this Note.

                                      H-1
<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  has executed and delivered this
Revolving Note under seal as of the date first written above.

                                         SENIOR HOUSING PROPERTIES TRUST

                                         By:
                                            -----------------------------------
                                              Name:
                                                   ----------------------------
                                              Title:
                                                    ---------------------------

                                         Attest:
                                                -------------------------------
                                                  Name:
                                                       ------------------------
                                                  Title:
                                                        -----------------------

                                         [CORPORATE SEAL]

                                      H-2
<PAGE>

                                            SCHEDULE OF REVOLVING LOANS

         This Note  evidences  Revolving  Loans made under the  within-described
Credit Agreement to the Borrower,  on the dates and in the principal amounts set
forth  below,  subject to the payments and  prepayments  of principal  set forth
below:

                         Principal                       Unpaid
                          Amount        Amount Paid      Principal    Notation
Date of Loan             of Loan        or Prepaid        Amount       Made By
------------             -------        ----------        ------       -------

                                      H-3
<PAGE>
                                   EXHIBIT I-1

                 FORM OF OPINION OF COUNSEL TO THE LOAN PARTIES

                             [LETTERHEAD OF COUNSEL]

                                                          June ___, 2002

Wachovia Bank, National Association, as Agent
for the Lenders under the Credit
Agreement referred to below
One Wachovia Center, NC0172
Charlotte, North Carolina 28288

The Additional Addresses set
forth on Schedule 1 hereto

 Ladies and Gentlemen:

         This opinion is delivered to you pursuant to Section  5.1(a)(iv) of the
Credit Agreement dated as of June 27, 2002 (the "Credit Agreement") by and among
Senior Housing  Properties Trust, a real estate investment trust organized under
the laws of the State of Maryland (the  "Borrower"),  the Lenders party thereto,
Wachovia Bank, National Association, as Agent, and the other parties thereto. We
have acted as counsel  for the  Borrower  and each of the  Guarantors  listed on
Schedule  II  hereto  (collectively  with  Borrower,   the  "Loan  Parties")  in
connection  with the Credit  Agreement and the other Loan  Documents  identified
below.  Capitalized terms used in this opinion, unless otherwise defined herein,
shall have the meanings assigned thereto in the Credit Agreement.

         For purposes of the opinions expressed below, we have examined executed
counterparts of:

         (i)      the Credit Agreement;

         (ii)     the Revolving Notes;

         (iii)    the Swingline Note; and

         (iv)     the Guaranty.

The Credit  Agreement,  the Revolving Notes, the Swingline Note and the Guaranty
are collectively referred to herein as the "Loan Documents".

         In  addition,  we  leave  examined  the  originals  or  copies  of  the
declaration of trust,  by-laws,  limited liability company operating  agreements
and  limited  partnership  agreements,   as  applicable,   of  each  Loan  Party
(collectively,  the  "Organizational  Documents"  for such Loan Party),  certain
resolutions of the board of trustees or other  governing body of each Loan Party
and  such  other  records,  agreements  and  instruments  of the  Loan  Parties,
certificates  of public

                                     I-1-1
<PAGE>

officials  and of officers  of the Loan  Parties  and such other  documents  and
records, and such matters of law, as we have deemed necessary as a basis for the
opinions hereinafter expressed.

         In connection with this opinion, we have assumed the genuineness of all
signatures,  the legal  capacity of natural  persons,  the  authenticity  of all
documents  submitted to us as originals  and the  conformity to the originals of
all documents  submitted to us as copies,  which facts we have not independently
verified. As to various facts material to the opinions set forth herein, we have
relied without independent verification upon factual representations made by the
Borrower in the Credit Agreement, upon certificates of public officials and upon
facts certified to us by officers of the Loan Parties, as the case may be.

         For purposes of the opinions expressed herein, we have assumed that (i)
each  Lender and Titled  Agent,  each Loan Party  organized  under the laws of a
jurisdiction  other than the State of Delaware  and each other party (other than
Loan  Parties  organized  under the laws of the State of  Delaware)  to the Loan
Documents and to all other documents,  agreements and instruments examined by us
(A) are  corporations or other entities  validly  existing under the laws of the
jurisdiction of its  organization and (B) have all requisite power and authority
(corporate  and  other) and have  taken all  necessary  action to enter into and
perform all of its obligations under the Loan Documents or such other documents,
agreements and instruments to which they are a party and (ii) each Loan Document
and each such  other  document,  agreement  and  instrument  are and will be the
valid, binding and enforceable obligations of each party thereto, other than the
Loan Parties.  We express no opinion upon the application of any federal,  state
or local  statute,  law, rule or regulation  (including  without  limitation any
Federal or state banking, truth-in-lending or other similar credit statute, law,
rule or regulation) to the authority of any Lender or Titled Agent to enter into
and to carry out its respective obligations under the Loan Documents.

         Statements herein as to the truth of certain matters "to our knowledge"
or as to matters  "known to us" and similar  statements  refer to the  knowledge
consciously held by the individual  lawyers in our firm who have participated in
the  negotiation  and  drafting  of  the  Loan  Documents  without   independent
investigation  and do not  necessarily  refer  to such  knowledge  as  might  be
acquired by a review of all of our files with respect to matters  involving  the
Loan Parties or by interviews with all present and former members and associates
of our firm. Without limiting the generality of the foregoing, please be advised
that in connection  with the opinions  expressed in paragraphs 6 and 8 below, we
have not conducted  any searches of dockets of any courts or other  Governmental
Authorities.

         Barry M.  Portnoy  is a  trustee  of the  Borrower,  a  trustee  and/or
director of the Guarantors and a director and 50% indirect  beneficial  owner of
REIT Management & Research LLC ("RMR"),  a Delaware  limited  liability  company
which is the Borrower's  advisor.  Jennifer B. Clark is an officer of several of
the Guarantors and of RMR. Mr. Portnoy and Ms. Clark are retired members of this
firm.  Inquiries  concerning  matters  which may be known to Mr.  Portnoy or Ms.
Clark should be directed to them.

         This   opinion  is  limited  to  the  laws  of  the   Commonwealth   of
Massachusetts,  the laws of the State of New York (with  respect to paragraphs 3
and 9  only),  the  Revised  Uniform  Limited  Partnership  Act and the  Limited
Liability  Company  Act of the State of  Delaware  and the  federal

                                     I-1-2
<PAGE>

laws of the United  States of America and we express no opinions with respect to
the law of any other jurisdiction.

         We express  no opinion as to the effect of the law of any  jurisdiction
other  than the State of New York  wherein  any  Lender  Party may be located or
wherein  enforcement of the Credit  Agreement or any of the other Loan Documents
may  be  sought  that  limits  the  rates  of  interest  legally  chargeable  or
collectible.

         Our  opinions  set  forth in  paragraph  1 below  with  respect  to the
existence  or good  standing  of the  Borrower  and the  Guarantors  in  various
jurisdictions,  are based solely on  certificates  to that effect  issued by the
Secretaries  of State of such  jurisdictions  and  heretofore  delivered  to the
Agent.

         Our  opinions  set forth  below are  subject to the  following  general
qualifications:

                  (a) Our opinion  set forth in  paragraph 3 below is subject to
         (i) the  effect of  applicable  bankruptcy,  insolvency,  receivership,
         reorganization,   moratorium,   liquidation   or  other   similar  laws
         (including,   without  limitation,  all  laws  relating  to  fraudulent
         transfers)  relating to or affecting  creditors' rights generally,  and
         (ii)  general  principles  of equity  (including  the  availability  of
         equitable remedies and further including, without limitation,  concepts
         of   materiality,   reasonableness,   good  faith  and  fair  dealing),
         regardless  of whether  considered in a proceeding in equity or at law.
         Further,  pursuant  to  such  equitable  principles,  Section  3 of the
         Guaranty, which provides, among other things, that the liability of the
         Guarantors  shall not be affected by  amendments to or other changes in
         the Loan Documents,  might be enforceable  only to the extent that such
         amendments or other changes were not so material as to constitute a new
         contract among the parties.

                  (b) We express no opinion as to provisions  granting indemnity
         or rights of  contribution  (to the extent  limited by federal or state
         securities laws or public policy).

                  (c) We express no  opinion as to (i) any  provision  of a Loan
         Document to the effect that  provisions  therein may only be amended or
         waived in writing,  to the extent that an oral agreement modifying such
         provisions  has been entered  into,  or (ii) any  provision of any Loan
         Document  for  the  payment  of an  increased  rate of  interest  after
         maturity  or a  default,  late  charges  or  similar  payments  (or any
         guaranty  thereof)  to the extent  such  interest,  charges or payments
         constitute a penalty or for the payment of interest  after  judgment in
         excess of any applicable statutory rate (or any guaranty thereof).

                  (d) The  enforceability  of the Loan  Documents may be limited
         (i) by general  principles  of contract law that where less than all of
         an agreement is enforceable,  the balance is enforceable  only when the
         unenforceable  portion is not an essential part of the agreed exchange,
         and  (ii)  by  the  exercise  of  judicial  discretion   regarding  the
         determination  of damages and  entitlement to attorneys' fees and other
         costs.

                  (e) We express no opinion as to whether any of the  Guarantors
         may guarantee or otherwise become liable for  indebtedness  incurred by
         the  Borrower  or  another  Loan

                                     I-1-3
<PAGE>

         Party  except to the  extent  that the  guaranteeing  Guarantor  may be
         determined to have benefited  from the incurrence of such  indebtedness
         by such other  entity,  and we  express  no  opinion as to whether  the
         amount of such benefit may be  determined by any measure other than the
         extent to which  proceeds  of the  indebtedness  incurred by such other
         entity are directly or indirectly  made available to such Guarantor for
         its corporate or analogous  purposes.  For purposes of this opinion, we
         have  relied  on  the   certification  of  each  Loan  Party  that  the
         transactions  contemplated  by the  Loan  Documents  are  necessary  or
         convenient  to the conduct,  promotion or attainment of the business of
         such Loan Party.

                  (f) We  express no  opinion  as to (i)  whether a state  court
         outside of the State of New York or a Federal  court  would give effect
         to the choice of New York law provided for in the Loan  Documents or to
         the  provisions of Section  12.4(b) of the Credit  Agreement or Section
         17(b) of the  Guaranty (or any  comparable  provision of any other Loan
         Document),  or (ii) the  provisions  of  Section  12.4(b) of the Credit
         Agreement or Section 17(b) of the Guaranty (or any comparable provision
         of any other Loan  Document)  to the extent  they relate to the subject
         matter jurisdiction of any Federal court.

         Based upon and subject to the foregoing, we are of the opinion that:

         1. Each  Guarantor  which,  as set forth on  Schedule  II hereto,  is a
limited partnership or limited liability company organized under the laws of the
State of  Delaware  (i) is validly  existing  and in good  standing as a limited
partnership or limited  liability company (as the case may be) under the laws of
the  State of  Delaware,  as the case may be,  and (ii) has the  partnership  or
limited liability company (as the case may be) power to execute and deliver, and
to perform its obligations under, the Guaranty,  and to own and use its material
assets and conduct its business in all material respects as presently conducted.

         2. The execution and delivery of the Guaranty by each  Guarantor  which
is organized under the laws of the State of Delaware and the performance by such
Guarantor  of its  obligations  thereunder  have  been  duly  authorized  by all
necessary  partnership or limited  liability company (as the case may be) action
on the part of such Guarantor.

         3. Each Loan Party has duly executed and  delivered the Loan  Documents
to which it is a party, and each Loan Document is a valid and binding obligation
of each Loan Party which is a party thereto,  enforceable against each such Loan
Party in accordance with its terms.

         4. The  execution  and delivery by each of the Loan Parties of the Loan
Documents  to which it is a party and the  consummation  by such Loan Parties of
the transactions  thereunder do not, and if each of the Loan Parties were now to
perform its  obligations  under such Loan Documents in accordance with the terms
thereof, such performance would not, result in any material:

                  (a) violation of such Loan Party's  respective  Organizational
         Documents;

                  (b) violation of any existing  federal,  Massachusetts  or New
         York constitution or statute or any existing federal,  Massachusetts or
         New York  governmental  regulation  or rule to which such Loan Party or
         its assets are subject;

                                     I-1-4
<PAGE>

                  (c)  breach  or  violation  of or  default  under  any  of the
         agreements,  instruments,  indentures  or  other  documents  listed  on
         Schedule  6.1 (g) or Schedule  6.1(h) to the Credit  Agreement to which
         such Loan Patty is a party or by which such Loan Party or its assets is
         bound;

                  (d) creation or imposition of any contractual lien or security
         interest  in, on or against  the assets of any Loan Party  under any of
         the agreements,  instruments,  indentures or other documents  listed on
         Schedule  6.1(g) or Schedule  6.1(h) to the Credit  Agreement  to which
         such  Loan  Party  is a  party  or by  which  such  Loan  Patty  or its
         respective assets is bound; or

                  (e) violation of any judicial or administrative  decree, writ,
         judgment  or order to which,  to our  knowledge,  any Loan Party or its
         respective assets are subject.

         5. The execution,  delivery and performance by each of the Loan Parties
of each Loan Document to which it is a party,  and the  consummation by the Loan
Parties  of the  transactions  thereunder,  do not  and  will  not  require  any
registration  with,  consent or approval  of, or notice to, or other  action to,
with or by, any  Governmental  Authority  of the United  States of America,  the
Commonwealth of  Massachusetts  or the State of New York or by any  Governmental
Authority  of the State of  Delaware  pursuant to the  Revised  Uniform  Limited
Partnership Act or the Limited Liability Company Act of the State of Delaware.

         6. To our knowledge  there is no (i)  undischarged  judgment  which has
been entered against any Loan Party,  the satisfaction of which, or (ii) action,
suit,  proceeding  or  investigation  before or by any  federal or state  court,
agency  or other  governmental  or  administrative  board or  body,  pending  or
threatened,  against any of the Loan Parties in which an  unfavorable  decision,
ruling or finding,  would materially adversely affect the business or properties
or financial condition of the Loan Parties,  considered as a consolidated whole,
or the validity or enforceability of any of the Loan Documents.

         7. None of the Loan Parties is, or,  after giving  effect to the Loans,
if made on the date hereof,  would be,  subject to  regulation  under the Public
Utility  Holding  Company Act of 1935,  the Federal Power Act or the  Investment
Company Act of 1940, each as amended, or to any federal or Massachusetts statute
or  regulation  specifically  limiting  its  ability to incur  indebtedness  for
borrowed money.

         8. Assuming that Borrower applies the proceeds of the Loans as provided
in the Credit Agreement, the transactions  contemplated by the Loan Documents do
not violate  the  provisions  of  Regulations  T, U or X of the Federal  Reserve
Board.

         9.  The  consideration  to be paid  to the  Lender  for  the  financial
accommodations  to be  provided  to the  Loan  Parties  pursuant  to the  Credit
Agreement does not violate any law of the State of New York relating to interest
and usury.

         This opinion is furnished to you solely for your benefit in  connection
with the consummation of the  transactions  contemplated by the Credit Agreement
and may not be relied upon by any other person or entity, other than an Assignee
of a  Lender,  or for any other  purpose  without  our  express,  prior  written
consent.  All of the  opinions  set forth  herein  are  rendered  as of

                                     I-1-5
<PAGE>

the date hereof,  and we assume no obligation to update such opinions to reflect
any facts or  circumstances  which may  hereafter  come to our  attention or any
changes in the law which may hereafter occur.

                                           Very truly yours,

                                     I-1-6
<PAGE>
                                   EXHIBIT I-2

                   FORM OF OPINION OF SPECIAL MARYLAND COUNSEL

                             [LETTERHEAD OF COUNSEL]

                                                          June ___, 200__

Wachovia Bank, National Association, as Agent
for the Lenders under the Credit
Agreement referred to below
One Wachovia Center, NC5604
301 South College Street
Charlotte, North Carolina 28288

The Lenders set forth on Schedule 1 hereto

Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109

         Re:      Senior Housing Properties Trust: $250,000,000 Revolving Credit
                  Facility

 Ladies and Gentlemen:

         We have served as Maryland counsel for Senior Housing Properties Trust,
a Maryland real estate investment trust (the "Borrower"), CCC Financing I Trust,
CCC Ohio Healthcare Trust, CCC Pueblo Norte Trust and SPT-Michigan Trust, each a
Maryland   business  trust  and  a  wholly  owned  subsidiary  of  the  Borrower
(collectively,  the "Business Trust Guarantors"),  HRES1 Properties Trust, HRES2
Properties  Trust,  SNH/CSL  Properties Trust,  SPTGEN Properties Trust,  SPTIHS
Properties  Trust,  SPTMISC  Properties Trust,  SPTMNR Properties Trust,  SPTMRT
Properties  Trust and SPTSUN II  Properties  Trust,  each a Maryland real estate
investment  trust and a wholly owned  subsidiary of the Borrower  (collectively,
the "REIT  Guarantors"  and together  with the Business  Trust  Guarantors,  the
"Guarantors"), in connection with certain matters of Maryland law arising out of
the Credit Agreement, dated as of June 27, 2002 (the "Credit Agreement"), by and
among  the  Borrower,  Wachovia  Securities,  Inc.,  as Lead  Arranger  and Book
Manager,  Wachovia  Bank,  National  Association,  as Agent (the  "Agent"),  ING
Capital LLC, as Syndication  Agent,  UBS AG, Stamford  Branch,  as Documentation
Agent,  and  each  of the  financial  institutions  party  thereto,  as  Lenders
(collectively,  the  "Lenders"),  pursuant  to  which  the  Lenders  are  making
available to the Borrower a $250,000,000 revolving credit facility,  including a
$50,000,000   letter  of  credit   subfacility   and  a  $25,000.000   swingline
subfacility. This firm did not participate in the negotiation or drafting of the
Loan Documents (as defined herein).

         This  opinion is being  delivered  to you in  connection  with  Section
5.1(a)(iv) of the Credit Agreement. Unless otherwise defined herein, capitalized
terms used herein have the meanings given to them in the Credit Agreement.

                                     I-2-1
<PAGE>

         In  connection  with  our   representation  of  the  Borrower  and  the
Guarantors  (collectively  referred to herein as the "Loan  Parties"),  and as a
basis for the opinion  hereinafter  set forth,  we have examined  originals,  or
copies certified or otherwise  identified to our satisfaction,  of the following
documents (hereinafter collectively referred to as the "Documents"):

         1. The  Articles of  Amendment  and  Restatement  of the  Borrower,  as
amended and supplemented,  certified as of a recent date by the State Department
of Assessments and Taxation of Maryland (the "SDAT");

         2. The Bylaws of the  Borrower,  as amended,  certified  as of the date
hereof by an officer of the Borrower;

         3. The Declaration of Trust of each of the REIT  Guarantors,  certified
as of a recent date by the SDAT;

         4. The  Certificate of Trust of each of the Business Trust  Guarantors,
certified as of a recent date by the SDAT;

         5. The  Declaration  of Trust or Amended and  Restated  Declaration  of
Trust, as applicable, of each of the Business Trust Guarantors,  certified as of
the date hereof by an officer of each of the Business Trust Guarantors;

         6.  The  Bylaws  of each of the  Guarantors,  certified  as of the date
hereof by an officer of each of the Guarantors;

         7. A  certificate  as of a  recent  date  of the  SDAT  as to the  good
standing of the Borrower;

         8. A  certificate  as of a  recent  date  of the  SDAT  as to the  good
standing of each of the Guarantors;

         9. Resolutions  adopted by the Board of Trustees of the Borrower,  or a
duly  authorized  committee  thereof,  relating to (a) the  organization  of the
Borrower and (b) the authorization of the execution, delivery and performance by
the Borrower of the Loan  Documents to which it is a party,  certified as of the
date hereof by an officer of the Borrower;

         10.  Resolutions  adopted  by the  Board  of  Trustees  of  each of the
Guarantors  relating to (a) the  organization  of each of the Guarantors and (b)
the execution,  delivery and performance by the Guarantors of the Loan Documents
to which each of the  Guarantors is a party,  certified as of the date hereof by
an officer of each of the Guarantors;

         11. The Credit Agreement, certified as of the date hereof by an officer
of the Borrower;

         12. ______ Revolving  Notes,  dated as of June 27, 2002 (the "Revolving
Notes"),  made by the  Borrower  to various  Lenders,  certified  as of the date
hereof by an officer of the Borrower;

                                     I-2-2
<PAGE>

         13.  The  Swingline  Note,  dated as of June 27,  2002 (the  "Swingline
Note'),  made  by the  Borrower  to  Wachovia  Bank,  National  Association,  as
Swingline Lender, certified as of the date hereof by an officer of the Borrower;

         14.  The  Guaranty,  dated as of June 27,  2002  (the  "Guaranty,"  and
together with the Credit Agreement,  the Revolving Notes and the Swingline Note,
collectively  referred to as the "Loan  Documents"),  made by the  Guarantors in
favor of the  Agent  and the  Lenders,  certified  as of the date  hereof  by an
officer of each of the Guarantors;

         15. A Certificate executed by an officer of the Borrower and an officer
of each of the Guarantors, dated as of the date hereof; and

         16. Such other  documents  and matters as we have deemed  necessary  or
appropriate to express the opinion set forth below,  subject to the assumptions,
limitations and qualifications stated herein.

         In  expressing  the  opinion  set  forth  below,  we have  assumed  the
following:

         1. Each individual executing any of the Documents, whether on behalf of
such individual or another person, is legally competent to do so.

         2. Each individual  executing any of the Documents on behalf of a party
(other than the Loan Parties) is duly authorized to do so.

         3. Each of the parties  (other than the Loan Parties)  executing any of
the Documents has duly and validly  executed and delivered each of the Documents
to which such  party is a  signatory,  and such  party's  obligations  set forth
therein are legal,  valid and binding and are enforceable in accordance with all
stated terms.

         4. Any  Documents  submitted  to us as  originals  are  authentic.  Any
Documents  submitted  to us as certified or  photostatic  copies  conform to the
original  documents.  All  signatures on all  Documents are genuine.  All public
records  reviewed or relied  upon by us or on our behalf are true and  complete.
All  representations,  warranties,  statements and information  contained in the
Documents are true and complete.  There has been no oral or written modification
of or  amendment  to any of the  Documents,  and there has been no waiver of any
provision  of any of the  Documents,  by action or  omission  of the  parties or
otherwise.

         The phrase  "known to us" is limited to the actual  knowledge,  without
independent  inquiry,  of the  lawyers  at Our  firm who  have  performed  legal
services in connection with the issuance of this Opinion.

         Based upon the foregoing,  and subject to the assumptions,  limitations
and qualifications stated herein, it is our opinion that:

         1. The Borrower is a real estate  investment  trust duly  organized and
validly existing under and by virtue of the laws of the State of Maryland and is
in good  standing  with the SDAT.  The  Borrower  has trust power to execute and
deliver, and to perform its obligations under, the Loan Documents to which it is
a party,  and to conduct the business of owning and

                                     I-2-3
<PAGE>

leasing  senior  apartments,   congregate  care  communities,   assisted  living
properties and nursing homes.

         2. Each of the REIT Guarantors is a real estate  investment  trust duly
organized and validly  existing  under and by virtue of the laws of the State of
Maryland and is in good standing with the SDAT.  Each of the REIT Guarantors has
trust power to execute and deliver,  and to perform its obligations  under,  the
Loan Documents to which it is a party, and to conduct the business of owning and
leasing  senior  apartments,   congregate  care  communities,   assisted  living
properties and nursing homes.

         3. Each of the  Business  Trust  Guarantors  is a  business  trust duly
organized and validly  existing  under and by virtue of the laws of the State of
Maryland  and is in good  standing  with the SDAT.  Each of the  Business  Trust
Guarantors  has  trust  power  to  execute  and  deliver,  and  to  perform  its
obligations under, the Loan Documents to which it is a party, and to conduct the
business of owning and leasing senior  apartments,  congregate care communities,
assisted living properties and nursing homes.

         4. Each of the Loan  Parties  has duly  authorized  the  execution  and
delivery of the Loan  Documents  to which it is a party and the  performance  of
such Loan  Party's  obligations  thereunder.  Each of the Loan  Parties has duly
executed and, so far as is known to us,  delivered,  the Loan Documents to which
it is a party.

         5. Neither (a) the  execution  and delivery by the Borrower of the Loan
Documents  to which it is a party  nor (b) the  performance  of its  obligations
thereunder will violate any Maryland law or any existing  Maryland  governmental
regulation  or rule to which the  Borrower  or its  assets  are  subject  or the
Declaration of Trust or Bylaws of the Borrower.

         6. Neither (a) the execution and delivery by each Guarantor of the Loan
Documents  to which it is a party  nor (b) the  performance  of its  obligations
thereunder will violate any Maryland law or any existing  Maryland  governmental
regulation  or rule to which such  Guarantor  or its  assets are  subject or the
Declaration of Trust or Bylaws of such Guarantor.

         7. No consent or approval  of,  registration  with,  notice to or other
action by, any Maryland governmental authority which has not been obtained, made
or waived,  if any, is required for any Loan Party's  execution and delivery of,
or  performance  of its  obligations  under the Loan  Documents to which it is a
party.

         The foregoing  opinion is limited to the substantive  laws of the State
of Maryland and we do not express any opinion  herein  concerning any other law.
We  express no  opinion  as to the  applicability  or effect of federal or state
securities laws,  including the securities laws of the State of Maryland,  or as
to federal or state laws regarding  fraudulent  transfers.  We note that Section
12.12 of the  Credit  Agreement  provides  that the  Credit  Agreement  shall be
governed by the laws of the State of New York.  To the extent that any matter as
to which our opinion is  expressed  herein  would be governed by the laws of any
jurisdiction other than the State of Maryland,  we do not express any opinion on
such matter. Our opinion expressed in paragraphs 5 and 6 above is based upon our
consideration of only those laws, governmental regulations or rules of the State
of  Maryland,  which,  in  our  experience,   are  normally  applicable  to  the

                                     I-2-4
<PAGE>

transactions of the type contemplated  under the Credit  Agreement.  Our opinion
expressed  in  paragraph 7 above is based upon our  consideration  of only those
consents,  approvals,  registrations,  notices or other actions  required by the
State of Maryland, if any, which, in our experience,  are normally applicable to
the  transactions  of the type  contemplated  under the  Credit  Agreement.  The
opinion expressed herein is subject to the effect of any judicial decision which
may  permit  the  introduction  of parol  evidence  to  modify  the terms or the
interpretation of agreements.

                  The  opinion  expressed  herein  is  limited  to  the  matters
specifically  set forth herein and no other opinion shall be inferred beyond the
matters  expressly stated. We assume no obligation to supplement this opinion if
any  applicable  law changes  after the date hereof or if we become aware of any
fact that might change the opinion expressed herein after the date hereof.

                  This opinion is being furnished to you solely for your benefit
in connection with the Credit Agreement.  Accordingly, it may not be relied upon
by, quoted in any manner to, or delivered (except delivery by the Lenders (a) to
regulatory  authorities,  (b) in connection with any litigation involving any of
the Loan  Documents or this opinion or (c) as otherwise  required by law) to any
other person or entity  without,  in each instance,  our prior written  consent,
except  that a  financial  institution  that is an  Assignee  (as defined in the
Credit  Agreement) of a Lender may rely on this opinion as if addressed to it on
the date hereof.

                                        Very truly yours,

<PAGE>
                                    EXHIBIT J

                         FORM OF COMPLIANCE CERTIFICATE

                           ___________________, 200___

Wachovia Bank, National Association
One Wachovia Center, NC0172
Charlotte, North Carolina 28288
Attention: _________________

Each of the Lenders Party to the Credit
  Agreement referred to below

Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of June 27,
2002 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time, the "Credit Agreement"), by and among Senior Housing Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the "Lenders"),  Wachovia Bank, National  Association,  as
Agent  (the  "Agent")  and the other  parties  thereto.  Capitalized  terms used
herein, and not otherwise defined herein,  have their respective  meanings given
them in the Credit Agreement.

         Pursuant  to Section  8.3.  of the Credit  Agreement,  the  undersigned
hereby certifies to the Agent and the Lenders as follows:

         (1) The undersigned is the chief financial officer of the Borrower.

         (2) The  undersigned has examined the books and records of the Borrower
and has conducted such other  examinations and  investigations as are reasonably
necessary to provide this Compliance Certificate.

         (3) No  Default  or Event of  Default  exists [if such is not the case,
specify  such  Default or Event of Default and its nature,  when it occurred and
whether it is continuing  and the steps being taken by the Borrower with respect
to such event, condition or failure].

         (4) The  representations  and  warranties  made or  deemed  made by the
Borrower  and the other  Loan  Parties in the Loan  Documents  to which any is a
party,  are true and  correct  in all  material  respects  on and as of the date
hereof except to the extent that such  representations and warranties  expressly
relate  solely to an  earlier  date (in  which  case  such  representations  and
warranties shall have been true and accurate on and as of such earlier date) and
except for changes in factual circumstances specifically and expressly permitted
under the Credit Agreement.

         (5) Attached hereto as Schedule 1 are reasonably detailed  calculations
establishing whether or not the Borrower and its Subsidiaries were in compliance
with the  covenants  contained in Sections 9.1 through 9.3 and 9.6 of the Credit
Agreement.

                                      J-1
<PAGE>

         (6) Attached hereto as Schedule 2 is a list of all Unencumbered  Senior
Housing Assets and  Unencumbered  Mortgage Notes;  and all  Unencumbered  Senior
Housing Assets and  Unencumbered  Mortgage Notes so listed fully qualify as such
under the  applicable  criteria for inclusion as a  Unencumbered  Senior Housing
Asset or Unencumbered Mortgage Note.

         (7)  Attached  hereto  as  Schedule  3 is  information,  to the  extent
obtained by tenants, indicating the underlying occupancy, Property Net Operating
Income and EBITDAR Ratio for each Senior  Housing Asset or Senior  Housing Asset
Pool, as the case may be, for the fiscal quarter ended _____________, 200_.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as of
the date first above written.

                                          ________________________________
                                          Name: _____________________________
                                          Title:_____________________________

                                      J-2

<PAGE>

                                   SCHEDULE I

                          [Calculations to be Attached]

                                      J-3

<PAGE>

                                   SCHEDULE 2

                  [Information Relating to Senior Housing Asset
                  or Senior Housing Asset Pool to be attached]

                                      J-4SUPPLEMENTAL INDENTURE NO. 10

                                 by and between

                              HRPT PROPERTIES TRUST

                                       and

                       STATE STREET BANK AND TRUST COMPANY

                              as of April 10, 2002

             SUPPLEMENTAL TO THE INDENTURE DATED AS OF JULY 9, 1997

                      ------------------------------------

                              HRPT PROPERTIES TRUST
                           6.95% Senior Notes due 2012

<PAGE>
         This SUPPLEMENTAL INDENTURE NO. 10 (this "Supplemental Indenture") made
and entered into as of April 10, 2002 between HRPT PROPERTIES  TRUST, a Maryland
real estate  investment trust (the  "Company"),  and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, as Trustee (the "Trustee"),

                                WITNESSETH THAT:

         WHEREAS,  the Company and the Trustee have  executed  and  delivered an
Indenture, dated as of July 9, 1997 (the "Indenture"), relating to the Company's
issuance, from time to time, of various series of debt securities; and

         WHEREAS,  the Company has determined to issue debt securities  known as
its 6.95% Senior Notes due 2012; and

         WHEREAS,  the Indenture  provides that certain terms and conditions for
each series of debt securities issued by the Company thereunder may be set forth
in an indenture supplemental to the Indenture;

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

                                    ARTICLE 1

                                  DEFINED TERMS

         Section 1.1 The following  definitions  supplement,  and, to the extent
inconsistent with, replace the definitions in Section 101 of the Indenture:

         "Acquired  Debt"  means Debt of a Person (i)  existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection  with the  acquisition
of assets from such Person, in each case, other than Debt incurred in connection
with,  or in  contemplation  of,  such  Person  becoming  a  Subsidiary  or such
acquisition.  Acquired  Debt shall be deemed to be  incurred  on the date of the
related  acquisition  of assets from any Person or the date the acquired  Person
becomes a Subsidiary.

         "Annual Debt Service" as of any date means the maximum  amount which is
expensed  in any  12-month  period for  interest  on Debt of the Company and its
Subsidiaries.

         "Business  Day" means any day other than a Saturday  or Sunday or a day
on which  banking  institutions  in the City of New York or in the city in which
the Corporate Trust Office of the Trustee is located, are required or authorized
to close.

         "Capital  Stock" means,  with respect to any Person,  any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests  (however  designated)  of such Person and any rights (other than debt
securities  convertible  into or exchangeable  for capital  stock),  warrants or
options to purchase any thereof.

         "Consolidated  Income  Available for Debt Service" for any period means
Earnings from Operations of the Company and its Subsidiaries  plus amounts which
have been deducted,  and
<PAGE>
                                      -2-

minus amounts which have been added,  for the following  (without  duplication):
(i) interest on Debt of the Company and its  Subsidiaries,  (ii)  provision  for
taxes of the Company and its Subsidiaries based on income, (iii) amortization of
debt discount and deferred financing costs, (iv) provisions for gains and losses
on properties and property, depreciation and amortization, (v) the effect of any
noncash charge  resulting from a change in accounting  principles in determining
Earnings  from  Operations  for such  period and (vi)  amortization  of deferred
charges.

         "Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness  of the Company or any Subsidiary,  whether or not  contingent,  in
respect of (i)  borrowed  money or  evidenced  by bonds,  notes,  debentures  or
similar  instruments,  (ii)  indebtedness  for  borrowed  money  secured  by any
Encumbrance existing on property owned by the Company or any Subsidiary,  to the
extent of the lesser of (x) the amount of  indebtedness  so secured  and (y) the
fair  market  value of the  property  subject  to such  Encumbrance,  (iii)  the
reimbursement  obligations,  contingent  or otherwise,  in  connection  with any
letters of credit  actually  issued  (other  than  letters  of credit  issued to
provide credit  enhancement or support with respect to other indebtedness of the
Company or any  Subsidiary  otherwise  reflected as Debt  hereunder)  or amounts
representing  the  balance  deferred  and  unpaid of the  purchase  price of any
property  or  services,  except any such  balance  that  constitutes  an accrued
expense or trade payable,  or all  conditional  sale  obligations or obligations
under  any  title  retention  agreement,   (iv)  the  principal  amount  of  all
obligations  of the  Company  or any  Subsidiary  with  respect  to  redemption,
repayment or other  repurchase of any  Disqualified  Stock,  or (v) any lease of
property by the Company or any  Subsidiary  as lessee  which is reflected on the
Company's  consolidated  balance sheet as a capitalized lease in accordance with
GAAP,  to the  extent,  in the case of items of  indebtedness  under (i) through
(iii) above,  that any such items (other than letters of credit) would appear as
a liability on the Company's consolidated balance sheet in accordance with GAAP,
and also includes,  to the extent not otherwise included,  any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor,  guarantor or
otherwise  (other than for  purposes of  collection  in the  ordinary  course of
business), Debt of another Person (other than the Company or any Subsidiary) (it
being  understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary  whenever  the  Company  or such  Subsidiary  shall  create,  assume,
guarantee or otherwise become liable in respect thereof).

         "Disqualified  Stock"  means,  with respect to any Person,  any Capital
Stock of such Person which by the terms of such  Capital  Stock (or by the terms
of any security into which it is convertible or for which it is  exchangeable or
exercisable),  upon the  happening of any event or  otherwise  (i) matures or is
mandatorily  redeemable,  pursuant to a sinking  fund  obligation  or  otherwise
(other than  Capital  Stock which is  redeemable  solely in exchange  for common
stock or shares),  (ii) is convertible  into or  exchangeable or exercisable for
Debt or  Disqualified  Stock, or (iii) is redeemable at the option of the holder
thereof,  in whole or in part (other  than  Capital  Stock  which is  redeemable
solely in exchange for common stock or shares),  in each case on or prior to the
stated maturity of the Notes.

         "Earnings from Operations" for any period means net earnings  excluding
gains  and  losses on sales of  investments,  extraordinary  items and  property
valuation  losses,  as reflected in the financial  statements of the Company and
its  Subsidiaries  for  such  period,  determined  on a  consolidated  basis  in
accordance with GAAP.

         "Encumbrance"  means any  mortgage,  lien,  charge,  pledge or security
interest of any kind.
<PAGE>
                                      -3-

         "Make-Whole  Amount" means, in connection with any optional  redemption
or  accelerated  payment of any notes prior to January 1, 2012,  the excess,  if
any, of (i) the  aggregate  present  value as of the date of such  redemption or
accelerated  payment of each dollar of principal  being redeemed or paid and the
amount of interest  (exclusive of interest  accrued to the date of redemption or
accelerated  payment)  that would have been payable in respect of such dollar if
such  redemption  or  accelerated  payment  had been made on  January  1,  2012,
determined by discounting, on a semiannual basis, such principal and interest at
the  Reinvestment  Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of  acceleration is made) from
the  respective  dates on which  such  principal  and  interest  would have been
payable if such  redemption or  accelerated  payment had been made on January 1,
2012,  over (ii) the aggregate  principal  amount of the Notes being redeemed or
paid. In the case of any redemption or accelerated  payment of notes on or after
January  1, 2012,  the  Make-Whole  Amount  means  zero.  For  purposes  of this
Supplemental Indenture and the Notes, references in the Indenture to the payment
of the principal (and premium, if any) and interest on the Notes shall be deemed
to include the payment of the  Make-Whole  Amount,  if any, due upon  redemption
with respect to the Notes.  The  Make-Whole  Amount shall be  calculated  by the
Company and set forth in an Officer's  Certificate delivered to the Trustee, and
the Trustee shall be entitled to rely on said Officer's Certificate.

         "Notes" means the Company's  6.95% Senior Notes due 2012,  issued under
this Supplemental  Indenture and the Indenture,  as amended or supplemented from
time to time.

         "Reinvestment  Rate"  means a rate per annum  equal to the sum of 0.50%
(fifty  one-hundredths of one percent) plus the yield on treasury  securities at
constant  maturity under the heading "Week Ending"  published in the Statistical
Release  under the  caption  "Treasury  Constant  Maturities"  for the  maturity
(rounded to the nearest month)  corresponding  to the remaining life to maturity
(which,  in the case of maturities  corresponding  to the principal and interest
due on the notes at their  maturity,  shall be deemed to be January 1, 2012), as
of the payment  date of the  principal  being  redeemed or paid.  If no maturity
exactly  corresponds to such maturity,  yields for the two published  maturities
most closely  corresponding to such maturity shall be calculated pursuant to the
immediately  preceding  sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line  basis,  rounding in each of
such relevant  periods to the nearest  month.  For purposes of  calculating  the
Reinvestment  Rate, the most recent  Statistical  Release published prior to the
date of determination of the Make-Whole Amount shall be used.

         "Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.

         "Statistical   Release"  means  the  statistical   release   designated
"H.15(519)"  or any  successor  publication  which is  published  weekly  by the
Federal  Reserve System and which  establishes  yields on actively traded United
States  government  securities  adjusted  to  constant  maturities  or,  if such
statistical release is not published at the time of any determination under this
Supplemental  Indenture,  then any publicly  available  source of similar market
data which shall be designated by the Company.

          "Subsidiary" means any corporation or other entity of which a majority
of (i) the voting power of the voting equity  securities or (ii) the outstanding
equity interests of which are owned,

<PAGE>
                                      -4-

directly or indirectly,  by the Company or one or more other Subsidiaries of the
Company.  For the purposes of this definition,  "voting equity securities" means
equity securities having voting power for the election of directors,  whether at
all times or only so long as no senior  class of security  has such voting power
by reason of any contingency.

         "Total  Assets" as of any date  means the sum of (i) the  Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined  in  accordance  with GAAP (but  excluding  accounts  receivable  and
intangibles).

         "Total  Unencumbered  Assets" means the sum of (i) those  Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its  Subsidiaries  not subject to an Encumbrance
for borrowed money  determined in accordance  with GAAP (but excluding  accounts
receivable and intangibles).

         "Undepreciated  Real  Estate  Assets"  as of any  date  means  the cost
(original cost plus capital  improvements)  of real estate assets of the Company
and its  Subsidiaries  on  such  date,  before  depreciation  and  amortization,
determined on a consolidated basis in accordance with GAAP.

         "Unsecured  Debt"  means  Debt  which  is  not  secured  by  any of the
properties of the Company or any Subsidiary.

                                    ARTICLE 2

                               TERMS OF THE NOTES

         Section 2.1 Pursuant to Section 301 of the  Indenture,  the Notes shall
have the following terms and conditions:

         (a) Title;  Aggregate  Principal Amount; Form of Notes. The Notes shall
be Registered Securities under the Indenture and shall be known as the Company's
"6.95%  Senior  Notes due  2012."  The Notes  will be  limited  to an  aggregate
principal amount of $200,000,000,  subject to the right of the Company to reopen
such series for issuances of additional  securities of such series and except as
provided  in  this  Section  and in  Section  306 of the  Indenture.  The  Notes
(together   with  the  Trustee's   certificate  of   authentication)   shall  be
substantially in the form of Exhibit A hereto,  which is hereby  incorporated in
and made a part of this Supplemental Indenture.

         The Notes will be issued in the form of one or more  registered  global
securities  without coupons  ("Global Notes") that will be deposited with, or on
behalf of, The Depository Trust Company  ("DTC"),  and registered in the name of
DTC's nominee,  Cede & Co. Except under the  circumstance  described  below, the
Notes will not be issuable in definitive form.  Unless and until it is exchanged
in whole or in part for the individual notes represented  thereby, a Global Note
may not be  transferred  except  as a whole by DTC to a  nominee  of DTC or by a
nominee of DTC to DTC or another  nominee of DTC or by DTC or any nominee of DTC
to a successor depositary or any nominee of such successor.

         So long as DTC or its nominee is the registered owner of a Global Note,
DTC or such nominee,  as the case may be, will be  considered  the sole owner or
holder of the Notes  represented

<PAGE>
                                      -5-

by such Global Note for all purposes under this Supplemental  Indenture.  Except
as described below, owners of beneficial interest in Notes evidenced by a Global
Note will not be entitled to have any of the  individual  Notes  represented  by
such Global Note  registered in their names,  will not receive or be entitled to
receive  physical  delivery of any such Notes in definitive form and will not be
considered   the  owners  or  holders   thereof  under  the  Indenture  or  this
Supplemental Indenture.

         If DTC is at any time  unwilling,  unable or  ineligible to continue as
depositary and a successor  depositary is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global Note or
Global Notes  representing such Notes. In addition,  the Company may at any time
and in its sole  discretion,  subject  to certain  limitations  set forth in the
Indenture,  determine not to have any of such Notes  represented  by one or more
Global Notes and, in such event, will issue individual Notes in exchange for the
Global Note or Global Notes  representing the Notes.  Individual Notes so issued
will be issued in denominations of $1,000 and integral multiples thereof.

         (b) Interest and Interest  Rate. The Notes will bear interest at a rate
of 6.95% per annum,  from April 10, 2002 (or,  in the case of Notes  issued upon
the reopening of this series of Notes,  from the date  designated by the Company
in connection with such reopening) or from the  immediately  preceding  Interest
Payment  Date to which  interest  has been paid or duly  provided  for,  payable
semiannually on each April 1 and October 1, commencing  October 1, 2002 (each of
which shall be an "Interest  Payment  Date"),  to the Persons in whose names the
Notes are  registered  in the Security  Register at the close of business on the
day falling 14 calendar days (whether or not a Business Day) next preceding such
Interest Payment Date (each, a "Regular Record Date").

         (c) Principal Repayment;  Currency. The stated maturity of the Notes is
April 1,  2012,  provided,  however,  the Notes may be earlier  redeemed  at the
option of the Company as provided in paragraph (d) below.  The principal of each
Note  payable  on its  maturity  date  shall be paid  against  presentation  and
surrender  thereof  at  the  Corporate  Trust  Office  of the  Trustee,  located
initially at Two Avenue de Lafayette,  Boston, Massachusetts 02111, in such coin
or currency  of the United  States of America as at the time of payment is legal
tender for the  payment of public or private  debts.  The  Company  will not pay
Additional Amounts (as defined in the Indenture) on the Notes.

         (d)  Redemption at the Option of the Company;  Acceleration.  The Notes
will be subject to redemption at any time at the option of the Company, in whole
or in part,  upon not less than 30 nor more than 60 days'  notice to each Holder
of Notes to be redeemed at its address appearing in the Security Register,  at a
price equal to the sum of (i) the principal  amount of the Notes being redeemed,
plus accrued and unpaid  interest to but  excluding  the  applicable  Redemption
Date, plus (ii) the Make-Whole  Amount,  if any. If the notes are redeemed on or
after  January 1, 2012,  the  redemption  price will not include the  Make-Whole
Amount. Upon the acceleration of the Notes in accordance with Section 502 of the
Indenture,  if such acceleration  occurs prior to January 1, 2012, the principal
amount of the Notes, plus accrued and unpaid interest thereon and the Make-Whole
Amount shall become due and payable immediately.

         (e) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or  transmitted by
any standard form of telecommunication. Notices to the Company shall be directed
to it at 400 Centre Street, Newton,

<PAGE>
                                      -6-

Massachusetts  02458,  Attention:  President;  notices to the  Trustee  shall be
directed  to it  at  Two  Avenue  de  Lafayette,  Boston,  Massachusetts  02111,
Attention:  Corporate Trust Department,  Re: HRPT Properties Trust 6.95 % Senior
Notes due  2012;  or as to  either  party,  at such  other  address  as shall be
designated by such party in a written notice to the other party.

         (f) Global  Note  Legend.  Each  Global  Note shall bear the  following
legend on the face thereof:

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
         THE DEPOSITORY TRUST COMPANY,  A NEW YORK CORPORATION  ("DTC"),  TO THE
         ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE OR PAYMENT,
         AND ANY  CERTIFICATE  ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
         IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED  REPRESENTATIVE  OF
         DTC (AND ANY  PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER  ENTITY AS
         IS REQUESTED BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC),  ANY TRANSFER,
         PLEDGE OR OTHER USE HEREOF FOR VALUE OR  OTHERWISE  BY OR TO ANY PERSON
         IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
         INTEREST HEREIN.

         (g)  Applicability  of Discharge,  Defeasance  and Covenant  Defeasance
Provisions.  The  Discharge,  Defeasance and Covenant  Defeasance  provisions in
Article Fourteen of the Indenture will apply to the Notes.

                                    ARTICLE 3

                              ADDITIONAL COVENANTS

         Section 3.1 In addition  to the  covenants  of the Company set forth in
Article Ten of the Indenture, for the benefit of the holders of the Notes:

         (a) Limitations on Incurrence of Debt.

                  (i) The Company will not,  and will not permit any  Subsidiary
         to,  incur  any  Debt  if,  immediately  after  giving  effect  to  the
         incurrence of such  additional Debt and the application of the proceeds
         thereof,  the aggregate principal amount of all outstanding Debt of the
         Company and its  Subsidiaries  on a  consolidated  basis  determined in
         accordance  with GAAP is greater than 60% of the sum  ("Adjusted  Total
         Assets") of (without  duplication)  (A) the Total Assets of the Company
         and its  Subsidiaries as of the end of the calendar  quarter covered in
         the Company's  Annual  Report on Form 10-K, or the Quarterly  Report on
         Form 10-Q, as the case may be, most recently  filed with the Securities
         and Exchange  Commission (or, if such filing is not permitted under the
         Securities Exchange Act of 1934, as amended, with the Trustee) prior to
         the  incurrence of such  additional  Debt and (B) the purchase price of
         any real estate assets or mortgages receivable acquired, and the amount
         of any securities  offering  proceeds received (to the extent that such
         proceeds  were not used to  acquire  real  estate  assets or  mortgages
         receivable  or used to reduce Debt),  by the Company or any

<PAGE>
                                      -7-

         Subsidiary  since the end of such  calendar  quarter,  including  those
         proceeds  obtained in connection with the incurrence of such additional
         Debt.

                  (ii)  In  addition  to  the  foregoing   limitations   on  the
         incurrence  of Debt,  the  Company  will not,  and will not  permit any
         Subsidiary  to,  incur any Secured  Debt if,  immediately  after giving
         effect  to the  incurrence  of such  additional  Secured  Debt  and the
         application of the proceeds thereof,  the aggregate principal amount of
         all outstanding  Secured Debt of the Company and its  Subsidiaries on a
         consolidated basis is greater than 40% of Adjusted Total Assets.

                  (iii)  In  addition  to  the  foregoing   limitations  on  the
         incurrence  of Debt,  the  Company  will not,  and will not  permit any
         Subsidiary  to,  incur  any Debt if the  ratio of  Consolidated  Income
         Available  for Debt  Service to the Annual  Debt  Service  for the four
         consecutive  fiscal  quarters most recently  ended prior to the date on
         which such  additional Debt is to be incurred shall have been less than
         1.5 to 1.0, on a pro forma basis after giving effect thereto and to the
         application of the proceeds therefrom, and calculated on the assumption
         that (A) such Debt and any other Debt  incurred  by the Company and its
         Subsidiaries  since the first day of such  four-quarter  period and the
         application  of the proceeds  therefrom,  including to refinance  other
         Debt,  had occurred at the beginning of such period;  (B) the repayment
         or  retirement  of any other Debt by the Company  and its  Subsidiaries
         since the first date of such  four-quarter  period  had been  repaid or
         retired at the  beginning of such period  (except  that, in making such
         computation,  the amount of Debt under any  revolving  credit  facility
         shall be  computed  based upon the average  daily  balance of such Debt
         during such period);  (C) in the case of Acquired Debt or Debt incurred
         in  connection  with  any  acquisition  since  the  first  day of  such
         four-quarter  period,  the related  acquisition  had occurred as of the
         first day of such period with  appropriate  adjustments with respect to
         such acquisition being included in such pro forma calculation;  and (D)
         in the case of any  acquisition  or  disposition  by the Company or its
         Subsidiaries  of any  asset or group of  assets  since the first day of
         such four-quarter period, whether by merger, stock purchase or sale, or
         asset purchase or sale, such  acquisition or disposition or any related
         repayment  of Debt had occurred as of the first day of such period with
         the  appropriate  adjustments  with  respect  to  such  acquisition  or
         disposition being included in such pro forma  calculation.  If the Debt
         giving rise to the need to make the foregoing  calculation or any other
         Debt incurred after the first day of the relevant  four-quarter  period
         bears interest at a floating rate then, for purposes of calculating the
         Annual Debt  Service,  the interest rate on such Debt shall be computed
         on a pro forma basis as if the average  interest  rate which would have
         been in effect during the entire such four-quarter  period had been the
         applicable rate for the entire such period.

         (b)  Maintenance  of Total  Unencumbered  Assets.  The  Company and its
Subsidiaries  will maintain at all times Total  Unencumbered  Assets of not less
than 200% of the aggregate outstanding principal amount of the Unsecured Debt of
the Company and its Subsidiaries on a consolidated basis.

<PAGE>
                                      -8-

                                    ARTICLE 4

                          ADDITIONAL EVENTS OF DEFAULT

         Section 4.1. For purposes of this Supplemental Indenture and the Notes,
in addition to the Events of Default set forth in Section 501 of the  Indenture,
it shall also  constitute  an "Event of  Default"  if a default  under any bond,
debenture,  note or other evidence of indebtedness  of the Company  (including a
default with respect to any other series of securities),  or under any mortgage,
indenture or other  instrument of the Company under which there may be issued or
by which there may be secured or evidenced any  indebtedness  for money borrowed
by the Company (or by any  Subsidiary,  the  repayment  of which the Company has
guaranteed or for which the Company is directly responsible or liable as obligor
or  guarantor)  having an aggregate  principal  amount  outstanding  of at least
$20,000,000, whether such indebtedness now exists or shall hereafter be incurred
or created,  which default shall have resulted in such indebtedness  becoming or
being  declared  due and payable  prior to the date on which it would  otherwise
have become due and payable,  without such indebtedness  having been discharged,
or such acceleration  having been rescinded or annulled,  within a period of ten
days after there shall have been given,  by registered or certified mail, to the
Company by the  Trustee or to the  Company  and the Trustee by the Holders of at
least  25% in  principal  amount of the  outstanding  Notes,  a  written  notice
specifying such default and requiring the Company to cause such  indebtedness to
be discharged or cause such acceleration to be rescinded or annulled and stating
that such notice is a "Notice of Default" hereunder.

         Section  4.2.  Notwithstanding  any  provisions  to the contrary in the
Indenture,  upon  any  acceleration  of  the  Notes  under  Section  502  of the
Indenture,  the amount immediately due and payable in respect of the Notes shall
equal the Outstanding principal amount thereof, plus accrued interest,  plus, if
such acceleration occurs prior to January 1, 2012, the Make-Whole Amount.

                                    ARTICLE 5

                                  EFFECTIVENESS

         This  Supplemental  Indenture shall be effective for all purposes as of
the date and time this Supplemental Indenture has been executed and delivered by
the Company and the Trustee in accordance with Article Nine of the Indenture. As
supplemented  hereby,  the Indenture is hereby  confirmed as being in full force
and effect.

                                    ARTICLE 6

                                  MISCELLANEOUS

         Section 6.1 In the event any provision of this  Supplemental  Indenture
shall be held invalid or unenforceable  by any court of competent  jurisdiction,
such holding shall not invalidate or render  unenforceable  any other  provision
hereof or any provision of the Indenture.

         Section 6.2 To the extent that any terms of this Supplemental Indenture
or the Notes are inconsistent with the terms of the Indenture, the terms of this
Supplemental Indenture or the Notes shall govern and supersede such inconsistent
terms.
<PAGE>
                                      -9-

         Section  6.3  This  Supplemental  Indenture  shall be  governed  by and
construed in accordance with the laws of The Commonwealth of Massachusetts.

         Section  6.4 This  Supplemental  Indenture  may be  executed in several
counterparts,  each  of  which  shall  be an  original  and all of  which  shall
constitute but one and the same instrument.

<PAGE>
                                      -10-

         IN WITNESS  WHEREOF,  the  Company  and the  Trustee  have  caused this
Supplemental  Indenture  to be  executed  as an  instrument  under seal in their
respective corporate names as of the date first above written.

                                            HRPT PROPERTIES TRUST

                                            By: /s/ John C. Popeo
                                                Name:  John C. Popeo
                                                Title: Chief Financial Officer,
                                                       Treasurer and Secretary

                                            STATE STREET BANK AND TRUST COMPANY,
                                            as Trustee

                                            By: /s/ Jacklyn Thompson
                                                Name:  Jacklyn Thompson
                                                Title: Assistant Vice President

<PAGE>
                                                                       EXHIBIT A

                                  FORM OF NOTE

                                 [Face of Note]

                           6.95% Senior Note due 2012

No. ______
$_________

                              HRPT PROPERTIES TRUST

promises to pay to ______________________________________ or registered assigns,
the  principal  sum of  _____________________________________  on April 1, 2012,
subject to the terms set forth on the  reverse of this Note and the terms of the
Indenture referred to therein.

Interest Payment Dates:  each April 1 and October 1, commencing October 1, 2002.
Record  Dates:  the day falling 14 calendar  days prior to any Interest  Payment
Date.

CUSIP No.:

                                            HRPT PROPERTIES TRUST

                                            By:____________________________
                                                 Name:
                                                 Title:

Attest:____________________________
[SEAL]

                          CERTIFICATE OF AUTHENTICATION

Dated:

This is one of the Notes referred to in the within-mentioned Indenture:

                                            STATE STREET BANK AND TRUST COMPANY,
                                            as Trustee

                                            By:______________________________
                                                Authorized Officer

                                      A-1
<PAGE>

             [THE FOLLOWING CONSTITUTES THE REVERSE OF THE SECURITY]

                              HRPT PROPERTIES TRUST

                           6.95% Senior Note due 2012

         Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.

         1. Interest.  HRPT Properties  Trust, a Maryland real estate investment
trust (the "Company"),  promises to pay interest on the principal amount of this
Note at the rate and in the manner specified below.

         The Company shall pay in cash interest on the principal  amount of this
Note at the rate per annum of 6.95%. The Company will pay interest semi-annually
in arrears on each April 1 and October 1,  commencing on October 1, 2002, or, if
any such day is not a Business  Day (as defined in the  Indenture),  on the next
succeeding  Business Day (each an "Interest Payment Date"), to Holders of record
on the day falling 14 calendar days immediately  preceding such Interest Payment
Date (whether or not a Business Day).

         Interest will be computed on the basis of a 360-day year  consisting of
twelve 30-day  months.  Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 10, 2002.

         2.  Method of  Payment.  The  Company  will pay  interest  on the Notes
(except defaulted  interest) to the Persons who are registered  Holders of Notes
at the close of business on the record date next preceding the Interest  Payment
Date,  even if such Notes are  canceled  after such record date and on or before
such Interest Payment Date. The Company will pay principal and interest in money
of the United  States that at the time of payment is legal tender for payment of
public and private debts. The Company,  however, may pay principal,  premium, if
any, and interest by check payable in such money.  It may mail an interest check
to a Holder's registered address.

         3. Indenture. The Company issued the Notes under an Indenture, dated as
of July 9, 1997, and a Supplemental  Indenture No. 10 thereto, dated as of April
10, 2002 (collectively,  the "Indenture"),  between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 as in effect on
the date of the Indenture.  The Notes are subject to all such terms, and Holders
of the Notes are referred to the  Indenture and such Act for a statement of such
terms. The terms of the Indenture shall govern any  inconsistencies  between the
Indenture and the Notes.  The Notes are  unsecured  general  obligations  of the
Company  limited  to  $200,000,000  in  aggregate  principal  amount,  except as
otherwise provided in the Indenture.

         4. Optional Redemption.  The Notes will be subject to redemption at any
time at the option of the  Company,  in whole or in part,  upon not less than 30
nor more than 60 days' notice, at a redemption price equal to the sum of (i) the
principal  amount of the Notes being redeemed,  plus accrued and unpaid interest
to but excluding the applicable  Redemption Date and (ii) the Make-Whole Amount,
if any. If the Notes are redeemed on or after  January 1, 2012,  the  redemption
price will not include the Make-Whole Amount.

                                      A-2
<PAGE>
         As used herein the term  "Make-Whole  Amount" means, in connection with
any optional  redemption or accelerated payment of any notes prior to January 1,
2012, the excess,  if any, of (i) the aggregate  present value as of the date of
such  redemption  or  accelerated  payment  of each  dollar of  principal  being
redeemed or paid and the amount of interest  (exclusive  of interest  accrued to
the date of redemption or  accelerated  payment) that would have been payable in
respect of such dollar if such  redemption or accelerated  payment had been made
on January 1, 2012,  determined  by  discounting,  on a semiannual  basis,  such
principal  and  interest  at the  Reinvestment  Rate  (determined  on the  third
Business  Day  preceding  the  date  such  notice  of  redemption  is  given  or
declaration of  acceleration  is made) from the  respective  dates on which such
principal and interest would have been payable if such redemption or accelerated
payment  had been made on  January 1, 2012,  over (ii) the  aggregate  principal
amount of the Notes being  redeemed or paid.  In the case of any  redemption  or
accelerated  payment of notes on or after January 1, 2012, the Make-Whole Amount
means zero.  For  purposes of the  Indenture  and the Notes,  references  in the
Indenture to the payment of the principal (and premium,  if any) and interest on
the Notes shall be deemed to include the payment of the  Make-Whole  Amount,  if
any, due upon redemption with respect to the Notes. The Make-Whole  Amount shall
be calculated by the Company and set forth in an Officer's Certificate delivered
to the  Trustee,  and the Trustee  shall be  entitled to rely on said  Officer's
Certificate.

         As used  herein  the term  "Reinvestment  Rate"  means a rate per annum
equal to the sum of 0.50% (fifty  one-hundredths  of one percent) plus the yield
on treasury  securities  at constant  maturity  under the heading  "Week Ending"
published  in the  Statistical  Release  (as defined  herein)  under the caption
"Treasury  Constant  Maturities" for the maturity (rounded to the nearest month)
corresponding  to  the  remaining  life  to  maturity  (which,  in the  case  of
maturities corresponding to the principal and interest due on the notes at their
maturity,  shall be deemed to be January 1, 2012), as of the payment date of the
principal  being  redeemed or paid. If no maturity  exactly  corresponds to such
maturity,  yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a  straight-line  basis,  rounding  in each of such  relevant  periods to the
nearest  month.  For purposes of  calculating  the  Reinvestment  Rate, the most
recent  Statistical  Release published prior to the date of determination of the
Make-Whole Amount shall be used.

         As used herein the term  "Statistical  Release"  means the  statistical
release designated  "H.15(519)" or any successor  publication which is published
weekly by the Federal  Reserve System and which  establishes  yields on actively
traded United States government  securities  adjusted to constant maturities or,
if such  statistical  release is not published at the time of any  determination
under the Supplemental Indenture,  then any publicly available source of similar
market data which shall be designated by the Company.

         5.  Mandatory  Redemption.  The  Company  shall not be required to make
sinking fund or redemption payments with respect to the Notes.

         6. Notice of Redemption.  Notice of redemption shall be mailed at least
30 days but not more than 60 days before the  Redemption  Date to each Holder of
Notes to be redeemed at its  registered  address.  Notes may be redeemed in part
but only in whole multiples of $1,000,  unless

                                      A-3
<PAGE>

all  of the  Notes  held  by a  Holder  are to be  redeemed.  On and  after  the
redemption  date,  interest ceases to accrue on Notes or portions of them called
for redemption.

         7. Denominations,  Transfer, Exchange. The Notes are in registered form
without coupons in denominations  of $1,000 and integral  multiples of $1,000 in
excess  thereof.  The  transfer  of Notes  may be  registered  and  Notes may be
exchanged as provided in the Indenture.  The Security  Registrar and the Trustee
may require a Holder,  among other things, to furnish  appropriate  endorsements
and  transfer  documents  and to pay  any  taxes  and  fees  required  by law or
permitted by the Indenture. The Security Registrar need not exchange or register
the transfer of any Note or portion of a Note selected for redemption.  Also, it
need not  exchange or register the transfer of any Notes for a period of 15 days
before the  mailing  of a notice of  redemption  of Notes,  or during the period
between a record date and the corresponding Interest Payment Date.

         8.  Defaults and  Remedies.  In case an Event of Default (as defined in
the Indenture)  with respect to the Notes shall have occurred and be continuing,
the principal hereof may be declared,  and upon such  declaration  shall become,
due and payable,  in the manner,  with the effect and subject to the  provisions
provided in the Indenture.

         9. Actions of Holders. The Indenture contains provisions permitting the
holders of not less than a majority  of the  aggregate  principal  amount of the
outstanding  Notes,  subject to certain exceptions as provided in the Indenture,
on behalf of the holders of all such Notes at a meeting  duly called and held as
provided  in  the  Indenture,  to  make,  give  or  take  any  request,  demand,
authorization,  direction,  notice,  consent, waiver or other action provided in
the Indenture to be made, given or taken by the holders of the Notes,  including
without  limitation,   waiving  (a)  compliance  by  the  Company  with  certain
provisions of the  Indenture,  and (b) certain past defaults under the Indenture
and their  consequences.  Any resolution passed or decision taken at any meeting
of the holders of the Notes in accordance  with the  provisions of the Indenture
shall be conclusive and binding upon such holders and upon all future holders of
this Note and other Notes issued upon the  registration of transfer hereof or in
exchange heretofore or in lieu hereof

         10. Persons Deemed Owners. The Company,  the Trustee,  and any agent of
the Company or the Trustee may deem and treat the Person in whose name this Note
is registered on the Security Register as its absolute owner for all purposes.

         11. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.

         12.   Governing   Law.  THE  INTERNAL  LAW  OF  THE   COMMONWEALTH   OF
MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES.

         13. No Personal  Liability.  THE AMENDED AND  RESTATED  DECLARATION  OF
TRUST OF THE  COMPANY,  DATED JULY 1, 1994, A COPY OF WHICH,  TOGETHER  WITH ALL
AMENDMENTS  THERETO  (THE  "DECLARATION"),  IS DULY  FILED IN THE  OFFICE OF THE
DEPARTMENT OF ASSESSMENTS  AND TAXATION OF THE STATE OF MARYLAND,  PROVIDES THAT
THE NAME "HRPT  PROPERTIES  TRUST" REFERS TO THE TRUSTEES UNDER THE  DECLARATION
COLLECTIVELY  AS  TRUSTEES,  BUT NOT

                                      A-4
<PAGE>

INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,  EMPLOYEE
OR AGENT OF THE  COMPANY  SHALL BE HELD TO ANY  PERSONAL  LIABILITY,  JOINTLY OR
SEVERALLY,  FOR ANY OBLIGATION OF, OR CLAIM  AGAINST,  THE COMPANY.  ALL PERSONS
DEALING  WITH THE  COMPANY,  IN ANY WAY,  SHALL  LOOK ONLY TO THE  ASSETS OF THE
COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

         The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:

         HRPT Properties Trust
         400 Centre Street
         Newton, MA 02458
         Telecopier No.:  (617) 332-2261
         Attention: President

or such other address as the Company may specify pursuant to the Indenture.

                                      A-5
<PAGE>

                                 ASSIGNMENT FORM

                  To assign this Note, fill in the form below:

[I] [We] assign and transfer this Note to ______________________________________

__________________________ [Print or type assignee's name, address and zip code]

________________________________ [Insert assignee's soc. sec. or tax I.D. no.]

and irrevocably appoint_________________________________________________________

to transfer this Note on the books of the Company.  The agent may substitute
another to act for him.

Date:  _______________

                                   Your Signature: ____________________________
                                   [Sign exactly as your name appears on the
                                   face of this Note]

Signature Guarantee:

-------------------------------------------
[The signature must be guaranteed by
an officer of a participant in a recognized
signature guarantee program. Notarized
or witnessed signatures are not acceptable.]

                                      A-6

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