Document:

EXHIBIT 10.3

                           LOAN AND SECURITY AGREEMENT

                          Dated as of October 24, 2002

                                      Among

                             FSQC FUNDING CO., LLC,
                                  as Borrower,

                            the Lenders party hereto,

                       DRESDNER KLEINWORT WASSERSTEIN LLC,
           as Co-Program Manager, Syndication Agent and Lead Arranger

                         HEALTHCARE FINANCE GROUP, INC.,
                              as Co-Program Manager

                                       and

                               HFG HEALTHCO-4 LLC,
                               as Collateral Agent

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                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I.   COMMITMENT; REVOLVING LOAN
             Section 1.01.  Commitments........................................1
             Section 1.02.  Revolving Loans....................................2
             Section 1.03.  Notice of Borrowing................................2
             Section 1.04.  Termination and Reduction of the Commitments.......3
             Section 1.05.  Interest...........................................3
             Section 1.06.  Fees    ...........................................4
             Section 1.07.  Prepayments of Revolving Loans.....................4
             Section 1.08.  Procedures for Payment; Evidence of Debt ..........5
             Section 1.09.  Taxes   ...........................................6
             Section 1.10.  Indemnities........................................6
             Section 1.11.  Increased Costs....................................8
             Section 1.12.  Break Funding Payments.............................9
             Section 1.13.  Telephonic Notice..................................9
             Section 1.14.  Maximum Interest...................................9
             Section 1.15.  Computation of Interest and Fees..................10

ARTICLE II.  COLLECTION AND DISTRIBUTION
             Section 2.01.  Collections on the Receivables....................10
             Section 2.02.  Distributions.....................................10
             Section 2.03.  Distribution of Funds at the Maturity Date or
                              Upon an Event of Default........................11
             Section 2.04.  Distributions to the Borrower Generally...........11

ARTICLE III. REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF DEFAULT
             Section 3.01.  Representations and Warranties; Covenants.........11
             Section 3.02.  Events of Default; Remedies.......................11
             Section 3.03.  Attorney-in-Fact..................................12

ARTICLE IV.  SECURITY
             Section 4.01.  Grant of Security Interest........................12

ARTICLE V.   MISCELLANEOUS
             Section 5.01.  Amendments, Waivers...............................13
             Section 5.02.  Notices, etc......................................13
             Section 5.03.  Assignability; Participations.....................14
             Section 5.04.  Further Assurances................................16
             Section 5.05.  Costs and Expenses; Collection Costs..............16
             Section 5.06.  Confidentiality...................................17
             Section 5.07.  Term and Termination; Early Termination Fee.......17

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                                                                            Page

             Section 5.08.  No Liability; No Fiduciary Duty...................18
             Section 5.09.  Entire Agreement; Severability....................19
             Section 5.10.  Governing Law.....................................19
             Section 5.11.  Waiver of Jury Trial, Jurisdiction and Venue .....19
             Section 5.12.  Execution in Counterparts.........................20
             Section 5.13.  No Proceedings....................................20

ARTICLE VI.  AGENTS

EXHIBITS
--------
Exhibit I           Definitions
Exhibit II          Conditions of Revolving Loans
Exhibit III         Representations and Warranties
Exhibit IV          Covenants
Exhibit V           Events of Default
Exhibit VI          Eligibility Criteria
Exhibit VII-A       Form of Borrowing Base Certificate
Exhibit VII-B       Form of Borrower's Certificate
Exhibit VIII        Form of Depositary Agreement
Exhibit IX-A        Form of Opinion of Counsel
Exhibit IX-B        Form of Opinion of Counsel
Exhibit X           Form of Assignment of Contracts
Exhibit XI          Form of Government Depositary Agreement

SCHEDULES
---------
Schedule I          Addresses for Notices
Schedule II         Credit and Collection Policy
Schedule III        Disclosures
Schedule IV         Lockbox Information
Schedule V          Net Value Factors

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         LOAN AND SECURITY  AGREEMENT,  dated as of October 24, 2002, among FSQC
FUNDING CO., LLC, a limited  liability  company  organized under the laws of the
State of Delaware  (together with its successors and assigns,  the  "Borrower"),
the LENDERS party hereto, DRESDNER KLEINWORT WASSERSTEIN LLC, a Delaware limited
liability  company,  as a Program Manager,  Lead Arranger and Syndication Agent,
HEALTHCARE  FINANCE GROUP, INC., a Delaware  corporation,  as a Program Manager,
and HFG HEALTHCO-4  LLC, a Delaware  limited  liability  company,  as Collateral
Agent.

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

         The Borrower (i) is a limited liability company owned by the Providers,
(ii) has acquired and will acquire healthcare  receivables from the Providers by
purchase or contribution to the capital of the Borrower pursuant to the RPTA, as
determined from time to time by the Borrower and the Providers, and (iii) wishes
to borrow funds from the Lenders on a continuing and revolving  basis secured by
all of its  assets,  including  the  healthcare  receivables  acquired  from the
Providers.

         The Lenders are, severally and not jointly,  prepared to make revolving
loans secured by the Borrower's assets, including such healthcare receivables on
the terms and subject to the conditions set forth herein.

                  Accordingly, the parties agree as follows:

                                   ARTICLE I.
                           COMMITMENT; REVOLVING LOANS

         Section 1.01. Commitments. Subject to and upon the terms and conditions
herein  set  forth,  each  Lender,  severally  and not  jointly,  agrees to make
Revolving Loans to the Borrower,  on any Funding Date, in an aggregate principal
amount  at any time  outstanding  not to  exceed  the  amount  of such  Lender's
Revolving  Commitment as set forth under its name on the signature  pages hereto
or in the Assignment  and  Assumption  pursuant to which such Lender assumed its
Revolving  Commitment,  as  applicable,  as  such  Revolving  Commitment  may be
increased or reduced from time to time in accordance with the provisions of this
Agreement.  Notwithstanding  the foregoing,  the aggregate  principal  amount of
Revolving  Loans  outstanding  at any time to the Borrower  shall not exceed the
lesser of (i) the Total  Revolving  Commitment and (ii) the Borrowing Base minus
Accrued Amounts as of such time (the lesser of (i) and (ii) being the "Borrowing
Limit").

         (a)  Subject to the  foregoing  and within the  foregoing  limits,  the
Borrower may borrow,  repay (without premium or penalty) and reborrow  Revolving
Loans,  on and after the date hereof  through,  but not including,  the Maturity
Date,  subject to the terms,  provisions and limitations set forth herein and in
Exhibit  II hereof,  including,  without  limitation,  the  requirement  that no

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Revolving Loan shall be made hereunder if after giving effect thereto the sum of
the aggregate  principal  amount of the Revolving  Loans  outstanding  hereunder
would exceed the Borrowing Limit.

         (b) So long as no  Default  or Event of  Default  then  exists or would
result  therefrom,  the  Borrower  may request by Written  Notice to the Program
Manager,  and the Program  Manager and the  Lenders may  approve,  in their sole
discretion,  an increase in the Total Revolving Commitment by an amount equal to
$5,000,000 or an integral  multiple  thereof up to a maximum of $25,000,000.  If
the Program  Manager  and the Lenders  approve  such  request,  then the Program
Manager shall request that the Syndication Agent use its best efforts to arrange
for a further syndication of the additional  commitments to the Lenders or other
Persons reasonably  satisfactory to the Borrower. No Lender shall be required to
participate in any of the additional  commitments.  The Borrower shall, upon the
effective date of any such  increase,  pay to the  Syndication  Agent and to the
Lenders or other Persons  agreeing to such additional  commitments  such fees as
shall be agreed  upon by the  Syndication  Agent,  such  Lenders  or such  other
Persons, as the case may be, and the Borrower.

         Section 1.02.  Revolving Loans. The Revolving Loans made by the Lenders
on any Funding  Date shall be made by the  Lenders  ratably in  accordance  with
their  respective  Revolving  Commitments  and shall be in a  minimum  amount of
$500,000  and in an aggregate  amount that is an integral  multiple of $250,000;
provided  that a Revolving  Loan may be in an aggregate  amount that is equal to
the entire unused balance of the Borrowing Limit.

         (a) Each  Lender at its option may make any  Revolving  Loan by causing
any  domestic  or  foreign  branch  or  Affiliate  of such  Lender  to make such
Revolving  Loan;  provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Revolving  Loan in accordance  with the
terms of this Agreement.

         (b)  Each  Lender  shall  make  each  Revolving  Loan  to be made by it
hereunder on the proposed  Funding Date thereof by wire transfer of  immediately
available  funds by 12:00  noon,  (New York  City  time) to the  account  of the
Program Manager most recently designated by it for such purpose by notice to the
Lenders.  The Program  Manager will make such Revolving  Loans  available to the
Borrower by promptly  transferring the amount so received, in like funds, to the
Borrower  Account.  The  failure  of any  Lender to make any  Revolving  Loan or
portion thereof  required to be made by it shall not relieve any other Lender of
its  obligations  hereunder;  provided  that the  Revolving  Commitments  of the
Lenders are several and no Lender shall be  responsible  for any other  Lender's
failure to make Revolving Loans as required.

         Section  1.03.  Notice of  Borrowing.  Whenever the Borrower  desires a
Revolving Loan be made, the Borrower shall give the Program  Manager,  not later
than (x) 10:00 a.m. (New York City time) two Business Days prior to the proposed
Funding  Date of a LIBOR  Loan and (y) 11:00  a.m.  (New York City  time) on the
proposed  Funding  Date of a Market  Rate  Loan or a Prime  Rate  Loan,  written
notice,  or  telephonic  notice  from  an  Authorized  Representative  confirmed
promptly by a Written Notice (which notice,  in each case, shall be irrevocable)
of its desire to make a borrowing of a Revolving  Loan. Each notice of borrowing
under  this  Section  1.03  shall  (i)  be  signed  by  the  Borrower,  (ii)  be
substantially  in  the  form  of  Exhibit  VII-B  hereto  (each,  a  "Borrower's

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Certificate"),  (iii) specify the proposed  Funding Date (which in each instance
shall be a Business  Day),  (iv) specify the  aggregate  amount of the Revolving
Loan being requested,  (v) specify whether such Revolving Loan is to be a Market
Rate Loan, a LIBOR Loan or a Prime Rate Loan,  (vi) specify the Interest  Period
to be applicable thereto, which shall be a period contemplated by the definition
of the term  "Interest  Period" and (vii) be  accompanied  by a  Borrowing  Base
Certificate dated as of such date. If no Interest Period is specified,  then the
Borrower  shall be deemed to have  selected  an  Interest  Period of one month's
duration  in the case of a LIBOR  Loan or a Prime  Rate  Loan and one day in the
case of a Market Rate Loan.

         Promptly  following  receipt of a Borrower's  Certificate in accordance
with this Section,  the Program Manager shall advise each  applicable  Lender of
the details thereof and of the amount of such Lender's  portion of the requested
Revolving Loan.

         Section  1.04.  Termination  and Reduction of the  Commitments.  On the
Maturity Date, the Revolving  Commitments shall terminate  automatically and the
outstanding balance of each Revolving Loan shall become due and payable in full.

         (a) The  Borrower  may at any time  terminate  in  whole,  pursuant  to
Section  5.07(c),  or from  time to time  reduce in part,  the  Total  Revolving
Commitment,  ratably among the Lenders in  accordance  with the amounts of their
Revolving  Commitments;  provided,  however, that the Total Revolving Commitment
shall not be  reduced  at any time to an amount  less than the  Revolving  Loans
outstanding  at  such  time.  Each  partial  reduction  of the  Total  Revolving
Commitment shall be in a minimum  $1,000,000 or an integral multiple of $500,000
in excess thereof.

         (b) The Borrower shall provide the Program  Manager with Written Notice
(which  shall be  irrevocable)  of any election to terminate or reduce the Total
Revolving  Commitment under paragraph (b) of this Section at least five Business
Days prior to the effective date of such  termination  or reduction,  specifying
such election and the effective date thereof.  Promptly following receipt of any
such  notice,  the Program  Manager  shall  advise the  Lenders of the  contents
thereof.

         (c) On the effective date of such  decrease,  the Borrower shall pay to
each Lender,  through the Program Manager,  (i) the  Non-Utilization Fee due and
owing  through and including  the date of such  termination  or reduction on the
amount of the Revolving  Commitment of such Lender so terminated or reduced, and
(ii) the Early  Termination Fee, if any, required to be paid pursuant to Section
5.07(d).

         Section 1.05.  Interest.  Subject to the provisions of Section  1.05(e)
and (f) hereof,  each  Market Rate Loan shall bear  interest at a rate per annum
equal to the Market Rate plus 3.60%.

         (a) Subject to the provisions of Section  1.05(e) and (f) hereof,  each
LIBOR Loan shall bear interest at a rate per annum equal to LIBOR plus 3.60%.

         (b) Subject to the provisions of Section  1.05(e) and (f) hereof,  each
Prime Rate Loan shall bear  interest at a rate per annum equal to the Prime Rate
plus 2.00%.

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         (c) The Borrower  shall pay interest on the average  daily  Outstanding
Balance during the prior Month (i) on the first Business Day of each Month,  and
(ii) on the Maturity Date (whether by acceleration or otherwise).

         (d)  Notwithstanding  anything to the contrary contained herein,  while
any Event of Default is continuing, each Outstanding Balance shall bear interest
at a rate  per  annum  equal  to 4.00% in  excess  of the  rate  then  otherwise
applicable pursuant to paragraph (a) of this Section.  Interest accrued pursuant
to this paragraph (b) shall be payable on demand.

         (e) The Program Manager shall determine the interest rate applicable to
the  Revolving  Loans and shall  promptly  advise the  Borrower  and the Lenders
thereof.

         (f)  The  Borrower  shall  have  the  right  at  any  time  upon  prior
irrevocable Written Notice to the Program Manager given in the manner and at the
times specified in Section 1.03 hereof to convert or continue all or any portion
of any  Revolving  Loan as a LIBOR Loan, a Market Rate Loan or a Prime Rate Loan
for any permissible Interest Period, subject to the terms and conditions of this
Agreement,  including without limitation Section 1.02(a).  If the Borrower fails
to deliver a timely  notice to convert  or  continue  any  Revolving  Loan,  the
Borrower shall be deemed to have elected to convert or continue, as the case may
be, such Revolving Loan as a LIBOR Loan.

         Section 1.06. Fees. The Borrower shall pay to the Program Manager,  for
the account of each Lender, a fee (the "Non-Utilization Fee") equal to 0.40% per
annum on the average amount, calculated on a daily basis, by which the Revolving
Commitment  of such  Lender  exceeded  the  Revolving  Loans made by such Lender
during the period from and including  the Initial  Funding Date to but excluding
the date on which such Revolving Commitment terminates. Accrued Non- Utilization
Fees shall be payable in arrears on (i) the first  Business  Day of each  Month,
commencing  November 1, 2002, (ii) on the date of any reduction of the Revolving
Commitments  pursuant to this Agreement,  including without limitation  Sections
1.04 and 5.07(c) and (iii) on the Maturity Date.

         (a) The  Borrower  shall  pay to the to the  Program  Manager,  for the
account of the Master Servicer,  a fee (the "Collateral  Tracking Fee") equal to
$25,000 per annum, which fee shall be due and payable in advance, on the Initial
Funding Date and on the first Business Day of each Month thereafter.

         (b) The Borrower shall pay to the Lead  Arranger,  for its own account,
fees in the amounts and at the times  separately  agreed upon in writing between
the Borrower and the Lead Arranger.

         Section 1.07.  Prepayments of Revolving Loans. The Borrower may, on any
Funding Date,  prepay any Revolving  Loan, in whole or in part,  without penalty
(except as otherwise  provided  herein);  provided,  however,  that the Borrower
shall  provide  the  Program  Manager  with at least five  Business  Days' prior
Written Notice (which notice shall be  irrevocable) to the extent such reduction
shall  be more  than  the  greater  of (i)  $3,000,000  or (ii)  20% of the then
aggregate

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outstanding  principal amount of all Revolving Loans. Promptly following receipt
of any such notice, the Program Manager shall advise the Lenders of the contents
thereof.

         (a) If at any time the aggregate  outstanding  principal  amount of all
Revolving  Loans exceeds the Borrowing  Limit at such time,  the Borrower  shall
promptly, in accordance with Article II hereof,  eliminate such excess by paying
an amount equal to such excess until such excess is eliminated in full.

         (b) All prepayments  hereunder shall be accompanied by accrued interest
to the extent required by Section 1.05.

         Section 1.08.  Procedures for Payment;  Evidence of Debt . Each payment
required to be made hereunder by Borrower (whether of principal,  interest, fees
or  otherwise)  shall be made not later  than 12:00 noon (New York City time) on
the day when due in lawful  money of the United  States of America to the Lender
without counterclaim, offset, claim or recoupment of any kind. All such payments
shall be made to the Program Manager at the offices of Healthcare Finance Group,
Inc. at 110 Wall Street,  New York, New York 10005 with a  notification  copy to
Dresdner Kleinwort  Wasserstein LLC at 75 Wall Street, New York, New York 10005,
and the Program  Manager shall  distribute  any such payments  received by it in
accordance with Article II hereof.

         (a)  Whenever  any  payment  to be made  hereunder  or under  any other
Document  shall be stated to be due and payable on a day which is not a Business
Day,  such payment  shall be made on the next  succeeding  Business Day and such
extension of time shall in such case be included in  computing  interest on such
payment.

         (b) Each Lender shall maintain in accordance with its usual practice an
account or accounts  evidencing the  indebtedness of the Borrower to such Lender
resulting from each Revolving Loan made by such Lender, including the amounts of
principal  and  interest  payable  and  paid to such  Lender  from  time to time
hereunder.  The Program Manager shall maintain accounts in which it shall record
the amount of each Revolving Loan made hereunder, the amount of any principal or
interest  due and payable or to become due and payable from the Borrower to each
Lender  hereunder  and the amount of any sum  received or applied by the Program
Manager  pursuant to Article II for the account of the Lenders and each Lender's
share thereof.

         (c) The entries made in the accounts  maintained  pursuant to paragraph
(c) of this Section  shall be prima facie  evidence of the existence and amounts
of the obligations recorded therein;  provided that the failure of any Lender or
the Program  Manager to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Revolving Loans in
accordance with the terms of this Agreement.

         Section 1.09.  Taxes. Any and all payments required to be made by or on
account of the  Borrower  hereunder  (whether of  principal,  interest,  fees or
otherwise)  shall be made free and clear of,  and  without  deduction  for,  any
present or future  withholding  or other taxes,  duties or charges of any nature
imposed on such  payments  or  prepayments  by or on behalf of any  Governmental
Entity thereof or therein,  except for Excluded Taxes. If any such taxes, duties
or charges are so levied or

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imposed on any payment to any Lender, the Borrower will make additional payments
in such  amounts as may be  necessary  so that the net amount  received  by such
Lender, after withholding or deduction for or on account of all taxes, duties or
charges,  including deductions  applicable to additional sums payable under this
Section,  will be equal to the amount  provided for herein.  Whenever any taxes,
duties or charges  are  payable by the  Borrower  with  respect to any  payments
hereunder,   the  Borrower  shall  furnish   promptly  to  the  Program  Manager
information, including certified copies of official receipts (to the extent that
the relevant governmental authority delivers such receipts),  evidencing payment
of any such taxes,  duties or charges so withheld or  deducted.  If the Borrower
fails to pay any such  taxes,  duties  or  charges  when due to the  appropriate
taxing  authority  or  fails  to  remit  to the  Program  Manager  the  required
information  evidencing payment of any such taxes, duties or charges so withheld
or deducted, the Borrower shall indemnify the Lenders for any incremental taxes,
duties, charges,  interest or penalties that may become payable by any Lender as
a result of any such failure.

         (a)  Notwithstanding   anything  to  the  contrary  contained  in  this
Agreement, the Borrower agrees to pay any present or future stamp or documentary
taxes, any intangibles tax or any other sales, excise or property taxes, charges
or similar levies now or hereafter assessed that arise from and are attributable
to any payment made hereunder or from the  execution,  delivery of, or otherwise
with respect to, this Agreement or any other Documents and any and all recording
fees relating to any Documents securing any Lender Debt ("Other Taxes").

         (b) The Borrower shall indemnify each Lender for the full amount of any
taxes,  duties  or  charges  other  than  Excluded  Taxes  (including,   without
limitation,  any taxes other than Excluded Taxes imposed by any  jurisdiction on
amounts  payable under this Section) duly paid or payable by such Lender and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto.  Indemnification  payments due under this Section shall be made
within 30 days after written demand therefor.

         (c) Without  prejudice  to the  survival of any other  agreement of the
Borrower hereunder,  the agreements and obligations of the Borrower contained in
this  Section  shall  survive  the  payment in full of  principal  and  interest
hereunder.

         Section 1.10. Indemnities.  The Borrower hereby agrees to indemnify the
Program  Manager,  the Syndication  Agent,  the Lead Arranger and each Lender on
demand  against  any loss or expense  which such  Program  Manager,  Syndication
Agent,  Lead Arranger,  Lender or branch or Affiliate of such Person may sustain
or incur as a  consequence  of: (i) any default in payment or  prepayment of the
principal  amount of any Revolving Loan or any portion thereof made to it or any
portion thereof or interest accrued thereon, as and when due and payable (at the
due date thereof, by irrevocable notice of payment or prepayment, or otherwise);
(ii) the effect of the  occurrence  of any Event of Default  upon any  Revolving
Loan made to it or any portion  thereof;  (iii) the payment or prepayment of the
principal amount of any Revolving Loan made to it or any portion thereof, on any
day other than a Funding  Date;  or (iv) the failure by the Borrower to accept a
Revolving Loan after it has requested such  borrowing;  in each case  including,
but not limited to, any loss or expense  sustained or incurred in liquidating or
employing  deposits  from third  parties  acquired  to effect or  maintain  such
Revolving Loan or any portion thereof.  The Lender shall provide to the Borrower
a

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statement,  supported when  applicable by documentary  evidence,  explaining the
amount  of any  such  loss or  expense  it  incurs,  which  statement  shall  be
conclusive absent manifest error.

         (a) The Borrower  hereby  agrees to indemnify  and hold  harmless  each
Lender,  the Program Manager,  the Master Servicer,  the Syndication  Agent, the
Lead Arranger, the Collateral Agent and their respective Affiliates,  directors,
officers, agents, representatives,  counsel and employees and each other Person,
if any,  controlling  them or any of  their  respective  Affiliates  within  the
meaning of either  Section 15 of the  Securities  Act of 1933,  as  amended,  or
Section  20(a) of The  Securities  Exchange Act of 1934,  as amended  (each,  an
"Indemnified  Party"),  from and against any and all  losses,  claims,  damages,
costs,  expenses  (including  reasonable  counsel  fees and  disbursements)  and
liabilities  which may be incurred by or asserted against such Indemnified Party
with respect to or arising out of the  commitments  hereunder to make  Revolving
Loans,  or  the  financings  contemplated  hereby,  the  other  Documents,   the
Collateral  (including,  without  limitation,  the  use  thereof  by any of such
Persons or any other Person, the execution and delivery of this Agreement or any
agreement or instrument  contemplated  hereby,  the exercise by any  Indemnified
Party of rights and remedies or any power of attorney with respect thereto,  and
any action or inaction of any Indemnified Party under and in accordance with any
Documents),  the  use of  proceeds  of  any  financial  accommodations  provided
hereunder,  any  investigation,  litigation  or  other  proceeding  (brought  or
threatened)  relating  thereto,  or the role of any such  Person or  Persons  in
connection  with the  foregoing,  whether  or not they or any other  Indemnified
Party is named as a party to any legal  action  or  proceeding  ("Claims").  The
Borrower will not,  however,  be responsible to any Indemnified  Party hereunder
for any  Claims  to the  extent  that a court  having  jurisdiction  shall  have
determined  by a final  nonappealable  judgment  that any such Claim  shall have
arisen out of or resulted  from (a)(i)  actions  taken or omitted to be taken by
such Indemnified Party by reason of the bad faith,  willful  misconduct or gross
negligence  of any  Indemnified  Party,  or  (ii)  in  violation  of any  law or
regulation  applicable to such Indemnified Party (except to the extent that such
violation  is  attributable  to any breach of any  representation,  warranty  or
agreement  by or on  behalf  of the  Borrower,  any  Provider  or  any of  their
respective  designees,  in each case,  as  determined  by a final  nonappealable
decision of a court of competent jurisdiction), or (b) a successful claim by any
Provider against such Indemnified  Party  ("Excluded  Claims").  The Indemnified
Party shall give the Borrower prompt Written Notice of any Claim setting forth a
description of those elements of the Claim of which such  Indemnified  Party has
knowledge.  The Program  Manager,  as an  Indemnified  Party shall be  permitted
hereunder to select  counsel to defend such Claim at the expense of the Borrower
and, if such Indemnified  Party shall decide to do so, then all such Indemnified
Parties  shall select the same counsel to defend such  Indemnified  Parties with
respect to such Claim;  provided,  however,  that if any such Indemnified  Party
shall in its reasonable opinion consider that the retention of one joint counsel
as aforesaid shall result in a conflict of interest, such Indemnified Party may,
at  the  expense  of the  Borrower,  select  its  own  counsel  to  defend  such
Indemnified  Party with respect to such Claim.  The Indemnified  Parties and the
Borrower and their  respective  counsel shall  cooperate  with each other in all
reasonable  respects in any  investigation,  trial and defense of any such Claim
and any appeal arising therefrom.

         (b) To the extent that the Borrower fails to pay any amount required to
be paid by it to the Program Manager under paragraph (a) or (b) of this Section,
each Lender  severally  agrees to pay to the Program  Manager such  Lender's pro
rata share (determined as of the time that the

                                        7

<PAGE>
unreimbursed  expense or  indemnity  payment is sought) of such  unpaid  amount;
provided that the  unreimbursed  expense or  indemnified  loss,  claim,  damage,
liability  or related  expense,  as the case may be, was  incurred  or  asserted
against the Program Manager in its capacity as such.

         (c) To the extent  permitted by applicable  law, the Borrower shall not
assert,  and hereby  waives,  any claim against any  Indemnified  Party,  on any
theory of liability,  for special,  indirect,  consequential or punitive damages
(as opposed to direct or actual damages)  arising out of, in connection with, or
as a result  of,  this  Agreement,  the  other  Documents  or any  agreement  or
instrument contemplated hereby or thereby, the financings contemplated hereunder
or thereunder, any Revolving Loan or the use of the proceeds thereof.

         Section 1.11. Increased Costs. If any Change in Law shall:

                  (i) impose,  modify or deem  applicable  any reserve,  special
deposit  or  similar  requirement  against  assets of  deposits  with or for the
account  of,  or  credit  extended  by,  any  Lender  (except  any such  reserve
requirement reflected in LIBOR); or

                  (ii) impose on any Lender or the London  interbank  market any
other condition affecting this Agreement or Revolving Loans made by such Lender;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of making or main  taining  any  Revolving  Loan (or of  maintaining  its
obligation to make any such  Revolving  Loan) or to reduce the amount of any sum
received or receivable by such Lender hereunder (whether of principal,  interest
or otherwise with respect to its Revolving Loans), then the Borrower will pay to
such Lender such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered. If the Borrower determines
in good  faith that such  additional  amount or amounts  are  unreasonable,  the
Borrower may terminate this  Agreement  upon payment in full of such  additional
amount or amounts and all amounts  payable  pursuant to Section  5.07 other than
the Early Termination Fee.

         (a) If any Lender  determines that any Change in Law regarding  capital
requirements has or would have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding company,  if any, as
a consequence of this Agreement or the Revolving  Loans made by such Lender to a
level below that which such Lender or such Lender's  holding  company could have
achieved but for such Change in Law (taking  into  consideration  such  Lender's
policies  and the  policies of such  Lender's  holding  company  with respect to
capital adequacy),  then from time to time the Borrower will pay to such Lender,
as the case may be, such  additional  amount or amounts as will  compensate such
Lender or such Lender's holding company for any such reduction suffered.  If the
Borrower  determines  in good faith that such  additional  amount or amounts are
unreasonable,  the Borrower may terminate this Agreement upon payment in full of
such additional  amount or amounts and all amounts  payable  pursuant to Section
5.07 other than the Early Termination Fee.

         (b) A certificate  of a Lender  setting forth in reasonable  detail the
calculation of the amount or amounts  necessary to compensate such Lender or its
holding  company,  as the case

                                        8
<PAGE>
may be, as specified in paragraph  (a) or (b) of this Section shall be delivered
to the Borrower and shall be  conclusive  absent  manifest  error.  The Borrower
shall pay such  Lender,  as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.

         (c)  Failure or delay on the part of any Lender to demand  compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such  compensation;  provided that the Borrower  shall not be required to
compensate  a  Lender  pursuant  to this  Section  for any  increased  costs  or
reductions  incurred  more than 270 days prior to the date that such Lender,  as
the case may be,  notifies the Borrower of the Change in Law giving rise to such
increased  costs  or  reductions  and  of  such  Lender's   intention  to  claim
compensation  therefor;  provided further that, if the Change in Law giving rise
to such increased  costs or reductions is  retroactive,  then the 270-day period
referred to above shall be extended to include the period of retroactive  effect
thereof.

         Section 1.12. Break Funding  Payments.  In the event of (a) the payment
of any principal of any Revolving Loan other than on the last day of an Interest
Period applicable  thereto (including as a result of an Event of Default) or (b)
the failure to borrow,  convert,  continue or prepay any  Revolving  Loan on the
date specified in any notice  delivered  pursuant hereto  (regardless of whether
such  notice may be  revoked),  then,  in any such  event,  the  Borrower  shall
compensate  each  Lender for the loss,  cost and  expense  attributable  to such
event. A certificate of any Lender setting forth in reasonable detail any amount
or amounts  that such  Lender is entitled  to receive  pursuant to this  Section
shall be  delivered  to the Borrower  and shall be  conclusive  absent  manifest
error.  The  Borrower  shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.

         Section  1.13.  Telephonic  Notice.  Without  in any way  limiting  the
Borrower's  obligation  to  confirm  in  writing  any  telephonic  notice  of  a
borrowing,  the  Program  Manager may act  without  liability  upon the basis of
telephonic  notice  believed by the Program  Manager in good faith to be from an
Authorized   Representative   of  the  Borrower  prior  to  receipt  of  written
confirmation.

         Section 1.14.  Maximum  Interest.  No provision of this Agreement shall
require  the  payment to any Lender or permit  the  collection  by any Lender of
interest in excess of the maximum rate of interest  from time to time  permitted
(after taking into account all consideration which constitutes interest) by laws
applicable  to the Lender  Debt and binding on such Lender  (such  maximum  rate
being such Lender's "Maximum Permissible Rate").

         (a) If the amount of interest  (computed  without giving effect to this
Section)  payable  on the first  Business  Day of each  Month in  respect of the
preceding  interest  computation  period  would  exceed the  amount of  interest
computed in respect of such period at a Lender's Maximum  Permissible  Rate, the
amount of interest payable to such Lender on such date in respect of such period
shall be computed at such Lender's Maximum Permissible Rate.

         (b) If at any time and from time to time:  (i) the  amount of  interest
payable to any Lender on the first  Business Day of each Month shall be computed
at the Maximum  Permissible  Rate pursuant to the preceding  subsection (b); and
(ii) in  respect of any  subsequent  interest  computation  period the amount of
interest  otherwise  payable  to such  Lender  would be less than the

                                        9

<PAGE>
amount of interest  payable to such Lender  computed at the Maximum  Permissible
Rate,  then the amount of  interest  payable  to such  Lender in respect of such
subsequent  interest  computation  period  shall  continue to be computed at the
Maximum  Permissible  Rate until the amount of  interest  payable to such Lender
shall equal the total  amount of interest  which would have been payable to such
Lender if the total amount of interest had been computed  without  giving effect
to the preceding subsection (b).

         Section 1.15. Computation of Interest and Fees. All interest,  fees and
other  amounts  calculated by the Program  Manager  hereunder or under any other
Document  shall be computed on the basis of actual days elapsed  (including  the
first day but excluding the last day) over a 360-day year.

                                   ARTICLE II.
                           COLLECTION AND DISTRIBUTION

         Section 2.01. Collections on the Receivables. The Collateral Agent, for
the benefit of the Lenders,  shall be entitled with respect to all  Receivables,
(i) to receive and to hold as collateral all  Receivables and all Collections on
Receivables in accordance with the terms of the Depositary  Agreement,  and (ii)
to have and to exercise  any and all rights (x) to collect,  record,  track and,
during  the  continuance  of an Event of  Default,  take all  actions  to obtain
Collections  with  respect  to  all  Receivables   payable  by  non-Governmental
Entities, and (y) to the extent permitted by law and in a manner consistent with
all applicable laws and regulations,  record,  track and, during the continuance
of an Event of Default,  take all actions to obtain  Collections with respect to
all Receivables payable by Governmental Entities.

         Section 2.02.  Distributions.  On each Business Day, and provided, that
no Event of Default is continuing,  the Program Manager shall distribute any and
all cash  Collections  in the  Collection  Account prior to 12:00 p.m. (New York
City time) on such  Business Day and any other  payments  received  hereunder as
follows:  FIRST, to the Lenders and the Master Servicer, on a pro rata basis, an
amount in cash equal to fees and  interest  that are due and  payable as of such
Business Day and have not otherwise  been paid in full by the Borrower,  if any,
until such amounts have been paid in full; SECOND, to the Lenders, on a pro rata
basis, an amount in cash equal to the Borrowing Base  Deficiency,  if any, until
such amount is paid in full;  THIRD,  to the  Lenders,  on a pro rata basis,  an
amount in cash equal to the reduction of the  principal  amount of the Revolving
Loan, if any,  directed by the Borrower in writing to be repaid on such Business
Day pursuant to Section 1.07(a) until such amount has been paid in full; FOURTH,
to the Lenders,  on a pro rata basis,  an amount in cash equal to the payment of
any other Lender Debt due and payable on such Business  Day, if any,  until such
amount has been paid in full; and FIFTH, to the Borrower,  all remaining amounts
of Collections.

         Section  2.03.  Distribution  of Funds at the Maturity  Date or Upon an
Event of Default.  At the Maturity  Date or upon the  occurrence  and during the
continuance  of an Event of Default,  subject to the rights and  remedies of the
Lender pursuant to Section 3.02 hereof, the Program Manager shall distribute any
and all Collections and other payments received hereunder as follows:

                                       10
<PAGE>
FIRST,  to the Lenders,  the Master Servicer and the Program  Manager,  on a pro
rata basis,  an amount in cash equal to any and all accrued fees and  collection
costs as set forth in Sections 1.06 and 5.05, until such amount has been paid in
full;  SECOND,  to the Lenders,  on a pro rata basis, an amount in cash equal to
all accrued and unpaid interest on the Revolving Loans (at the rates established
under  Section  1.05)  until such  amount has been paid in full;  THIRD,  to the
Lenders, on a pro rata basis, an amount in cash equal to the principal amount of
the Revolving Loans,  until such amount is paid in full; FOURTH, to the Lenders,
on a pro rata basis,  an amount in cash equal to the payment of any other Lender
Debt due and payable on such date,  until such amount has been paid in full; and
FIFTH, to the Borrower, all remaining amounts of Collections.

         Section 2.04. Distributions to the Borrower Generally. Distributions to
the Borrower on each Business Day shall be deposited in the Borrower Account.

                                  ARTICLE III.
                   REPRESENTATIONS AND WARRANTIES; COVENANTS;
                                EVENTS OF DEFAULT

         Section 3.01.  Representations and Warranties;  Covenants. The Borrower
makes on the Initial  Funding  Date and on each  subsequent  Funding  Date,  the
representations  and  warranties  set forth in Exhibit  III  hereto,  and hereby
agrees to perform and observe the covenants set forth in Exhibit IV hereto.

         Section  3.02.  Events of  Default;  Remedies.  If any Event of Default
shall occur and be  continuing,  the Program  Manager may, and at the request of
the Required  Lenders shall,  by Written Notice to the Borrower,  take either or
both of the following  actions:  (x) declare the Maturity Date to have occurred,
and (y) without  limiting any rights  hereunder and subject to  applicable  law,
replace the Borrower or any of the Borrower's agents, as the case may be, in its
performance of any or all of the "Primary Servicer  Responsibilities"  under the
RPTA  (which  replacement  may be  effectuated  through  the  outplacement  to a
qualified  and  experienced  third-party  of all back office  duties,  including
billing,  collection  and  processing   responsibilities,   and  access  to  all
personnel,   hardware   and   software   utilized   in   connection   with  such
responsibilities); provided, that with respect to the Event of Default in clause
(i)  of  Exhibit  V,  the  Maturity  Date  shall  be  deemed  to  have  occurred
automatically and without notice. Upon any such declaration or designation,  the
Program  Manager and the Collateral  Agent shall have, in addition to the rights
and  remedies  which they may have under this  Agreement,  all other  rights and
remedies  provided after default under the UCC and under other  applicable  law,
which rights and remedies shall be cumulative.

         (a) Right of Set-Off.  The Borrower hereby  irrevocably  authorizes and
instructs the Program  Manager to set-off the full amount of any Lender Debt due
and payable  against (i) any  Collections,  or (ii) the principal  amount of any
Revolving  Loans  requested on or after such due date. No further  notification,
act or consent of any nature  whatsoever  is required  prior to the right of the
Program  Manager to  exercise  such right of  set-off;  provided,  however,  the
Program  Manager  shall  notify the  Borrower:  (1) a set-off  pursuant  to this
Section 3.02 occurred,  (2) the amount of such set- off and (3) a description of
the Lender Debt that was due and payable.

                                       11

<PAGE>
         (b) The  remedies  described  in (a) and (b) above will be available to
the Program  Manager,  on behalf of the  Lenders,  only until all Lender Debt is
paid in full, after which the Program Manager,  on behalf of the Lenders,  shall
relinquish any and all of the Primary Servicer  Responsibilities to the Borrower
and the Borrower's agents.

         Section  3.03.   Attorney-in-Fact.   The  Borrower  hereby  irrevocably
designates and appoints the Program  Manager,  the Collateral  Agent, the Master
Servicer and each other Person in the Lender Group,  to the extent  permitted by
applicable  law  and  regulation,  as the  Borrower's  attorneys-in-fact,  which
irrevocable power of attorney is coupled with an interest, with authority,  upon
the  continuance of an Event of Default (and to the extent not prohibited  under
applicable law and  regulations)  to (i) endorse or sign the Borrower's  name to
financing statements,  remittances,  invoices,  assignments, checks (other than,
absent a court order,  payments from  Governmental  Entities),  drafts, or other
instruments   or   documents  in  respect  of  the   Receivables,   (ii)  notify
non-Governmental  Entities to make payments on the  Receivables  directly to the
Program  Manager,  and (iii)  bring  suit in the  Borrower's  name and settle or
compromise  such  Receivables as the Program Manager or the Master Servicer may,
in its discretion, deem appropriate.

                                   ARTICLE IV.
                                    SECURITY

         Section 4.01. Grant of Security  Interest.  As collateral  security for
the  Borrower's  obligations to pay the Lender Debt when due and payable and its
indemnification  obligations  hereunder,  the  Borrower  hereby  grants  to  the
Collateral  Agent, for the benefit of the Lenders,  a first priority Lien on and
security  interest in and right of set-off against all of the rights,  title and
interest  of the  Borrower  in and to (i) the  Provider  Documents,  (ii) to the
maximum  extent  permitted  by law,  the  Provider  Account  and the  Government
Lockboxes,  (iii) all of the Borrower's  Accounts whether now owned or hereafter
acquired,  (iv) any and all amounts held in any accounts  maintained at Citizens
Bank of Massachusetts,  Bank One, N.A. (formerly American National Bank), or any
other bank in respect of any of the foregoing or in compliance with any terms of
this Agreement,  (v) all of the Additional Collateral,  and (vi) all proceeds of
the foregoing (all of the foregoing, the "Collateral").  This Agreement shall be
deemed to be a security agreement as understood under the UCC.

         (a) The Borrower hereby authorizes the Collateral Agent to file, one or
more financing  statements or continuation  statements or amendments  thereto or
assignments thereof in respect of the Lien created pursuant to this Section 4.01
which may at any time be required or, in the opinion of the Collateral  Agent or
the Program  Manager,  be  desirable,  and to do so without the signature of the
Borrower where permitted by law.

                                       12
<PAGE>
                                   ARTICLE V.
                                  MISCELLANEOUS

         Section  5.01.  Amendments,  Waivers.  No  amendment  or  waiver of any
provision  of this  Agreement or consent to any  departure  therefrom by a party
hereto  shall be  effective  unless in a writing  signed by the Borrower and the
Required Lenders or the Borrower and the Program Manager with the consent of the
Required  Lenders;  provided  that no such  agreement  shall  (i)  increase  the
Revolving  Commitment of any Lender without the written  consent of such Lender,
(ii) reduce the  principal  amount of any  Revolving  Loan or reduce the rate of
interest  thereon,  or reduce any fees  payable  hereunder,  without the written
consent of each Lender directly  affected  thereby,  (iii) postpone the Maturity
Date, (iv) change Section 2.02 or 2.03, (v) increase any percentage contained in
the  definition  of  Borrowing  Base,  release all or a material  portion of the
Collateral or make overadvances  other than Permitted  Overadvances  without the
written  consent of each  Lender,  (vi)  release  any  Guarantee  (other than in
accordance  with its terms)  without the consent of each Lender,  (vii) increase
the Total Revolving Commitment pursuant to Section 1.01(c), or (viii) change any
of the provisions of this Section or the definition of "Required Lenders" or any
other provisions  hereof specifying the number or percentage of Lenders required
to waive,  amend or modify any rights  hereunder  or make any  determination  or
grant any  consent  hereunder,  without  the  written  consent  of each  Lender;
provided further that no such agreement shall amend,  modify or otherwise affect
the  rights  or duties  of the  Program  Manager,  the  Collateral  Agent or the
Syndication  Agent  hereunder  without the prior written  consent of the Program
Manager, the Collateral Agent or the Syndication Agent, as the case may be.

         (a) No failure on the part of the Program Manager, the Collateral Agent
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any other right.  No waiver of any provision in this  Agreement or consent to
any departure by the Borrower  therefrom shall in any event be effective  unless
the same shall be permitted by paragraph  (a) or (b) of this  Section,  and then
such waiver or consent shall be effective only in the specific  instance and for
the specific purpose for which given.

         Section  5.02.  Notices,  etc.  All  notices  and other  communications
hereunder  shall,  unless  otherwise  stated  herein,  be in writing  (which may
include facsimile  communication)  and shall be faxed or delivered,  (i) to each
party  hereto at its  address set forth  under its name on the  signature  pages
hereof  or at such  other  address  as shall be  designated  by such  party in a
Written Notice to the other parties  hereto,  and (ii) to the Master Servicer at
the address set forth on Schedule I attached  hereto and as such schedule may be
amended from time to time.  Notices and  communications  by  facsimile  shall be
effective  when sent (and  shall be  immediately  followed  by hard copy sent by
regular  mail),  and  notices  and  communications  sent by other means shall be
effective when received.

         Section 5.03. Assignability; Participations. This Agreement shall inure
to the benefit of and be binding  upon the parties  hereto and their  respective
permitted successors and assigns, except that (i) the Borrower may not assign or
otherwise  transfer any of its rights or  obligations  hereunder or any interest
herein  without the prior  written  consent of each  Lender  (and any  attempted
assignment  or transfer by the Borrower  without such consent  shall be null and
void)  and (ii) no

                                       13
<PAGE>
Lender may assign or  otherwise  transfer  its rights or  obligations  hereunder
except in accordance with this Section. Nothing in this Agreement,  expressed or
implied,  shall be construed  to confer upon any Person  (other than the parties
hereto,  their  respective  successors and assigns  permitted hereby and, to the
extent  expressly  contemplated  hereby,  their  respective  Affiliates  and the
respective directors,  officers,  employees,  agents and advisors of the parties
and their Affiliates) any legal or equitable right,  remedy or claim under or by
reason of this Agreement.

         (a)  Subject  to the  conditions  set  forth in  paragraph  (c) of this
Section,  any Lender may assign to one or more assignees all or a portion of its
rights and obligations  under this Agreement  (including all or a portion of its
Revolving  Commitment and the Revolving  Loans at the time owing to it) with the
prior  written  consent (such  consent not to be  unreasonably  withheld) of the
Program  Manager,  provided  that no consent  of the  Program  Manager  shall be
required for an assignment to an assignee that is a Lender  immediately prior to
giving effect to such assignment or to any Affiliate or branch of any Lender, or
to any trust or  special  purpose  funding  vehicle,  whether  or not the Lender
maintains any interest in such trust or special  purpose  funding  vehicle.  The
Program  Manager  shall  notify the Borrower of any such  assignment;  provided,
however,  that  failure  to so notify  shall not  effect  the  validity  of such
assignment.

         (b)   Assignments   shall  be  subject  to  the  following   additional
conditions:

                  (i) the  assignee  is a competent  Person  with the  financial
ability to perform as a Lender under this Agreement;

                  (ii)  except  in the case of an  assignment  to a Lender or an
Affiliate of a Lender or an  assignment  of the entire  remaining  amount of the
assigning  Lender's  Revolving  Commitment or Revolving Loans, the amount of the
Revolving  Commitment or Revolving Loans of the assigning Lender subject to each
such  assignment  (determined as of the date the Assignment and Assumption  with
respect to such  assignment  is delivered to the Program  Manager)  shall not be
less than $1,000,000 of such Lender's  Revolving  Commitment  unless the Program
Manager otherwise consents; and

                  (iii) the parties to each assignment shall execute and deliver
to the Program Manager an Assignment and Assumption,  together with a processing
and  recordation  fee of  $3,500;  provided  that such fee shall not apply to an
assignment  by a Lender to an Affiliate of such Lender or to an assignment by an
Initial Lender, an Affiliate of an Initial Lender or an Affiliate of the Program
Manager.

         (c) Subject to acceptance by the Program Manager  pursuant to paragraph
(e) of this  Section,  from and  after  the  effective  date  specified  in each
Assignment and Assumption the assignee  thereunder  shall be a party hereto and,
to the extent of the interest  assigned by such Assignment and Assumption,  have
the rights and obligations of a Lender under this  Agreement,  and the assigning
Lender  thereunder  shall,  to the  extent  of the  interest  assigned  by  such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption  covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall  continue to be entitled to the

                                       14
<PAGE>
benefits of  Sections  1.09,  1.10 and 5.05).  Any  assignment  or transfer by a
Lender of rights or  obligations  under this Agreement that does not comply with
this Section  5.03 shall be treated for purposes of this  Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
paragraph (f) of this Section.

         (d) Upon its  receipt of a duly  completed  Assignment  and  Assumption
executed  by an  assigning  Lender  and  an  assignee  and  the  processing  and
recordation fee referred to in paragraph (c)(ii) and any written consent to such
assignment required by paragraph (b) of this Section,  the Program Manager shall
accept such Assignment and Assumption.

         (e) Any Lender may,  without the consent of the Borrower or the Program
Manager,  sell  participations  to  one or  more  banks  or  other  entities  (a
"Participant") in all or a portion of such Lender's rights and obligations under
this Agreement  (including all of a portion of its Revolving  Commitment and the
Revolving Loans owing to it); provided that (A) such Lender's  obligations under
this  Agreement  shall remain  unchanged,  (B) such Lender  shall remain  solely
responsible to the other parties hereto for the performance of such  obligations
and (C) the Borrower,  the Program  Manager,  the Collateral  Agent,  the Master
Servicer,  the  Syndication  Agent and the other Lenders shall  continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation  shall provide that such Lender shall retain
the  sole  right  to  enforce  this  Agreement  and to  approve  any  amendment,
modification  or waiver of any provision of this  Agreement;  provided that such
agreement  or  instrument  may provide  that such  Lender will not,  without the
consent  of the  Participant,  agree to any  amendment,  modification  or waiver
described in the first proviso to Section 5.01(b) that affects such Participant.
Subject to  paragraph  (c)(ii) of this  Section,  the  Borrower  agrees,  to the
fullest extent permitted under  applicable law, that each  Participant  shall be
entitled  to the  benefits  of Section  1.09 to the same  extent as if it were a
Lender and had acquired its interest by assignment  pursuant to paragraph (b) of
this Section. A Participant shall not be entitled to receive any greater payment
under  Section  1.09 than the  applicable  Lender  would have been  entitled  to
receive with respect to the participation  sold to such Participant,  unless the
sale of the  participation to such Participant is made with the Borrower's prior
written consent.

         (f) Any Lender may at any time pledge or assign a security  interest in
all or any portion of its rights under this  Agreement to secure  obligations of
such Lender,  including  any pledge or  assignment  to secure  obligations  to a
Federal  Reserve  Bank,  and this Section  shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

         Section 5.04. Further  Assurances.  The Borrower shall, at its cost and
expense,  upon the request of the Program Manager or the Collateral  Agent, duly
execute and deliver, or cause to be duly executed and delivered,  to such Person
such further instruments and do and cause to be done such further acts as may be
necessary  or proper in the  reasonable  opinion of the  Program  Manager or the
Collateral  Agent to carry out more  effectively  the provisions and purposes of
this Agreement.

                                       15

<PAGE>
         Section 5.05. Costs and Expenses; Collection Costs. The Borrower agrees
to pay on demand (i) all reasonable  non-legal  costs and expenses in connection
with  the  preparation,  execution  and  delivery  of this  Agreement;  (ii) the
reasonable fees and out-of-pocket  expenses of counsels for the Program Manager,
the Collateral  Agent,  the Syndication  Agent,  the Lead Arranger,  the Initial
Lenders and their  respective  Affiliates  in connection  with this  transaction
(including the allocated fees and expenses of internal  counsel);  and (iii) all
reasonable  costs and expenses,  if any (including  reasonable  counsel fees and
expenses  (including the allocated fees and expenses of internal  counsel)),  of
the Program  Manager,  the Collateral  Agent,  the Syndication  Agent,  the Lead
Arranger, the Initial Lenders and their respective Affiliates in connection with
any waiver, modification,  supplement or amendment hereto, or the enforcement of
this Agreement.  The Borrower  further agrees to pay on the Initial Funding Date
(and with respect to costs and expenses  incurred  following the Initial Funding
Date,  within  seven  days of  demand  therefor)  (a) all  reasonable  costs and
expenses  incurred by the Program  Manager or its agent in connection with up to
four periodic  audits of the  Receivables  during any calendar  year;  provided,
however,  that during the continuance of an Event of Default, the Borrower shall
pay all  reasonable  costs and expenses  incurred by the Program  Manager or its
agent in connection with all audits of the Receivables, (b) all reasonable costs
and  expenses  incurred  by the  Master  Servicer  or  the  Program  Manager  to
accommodate any  significant  coding or data system changes made by the Borrower
that would affect the  transmission or  interpretation  of data received through
the interface,  and (c) all reasonable costs and expenses incurred by the Lender
for additional time and material expenses of the Master Servicer  resulting from
a lack of either  cooperation or  responsiveness  of the Borrower to agreed-upon
protocol and schedules with the Master Servicer; provided, that the Borrower has
been informed of the alleged lack of cooperation or responsiveness  and has been
provided the opportunity to correct such problems.

         (a) In the event that the  Program  Manager or  Collateral  Agent shall
retain an attorney or attorneys to collect, enforce, protect, maintain, preserve
or foreclose its interests, for the benefit of the Lenders, with respect to this
Agreement,  any other  Document,  any Lender Debt, any Receivable or the Lien on
any Collateral or any other security for the Lender Debt or under any instrument
or document  delivered  pursuant to this  Agreement,  or in connection  with any
Lender Debt, the Borrower shall pay all of the reasonable  costs and expenses of
such  collection,   enforcement,   protection,   maintenance,   preservation  or
foreclosure,  including reasonable  attorneys' fees, which amounts shall be part
of the Lender Debt,  and the Program  Manager and/or  Collateral  Agent may take
judgment for all such amounts.  The attorney's  fees arising from such services,
including  those of any  appellate  proceedings,  and all  reasonable  expenses,
costs,  charges  and other  fees  incurred  by such  counsel  in any way or with
respect to or arising  out of or in  connection  with or  relating to any of the
events or  actions  described  in this  Section  5.05  shall be  payable  by the
Borrower  to the Program  Manager or  Collateral  Agent,  as the case may be, on
demand (with  interest  accruing from the earlier of two Business Days following
(i) the date of such demand and (ii) the date the  Borrower  became aware of the
incurrence  of such  cost),  and  shall be  additional  obligations  under  this
Agreement.  Without  limiting the  generality of the  foregoing,  such expenses,
costs, charges and fees may include: recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; court costs and
expenses;  photocopying and duplicating expenses; court reporter fees, costs and
expenses;  long  distance  telephone  charges;  air  express

                                       16
<PAGE>
charges; telegram charges; telecopier charges; secretarial overtime charges; and
expenses for travel,  lodging and food paid or incurred in  connection  with the
performance of such legal services.

         Section 5.06.  Confidentiality.  The Program  Manager hereby agrees to,
and shall take  reasonable  steps to cause each  member of the Lender  Group to,
comply with all applicable laws regarding  confidential patient information,  if
any,  it  receives  in  connection  with  the  transactions  described  in  this
Agreement.

         Section  5.07.  Term  and  Termination;  Early  Termination  Fee.  This
Agreement  shall commence on the Initial  Funding Date and expire on October 24,
2005.

         (a) The  obligations of the Lenders under this Agreement shall continue
in full force and effect from the date hereof until the Maturity Date.

         (b) The Borrower may terminate  this Agreement at any time prior to the
Maturity  Date upon  payment in full of all Lender Debt,  including  all accrued
interest, applicable fees, charges, premiums and costs with respect thereto, all
as  provided  hereunder,   and  the  termination  of  the  Revolving  Commitment
hereunder.

         (c) If  the  Revolving  Commitment  is  reduced  or  terminated  or the
Revolving  Loan becomes due and payable prior to October 24, 2003  (including by
reason of an Event of Default),  the Borrower shall pay to the Program  Manager,
for the account of the Lenders, the Early Termination Fee.

         (d) The  termination of this  Agreement  shall not affect any rights of
the Program  Manager,  the Collateral  Agent or any Lender or any obligations of
the Borrower arising on or prior to the effective date of such termination,  and
the provisions hereof shall continue to be fully operative until all Lender Debt
incurred on or prior to such termination has been paid and performed in full.

         (e) Upon the giving of notice of a Default or an Event of Default under
this Agreement,  all Lender Debt shall be due and payable on the date of Default
or the Event of Default specified in such notice.

         (f) The Liens and rights granted to the Lender hereunder shall continue
in full force and effect,  notwithstanding  the  termination of this  Agreement,
until all of the Lender Debt has been  indefeasibly  paid in full in cash.  Upon
the (i) the termination of all  commitments and obligations of the Lenders,  and
(ii) the  indefeasible  payment in full of all Lender Debt, the Collateral Agent
and the Program  Manager  shall take all  actions  and deliver all  assignments,
certificates,  releases, notices and other documents, at the Borrower's expense,
as the Borrower may reasonably request to evidence such termination.

         (g) All indemnities,  representations,  warranties,  covenants, waivers
and  agreements   contained  herein  shall  survive  termination  hereof  unless
otherwise provided.

                                       17
<PAGE>
         (h) Notwithstanding  the foregoing,  if after receipt of any payment of
all or any part of the Lender  Debt,  any Lender is for any reason  compelled to
surrender  such  payment  to any  Person  or  entity  because  such  payment  is
determined to be void or voidable as a preference,  an  impermissible  setoff, a
diversion of trust funds or for any other reason,  this Agreement shall continue
in full force (except that the Revolving  Commitments  of the Lenders shall have
been  terminated),  and the Borrower shall be liable to, and shall indemnify and
hold each such Lender harmless for the amount of such payment  surrendered until
such Lender or Lenders shall have been finally and irrevocably paid in full. The
provisions   of  the   foregoing   sentence   shall  be  and  remain   effective
notwithstanding  any contrary  action which may have been taken by any Lender in
reliance  upon such  payment,  and any such  contrary  action so taken  shall be
without  prejudice to any  Lender's  rights  under this  Agreement  and shall be
deemed to have  been  conditioned  upon such  payment  having  become  final and
irrevocable.

         Section 5.08. No Liability;  No Fiduciary Duty.  Neither this Agreement
nor any document executed in connection  herewith shall constitute an assumption
by any Agent or any Lender of any  obligation to any Obligor,  or any patient or
customer of the Borrower or any Provider.

         (a)  Notwithstanding  any other provision herein, no recourse under any
obligation,  covenant, agreement or instrument of an Agent or a Lender contained
herein or with  respect  hereto shall be had against any Related  Party  whether
arising by breach of contract,  or otherwise at law or in equity  (including any
claim in  tort),  whether  express  or  implied,  it being  understood  that the
agreements  and other  obligations of each Agent and each Lender herein and with
respect hereto are solely its corporate obligations;  provided, however, nothing
herein above shall  operate as a release of any  liability  which may arise as a
result of such Related  Party's  gross  negligence  or willful  misconduct.  The
provisions of this Section 5.08 shall survive the termination of this Agreement.

         (b) The Borrower hereby acknowledges that (i) none of the Agents or the
Lenders has any fiduciary  relationship  with or fiduciary  duty to the Borrower
arising  out of or in  connection  with  this  Agreement  or  any  of the  other
Documents,  and  the  relationship  between  the  Lenders  and the  Borrower  in
connection  herewith  is solely that of debtor and  creditor;  and (ii) no joint
venture is  created  hereby or by any other  Documents  or  otherwise  exists by
virtue of the transactions  contemplated  hereby between the Borrower and any of
the Agents or the Lenders.

         (c) The  Borrower  hereby  acknowledges  that it has  been  advised  by
counsel in the  negotiation,  execution  and delivery of this  Agreement and the
other Documents.

         Section 5.09. Entire Agreement; Severability. This Agreement, including
all exhibits and schedules hereto and the documents  referred to herein,  embody
the entire  agreement and  understanding  of the parties  concerning the subject
matter contained herein. This Agreement  supersedes any and all prior agreements
and understandings between the parties, whether written or oral.

                                       18
<PAGE>
         (a) If any  provision of this  Agreement  shall be declared  invalid or
unenforceable,  the parties  hereto agree that the remaining  provisions of this
Agreement shall continue in full force and effect.

         Section 5.10.  GOVERNING LAW. THIS AGREEMENT  SHALL, IN ACCORDANCE WITH
SECTION  5-1401 OF THE  GENERAL  OBLIGATIONS  LAW OF THE  STATE OF NEW YORK,  BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,  WITHOUT  REGARD TO ANY CONFLICTS
OF LAWS  PRINCIPLES  THEREOF THAT WOULD CALL FOR THE  APPLICATION OF THE LAWS OF
ANY OTHER  JURISDICTION  EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY  INTERESTS  GRANTED  HEREUNDER,  OR REMEDIES  RELATED  THERETO,  IN
RESPECT OF ANY PARTICULAR  COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.

         Section 5.11. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH OF THE
PARTIES  HERETO  HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY
LITIGATION  WITH  RESPECT TO ANY MATTER  RELATED TO THIS  AGREEMENT,  AND HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN NEW YORK COUNTY,  NEW YORK CITY,  NEW YORK IN  CONNECTION  WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION,
EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS,  COMPLAINT OR
OTHER  PROCESS  AND AGREES THAT  SERVICE  THEREOF  MAY BE MADE BY  CERTIFIED  OR
REGISTERED  MAIL DIRECTED TO THE PARTIES HERETO AT THEIR  ADDRESSES SET FORTH ON
THE  SIGNATURE  PAGE HEREOF.  THE PARTIES  HERETO SHALL APPEAR IN ANSWER TO SUCH
SUMMONS,  COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW,  FAILING
WHICH THE PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY
BE  ENTERED  BY THE  OTHER  PARTY FOR THE  AMOUNT OF THE CLAIM AND OTHER  RELIEF
REQUESTED THEREIN.

         Section 5.12. Execution in Counterparts. This Agreement may be executed
in  counterparts,  each of  which  when so  executed  shall be  deemed  to be an
original and all of which when taken together shall  constitute one and the same
agreement.

         Section 5.13. No  Proceedings.  The Borrower hereby agrees that it will
not  institute  against  any Lender any  proceeding  of the type  referred to in
clause (i) of Exhibit V so long as any senior indebtedness issued by such Lender
shall be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such senior indebtedness shall have been outstanding.

                                       19
<PAGE>
                                   ARTICLE VI.
                                     AGENTS

         Each of the Lenders hereby irrevocably  appoints the Program Manager as
its agent, the Collateral  Agent as its collateral agent and Dresdner  Kleinwort
Wasserstein LLC as the Syndication  Agent and authorizes each Agent to take such
actions on its behalf and to exercise such powers as are delegated to such Agent
by the terms  hereof and the other  Documents,  together  with such  actions and
powers as are reasonably incidental thereto.

         Each Person serving as an Agent hereunder and under the other Documents
shall have the same  rights and powers in its  capacity as a Lender as any other
Lender  and may  exercise  the same as though it were not an Agent and each such
Person and their  respective  Affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or any Subsidiary
or other Affiliate thereof as if it were not an Agent hereunder.

         No Agent shall have any duties or  obligations  except those  expressly
set forth  herein or in the other  Financing  Documents.  Without  limiting  the
generality of the  foregoing,  (a) no Agent shall be subject to any fiduciary or
other  implied  duties,  regardless  of whether a Default  has  occurred  and is
continuing, (b) no Agent shall have any duty to take any discretionary action or
exercise  any  discretionary  powers,  except  discretionary  rights  and powers
expressly contemplated hereby or thereby that such Agent is required to exercise
in writing by the Required  Lenders (or such other number or  percentage  of the
Lenders as shall be  necessary  under the  circumstances  as provided in Section
5.01),  and (c) except as expressly  set forth  herein,  no Agent shall have any
duty to  disclose,  and shall not be liable  for any  failure to  disclose,  any
information  relating  to  the  Borrower,  the  Primary  Servicer  or any of the
Providers that is communicated to or obtained by such Person serving as an Agent
or any of its  Affiliates  in any  capacity.  No Agent  shall be liable  for any
action  taken or not  taken  by it with the  consent  or at the  request  of the
Required  Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 5.01) or in the absence
of its own gross  negligence or wilful  misconduct.  No Agent shall be deemed to
have  knowledge of any Default  unless and until written notice thereof is given
to such Agent by the Borrower or a Lender, and no Agent shall be responsible for
or have any duty to  ascertain or inquire  into (i) any  statement,  warranty or
representation  made in or in connection with this Agreement,  (ii) the contents
of  any  certificate,  report  or  other  document  delivered  hereunder  or  in
connection  herewith,  (iii)  the  performance  or  observance  of  any  of  the
covenants,  agreements or other terms or conditions  set forth herein,  (iv) the
validity, enforceability,  effectiveness or genuineness of this Agreement or any
other  agreement,  instrument  or  document,  or  (v)  the  satisfaction  of any
condition  set forth in Exhibit II or  elsewhere  herein,  other than to confirm
receipt of items expressly required to be delivered to such Agent.

         Each Agent  shall be  entitled  to rely  upon,  and shall not incur any
liability  for  relying  upon,  any  notice,  request,   certificate,   consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been signed or sent by the proper  Person.  Each Agent also may rely
upon any  statement  made to it orally or by telephone  and believed by it to be
made by the  proper  Person,  and  shall not incur  any  liability  for  relying
thereon.  Each Agent may consult with legal  counsel (who may be counsel for the
Borrower),  independent  accountants and other experts

                                       20
<PAGE>
selected by it, and shall not be liable for any action  taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

         Each  Agent may  perform  any and all of its duties  and  exercise  its
rights and powers by or through  any one or more  sub-agents  appointed  by such
Agent.  Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their  respective  Related  Parties.  The
exculpatory  provisions  of the  preceding  paragraphs  shall  apply to any such
sub-agent and to the Related Parties of such Agent and any such  sub-agent,  and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as such Agent.

         With  respect  to  the  release  of  Collateral,   the  Lenders  hereby
irrevocably  authorize the Program Manager, at its option and in its discretion,
to direct the  Collateral  Agent to release  any Lien  granted to or held by the
Collateral  Agent  upon any  property  covered  by this  Agreement  or the other
Documents (i) upon termination or expiration of the Revolving  Commitments,  the
payment and satisfaction of all Lender Debt; or (ii) constituting property being
sold or disposed of in compliance  with the provisions of the Documents (and the
Program Manager may rely in good faith  conclusively on any certificate  stating
that the property is being sold or disposed of in compliance with the provisions
of the Documents,  without further  inquiry);  provided,  however,  that (x) the
Program  Manager shall not be required to cause the Collateral  Agent to execute
any release on terms which, in the Program Manager's  opinion,  would expose the
Program Manager or the Collateral Agent to liability or create any obligation or
entail any consequence  other than the release of such Liens without recourse or
warranty,  and (y) such  release  shall not in any manner  discharge,  affect or
impair any Liens upon all  interests  retained,  all of which shall  continue to
constitute part of the property covered by the Documents.

         With respect to perfecting  security  interests in Collateral which, in
accordance  with  Article 9 of the  Uniform  Commercial  Code or any  comparable
provision of any Lien perfection statute in any applicable jurisdiction,  can be
perfected only by possession,  each Lender hereby appoints each other Lender its
agent for the purpose of perfecting such interest. Should any Lender (other than
the  Collateral  Agent) obtain  possession of any such  Collateral,  such Lender
shall  notify the Program  Manager,  and,  promptly  upon the Program  Manager's
request,  shall deliver such Collateral to the Collateral Agent or in accordance
with the Program  Manager's  instructions.  Each Lender  agrees that it will not
have any right  individually to enforce or seek to enforce this Agreement or any
other  Document or to realize upon any  Collateral for the Lender Debt, it being
understood  and agreed that such rights and remedies may be exercised only by or
with the approval of the Program Manager.

         In the event  that a  petition  seeking  relief  under  Title 11 of the
United  States  Code  or  any  other  Federal,   state  or  foreign  bankruptcy,
insolvency,  liquidation or similar law is filed by or against the Borrower, the
Primary Servicer, any Provider or any other Person obligated under any Document,
the Program Manager is authorized, to the fullest extent permitted by applicable
law,  to file a proof of claim on  behalf  of  itself  and the  Lenders  in such
proceeding for the total amount of obligations owed by such Person. With respect
to any such proof of claim  which the  Program  Manager  may file,  each  Lender
acknowledges  that  without  reliance on such proof of claim,  such

                                       21
<PAGE>
Lender shall make its own evaluation as to whether an individual  proof of claim
must be filed in respect of such  obligations  owed to such  Lender  and, if so,
take the steps necessary to prepare and timely file such individual claim.

         Subject to the  appointment  and  acceptance  of a  successor  Agent as
provided in this  paragraph,  any Agent  (including the Program  Manager and the
Collateral  Agent)  may  resign at any time by  notifying  the  Lenders  and the
Borrower. Upon any such resignation,  the Required Lenders shall have the right,
to appoint a  successor.  If no  successor  shall have been so  appointed by the
Required Lenders and shall have accepted such  appointment  within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders,  appoint a successor Agent. Upon the acceptance of its
appointment as an Agent  hereunder by a successor,  such successor shall succeed
to and become vested with all the rights,  powers,  privileges and duties of the
retiring  Agent,  and the retiring Agent shall be discharged from its duties and
obligations  hereunder.  The fees payable by the  Borrower to a successor  Agent
shall be the same as those payable to its predecessor  unless  otherwise  agreed
between the Borrower and such successor. After an Agent's resignation hereunder,
the  provisions  of this  Article and Sections  1.10 and 5.05 shall  continue in
effect  for the  benefit  of such  retiring  Agent,  its  sub-agents  and  their
respective  Related  Parties in respect  of any  actions  taken or omitted to be
taken by any of them while it was acting as such Agent.

         Each  Lender  acknowledges  that  it  has,  independently  and  without
reliance  upon any Agent or any Related  Party  thereof or any other  Lender and
based on such documents and information as it has deemed  appropriate,  made its
own credit analysis and decision to enter into this Agreement.  Each Lender also
acknowledges that it will,  independently and without reliance upon any Agent or
any Related  Party  thereof or any other Lender and based on such  documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document  furnished  hereunder or thereunder.  Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Revolving Loans, and
expressly consents to and waives any claim based upon such conflict of interest.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       22

<PAGE>

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

      BORROWER:                   FSQC FUNDING CO., LLC

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

                                      400 Center Street
                                      Newton, MA 02458
                                      Attention:  Bruce J. Mackey, Jr.
                                      Facsimile Number:  617-796-8385

      LENDERS:                    DRESDNER BANK AG, NEW YORK AND
                                  GRAND CAYMAN BRANCHES

                                  By: /s/ I. M. Leffler
                                      Name:
                                      Title:

                                  By: /s/ Stephen Kovach
                                      Name:
                                      Title:

                                      1301 Avenue of the Americas
                                      New York, NY  10019
                                      Attention: Michael Leffler/Stephen Kovach
                                      Facsimile Number:  (212) 895-1723/1774

                                  Revolving Commitment: $1,250,000

<PAGE>
                                  HFG HEALTHCO-4 LLC

                                  By: HFG Healthco-4, Inc., a member

                                      By: /s/ Orlando Figueroa
                                          Name: Orlando Figueroa
                                          Title: Vice President

                                      c/o Lord Securities Corporation
                                      48 Wall Street, 27th Floor
                                      New York, NY  10005
                                      Attention: Orlando Figueroa
                                      Facsimile Number:  (212) 346-9012

                                  Revolving Commitment: $11,250,000

PROGRAM MANAGER:                  DRESDNER KLEINWORT WASSERSTEIN LLC

                                  By: /s/ I. M. Leffler
                                      Name:
                                      Title:

                                  By: /s/ Stephen Kovach
                                      Name:
                                      Title:

                                      1301 Avenue of the Americas
                                      New York, NY  10019
                                      Attention: Michael Leffler/Stephen Kovach
                                      Facsimile Number:  (212) 895-1723/1774

<PAGE>

                                  HEALTHCARE FINANCE GROUP, INC.

                                  By: /s/ Robert D. Lynch
                                      Name:  Robert D. Lynch
                                      Title: Chief Operating Officer

                                      110 Wall Street, 2nd Floor
                                      New York, NY  10005
                                      Attention: David Hyams
                                      Facsimile Number:  (212) 785-9211

LEAD ARRANGER AND
SYNDICATION AGENT:                DRESDNER KLEINWORT WASSERSTEIN LLC

                                  By: /s/ I. M. Leffler
                                      Name:
                                      Title:

                                  By: /s/ Stephen Kovach
                                      Name:
                                      Title:

                                      1301 Avenue of the Americas
                                      New York, NY  10019
                                      Attention: Michael Leffler/Stephen Kovach
                                      Facsimile Number:  (212) 895-1723/1774

<PAGE>

COLLATERAL AGENT:                 HFG HEALTHCO-4 LLC

                                  By:   HFG Healthco-4, Inc., a member

                                      By: /s/ Orlando Figueroa
                                          Name: Orlando Figueroa
                                          Title: Vice President

                                      c/o Lord Securities Corporation
                                      48 Wall Street, 27th Floor
                                      New York, NY  10005
                                      Attention: Orlando Figueroa
                                      Facsimile Number:  (212) 346-9012
<PAGE>

                                    EXHIBIT I

                                   DEFINITIONS

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

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

         "Accrued  Amounts"  means,  as at any  date,  the  aggregate  amount of
accrued  but  unpaid  (whether  or  not  due  and  payable)  (a)  interest,  (b)
Non-Utilization Fees, and (c) Collateral Tracking Fees.

         "Additional  Collateral" means all of the Borrower's (i)(a) present and
future securities,  security entitlements and securities accounts (collectively,
"Investment  Property");  (b) all  deposit  accounts  and all  other  goods  and
personal property (including, without limitation,  patents, patent applications,
trade names and trademarks and Federal, state and local tax refund claims of all
kinds),  whether  tangible  or  intangible,  or whether  now owned or  hereafter
acquired  and wherever  located;  and (c) all proceeds of every kind and nature,
including proceeds of proceeds, of any and all of the foregoing,  and (ii) money
and cash; and all books,  records and other property relating to or referring to
any of the foregoing including all books, records, ledger cards, data processing
records,  computer  software and other  property and general  intangibles at any
time used or useful in connection with, evidencing,  embodying, referring to, or
relating to, any of the foregoing.

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

         "Agent" means each of the Program Manager, the Collateral Agent and the
Syndication Agent.

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

         "Assignment of Contracts" means that certain Assignment of Contracts as
Collateral  Security,  dated  the date  hereof,  between  the  Borrower  and the
Collateral  Agent,  in  substantially  the form attached hereto as Exhibit X, as
such  agreement may be amended,  modified or  supplemented  from time to time in
accordance with its terms.

                                       I-1
<PAGE>
         "Authorized  Representative"  means each Person designated from time to
time, as appropriate, in a Written Notice by the Borrower to the Program Manager
for the  purposes  of giving  notices  of  borrowing,  conversion  or renewal of
Revolving  Loans,  which  designation  shall  continue in force and effect until
terminated in a Written Notice to the Program Manager.

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

         "Borrower Account" means initially account # 1135638907 of the Borrower
at Citizens Bank of Massachusetts,  ABA #211070175,  or, thereafter,  such other
bank account designated by the Borrower by Written Notice to the Master Servicer
and the Program Manager from time to time.

         "Borrower Lockbox Account(s)" means, collectively, the Primary Borrower
Account  and the  Local  Borrower  Accounts  set  forth on  Schedule  IV  hereto
established  by the Borrower to deposit all cash  collections,  wire  transfers,
electronic   funds  transfers  and  other  cash  proceeds  of  Receivables  from
non-Governmental Entities, including collections received in the form of a check
and  collections  received  by  wire  transfer  directly  from  non-Governmental
Entities.

         "Borrower's Certificate" has the meaning set forth in Section 1.03.

         "Borrowing  Base" means,  as of any time, an amount equal to 75% of the
Expected  Net  Value  of  Eligible   Receivables   the  Obligors  of  which  are
Governmental Entities;  provided,  however, that no more than 6% of all Eligible
Receivables  included in the Borrowing  Base at any time shall be aged more than
120  days  from its Last  Date of  Service.  All  items in the  prior  sentence,
including  the proviso,  shall at all times be determined by reference to and as
set forth in the most recent Borrowing Base Certificate required to be delivered
to the Program  Manager by the Borrower as of such time  pursuant to Exhibit IV,
clause (j)(i).

         "Borrowing Base Certificate"  means a certificate (which may be sent by
Transmission) signed by the Borrower and the Primary Servicer,  substantially in
the form set  forth in  Exhibit  VII-A  hereto,  which  shall  provide  the most
recently available  information  (including updated information) with respect to
the Eligible Receivables of the Borrower (segregated by the classes (if any) set
forth on Schedule V hereto)  that is set forth in the aged  accounts  receivable
trial  balance and books and  records of the  Providers,  in form and  substance
satisfactory to the Lender and the Master Servicer.

         "Borrowing  Base  Deficiency"  means,  as of  any  date,  the  positive
difference,  if any, between (i) (x) the aggregate  outstanding principal amount
of all Revolving  Loans,  plus (y) Accrued Amounts minus (ii) the Borrowing Base
indicated on the most recent Borrowing Base Certificate.

         "Borrowing Limit" has the meaning set forth in Section 1.01(a).

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

                                       I-2
<PAGE>
         "CHAMPUS"  means  the  Civilian  Health  and  Medical  Program  of  the
Uniformed  Service,  a program of medical  benefits  covering  former and active
members of the uniformed services and certain of their dependents,  financed and
administered  by the United  States  Departments  of  Defense,  Health and Human
Services  and  Transportation  and  established  pursuant  to 10 USC  Sectionss.
1071-1106,   and  all  regulations   promulgated  thereunder  including  without
limitation  (a) all federal  statutes  (whether  set forth in 10 USC  Sectionss.
1071-1106  or  elsewhere)  affecting  CHAMPUS;  and (b) all  rules,  regulations
(including 32 CFR 199), manuals,  orders and  administrative,  reimbursement and
other guidelines of all Governmental  Entities  (including,  without limitation,
the  Department of Health and Human  Services,  the  Department of Defense,  the
Department  of  Transportation,  the  Assistant  Secretary  of  Defense  (Health
Affairs),  and the Office of CHAMPUS,  or any Person or entity succeeding to the
functions of any of the foregoing) promulgated pursuant to or in connection with
any of the  foregoing  (whether  or not having the force of law) in each case as
may be amended, supplemented or otherwise modified from time to time.

         "Change in Law" means (a) the adoption of any law,  rule or  regulation
after  the  date of  this  Agreement  or (b)  any  change  in any  law,  rule or
regulation or in the  interpretation or application  thereof by any Governmental
Entity after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section  1.11(b),  by any  lending  office of such Lender or by such
Lender's  holding  company,  if any) with any  request,  guideline  or directive
(whether  or not having  the force of law) of any  Governmental  Entity  made or
issued after the date of this Agreement.

         "Claims" has the meaning set forth in Section 1.10(b).

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

         "Collateral" has the meaning set forth in Section 4.01(a).

         "Collateral Agent" means HFG Healthco-4 LLC as collateral agent for the
Lenders, and its successors and assigns in such capacity.

         "Collateral Tracking Fee" has the meaning set forth in Section 1.06(b).

         "Collection  Account" means the Program Manager's account maintained at
The Bank of New York, ABA # 021000018, GLA 111565, For Further Credit to Account
#205779,  Ref:  HEALTHCO-4/FSQC,  Attn: Scott Tepper, or such other bank account
designated by the Program Manager from time to time.

         "Collections"  means all cash collections,  wire transfers,  electronic
funds  transfers  and  other  cash  proceeds  of  Receivables  deposited  in  or
transferred to the Collection Account,  including,  without limitation, all cash
proceeds thereof.

         "Control Agreement" means each Control Agreement,  dated as of the date
hereof,  among the Primary Servicer,  the Provider named therein,  the Borrower,
the  Program  Manager,  the  Collateral  Agent and the bank  named  therein,  in
substantially  the form attached  hereto as Exhibit XI,

                                       I-3
<PAGE>
as such agreement may be amended,  modified or supplemented from time to time in
accordance with its terms.

          "Credit and  Collection  Policy"  means those  receivables  credit and
collection  policies and  practices of the Borrower in effect on the date of the
Agreement and set forth in Schedule II hereto,  as modified from time to time in
accordance with the provisions of the Agreement.

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

         "Default"  means an event,  act or  condition  which with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.

         "Defaulted  Receivable"  means a Receivable (i) as to which the Obligor
therefor or any other Person obligated thereon has taken any action, or suffered
any event to occur, of the type described in paragraph (i) of Exhibit V, or (ii)
which,  consistent with the Credit and Collection  Policy,  would be written off
the applicable  Provider's books as  uncollectible;  provided,  however,  that a
Receivable   as  to  which  the  Obligor   therefor  has  suffered  a  temporary
governmental shutdown or delay shall not be a "Defaulted Receivable".

         "Delinquency Ratio" means, as of the last Business Day of each Month, a
percentage equal to:

                           DLR
                           ---
                           ENV

where:

         DLR       =       The  Expected  Net Value of all  Receivables  which
                           were  transferred  to the  Borrower  and which became
                           Delinquent Receivables in the Month immediately prior
                           to the date of calculation.

         ENV       =       The  Expected  Net  Value of  Eligible  Receivables
                           which were  transferred  to the Borrower in the Month
                           that is six Months  immediately  prior to the date of
                           calculation.

                                       I-4
<PAGE>
         "Delinquent  Receivable"  means a Receivable (a) that has not been paid
in full on or following the 180th day  following the date of original  invoicing
thereof, or (b) that is a Denied Receivable.

         "Denied  Receivable"  means  any  Receivable  as to which  any  related
representations  or  warranties  have been  discovered  at any time to have been
breached.

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

         "Distribution"  means any  dividend  payment or other  distribution  of
assets,  properties,  cash, rights,  obligations or securities on account of any
capital interest in the Borrower,  or return any capital to its members as such,
or purchase,  retire, defease, redeem or otherwise acquire for value or make any
payment  in  respect  of any  shares of any class of  capital  interests  in the
Borrower or any warrants,  rights or options to acquire any such interests,  now
or hereafter outstanding.

         "Documents"  means  this  Agreement,   the  Depositary  Agreement,  the
Government  Depositary  Agreement,  the Control  Agreements,  the  Assignment of
Contracts,  the RPTA, each other Provider Document, each Borrower's Certificate,
each  Borrowing Base  Certificate,  and each other document or instrument now or
hereafter  executed and  delivered to the Lender by or on behalf of the Borrower
pursuant  to  or  in  connection  herewith  or  therewith  (including,   without
limitation,  each other  agreement now existing or hereafter  created  providing
collateral security for the payment or performance of any Lender Debt).

         "Early  Termination Fee" means an amount equal to .50% of the Revolving
Commitment (or portion of Revolving Commitment being terminated).

         "Eligibility  Criteria"  means the criteria  and basis for  determining
whether a  Receivable  shall be deemed by the  Program  Manager to qualify as an
Eligible Receivable,  all as set forth in Exhibit VI hereto, as such Eligibility
Criteria  may be modified  from time to time by the Program  Manager in its good
faith discretion and based on historical  performance and other  Obligor-related
factually-based credit criteria upon Written Notice to the Borrower.

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

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

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

                                       I-5
<PAGE>
         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended.

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

         "Event of  Default"  means any of the  events  specified  in  Exhibit V
hereto.

         "Event of Termination" has the meaning set forth in the RPTA.

         "Excluded Claims" has the meaning set forth in Section 1.10(b).

         "Excluded  Taxes"  means taxes upon or  determined  by  reference  to a
Lender's  net  income  imposed  by the  jurisdiction  in which  such  Lender  is
organized or has its principal or registered office.

         "Expected  Net Value" means,  with respect to any Eligible  Receivable,
the gross unpaid amount of such  Receivable on date of creation  thereof,  times
the applicable Net Value Factor.

         "Five Star" means Five Star Quality Care, Inc., a corporation organized
under  the laws of the  State of  Maryland,  together  with its  successors  and
assigns.

         "Funding  Date" means the Initial  Funding Date and any Business Day on
which a Revolving  Loan is made at the  Borrower's  request in  accordance  with
provisions of the Agreement.

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

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

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

         "Government  Lockbox  Account(s)" means each of the accounts identified
on Schedule IV hereto as a Government  Lockbox Account in the name of a Provider
listed  on  Schedule  VI  hereto  and  associated  with the  Government  Lockbox
established and controlled by such

                                       I-6
<PAGE>
Provider to deposit  all cash  collections,  wire  transfers,  electronic  funds
transfers  and  other  cash  proceeds  of   Receivables   from  the   applicable
Governmental Entity listed on Schedule VI, including collections received in the
associated Government Lockbox and collections received by wire transfer directly
from  applicable  the  Governmental  Entity,  all as more fully set forth in the
Government Depositary Agreement.

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

         "Group-Wide  Event of  Termination"  has the  meaning  set forth in the
RPTA.

         "Indemnified Party" has the meaning set forth in Section 1.10(b).

         "Initial  Funding Date" means the date of the first borrowing under the
Agreement.

         "Initial Lenders" means,  collectively,  Dresdner Bank AG, New York and
Grand Cayman Branches and HFG Healthco-4 LLC.

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

         "Interest  Period" means (a) with respect to any LIBOR Loan, the period
commencing  on the  date  of such  LIBOR  Loan  and  ending  on the  numerically
corresponding day in the Month that is one Month thereafter, (b) with respect to
any Market Rate Loan, the period commencing on the date of such Market Rate Loan
and  ending  on any day that is less  than one  Month  thereafter,  and (c) with
respect to any Prime Rate Loan, the period  commencing on the date of such Prime
Rate Loan and  ending on either  (x) the  numerically  corresponding  day in the
Month that is one Month thereafter or (y) any day prior to such date;  provided,
that (i) if any Interest  Period  would end on a day other than a Business  Day,
such Interest Period shall be extended to the next  succeeding  Business Day and
(ii) in the case of a LIBOR  Loan or a Prime Rate Loan with an  Interest  Period
pursuant to clause (c)(x),  an Interest Period that commences on a day for which
there is no  numerically  corresponding  day in the last calendar  month of such
Interest Period shall end on the last Business Day of the last calendar month of
such  Interest  Period.  For  purposes  hereof,  the  date of a  Revolving  Loan
initially

                                       I-7
<PAGE>
shall be the date on which such Revolving  Loan is made and thereafter  shall be
the effective date of the most recent continuation of such Revolving Loan.

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

         "Lender  Debt" means and includes any and all amounts due,  whether now
existing  or  hereafter  arising,  under  the  Agreement,   including,   without
limitation, any and all principal, interest, penalties, fees, charges, premiums,
indemnities  and costs owed or owing to any Lender,  the Program  Manager or the
Master Servicer by the Borrower,  any Provider, or any Affiliate of the Borrower
or any Provider, arising under or in connection with this Agreement or any other
Document, in each instance, whether absolute or contingent,  direct or indirect,
secured or unsecured,  due or not, arising by operation of law or otherwise, and
all  interest  and  other  charges  thereon,   including,   without  limitation,
post-petition  interest  whether or not such interest is an allowable claim in a
bankruptcy.

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

         "Lenders"  means  the  Persons  listed on  Schedule  1.01 and any other
Person  that shall have become a party  hereto  pursuant  to an  Assignment  and
Assumption, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Assumption.

         "LIBOR"  means,  with  respect to any  Revolving  Loan for any Interest
Period,  (i)(a) the rate  appearing  on Page 3750 of the Dow Jones Market (or on
any  successor  or  substitute  page of such  Service,  or any  successor  to or
substitute  for such  Service,  providing  rate  quotations  comparable to those
currently  provided on such page of such  Service,  as determined by the Program
Manager from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London  interbank  market) at approximately
11:00 a.m.,  London time,  two Business days prior to the  commencement  of such
Interest Period,  as the rate for dollar deposits with a maturity  comparable to
such  Interest  Period,  or (b) if the  rate  set  forth  in  clause  (a) is not
available at such time for any reason, then the rate at which dollar deposits of
$5,000,000 and for a maturity  comparable to such Interest Period are offered by
the principal  London office of Dresdner Bank AG in immediately  available funds
in the London  interbank market at  approximately  11:00 a.m.,  London time, two
Business Days prior to the  commencement  of such Interest  Period or (c) if the
rate set  forth in  clause  (a) is not  available  and  Dresdner  Bank AG is not
quoting  lending  rates,  then the rate per annum  applicable to the most recent
Interest Period for which one of the prior provisions  applied divided by (ii) a
percentage  equal to 100%  minus the then  stated  maximum  rate of all  reserve
requirements   (including,   without   limitation,   any  marginal,   emergency,
supplemental special or other reserves required by applicable law) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency funding
or  liabilities  as defined in  Regulation  D of the Board of  Governors  of the
Federal  Reserve  System as from time to time in effect and any successor to all
or
                                       I-8
<PAGE>
a portion thereof establishing reserve requirements (or an successor category of
liabilities under Regulation D).

         "LIBOR Loan" means a loan bearing interest based on LIBOR.

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

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

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

         "Loss-to-Liquidation  Ratio" means, as of the last Business Day of each
Month, a percentage equal to:

                                      DR
                                      --
                                       C

where:

         DR        =       The Expected Net Value of all Eligible  Receivables
                           which  became  Defaulted  Receivables  in  the  Month
                           immediately prior to the date of calculation.

         C         =       Collections  on such Eligible  Receivables  in the
                           Month immediately prior to the date of calculation.

         "Market  Rate" means a rate of  interest  per annum  determined  by the
Program Manager.

         "Market  Rate Loan" means a loan bearing  interest  based on the Market
Rate.

         "Master  Servicer" means Healthcare  Finance Group,  Inc. and any other
Person  then  identified  by the  Program  Manager  to  the  Borrower  as  being
authorized to administer and service Receivables.

                                       I-9
<PAGE>
         "Material Adverse Effect" means any event, condition,  change or effect
that  (a)  has  a  materially  adverse  effect  on  the  business,   Properties,
capitalization, liabilities, operations, prospects or financial condition of (i)
the  Providers,  taken as a whole,  (ii) the Borrower,  or (iii) Five Star,  (b)
materially  impairs the ability of the Borrower to perform its obligations under
this Agreement or any of the other Documents, (c) materially impairs the ability
of  the  Primary  Servicer,  any  Provider  or the  Borrower  to  perform  their
respective obligations under the RPTA or any of the other Provider Documents, or
(d) materially  impairs the validity or enforceability of, or materially impairs
the rights,  remedies  or benefits  available  to the  Collateral  Agent for the
benefit of the Lenders,  under this  Agreement or (as assignee of the  Borrower)
under the RPTA or any of the other Provider Documents.

         "Maturity  Date"  means  the  earlier  of (a) the  date on  which  this
Agreement  terminates in accordance with the provisions of Section 5.07(a),  and
(b) the  occurrence  of an Event of Default  unless  such event is waived by the
Required Lenders in writing.

         "Maximum  Permissible  Rate"  has the  meaning  set  forth  in  Section
1.14(a).

         "Medicaid" means the medical  assistance  program  established by Title
XIX of the Social  Security Act (42 U.S.C.  Secs. 1396 et seq.) and any statutes
succeeding thereto.

         "Medicare" means the health insurance program for the aged and disabled
established by Title VXII of the Social  Security Act (42 U.S.C.  Secs.  3395 et
seq.) and any statutes succeeding thereto.

         "Month" means a calendar month.

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

         "Net Value  Factor"  means,  initially,  the  percentages  set forth on
Schedule V attached  hereto,  as such  percentages  may be adjusted,  upwards or
downwards  with notice (which may be  telephonic)  to the Borrower,  in the good
faith  discretion  of the Program  Manager,  based on  historical  actual  final
collections  received on the Receivables within the 180 days of the Last Service
Date of such  Receivables  (without  regard  to the  factors  set  forth  in the
definition of "Defaulted Receivable").

         "Non-Utilization Fee" has the meaning set forth in Section 1.06(a).

         "Notice" has the meaning set forth in the RPTA.

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

         "Other Entities" means any Provider and each of its direct and indirect
parents or  subsidiaries  (in whatever  business form such Person  exists) other
than the Borrower.

                                      I-10
<PAGE>
         "Other Taxes" has the meaning set forth in Section 1.09(b).

         "Outstanding  Balance"  means,  as of any  date of  determination,  the
aggregate  outstanding  principal  balance of all Revolving Loans (plus interest
that is due and payable  thereon that remains  unpaid beyond the first  Business
Day of such Month);  provided that, for purposes of interest  calculation  only,
any  Collections  utilized  to reduce the  outstanding  principal  amount of the
Revolving Loans shall reduce the "Outstanding  Balance" hereunder only following
a one Business Day clearance period applied thereto.

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

         "Permitted Overadvances" means involuntary overadvances that may result
from time to time due to the fact that any  borrowing  formulas set forth in the
Documents were  unintentionally  exceeded  (whether at the time of any Revolving
Loan or  otherwise)  for any reason  (other  than the  Program  Manager's  gross
negligence or willful misconduct), including Receivables believed to be eligible
in fact being or becoming ineligible.  To the extent any Permitted  Overadvances
are  made,  each  Lender  shall  bear  its  pro  rata  (based  on its  Revolving
Commitment) share thereof.

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

         "Prime  Rate" means the rate of interest per annum  publicly  announced
from time to time by  JPMorgan  Chase Bank at its  principal  office in New York
City as its prime rate in effect at such time.

         "Prime  Rate Loan"  means a loan  bearing  interest  based on the Prime
Rate.

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

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

         "Primary Servicer" has the meaning set forth in the RPTA.

                                      I-11
<PAGE>
         "Program   Manager"   means  (i)   collectively,   Dresdner   Kleinwort
Wasserstein LLC and Healthcare Finance Group, Inc., in their capacity as program
manager  hereunder  and any  successors  or assigns in such capacity or (ii) any
other Person  identified by the then Program  Manager in writing to the Borrower
as being  authorized  to provide  administrative  services  with  respect to the
Borrower and the funding and  collection  of  healthcare  receivables  by and on
behalf of the Lenders.

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

         "Provider" has the meaning set forth in the RPTA

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

         "Provider Documents" has the meaning set forth in the RPTA.

         "Receivable Information" has the meaning set forth in the RPTA.

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

         "Related  Party"  means,  with respect to any  specified  Person,  such
Person's Affiliates,  incorporators, members and stockholders and the respective
agents, attorneys,  advisors, officers,  directors, members, managers, employees
or partners of such Person and such Person's Affiliates,  incorporators, members
and stockholders.

         "Required  Lenders"  means,  at any  time,  Lenders  holding  Revolving
Commitments  representing at least 66 2/3% of the Total Revolving Commitment or,
if the Revolving Commitments

                                      I-12
<PAGE>
shall have been terminated, having at least 66 2/3% of all outstanding Revolving
Loans;  provided,  that if at any time  there  are only  two  Lenders,  Required
Lenders shall mean both such Lenders.

         "Revolving   Commitment"means,   with  respect  to  each  Lender,   the
commitment  of such Lender to make  Revolving  Loans  hereunder  in an aggregate
amount at any time  outstanding  not in excess of the amount set forth under the
name of such Lender on the signature pages hereof, or, if applicable, the amount
set forth in the Assignment and Assumption  pursuant to which such Lender became
a Lender hereunder,  as such commitment may be reduced or increased from time to
time pursuant to the term of this Agreement.

         "Revolving Loan" means a Revolving Loan made pursuant to Section 1.03.

         "RPTA" means that certain Receivables  Purchase and Transfer Agreement,
dated  as of the  date  of this  Agreement,  among  the  Primary  Servicer,  the
Providers  and the  Borrower,  as such  agreement  may be  amended,  modified or
supplemented from time to time in accordance with the terms hereof and thereof.

         "Syndication  Agent" means Dresdner  Kleinwort  Wasserstein LLC, in its
capacity as syndication agent hereunder.

         "Tangible Net Worth" with respect to the Borrower,  means, at any time,
the  excess  of (i) the  Expected  Net  Value  of all  Receivables  owned by the
Borrower  and not  financed by the Lender,  plus cash,  plus  investments,  plus
amounts  which are owing from the Lenders to the Borrower  minus (ii) the sum of
all accrued  unpaid  monetary  obligations  and accrued unpaid fees and expenses
payable hereunder or otherwise owed by the Borrower.

         "Total Revolving  Commitment"  means the sum of the Lenders'  Revolving
Commitments,  as the same may be reduced or increased from time to time pursuant
to this Agreement.

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

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

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

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

                                      I-13
<PAGE>
Other Terms.  All  accounting  terms not  specifically  defined  herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York,  and not  specifically  defined  herein,  are used  herein as
defined in such Article 9.

                                      I-14
<PAGE>
                                   EXHIBIT II

                          CONDITIONS OF REVOLVING LOANS

         1.  Conditions  Precedent on Initial  Funding  Date.  The making of the
Revolving  Loan  on the  Initial  Funding  Date  is  subject  to the  conditions
precedent that the Program  Manager shall have received on or before the Initial
Funding Date the following,  each (unless otherwise  indicated) dated such date,
in form and substance reasonably satisfactory to the Program Manager:

         (a) A  certificate  issued  by the  Secretary  of State of the State of
Delaware, dated as of a recent date, as to the legal existence and good standing
of the Borrower  (which  certificate may be dated not more than 20 days prior to
the Initial Funding Date).

         (b) Certified copies of the organizational documents and all amendments
thereto,  certified  copies  of  resolutions  of the  managers  of the  Borrower
approving this  Agreement,  certified  copies of all documents filed to register
any and all  assumed/trade  names of the Borrower,  and certified  copies of all
documents   evidencing   other  necessary   corporate  action  and  governmental
approvals, if any, with respect to this Agreement.

         (c) A  certificate  of the  Secretary  or  Assistant  Secretary  of the
Borrower  certifying  the  names  and true  signatures  of the  officers  of the
Borrower  authorized  to sign  this  Agreement  and the  other  documents  to be
delivered by it hereunder.

         (d) A copy of the  opening  balance  sheet  of the  Borrower  as at the
Initial Funding Date, certified by the chief financial officer of the Borrower.

         (e)  Acknowledgment or time-stamped  receipt copies of proper financing
statements  (showing the Borrower as debtor and the Collateral  Agent as secured
party)  duly filed on or before the  Initial  Funding  Date under the UCC of all
jurisdictions  that the  Collateral  Agent  may  deem  necessary  or  reasonably
desirable  in  order to  perfect  the  security  interests  contemplated  by the
Agreement.

         (f)  Completed  requests  for  information  (UCC search  results) and a
schedule  thereof  listing  all  effective  financing  statements  filed  in the
applicable  jurisdictions that name the Borrower as debtor, together with copies
of such financing statements.

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

         (h) With respect to each  Provider,  a copy of each of such  Provider's
existing  forms  of  patient  consents,  as well as a copy of each  new  patient
consent form to be signed by each patient for which a Receivable will be created
after  the  Initial  Funding  Date,   which  consent  forms  authorize   certain
demographic and medical information with respect to such patient to be disclosed
by such Provider to its  servicing  agents and by such  servicing  agents to any
third party obligors

                                      II-1
<PAGE>
thereon,  certified by a Secretary or  Assistant  Secretary of such  Provider as
being true, complete and correct.

         (i) A favorable opinion of Schnader Harrison Segal & Lewis LLP, counsel
to the Borrower,  substantially in the form attached hereto as Exhibit IX-A, and
as to such other matters as the Lender Group requests.

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

         (k) The  Assignment of Contracts with respect to the RPTA and the other
Provider Documents and assignments of all other documents, lockboxes and lockbox
accounts  with  respect  to the  RPTA and the  other  Provider  Documents,  duly
executed by the Borrower and  acknowledged  by the other  Persons  party to such
Provider Documents.

         (l)  Originally  executed  copies  of the RPTA and the  other  Provider
Documents, all other documentation required to be delivered with respect to this
Agreement,  the  RPTA  and  the  other  Documents,  all in  form  and  substance
satisfactory to the Program Manager, which agreements shall be in full force and
effect and enforceable in accordance with their respective terms.

         (m) Evidence that all of the  conditions  precedent with respect to the
initial purchase under the RPTA have been satisfied or waived.

         (n) A  duly  executed  Depositary  Agreement,  together  with  evidence
satisfactory  to the Program Manager that the Primary  Borrower  Account and the
Primary Provider Account and the Government Lockboxes and the Government Lockbox
Accounts have been established.

         (o) Duly  executed  Government  Depositary  Agreements,  together  with
evidence  satisfactory to the Program Manager that the Government  Lockboxes and
the Government Lockbox Accounts have been established.

         (p)  Duly   executed   Control   Agreements,   together  with  evidence
satisfactory to the Program  Manager that the Local Borrower  Accounts have been
established.

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

         (r) Evidence that the capitalization of the Borrower is satisfactory to
the Program Manager.

         (s) Completion of a due diligence review by the Program Manager (or its
agent) of the Providers,  the results of which are  satisfactory  to the Program
Manager.

                                      II-2
<PAGE>
         2. Conditions  Precedent on All Funding Dates. Each Revolving Loan on a
Funding  Date  (including  the  Initial  Funding  Date)  shall be subject to the
further  conditions  precedent  that the Borrower and the Program  Manager shall
have agreed upon the terms of such Revolving Loan and also that:

         (a) the Borrower shall have delivered to the Program Manager,  at least
two Business Days prior to such Funding Date, in form and substance satisfactory
to the  Program  Manager a completed  Borrower's  Certificate,  together  with a
completed  Borrowing Base  Certificate  and such  additional  information as may
reasonably be requested by the Program Manager or the Master Servicer;

         (b) on such Funding  Date the  following  statements  shall be true and
correct (and acceptance of the proceeds of such Revolving Loan shall be deemed a
representation  and warranty by the Borrower that such  statements are then true
and correct):

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

                           (ii) no event  has  occurred  and is  continuing,  or
         would  result  from  such  Revolving  Loan  or  any  actions  connected
         therewith, that constitutes a Default or an Event of Default; and

         (c) the  Program  Manager  shall have  received  such other  approvals,
opinions or documents as it may reasonably request.

                                      II-3
<PAGE>

                                   EXHIBIT III

                         REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants as follows:

         (a) The Borrower is a limited liability company duly organized, validly
existing and in good  standing  under the laws of the State of Delaware,  and is
duly qualified to do business,  and is in good standing,  in every  jurisdiction
where the nature of its business requires it to be so qualified.

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

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

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

         (e) The  Borrower  has all power and  authority,  and has all  permits,
licenses, accreditations,  certifications,  authorizations,  approvals, consents
and agreements of all Insurers,  Governmental  Entities,  accreditation agencies
and any other  Person  necessary  or required  for the  Borrower  (i) to own the
assets  (including  Receivables) that it now owns, (ii) to carry on its business
as now  conducted,  (iii) to execute,  deliver and perform the Agreement and the
other  Documents to which it is a party,  and (iv) to receive  payments from the
Obligors in the manner  contemplated in the Agreement and the RPTA,  except,  in
each case, where the failure to do so would not reasonably be expected to result
in a Material Adverse Effect.

         (f) Except as disclosed on Schedule  III, no Provider has been notified
by any Insurer, Governmental Entity or instrumentality,  accreditation agency or
any other person,  during the immediately  preceding 24 Month period,  that such
party has rescinded or not renewed,  or is

                                      III-1

<PAGE>
reasonably   likely  to  rescind  or  not  renew,  any  such  permit,   license,
accreditation,  certification,  authorization,  approval,  consent or  agreement
granted by it to such Provider or to which it and such Provider are parties.

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

         (h) The opening  balance  sheet of the  Borrower,  copies of which have
been furnished to the Program Manager, fairly present the financial condition of
the Borrower as of the date thereof all in accordance with GAAP.

         (i) The RPTA is in full force and effect and no Event of Termination or
Group-Wide Event of Termination (without regard to waivers granted or sought) is
continuing thereunder.

         (j) There is no pending or, to the Borrower's knowledge, any threatened
action or proceeding or  injunction,  writ or  restraining  order  affecting the
Borrower or any Provider  before any court,  Governmental  Entity or  arbitrator
which would  reasonably be expected to result in a Material  Adverse Effect,  or
which  purports  to affect  the  legality,  validity  or  enforceability  of the
Agreement,  the RPTA or any other  Document,  and neither the  Borrower  nor any
Provider  is  currently  the  subject  of,  or  has  any  present  intention  of
commencing, an insolvency proceeding or petition in bankruptcy.

         (k) The Borrower is the legal and  beneficial  owner of the  Collateral
free and clear of any Lien. No effective financing statement or other instrument
similar in effect  covering any item of  Collateral  is on file in any recording
office,  except those being terminated on or before the Initial Funding Date and
those filed in favor of the Borrower relating to the purchase of the Receivables
under  the RPTA and  those in favor  of the  Collateral  Agent  relating  to the
Agreement,  and no competing notice or notice inconsistent with the transactions
contemplated in the Agreement has been sent to any Obligor.

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

         (m) The principal place of business and chief  executive  office of the
Borrower  and the office  where the Borrower  keeps its records  concerning  the
Collateral  are located at the address  referred to on the signature page of the
Agreement or in a Written Notice  pursuant to clause (b) of Exhibit IV and there
have been no other such locations for the four immediately prior Months.

                                      III-2

<PAGE>
         (n) The provisions of the Agreement create legal and valid Liens in all
of the  Collateral  in favor of the  Collateral  Agent,  for the  benefit of the
Lenders, and when all proper filings and other actions necessary to perfect such
Liens have been  completed,  will  constitute a perfected and continuing Lien on
all of the Collateral,  having priority over all other Liens on such Collateral,
enforceable against the Borrower and all third parties.

         (o) The  Borrower  has not changed its  principal  place of business or
chief executive office in the last five years.

         (p) The exact  name of the  Borrower  is as set forth on the  signature
page of the Agreement, and except as notified in writing to the Program Manager,
the  Borrower  has not  changed its name in the last 12 Months,  and,  except as
notified in writing to the Program  Manager,  the Borrower did not use, nor does
the Borrower now use, any fictitious or trade name.

         (q)  With  respect  to the  Borrower,  any  Providers  or  the  Primary
Servicer,  since the  Funding  Date prior to the making of this  representation,
there has  occurred  no event which has or is  reasonably  likely to result in a
Material Adverse Effect.

         (r) Neither the Borrower  nor any  Provider is in  violation  under any
applicable statute,  rule, order, decree or regulation of any court,  arbitrator
or  governmental  body or agency having  jurisdiction  over the Borrower or such
Provider  which has or is  reasonably  likely to  result in a  Material  Adverse
Effect.

         (s) The  Borrower  has filed on a timely  basis,  including  applicable
extensions,  all tax returns (federal, state and local) required to be filed and
has paid, or made adequate provision for payment of, all taxes,  assessments and
other governmental charges due from the Borrower. No tax Lien has been filed and
is now effective  against the Borrower or any of its Properties  except any Lien
in respect of taxes and other  charges not yet due or contested in good faith by
appropriate  proceedings.  To the  Borrower's  knowledge,  there  is no  pending
investigations  of the  Borrower  by any taxing  authority  nor any  pending but
unassessed  tax  liability  of the  Borrower.  The  Borrower  does  not have any
obligation under any tax sharing agreement.

         (t) The Borrower is solvent and will not become  insolvent after giving
effect to the transactions  contemplated by this Agreement; the Borrower has not
incurred  debts or  liabilities  beyond its ability to pay nor does it intend to
incur such debts or liabilities;  the Borrower will,  after giving effect to the
transaction  contemplated by this Agreement,  have an adequate amount of capital
to conduct its business in the foreseeable future; the transactions contemplated
under the Documents are made in good faith and without  intent to hinder,  delay
or defraud present or future creditors.

         (u)  The  Providers  maintain  only  the  Government   Lockboxes,   the
Government Accounts and the Provider Accounts as described on Schedule IV to the
Agreement, for Receivables the Obligor of which is a Governmental Entity (except
those lockboxes and lockbox accounts  terminated or being terminated prior to or
on the Initial  Funding  Date);  the Providers do not maintain any lockboxes and
the  Local  Borrower  Accounts  are the only  lockbox  accounts  maintained  for
Receivables,  the  Obligors  of  which  are  non-Governmental  Entities;  and no
direction is in effect

                                      III-3

<PAGE>
directing Obligors to remit payments on Receivables other than to the applicable
Provider, Borrower Lockbox Account, Government Lockbox or Provider Account, each
as described on Schedule IV.

         (v) The Borrower has no pension plans or profit sharing plans.

         (w) Except as disclosed  on Schedule  III hereto,  there are no pending
civil or  criminal  investigations  by any  Governmental  Entity  involving  the
Borrower, any Provider or any of their respective officers or directors and none
of the Borrower,  any Provider or any of their respective  officers or directors
has been involved in, or the subject of, any civil or criminal  investigation by
any  Governmental  Entity  that  would  reasonably  be  expected  to result in a
Material Adverse Effect.

         (x)  The  sole   business  of  the  Borrower  is  as  provided  in  its
organizational documents.

         (y) The assets of the Borrower are free and clear of any Liens in favor
of the Internal  Revenue Service,  any Employee Benefit Plan, any  Multiemployer
Plan or the PBGC other than inchoate tax Liens resulting from an assessment of a
Provider or the Borrower.

         (z) None of the Eligible Receivables  constitutes or has constituted an
obligation of any Person which is an Affiliate of the Borrower.

         (aa) The Obligor of each Eligible  Receivable  has not been the Obligor
of any Defaulted  Receivables in the past 12 Months (other than, for the purpose
of this clause, as a result of good faith disputes).

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

         (cc) The Borrower has no Debt except hereunder and under the RPTA.

                                      III-4
<PAGE>
                                   EXHIBIT IV

                                    COVENANTS

Until  the  payment  in full of all  Lender  Debt  and  the  termination  of the
Revolving Commitment hereunder:

         (a) Compliance with Laws, etc. The Borrower will comply in all material
respects with all applicable  laws,  rules,  regulations and orders and preserve
and  maintain  its limited  liability  company  existence,  rights,  franchises,
qualifications, and privileges.

         (b) Offices,  Records and Books of Account.  The Borrower will keep its
principal place of business and chief  executive  office and the office where it
keeps its records  concerning  the Collateral at the address of the Borrower set
forth under its name on the  signature  page to the  Agreement or, upon 30 days'
prior  Written  Notice  to the  Program  Manager,  at  any  other  locations  in
jurisdictions where all actions reasonably  requested by the Lender or otherwise
necessary  to  protect  and  perfect  the  Collateral  Agent's  interest  in the
Collateral have been taken and completed.  The Borrower shall keep its books and
accounts  in  accordance  with GAAP and shall make a  notation  on its books and
records,  including any computer files,  to indicate that the  Receivables  have
been  assigned  as  security  to the  Collateral  Agent,  for the benefit of the
Lenders. The Borrower shall maintain and implement  administrative and operating
procedures  (including,  without  limitation,  an  ability to  recreate  records
evidencing  Receivables and related contracts in the event of the destruction of
the originals thereof), and keep and maintain all documents,  books, records and
other  information   reasonably   necessary  or  advisable  for  collecting  all
Receivables (including, without limitation, records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each
existing Receivable) and for providing the Receivable Information.

         (c) Performance and Compliance with Contracts and Credit and Collection
Policy.  The Borrower will, at its expense,  timely and fully perform and comply
(and will cause the Primary Servicer,  the Providers or their designees to fully
perform and comply) with all material  provisions,  covenants and other promises
required to be observed by it under the  contracts  related to the  Receivables,
and  timely  and fully  comply in all  material  respects  with the  Credit  and
Collection Policy in regard to each Receivable and the related contract, and the
Borrower  shall  maintain,  at its expense,  in full  operation each of the bank
accounts  and  lockboxes  required to be  maintained  under the  Agreement.  The
Borrower shall do nothing,  nor suffer or permit any other Person,  to impede or
interfere with the collection by the Program  Manager or the Master  Servicer on
behalf of the Lenders, of the Receivables.

         (d) Notice of Breach of  Representations  and Warranties.  The Borrower
shall promptly (and in no event later than five Business Days  following  actual
knowledge  thereof)  inform the Program  Manager and the Master  Servicer of any
breach of covenants or  representations  and warranties  hereunder and under the
RPTA,  including,  without  limitation,  upon  discovery  of  a  breach  of  the
Eligibility Criteria set forth in Exhibit VI hereof and thereof.

                                      IV-1
<PAGE>
         (e) Debt, Sales,  Liens, etc. The Borrower will not incur or assume any
Debt or issue any securities  except under or as contemplated by this Agreement.
The  Borrower  will not sell,  assign  (by  operation  of law or  otherwise)  or
otherwise  dispose  of, or  create  or  suffer  to exist any Liens  upon or with
respect to, the Borrower's Properties, or upon or with respect to any account to
which any Collections are sent, or assign any right to receive income in respect
thereof except (i) those Liens in favor of Collateral  Agent, for the benefit of
the Lenders or any assignee of any Lender  relating to the  Agreement,  and (ii)
those  assignments  of Denied  Receivables  upon  receipt by the Borrower of the
respective Repurchase Prices (as defined in the RPTA).

         (f)  Extension  or  Amendment of  Receivables.  The Borrower  shall not
amend,  waive or agree,  or  otherwise  suffer or permit any  Provider to amend,
waive or agree,  to any deviation from the terms or conditions of any Receivable
owned by the Borrower in a manner  inconsistent  with the Credit and  Collection
Policy.

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

         (h) Audits and  Visits.  The  Borrower  will,  from time to time during
regular  business hours as requested by the Program  Manager,  permit the Lender
upon  reasonable  notice,   without  interfering  with  the  Borrower's  or  the
Providers'  businesses or operations and subject to compliance  with  applicable
law in the case of  review of  patient/customer  information,  or its  agents or
representatives  (including the Master Servicer), (i) to examine and make copies
of and  abstracts  from all books,  records and  documents  (including,  without
limitation,  computer tapes and disks) in the possession or under the control of
the Borrower relating to Receivables including,  without limitation, the related
contracts,  and (ii) to visit the offices and properties of the Borrower for the
purpose of examining and auditing such materials  described in clause (i) above,
and to discuss  matters  relating to Receivables  or the Borrower's  performance
hereunder  or under the  contracts  with any of the officers or employees of the
Borrower having  knowledge of such matters.  The Borrower shall, at any time and
from time to time  during  regular  business  hours as  requested  by the Master
Servicer,  permit  the  Master  Servicer  to have at least one of its  agents or
representatives physically present in the Borrower's administrative office, upon
reasonable  notice,  to assist the Borrower in the  collection  of  Receivables;
provided,  however,  that no notice shall be required  upon the  occurrence  and
during the continuance of an Event of Default.

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

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

                           (i) on or prior to the 15th of each Month,  a copy of
         the "Monthly Report"  delivered by the Primary Servicer to the Borrower
         pursuant to Section 1.03 of the RPTA,  together  with a Borrowing  Base
         Certificate,  which shall be a revised Borrowing Base Certificate based
         on reconciliations and adjustments  reflected in such Monthly Report if
         a Borrowing  Base  Certificate  was delivered with respect to a Funding
         Date occurring  after delivery of the prior "Monthly  Report",  in each
         case,  certified by the chief financial officer of the Borrower and the
         Primary Servicer;

                           (ii) as soon as available  and in any event within 45
         days after the end of each of the first  three  quarters of each fiscal
         year of the Borrower,  balance  sheets of the Borrower as of the end of
         such quarter and statements of income, cash flows and retained earnings
         of the  Borrower  for the period  commencing  at the  beginning  of the
         current fiscal year and ending with the end of such quarter,  certified
         by the chief  financial  officer of the Borrower,  and accompanied by a
         certificate of an authorized  officer of the Borrower  stating that, as
         of such date, (i) no Event of Default  exists and is  continuing,  (ii)
         all representations and warranties are true and correct in all material
         respects  (except  any   representation   or  warranty  that  expressly
         indicates  that it is being made as of a specific  date,  in which case
         such  representation or warranty shall be true and correct on and as of
         such date) and (iii) the conditions  precedent set forth in paragraph 2
         of Exhibit II have been  fulfilled  or waived in writing by the Program
         Manager,  and detailing its  compliance for such fiscal period with the
         financial covenants contained in this Agreement;

                           (iii) as soon as available and in any event within 90
         days after the end of each fiscal year of the Borrower,  balance sheets
         as of, and statements of income for, such fiscal year, and  accompanied
         by a certificate of an authorized officer of the Borrower stating that,
         as of such date, (i) no Event of Default exists and is continuing, (ii)
         all representations and warranties are true and correct in all material
         respects  (except  any   representation   or  warranty  that  expressly
         indicates  that it is being made as of a specific  date,  in which case
         such  representation or warranty shall be true and correct on and as of
         such date) and (iii) the conditions  precedent set forth in paragraph 2
         of Exhibit II have been  fulfilled  or waived in writing by the Program
         Manager,  and detailing its  compliance for such fiscal period with the
         financial covenants contained in this Agreement;

                           (iv)  promptly and in any event within five  Business
         Days  after the  occurrence  of each  Default  or Event of  Default,  a
         statement of the chief financial  officer of the Borrower setting forth
         details of such  Default or Event of  Default,  and the action that the
         Borrower has taken and proposes to take with respect thereto;

                           (v) at least ten Business Days prior to any change in
         the  Borrower's  name,  a  notice  setting  forth  the new name and the
         proposed effective date thereof;

                                      IV-3

<PAGE>
                           (vi)  promptly  (and  in no  event  later  than  five
         Business Days following actual knowledge or receipt  thereof),  Written
         Notice in  reasonable  detail,  of (w) any Lien  asserted or claim made
         against  a  Receivable,  (x) the  occurrence  of an Event  of  Default,
         including the occurrence of any other event which could have a material
         adverse  effect on the  value of a  Receivable,  (y) any  notice of any
         investigations or similar audits of any Provider being conducted by any
         federal, state or county Governmental Entity or its agents or designees
         or (z) the  results  of any  cost  report  filed  and  reviewed  by any
         Governmental  Entity  or  its  fiscal  intermediary  or  settled,   and
         investigations or similar audits of any Provider being conducted by any
         federal,   state  or  county  Governmental  Entity  or  its  agents  or
         designees;

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

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

                           (ix) within 90 days after the end of each fiscal year
         of  the  Borrower,  a  certificate  of  independent   certified  public
         accountants  stating  that to their  knowledge no  Group-Wide  Event of
         Termination  has occurred and exists as of the end of such fiscal year,
         or if in their  opinion  such a  Group-Wide  Event of  Termination  has
         occurred and is continuing, a statement as to the nature thereof; and

                           (x) such other information respecting the Receivables
         or the condition or operations, financial or otherwise, of the Borrower
         as the Program  Manager or any Lender may from time to time  reasonably
         request.

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

         (l)  Officer's  Certificate.  On the  dates  the  financial  statements
referred to in clause (j) above are to be  delivered  after the Initial  Funding
Date, the chief financial officer of the Borrower shall deliver a certificate to
the Program Manager,  stating that, as of such date, (i) all representations and
warranties  are true and correct,  (ii) the  conditions  precedent  set forth in
paragraph  2 of  Exhibit  II have been  fulfilled  or waived in  writing  by the
Program Manager, and (iii) no Event of Default exists and is continuing.

                                      IV-4
<PAGE>
         (m) Further Instruments,  Continuation Statements.  The Borrower shall,
at its  expense,  promptly  execute  and deliver  all  further  instruments  and
documents,  and  take  all  further  action  that  the  Program  Manager  or the
Collateral Agent may reasonably request, from time to time, in order to perfect,
protect or more fully evidence the Collateral  Agent's security  interest in the
Collateral, or to enable the Collateral Agent or the Program Manager to exercise
or enforce the rights of the  Collateral  Agent,  for the benefit of the Lender,
hereunder  or  in  the  Collateral.  Without  limiting  the  generality  of  the
foregoing, the Borrower will upon the request of the Program Manager execute and
file such UCC financing or  continuation  statements,  or amendments  thereto or
assignments  thereof,  and such other instruments or notices,  as may be, in the
opinion of the Program  Manager,  necessary or appropriate.  The Borrower hereby
authorizes  the Program  Manager to file one or more  financing or  continuation
statements and amendments  thereto and assignments  thereof,  relative to all or
any of the Collateral now existing or hereafter arising without the signature of
the Borrower where permitted by law. If the Borrower fails to perform any of its
agreements or  obligations  under the  Agreement,  the Program  Manager may (but
shall  not be  required  to)  itself  perform,  or cause  performance  of,  such
agreement or  obligation,  and the expenses of the Program  Manager  incurred in
connection therewith shall be payable by the Borrower.

         (n) Merger,  Consolidation.  The Borrower shall not merge with or into,
consolidate  with or into, or enter into any  agreement to merge or  consolidate
with or into, another Person, or convey, transfer, lease or otherwise dispose of
all  or  substantially  all  of its  assets  (whether  now  owned  or  hereafter
acquired).

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

         (p) Preservation of Company Existence.  The Borrower shall preserve and
maintain its existence, rights, franchises and privileges in the jurisdiction of
its organization, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve and maintain such
existence,  rights,  franchises,  privileges and qualification would result in a
Material Adverse Effect.

         (q) Provider Documents.  The Borrower will, at its sole expense, timely
and fully perform and comply with all  provisions,  covenants and other promises
required  to be  observed  by it under  the  Provider  Documents,  maintain  the
Provider  Documents in full force and effect,  enforce each Provider Document in
accordance with its terms,  take all such action to such end as may be from time
to time reasonably  requested by the Program  Manager,  and make to any party to
the Provider  Documents such demands and requests for information and reports or
for action as the  Borrower is entitled  to make  thereunder  and as may be from
time to time reasonably requested by the Program Manager. The Borrower shall not
permit any waiver, modification or amendment of any Provider Document.

         (r) New Providers. The Borrower shall not cause or suffer or permit any
other  Person to become a "Provider"  under the RPTA  without the prior  written
consent of the Program Manager.

                                      IV-5
<PAGE>
         (s) Master  Servicer  Certificate.  On or before the 30th  calendar day
after the Initial  Funding Date, the Program Manager shall receive a certificate
from the Master  Servicer  stating  that all  computer  linkups  and  interfaces
necessary or desirable,  in the judgment of the Master  Servicer,  to effectuate
the transactions and information  transfers  contemplated  hereunder,  are fully
operational to the reasonable satisfaction of the Master Servicer.

                                      IV-6

<PAGE>
                                SPECIAL COVENANTS
                               ENTITY SEPARATENESS

         Until the payment in full of all Lender Debt and the termination of the
Total Revolving Commitment hereunder:

                  (i) The  Borrower  will at all  times  maintain  at least  one
independent  manager  who is (x) not a  current  or  former  officer,  director,
manager or employee of an  Affiliate of the Borrower or any Other Entity and who
is not a current or former  officer or  employee of the  Borrower  and (y) not a
stockholder  or the holder of any other equity  interests of any Other Entity or
any of their respective Affiliates.

                  (ii)  The  Borrower  will not  direct  or  participate  in the
management of any of the Other Entities' operations.

                  (iii) The Borrower will at all times be adequately capitalized
in light of its contemplated business.

                  (iv)  The  Borrower  will  at all  times  provide  for its own
operating expenses and liabilities from its own funds.

                  (v) Subject to consolidation with the Providers for accounting
and tax  purposes,  the  Borrower  will  maintain  its assets  and  transactions
separately  from  those of the  Other  Entities  and  reflect  such  assets  and
transactions  in financial  statements  separate and distinct  from those of the
Other Entities and evidence such assets and transactions by appropriate  entries
in books and records separate and distinct from those of the Other Entities. The
Borrower will not hold itself out as being liable, primarily or secondarily, for
any obligations of the Other Entities.

                  (vi) The Borrower will not maintain any joint account with any
Provider  or any  Other  Entity,  or be a  party,  whether  as a  co-obligor  or
otherwise, to any agreement to which any Other Entity is a party (other than any
Provider  Document) or become liable as a guarantor or otherwise with respect to
any indebtedness or contractual obligation of any Other Entity.

                  (vii) Other than as contemplated under this Agreement or under
any other Document and the payment of dividends or distributions to its members,
the Borrower will not make any payment or distribution of assets with respect to
any  obligation  of any  Other  Entity  or grant a Lien on any of its  assets to
secure any obligation of any Other Entity.

                  (viii)  The  Borrower  will not make any  loans,  advances  or
otherwise  extend  credit  to any of the  Other  Entities;  provided,  that  the
Borrower  may issue  dividends  or  distributions  to each of its members to the
extent otherwise permitted under this Agreement and under applicable law.

                  (ix) The Borrower  will hold regular duly noticed  meetings of
its members and make and retain minutes of such meetings.

                                      IV-7
<PAGE>
                  (x) The Borrower will comply in full with the  procedures  set
forth in the Documents  with respect to the assignment of all assets from any of
the Other Entities.

                  (xi) The Borrower will not engage in any transaction  with any
of the  Other  Entities  or any of  their  respective  subsidiaries,  except  as
permitted or contemplated by the Agreement and as contemplated by the Documents.

                  (xii) The Borrower  will not enter into any  transaction  with
any Affiliate or third party except (a)(x) as permitted or  contemplated by this
Agreement or the Documents, or (y) investments of cash and cash equivalents with
third parties and (b) on terms and conditions  which  reasonably  approximate an
arm's length transaction between unaffiliated parties.

                  (xiii) The Borrower will not amend,  modify or supplement  its
organizational documents.

                  (xiv)  The  Borrower  will  not  have  any   subsidiaries  nor
ownership interest in any other entities.

                                      IV-8
<PAGE>
                                    EXHIBIT V

                                EVENTS OF DEFAULT

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

         (a) The Borrower  shall default in the due and punctual  payment of the
principal  of any  Revolving  Loan  when and as the same  shall  become  due and
payable  (except that the Borrower shall have up five Business Days to cure such
a default  with  respect to a Borrowing  Base  Deficiency)  whether  pursuant to
Article II of this Agreement, at maturity, by acceleration or otherwise.

         (b) The Borrower  shall default in the due and punctual  payment of any
installment  of  interest  on any  Revolving  Loan  or any  other  Lender  Debt,
including,  without limitation,  any fee or expense owing to the Program Manager
or any  Lender  pursuant  to any of the  Documents,  when and as such  amount of
interest,  fee or expense  shall become due and payable and such  default  shall
continue unremedied for three Business Days.

         (c) Any  material  provision of any Document is no longer in full force
and  effect  or there  shall be  continuing  a  default  in the  performance  or
observance of any covenant,  agreement or provision  (other than as described in
clause (a) or (b) above) contained in this Agreement or any other Document or in
any instrument or document  evidencing or creating any  obligation,  guaranty or
Lien directly or indirectly in favor of the Collateral Agent, for the benefit of
the  Lenders,  in  connection  with or pursuant to this  Agreement or any Lender
Debt, and,  except in the case of the agreements and covenants  contained in any
Document as to each of which no notice or grace period shall apply, such default
continues  for a  period  of 30 days  (or,  in the  case  where  agreements  and
covenants contained in any Document provide for a grace period that is less than
30 days,  continuance of a default for such shorter period) after the earlier of
(i)  there  has been  given  Written  Notice  of such  default  to either of the
Borrower  or the  Primary  Servicer  on behalf of any  Provider  by the  Program
Manager or (ii) discovery  thereof by the Borrower;  or if this Agreement or any
other  Document or any such other  instrument or document  shall  terminate,  be
terminated or become void or unenforceable for any reason whatsoever without the
written consent of the Program Manager.

         (d) A Group-Wide  Event of  Termination  shall have occurred  under the
RPTA (without regard to waivers granted or sought).

         (e) A Revocation  Order (as defined in the Depositary  Agreement) shall
have been sent or any change or replacement shall have been made in the Standing
Revocable Instruction (as defined in the Depositary Agreement).

         (f) Any  representation or warranty made or deemed made by the Borrower
(other  than  with  respect  to  the  eligibility  of  Receivables  as  Eligible
Receivables  hereunder)  under or in connection  with the Agreement or any other
Document or any information or report delivered by the Borrower (other than with
respect to the Providers)  pursuant to the Agreement or any other

                                       V-1

<PAGE>
Document  shall prove to have been  incorrect or untrue in any material  respect
when made or deemed made or delivered.

         (g) The Borrower  shall incur any Debt other than under this  Agreement
or the RPTA.

         (h) This  Agreement  shall for any reason  (other than  pursuant to the
terms hereof) fail or cease to create,  or the security interest created by this
Agreement fails or ceases to be, a valid and perfected  first priority  security
interest  in the  Collateral  free and  clear of all  Liens  (other  than  Liens
referred to in clauses (i) and (ii) of paragraph (e) of Exhibit IV).

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

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

         (k) There  shall  have  occurred  any  Material  Adverse  Effect  since
December 31, 2001.

         (l) The  Borrower  (x)  shall  have  entered  into any  transaction  or
agreement and not provided prompt Written Notice thereof to the Program Manager,
or (y) shall have consummated,  any transaction or agreement  intended to result
in (i) the merger or consolidation of the Borrower,  (ii) the acquisition of all
or a substantial portion of the assets of any Person, (iii) the transfer,  sale,
assignment,  lease or other  disposition of all or a substantial  portion of the
Borrower's  assets or  Properties,  (iv) a change in the  general  nature of the
Borrower's  business,  (v)  the  sale of a  controlling  interest,  directly  or
indirectly,  in the  Borrower,  or (vi) a Change of Control with respect to Five
Star.

         (m) The Loss-to-Liquidation Ratio at end of any Month exceeds 5%.

                                       V-2
<PAGE>
         (n) The Delinquency Ratio at the end of any Month exceeds 7%.

         (o) The  arithmetic  average  of the  Delinquency  Ratios for any three
consecutive Months exceeds 4.5%.

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

         (q) Any governmental  authority  (including,  without  limitation,  the
Internal  Revenue  Service or the PBGC) files a notice of a Lien against (i) any
of the  Receivables  or (ii)  assets  other than the  Receivables  involving  an
aggregate  amount in excess of $100,000 which remains unpaid or discharged for a
period of 30 days or more.

         (r) The  Borrower  shall fail to  discharge  within a period of 30 days
after the commencement  thereof any attachment,  sequestration,  forfeiture,  or
similar  proceeding or  proceedings  involving an aggregate  amount in excess of
$100,000 against any of its Properties.

         (s) The Borrower  does not pay or  discharge  at or before  maturity or
before becoming  delinquent all taxes,  levies,  assessments,  and  governmental
charges  imposed on it or its income or profits or any of its  Property,  except
any taxes, levies, assessments or charges contested in good faith by appropriate
proceedings.

         (t) The  Borrower  sells,  leases,  assigns,  transfers,  or  otherwise
disposes of any of its  Receivables,  except as permitted or contemplated  under
the Agreement.

         (u) The Borrower declares or makes any Distribution,  unless both prior
and subsequent to the effectiveness of such proposed Distribution,  (i) no Event
of Default is continuing,  (ii) such  Distribution  is in full  compliance  with
applicable law,  including the law of the State of Delaware as in effect at such
time, and (iii) the Borrower and the recipient of such  Distribution  have taken
all necessary and appropriate action to effectuate such Distribution.

         (v) The Borrower engages in any business other than solely the business
of directly or  indirectly  purchasing  Receivables  from the  Providers  and in
financing such Receivables with the Lenders hereunder and the other transactions
permitted or contemplated hereby.

         (w) The  Borrower  shall at any time fail to  maintain a  Tangible  Net
Worth of at least 120% of the Borrowing Limit.

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

                                       V-3
<PAGE>
                                   EXHIBIT VI

                              ELIGIBILITY CRITERIA

         The following shall constitute the eligibility  criteria for acceptance
of  Receivables  for financing  and  inclusion in the  Borrowing  Base under the
Agreement (the "Eligibility Criteria"):

         (a) The information  provided by the Borrower with respect to each such
Receivable  is  complete  and  correct  and  all  documents,   attestations  and
agreements  relating thereto that have been delivered to the Program Manager are
true and  correct in all  material  respects.  Except  with  respect to Unbilled
Receivables,  the related  Provider  has billed the  applicable  Obligor and has
delivered to such Obligor all requested  supporting claim documents with respect
to such Receivable and no amounts with respect to such Receivable have been paid
as of the date and time of the  inclusion of such  Receivable  in the  Borrowing
Base. Each Provider has, or has the right to use, valid provider  identification
numbers and  licenses  to generate  valid  Receivables.  Except with  respect to
Unbilled Receivables, all information set forth in the bill and supporting claim
documents  with respect to such  Receivable  is true,  complete and correct;  if
additional information is requested by the Obligor, the Borrower (or the related
Provider) has or will promptly  provide the same, and if any error has been made
with respect to such  information,  the Borrower (or the related  Provider) will
promptly correct the same and, if necessary, rebill such Receivable.

         (b) The related Provider's  Medicare and Medicaid cost reports, if any,
with respect to such  Receivable  for all cost  reporting  periods  ending on or
before the date of the last audited  cost report have been  examined and audited
by (i), as to Medicaid,  the  applicable  state  agency or other  CMS-designated
agents or agents of such state agency, charged with such responsibility or (ii),
as to Medicare, the Medicare intermediary or other CMS-designated agents charged
with such  responsibility;  and there is no basis for any Governmental Entity to
assert an offset against such Provider.

         (c) Each such Receivable (i) is payable, in an amount not less than its
Expected Net Value, by the Obligor  identified by the related  Provider as being
obligated  to do so,  (ii) is based on an  actual  and bona  fide  rendition  of
services or sale of goods to the patient by the related Provider in the ordinary
course of business, (iii) is denominated and payable only in U.S. dollars in the
United States,  (iv) is an account or general  intangible  within the meaning of
the UCC of the state in which the  related  Provider  is  incorporated,  or is a
right to payment  under a policy of  insurance or proceeds  thereof,  and is not
evidenced  by any  instrument  or chattel  paper,  and (v) shall be subject to a
patient  consent form as described in Exhibit II,  Section 1(h)  approved by the
Program Manager and executed by the applicable patient.  There is no payor other
than the Obligor  identified  by the Borrower as the payor  primarily  liable on
such Receivable.

         (d) Each such  Receivable  (i) is not the subject of any action,  suit,
proceeding or dispute (pending or threatened),  setoff,  counterclaim,  defense,
abatement,  suspension,  deferment,  deductible, reduction or termination by the
Obligor thereof (except for statutory  rights of Governmental  Entities that are
not  pending  or  threatened),  (ii) is not  past,  or  within  60 days of,  the
statutory limit for collection  applicable to the Obligor thereof or is not aged
more than 180 days from

                                      VI-1

<PAGE>
its Last Service  Date,  and (iii) except with respect to Unbilled  Receivables,
was not billed to the Obligor thereof on a date more than 45 days after the Last
Service Date.

         (e) Each such Receivable is not due from any Governmental  Entity based
on any cost report settlement or expected settlement.

         (f) Neither the Borrower nor the related  Provider has any guaranty of,
letter of credit providing credit support for, or collateral  security for, such
Receivable,  other  than any such  guaranty,  letter  of  credit  or  collateral
security as has been assigned to the  Collateral  Agent,  for the benefit of the
Lenders,  and any such guaranty,  letter of credit or collateral security is not
subject to any Lien in favor of any other Person.

         (g) The goods and services  provided and  reflected by such  Receivable
were  medically  necessary  for the  customer  or patient,  and the  customer or
patient has received such goods and services.

         (h) The fees charged for the goods and services  constituting the basis
for such Receivable are consistent with the usual, customary and reasonable fees
charged by other similar medical  providers for the same or similar goods in the
related Provider's community and in the community in which the patient resides.

         (i) The  Obligor  with  respect  to  each  such  Receivable  is (i) not
currently the subject of any bankruptcy,  insolvency or receivership proceeding,
nor is it unable to make payments on its  obligations  when due, (ii) located in
the United  States of America,  (iii) not a  subsidiary,  parent or other Person
that is an Affiliate of any  Provider,  (iv) not the Obligor of any  Receivables
that was a  Defaulted  Receivable  in the past 12 Months and (v) a  Governmental
Entity.

         (j) The  financing of such  Receivable  hereunder is made in good faith
and  without  actual  intent  to  hinder,  delay or  defraud  present  or future
creditors of the Borrower.

         (k) The insurance  policy,  contract or other  instrument  obligating a
Governmental Entity to make payment with respect to such Receivable (i) has been
duly authorized and,  together with the applicable  Receivable,  constitutes the
legal,  valid and binding  obligation of the  Governmental  Entity in accordance
with  its  terms,  (ii)  together  with  the  applicable  Receivable,  does  not
contravene in any material  respect any  requirement of law applicable  thereto,
and (iii) was in full force and effect and applicable to the customer or patient
at the time the goods or  services  constituting  the basis for such  Receivable
were sold or performed.

         (l) No consents by any third party to the sale of such  Receivable  are
required other than consents previously  obtained in writing by the Borrower,  a
copy of each such consent having been provided to the Program Manager.

         (m) The inclusion of such  Receivable  in the Borrowing  Base would not
increase the fraction  expressed as a percentage  where (i) the numerator is the
sum of the then  outstanding  principal  amount of Eligible  Receivables for any
obligor (or group of obligors) listed below included

                                      VI-2
<PAGE>
in the Borrowing  Base,  and (ii) the  denominator is the Borrowing Base for all
Eligible Receivables, above the corresponding maximum percentage listed below:

                                                     Maximum
Obligor                                             Percentage
-------                                             ----------
Medicare                                                50%
Medicaid from any single state                          30%

         (n) Unless specifically verified and accepted by the Master Servicer or
Program Manager, no single Eligible Receivable has an Expected Net Value greater
than $15,000.

         (o) No prior sale or assignment of security  interest which is still in
effect on the  applicable  Funding Date has been made with respect to or granted
in any such Receivable.

         (p) Such  Receivable  does  not  constitute  or  relate  to a  worker's
compensation or personal injury claim.

         (q) An Event of  Termination  shall not have occurred and be continuing
with respect to the related Provider.

                                      VI-3

<PAGE>

                                   SCHEDULE I

                              ADDRESSES FOR NOTICE

If to the Master Servicer:

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

<PAGE>

                         OMITTED EXHIBITS AND SCHEDULES

The  following  Exhibits and Schedules to the Loan and Security  Agreement  have
been omitted:

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

VII-A                         Form of Borrowing Base Certificate

VII-B                         Form of Borrower's Certificate

VIII                          Form of Depository Agreement

IX-A                          Form of Opinion of Counsel with Respect to
                              Certain Corporate and UCC Matters

IX-B                          Form of Opinion of Counsel with Respect to
                              "True Sale" and Substantive Consolidation

X                             Form of Assignment of Contracts

XI                            Form of Governmental Depositary Agreement

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

Schedule II                   Credit and Collection Policy

Schedule III                  Disclosures

Schedule IV                   Lockbox Information

Schedule V                    Net Value Factors

The Registrant agrees to furnish  supplementally a copy of the foregoing omitted
exhibits and schedules to the Securities and Exchange Commission upon request.EXHIBIT 10.4

                                    GUARANTY

                  GUARANTY  dated as of October 24, 2002 (this  "Guaranty"),  by
FIVE STAR QUALITY CARE, INC., FIVE STAR QUALITY CARE TRUST AND FIVE STAR QUALITY
CARE HOLDING CO.,  INC.  (each,  together  with its  successors  and assigns,  a
"Guarantor" and, collectively, the "Guarantors"),  in favor of FSQC FUNDING CO.,
LLC, a Delaware limited liability company (the "Purchaser").

                  PRELIMINARY  STATEMENTS.  The  Purchaser has entered into that
certain Receivables Purchase and Transfer Agreement, dated as of the date hereof
(as amended,  restated,  modified or supplemented from time to time, the "RPTA";
capitalized  terms used herein and not defined  herein  shall have the  meanings
attributed thereto in the RPTA) with each of the entities named on Schedule I of
the RPTA (each,  together with each one's  successors and assigns,  a "Provider"
and, collectively, the "Providers") and Five Star Quality Care, Inc., a Maryland
corporation, as Primary Servicer.

                  The  Guarantors  will  derive  substantial  benefit  from  the
transactions contemplated by the RPTA and the Loan and Security Agreement, dated
as of the date hereof (as amended, restated,  modified or supplemented from time
to time,  the  "LSA")  among the  Purchaser,  the  lenders  party  thereto  (the
"Lenders"),   Dresdner  Kleinwort   Wasserstein  LLC,  as  Co-Program   Manager,
Syndication  Agent  and  Lead  Arranger,  Healthcare  Finance  Group,  Inc.,  as
Co-Program Manager, and HFG Healthco-4 LLC, as Collateral Agent.

                  It is a condition  precedent to the  effectiveness of the RPTA
and the LSA and the making of any financial  accommodations  thereunder that the
Guarantors  shall have  executed and  delivered a guaranty in the form hereof of
the due and  punctual  payment and  performance  of (i) the  obligations  of the
Providers to purchase  Denied  Receivables  under Section 4.01 of the RPTA, (ii)
the indemnification  obligations of the Providers to the Purchaser under Section
4.02 of the RPTA,  and (iii) all  obligations  of the  Providers  to pay  costs,
expenses and fees under Section 5.05 of the RPTA (collectively,  the "Guaranteed
Obligations").

                  NOW, THEREFORE, in consideration of the premises, and in order
to induce  the  Lenders  under the LSA to make loans to the  Purchaser  or other
financial accommodations thereunder, each Guarantor hereby agrees as follows:

                  Section 1. Guaranty.  Each Guarantor  hereby,  jointly and
severally,  irrevocably and unconditionally guarantees the punctual payment when
due  and  the  punctual   performance  of  all  present  and  future  Guaranteed
Obligations,  and  agrees  to pay any  and all  costs  and  expenses  (including
reasonable  counsel fees and expenses)  paid or incurred by the  Purchaser,  the
Lenders,  the Program  Manager or the  Collateral  Agent in enforcing any rights
under this Guaranty or in enforcing  payment of the  Guaranteed  Obligations  or
otherwise in connection with
<PAGE>

the provisions  hereof.  Without  limiting the generality of the foregoing,  the
Guarantors'  liability  shall extend to all amounts that  constitute part of the
Guaranteed Obligations and would be owed by the Providers under the RPTA but for
the fact that they are  unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving a Provider.

                  (a) Any and all  payments  by or on behalf  of the  Guarantors
hereunder  shall be made free and clear of and without  deduction or withholding
for any and all present or future taxes unless required by law.

                  Section 2. Guaranty  Absolute.  The Guarantor  guarantees that
the  Guaranteed  Obligations  will be paid or performed in  accordance  with the
terms of the RPTA regardless of any law, regulation or order now or hereafter in
effect in any  jurisdiction  affecting  any of such  terms or the  rights of the
Providers or the Borrower with respect thereto.  This Guaranty is one of payment
and  performance,  and not of collection,  and the obligations of the Guarantors
hereunder are independent of the obligations of the Providers under the RPTA and
a separate action or actions may be brought or prosecuted against each Guarantor
to enforce this Guaranty,  irrespective of whether action is brought against the
Providers or whether the Providers are joined in any such action or actions. The
liability of the  Guarantors  under this Guaranty  shall,  to the fullest extent
permitted under applicable law, be absolute and unconditional,  and shall not be
affected or released in any way, irrespective of:

                  (a)  any   lack  of   validity   or   enforceability   or  any
         irregularity,  voidability  or  voidness  of the  RPTA,  the LSA or any
         agreement   or   instrument   relating   thereto   (collectively,   the
         "Documents") or of all or any part of the Guaranteed  Obligations or of
         any security therefore;

                  (b) any  change in the  manner,  place or terms of  payment or
         performance  of,  and/or any change or extension or the time of payment
         or  performance  of,  renewal  or  alteration  of  all  or  any  of the
         Guaranteed  Obligations,   any  security  therefor,  or  any  liability
         incurred  directly  or  indirectly  in  respect  thereof,  or any other
         amendment  or waiver of or any consent to  departure  from any Document
         including,   without   limitation,   any  increase  in  the  Guaranteed
         Obligations;

                  (c)  any  taking  and  holding  of  collateral  or  additional
         guarantees  for  all  or  any of  the  Guaranteed  Obligations,  or any
         amendment,   alteration,   exchange,   substitution,   sale,  transfer,
         enforcement,  waiver,  subordination,  termination  or  release  of  or
         realization upon any collateral or such guarantees,  or non-perfection,
         failure to perfect or continue the perfection of or delay in perfection
         of any Lien on any  collateral,  or any waiver or consent to  departure
         from any such guaranty, for all or any of the Guaranteed Obligations;

                  (d) any  manner of  application  of  collateral,  or  proceeds
         thereof, to all or any of the Guaranteed Obligations,  or any manner of
         sale  or  other  disposition  of any  collateral  for all or any of the
         Guaranteed Obligations or any other assets of any Provider or any

                                       2
<PAGE>

         other Person;

                  (e) any exercise or failure to exercise any rights against the
         Providers or any other Person (including the Guarantors);

                  (f) any settlement or compromise of any Guaranteed Obligation,
         any  security  therefor  or  any  liability  (including  any  of  those
         hereunder)  incurred  directly  or  indirectly  in  respect  thereof or
         hereof, and any subordination of the payment of all or any part thereof
         to the payment of a Guaranteed  Obligation  (whether due or not) of the
         Providers to creditors of the Providers other than the Guarantors;

                  (g) any change,  restructuring or termination of the existence
         of any of the Providers,  the Purchaser or any of their affiliates,  or
         any consent by the  Purchaser,  any Provider,  any Lender,  the Program
         Manager or the Collateral Agent or any other Person to any such change,
         restructuring or termination,  and any corresponding restructure of the
         Guaranteed Obligations,  or any other restructure or refinancing of the
         Guaranteed Obligations or any portion thereof; or

                  (h)  any  other  agreements  or  circumstance  of  any  nature
         whatsoever which might otherwise  constitute a defense available to, or
         a discharge  of, this Guaranty  and/or  obligations  of the  Guarantors
         hereunder,  or a defense to, or discharge  of, any of the  Providers or
         any other Person or party relating to this Guaranty or the  obligations
         of the Guarantors hereunder.

                  Without  limiting  the  generality  of  the  foregoing,   each
Guarantor  hereby  consents  to,  and  hereby  agrees,  that the  rights  of the
Purchaser hereunder, and the liability of each Guarantor hereunder, shall not be
affected by any and all  releases  of any  collateral,  whether for  purposes of
commercially  reasonable sales or other  dispositions of assets or for any other
purpose.  The  Purchaser  may at any time and from time to time  (whether or not
after  revocation or termination  of this  Guaranty)  without the consent of, or
notice (except as shall be required by applicable law that cannot be waived) to,
the  Guarantors,  and without  incurring  responsibility  to the  Guarantors  or
impairing or releasing the  obligations of the Guarantors  hereunder,  apply any
sums by  whomsoever  paid or  howsoever  realized to any  Guaranteed  Obligation
regardless of what Guaranteed Obligations remain unpaid.

                  This Guaranty shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the  Purchaser,  any Lender,  any
Program Manager or the Collateral  Agent for repayment or recovery of any amount
or amounts received by the Purchaser,  such Lender,  such Program Manager or the
Collateral  Agent in payment or on account of any of the Guaranteed  Obligations
and the Purchaser,  such Lender,  such Program  Manager or the Collateral  Agent
repays all or part of said amount by reason of any judgment,  decree or order of
any court or administrative  body having  jurisdiction over the Purchaser,  such
Lender,  such Program Manager or the Collateral Agent or the respective property
of each, or any settlement or compromise of any such claim effected

                                       3
<PAGE>
by the Purchaser, such Lender, such Program Manager or the Collateral Agent with
any such claimant (including the Providers),  the Guarantors shall be and remain
liable to the Purchaser, such Lender, such Program Manager and/or the Collateral
Agent  hereunder  for the amount so repaid or recovered to the same extent as if
such amount had never  originally  been received by the Purchaser,  such Lender,
such Program Manager or the Collateral Agent.

                  Section  3.  Waiver.   Each   Guarantor   hereby   absolutely,
unconditionally  and irrevocably waives, to the fullest extent permitted by law,
(i)  promptness,  diligence,  notice of  acceptance  and any other  notice  with
respect to this Guaranty, (ii) presentment,  demand of payment,  protest, notice
of dishonor or  nonpayment  and any other notice with respect to the  Guaranteed
Obligations,  (iii) any requirement that the Purchaser, the Lenders, the Program
Manager or the Collateral Agent or any other Person protect,  secure, perfect or
insure any security  interest or Lien or any property subject thereto or exhaust
any right or take any action  against the  Providers  or any other Person or any
collateral,  (iv) any other action,  event or precondition to the enforcement of
this Guaranty or the performance by each Guarantor of its obligations hereunder,
and (v) any duty on the part of the Purchaser,  the Lenders, the Program Manager
or the  Collateral  Agent or any other Person to disclose to the  Guarantors any
matter,  fact or thing  relating to the business,  operation or condition of the
Providers and their assets now known or hereafter known by such Person.

                  Section 4. Waiver of Subrogation and  Contribution.  Until the
later to occur  of the  Facility  Termination  Date and  payment  in full of all
Guaranteed  Obligations,  each Guarantor hereby  irrevocably waives any claim or
other  rights which he may now or hereafter  acquire  against any Provider  that
arises  from  the  existence,   payment,   performance  or  enforcement  of  the
Guarantors' obligations under this Guaranty,  including, without limitation, any
right   of   subrogation,    reimbursement,    exoneration,    contribution   or
indemnification  and any right to  participate  in any claim or remedy against a
Provider or any collateral which the Purchaser, a Lender, the Program Manager or
the Collateral Agent now has or hereafter  acquires,  whether or not such claim,
remedy or right  arises in equity,  or under  contract,  statute or common  law,
including,  without limitation, the right to take or receive from a Provider or,
directly or indirectly,  in cash or other property or by set-off or in any other
manner,  payment or security on account of such claim, remedy or other right. If
any amount shall be paid to a Guarantor in violation of the  preceding  sentence
at any time  prior to the later to occur of the  Facility  Termination  Date and
payment in full of all  Guaranteed  Obligations,  such amount shall be deemed to
have been paid to such  Guarantor  for the benefit of, and held in trust for the
benefit of, the  Purchaser,  and shall  forthwith be paid to the Purchaser to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty,  whether matured or unmatured, in accordance with the terms
of the Documents,  or to be held as collateral for any Guaranteed Obligations or
other amounts  payable under this Guaranty  thereafter  arising.  Each Guarantor
acknowledges  that it  will  receive  direct  and  indirect  benefits  from  the
financing  arrangements  contemplated  by the  Documents and that the waiver set
forth in this subsection is knowingly made in contemplation of such benefits.

                  Section 5.  Representations  and  Warranties.  Each  Guarantor
hereby represents and warrants as follows:

                                       4
<PAGE>

                  (a) Such  Guarantor  has the power to execute and deliver this
Guaranty and to incur and perform its obligations hereunder;

                  (b) Such  Guarantor  has duly  taken all  necessary  action to
authorize the execution,  delivery and performance of this Guaranty and to incur
and perform its obligations hereunder;

                  (c) No consent,  approval,  authorization  or other action by,
and no notice to or of, or declaration or filing with, any governmental or other
public  body,  or any  other  Person,  is  required  for the due  authorization,
execution,  delivery or  performance  by such  Guarantor of this Guaranty or the
consummation of the transactions contemplated hereby;

                  (d) The execution,  delivery and performance by such Guarantor
of this Guaranty do not and will not violate or otherwise conflict with any term
or provision of any material agreement,  instrument,  judgment, decree, order or
any statute,  rule or  governmental  regulation  applicable to such Guarantor or
result in the creation of any Lien upon any of its properties or assets pursuant
thereto (other than any Liens created pursuant to the Documents);

                  (e) This  Guaranty  has been  duly  authorized,  executed  and
delivered  by such  Guarantor  and  constitutes  the  legal,  valid and  binding
obligation  of such  Guarantor,  and is  enforceable  against such  Guarantor in
accordance with its terms,  except as enforcement  thereof may be subject to the
effect of any applicable bankruptcy, insolvency,  reorganization,  moratorium or
similar law affecting  creditors'  rights generally,  and general  principles of
equity  (regardless  of whether such  enforcement  is sought in a proceeding  in
equity or at law);

                  (f) No proceeding referred to in paragraph (g) of Exhibit V of
the RPTA is pending  against such  Guarantor  and no other event  referred to in
such paragraph (g) of such Exhibit V has occurred and is continuing with respect
to such  Guarantor,  and the  property of such  Guarantor  is not subject to any
assignment for the benefit of creditors;

                  (g) Such Guarantor is the sole direct or indirect  shareholder
or member,  as the case may be, of the Providers and Guarantors listed below its
name on  Schedule  I  attached  hereto,  and  there are no  outstanding  rights,
options,  warrants or  agreements  pursuant  to which any such  Provider or such
Guarantor  may be  required  to sell  any of its  capital  stock  or  membership
interests, as applicable; and

                  Section 6.  Amendments,  Etc.  No  amendment  or waiver of any
provision  of this  Guaranty  nor  consent to any  departure  by the  Guarantors
therefrom  shall in any event be  effective  unless the same shall be in writing
and signed by the Purchaser,  the Program Manager and the Collateral  Agent (and
in an amendment,  by the  Guarantors),  and then such waiver or consent shall be
effective only in the specific  instance and for the specific  purpose for which
given.

                  Section  7.  Remedies  Upon  Event  of  Termination.  Upon the
occurrence and

                                       5
<PAGE>

during the continuance of any Event of Termination,  the Purchaser may,  without
notice to or demand upon the Providers or the Guarantors, declare any Guaranteed
Obligations  immediately  due and payable,  and shall be entitled to enforce the
obligations of the Guarantors hereunder.

                  Section 8. Statute of Limitations.  Any  acknowledgment or new
promise,  whether by sale or  contribution  of a  Receivable  or  otherwise  and
whether by the Providers or others  (including any  Guarantor),  with respect to
any of the Guaranteed  Obligations  shall, to the fullest extent permitted under
applicable law, if the statute of limitations in favor of the Guarantors against
the  Purchaser  or the  Collateral  Agent (for the benefit of the  Lenders),  as
assignee  hereunder,  shall  have  commenced  to run,  toll the  running of such
statute of limitations  and, if the period of such statute of limitations  shall
have expired, prevent the operation of such statute of limitations.

                  Section 9.  ASSIGNABILITY.  SUBJECT TO SECTION  5.03(a) OF THE
LSA, THIS GUARANTY AND THE PURCHASER'S  RIGHTS AND  OBLIGATIONS  HEREIN SHALL BE
ASSIGNABLE BY THE  PURCHASER  AND ITS  SUCCESSORS  AND ASSIGNS.  EACH  GUARANTOR
HEREBY  ACKNOWLEDGES  AND CONFIRMS THAT, AS COLLATERAL  SECURITY FOR ANY AND ALL
OBLIGATIONS  OF THE PURCHASER  PURSUANT TO THE LSA, THE PURCHASER IS GRANTING TO
THE COLLATERAL  AGENT, FOR THE BENEFIT OF THE LENDERS,  A SECURITY  INTEREST IN,
AND COLLATERAL  ASSIGNMENT OF, THIS GUARANTY AND ALL OF THE PURCHASER'S  RIGHTS,
TITLE AND INTERESTS HEREUNDER, INCLUDING, ALL MONIES DUE OR TO BECOME DUE TO THE
PURCHASER, UNDER OR IN CONNECTION WITH THIS GUARANTY.

                  Section 10. No Waiver; Remedies. No failure on the part of the
Purchaser or the Collateral Agent (for the benefit of the Lenders),  as assignee
hereunder,  to exercise,  and no delay in exercising,  any right hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law or any other Document.

                  Section 11. Continuing Guaranty. This Guaranty is a continuing
one and shall (i) remain in full  force and  effect  until the later to occur of
the Facility Termination Date and payment in full of all Guaranteed Obligations,
(ii) be binding upon each Guarantor, its successors and assigns, and (iii) inure
to the benefit of, and be  enforceable  by, the  Purchaser  and its  successors,
transferees and assigns,  including,  without  limitation,  the Collateral Agent
(for the benefit of the Lenders). All obligations to which this Guaranty applies
or may apply under the terms hereof shall be conclusively  presumed to have been
created in reliance hereon.

                  Section  12.  Financial  Condition  of  the  Providers.   Each
Guarantor   represents  to  the  Purchaser  (and  its  successors  and  assigns,
including,  without  limitation,  the Collateral  Agent,  for the benefit of the
Lenders)  that it is now and will be  completely  familiar  with the  prospects,
business,  operations and condition  (financial and otherwise) of the Providers,
and each Guarantor  hereby waives and  relinquishes  any duty on the part of the
Purchaser,  the Lenders,  the Collateral Agent, the

                                       6
<PAGE>

Program  Manager  or any other  Person to  disclose  any  matter,  fact or thing
relating  to  the  prospects,  business,  assets,  liabilities,   operations  or
condition  (financial or otherwise) of any Provider now known or hereafter known
by the Purchaser,  the Lenders, the Collateral Agent, the Program Manager or any
other Person.

                  Section 13.  Admissibility of Guaranty.  Each Guarantor agrees
that any copy of this  Guaranty  signed  by the  Guarantor  and  transmitted  by
telecopier for delivery to the Collateral Agent (for the benefit of the Lenders)
shall be  admissible  in  evidence  as the  original  itself in any  judicial or
administrative proceeding, whether or not the original is in existence.

                  Section 14.  Notices.  All  notices  and other  communications
hereunder  shall,  unless  otherwise  stated  herein,  be in writing  (which may
include facsimile  communication)  and shall be faxed or delivered to such party
at its address set forth under its name on the signature  page hereof or at such
other address as shall be  designated  by such party in a Written  Notice to the
other party.  Notices and  communications  by facsimile  shall be effective when
sent (and shall be followed  by hard copy sent by regular  mail) and notices and
communications sent by other means shall be effective when received.

                  Section 15. Counterparts. This Guaranty may be executed in any
number  of  counterparts  and  by  the  different  parties  hereto  on  separate
counterparts,  each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.

                  Section 16.  GOVERNING LAW. THIS GUARANTY SHALL, IN ACCORDANCE
WITH SECTION  5-1401 OF THE GENERAL  OBLIGATION LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,  WITHOUT  REGARD TO ANY CONFLICTS
OF LAWS PRINCIPLES THEREOF.

                  Section 17. WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH
OF THE PARTIES  HERETO  HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT
OF ANY  LITIGATION  WITH  RESPECT TO ANY MATTER  RELATED TO THIS  GUARANTY,  AND
HEREBY IRREVOCABLY  CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN NEW YORK  COUNTY,  NEW YORK  CITY,  NEW YORK IN  CONNECTION  WITH ANY
ACTION OR PROCEEDING  ARISING OUT OF OR RELATING TO THIS  GUARANTY.  IN ANY SUCH
LITIGATION,  EACH OF THE PARTIES HERETO WAIVES PERSONAL  SERVICE OF ANY SUMMONS,
COMPLAINT  OR OTHER  PROCESS  AND AGREES  THAT  SERVICE  THEREOF  MAY BE MADE BY
CERTIFIED OR REGISTERED  MAIL DIRECTED TO THE PARTIES HERETO AT THEIR  ADDRESSES
SET FORTH ON THE  SIGNATURE  PAGE  HEREOF.  THE PARTIES  HERETO  SHALL APPEAR IN
ANSWER TO SUCH SUMMONS, COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY
LAW, FAILING WHICH THE PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND
JUDGMENT MAY BE ENTERED BY THE OTHER PARTY FOR THE

                                       7
<PAGE>

AMOUNT OF THE CLAIM AND OTHER RELIEF REQUESTED THEREIN.

                  Section  18.  Captions;  Separability.  The  captions  of  the
Sections and  subsections  of this Guaranty  have been inserted for  convenience
only  and  shall  not in any way  affect  the  meaning  or  construction  of any
provision of this Guaranty.

                  (a) If any term of this Guaranty  shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.

                  Section  19.   Acknowledgment   of  Receipt.   Each  Guarantor
acknowledges receipt of a copy of this Guaranty and each of the Documents.

                [Remainder of this page intentionally left blank]

                                        8

<PAGE>

                  IN WITNESS WHEREOF, each party hereto has caused this Guaranty
to be duly executed as of the date first above set forth.

                                     FIVE STAR QUALITY CARE, INC.

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

                                     Address:          400 Center Street
                                                       Newton, MA 02458

                                     FIVE STAR QUALITY CARE TRUST

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

                                     Address:          400 Center Street
                                                       Newton, MA 02458

                                     FIVE STAR QUALITY HOLDING CO., INC.

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

                                     Address:          400 Center Street
                                                       Newton, MA 02458

<PAGE>

ACCEPTED AND AGREED:

FSQC FUNDING CO., LLC

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

Address:          400 Center Street
                  Newton, MA 02458

with a copy to:

Dresdner Kleinwort Wasserstein LLC
1301 Avenue of the Americas
New York, New York  10019
Attention:  Michael Leffler/Stephen Kovach
Fax:        212-895-1723/1774

                              and

Healthcare Finance Group, Inc.
110 Wall Street - 2nd Floor
New York, New York  10005
Attention:  Robert Lynch
Fax:        212-785-9211

<PAGE>

                                   SCHEDULE I

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

<PAGE>

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