Document:

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                                                                    EXHIBIT 10.2

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

                              SETTLEMENT AGREEMENT

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

                                   WITNESSETH:

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

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

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

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

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

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

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

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

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

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

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

                                    ARTICLE 1

                                   DEFINITIONS

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

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

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

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

     "CONSUMABLES" shall mean, with respect to any Facility, all inventory and
consumables, including, without limitation, food, central supplies, unopened
linens and housekeeping supplies

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and other consumables, customarily used or consumed in the day-to-day operation
of such Facility.

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

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

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

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

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

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

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

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

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

     "HAZARDOUS SUBSTANCES" shall mean any hazardous substances (as defined by
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as now in effect), hazardous wastes (as defined by the Resource
Conservation and Recovery Act

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("RCRA"), as now in effect), pollutants or contaminants, oils, radioactive
materials, asbestos in any form or condition, or any pollutants or contaminants
or hazardous, dangerous or toxic chemicals, materials or substances within the
meaning of any other applicable Federal, state or local law, regulation,
ordinance or requirements relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, all as now in
effect.

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

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

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

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

     "PERMITS" shall mean, with respect to any Facility, all licenses,
approvals, certificates of need, determinations of need, franchises,
accreditations, certificates, certifications, consents, permits and other
authorizations benefiting, relating to or affecting the operation of such
Facility or the operation of programs or provision of services in conjunction
with such Facility, issued by or entered into with any Governmental Authority,
Third Party Payor or accreditation body (including, without limitation, the
Provider Agreements), and all renewals, replacements and substitutions therefor.

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

     "PERMITTED PERSONAL PROPERTY ENCUMBRANCES" shall mean, (i) with respect to
any personal property present at or used in connection with the operation of any
Transferred Facility, any and all security interests and liens affecting such
personal property other than those arising by, through or under, any SNH Entity
(except that those security interests and liens arising by, through or under,
any SNH Entity as a result of a Mariner Entity's failure to pay or perform any
obligation required to be paid by it as lessee under the Master Lease prior to
the Effective Time shall be Permitted Personal Property Encumbrances), and (ii)
with respect to any personal property present at or used in connection with the
operation of any Retained Facility, those

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security interests and liens listed in SCHEDULE 1.1.1 attached hereto (and
specifically excluding, without limitation, any security interests and liens
arising by, through or under any Mariner Entity, or which has been granted by
order of the Court).

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

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

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

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

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

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     "SETTLEMENT DOCUMENTS" shall mean, collectively, this Agreement and each
agreement, undertaking or instrument delivered pursuant to ARTICLE 3 and ARTICLE
6 hereof.

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

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

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

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

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

     "THIRD PARTY PAYOR PROGRAMS" shall mean all third party payor programs in
which any Facility participates, including, without limitation, Medicare,
Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, TriCare, managed care plans,
other private insurance programs, workers compensation and employee assistance
programs.

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

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

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

DEFINED TERM:                                               DEFINED IN:
AMS Properties                                              Introduction
Account Transfer Time                                       Section 10.3
Agreed Deficiency                                           Section 4.1
Agreement                                                   Introduction
Approval Order                                              Section 2.2
Bankruptcy Code                                             Recitals
Cases                                                       Recitals
Chase                                                       Section 6.15
Court                                                       Recitals
Damages                                                     Section 10.5
Effective Time                                              Section 5.1

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Exchange Act                                                Section 13.8
Existing A/R Accounts                                       Section 10.3
Existing Documents                                          Section 2.1
Existing Mariner Obligations                                Section 2.1
Facilities                                                  Recitals
GCIHCC                                                      Recitals
GranCare                                                    Introduction
HRP                                                         Recitals
Indemnitee                                                  Section 10.5
Interim Management Agreement                                Section 3.5
Interim Occupancy Agreement                                 Section 3.5
Mariner                                                     Introduction
Mariner Entities                                            Introduction
NYSE Requirements                                           Section 13.8
New A/R Accounts                                            Section 10.3
New Manager                                                 Introduction
New Operators                                               Introduction
Outside Effective Time                                      Section 5.1
Petition Date                                               Recitals
Pledged Shares                                              Recitals
Post-Effective A/R                                          Section 10.3
RMR                                                         Recitals
SNH                                                         Introduction
SNH Declaration                                             Section 13.10
SNH Entities                                                Introduction
SPTMNR                                                      Introduction
SPTMNR Declaration                                          Section 13.11
Security Deposit                                            Recitals
Share Pledge Agreement                                      Recitals
Title Commitments                                           Section 7.5
Transaction Approval Motion                                 Section 2.2
Transferred Facilities                                      Recitals
Transferred Real Estate                                     Section 3.6
True-Up Time                                                Section 10.2.2

                                    ARTICLE 2

                          ACKNOWLEDGMENT OF OBLIGATIONS

     2.1 MARINER OBLIGATIONS. Each of the Mariner Entities hereby acknowledges
that, subject to the effect of the filing of the Cases, it is unconditionally
liable to SPTMNR for the full and immediate payment and performance of each of
the obligations under the terms of the Master Lease and the other documents,
instruments and agreements listed in SCHEDULE 2.1 hereto (collectively, the
"EXISTING DOCUMENTS"), plus all charges that may arise under the various
documents executed or delivered by any of the Mariner Entities evidencing or
relating to such obligations, plus all costs of collection incurred in
connection with such obligations by the SNH Entities and the reasonable fees and
expenses incurred by attorneys for the SNH Entities (hereinafter all such
obligations are referred to as the "EXISTING MARINER OBLIGATIONS"), and that

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none of the Mariner Entities has any defenses, counterclaims or set-offs with
respect to the full and immediate payment of any or all of the Existing Mariner
Obligations other than as may arise by reason of the filing of the Cases.

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

                                    ARTICLE 3

                   TRANSACTIONS TO OCCUR AT THE EFFECTIVE TIME

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

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

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

     3.3. TRANSFER OF CONTRACTS AND PERMITS. AMS Properties and/or GCIHCC (as
applicable) shall assume and assign, set over and transfer to the New Manager or
New Operator all of their right, title and interest in and to (i) all of the
Subleases (other than the right, title and interest of GCIHCC in and to the
Tenant Purchase and Sale Agreement referred to in each of the South Dakota
Subleases, or in and to any promissory note delivered by any Subtenant pursuant
thereto or otherwise delivered in connection with any such Subleases), (ii) to
the extent permitted

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<PAGE>

by law, all of the Permits with respect to the Retained Facilities that the New
Manager or the New Operators elect to assume, and (iii) all of the Contracts
with respect to the Retained Facilities that the New Manager or the New
Operators elect to assume as provided in SECTION 10.7 hereof, but specifically
excluding, in each of the immediately preceding clauses (i), (ii) and (iii) any
Pre-Closing Obligations (except, in the case of the Contracts, as otherwise
provided in SECTION 10.7 hereof).

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

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

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

     3.7 BANKRUPTCY CODE PROVISIONS. Each of the transactions provided for in
SECTIONS 3.1, 3.2, 3.3, 3.4 AND 3.5 shall be completed in accordance with
Sections 105, 363(b),

                                       9
<PAGE>

(f), and (m), and 365 and 1146(c) of the Bankruptcy Code, as applicable, and the
provisions of the Approval Order, with the SNH Entities receiving the full
benefits and protections of such sections and the provisions of the Approval
Order.

                                    ARTICLE 4

                                  CONSIDERATION

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

                                    ARTICLE 5

                                     CLOSING

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

                                    ARTICLE 6

               CONDITIONS PRECEDENT TO OBLIGATIONS OF SNH ENTITIES

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

     6.1 TRUSTEE APPROVAL. This Agreement and each of the transactions
contemplated hereby shall have been approved by the Board of Trustees of SNH and
by each of the "Independent Trustees" of SNH. The Independent Trustees of SNH
are those trustees who are not affiliated with RMR. The SNH Entities shall
notify the Mariner Entities if the Board of

                                       10
<PAGE>

Trustees or any of the "Independent Trustees" do not approve of this Agreement
and each of the transactions contemplated hereby on or before March 24, 2000.

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

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

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

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

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

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

     6.8 NO DEFAULT. Consummation of the transactions contemplated in this
Agreement shall not constitute, nor with the passage of time or giving of notice
or both result in, a default or event of default under any agreement, contract,
indenture, Permit, instrument or understanding to which any of the Mariner
Entities or any of their subsidiaries is a party or by which it or any of its

                                       11
<PAGE>

properties is bound and which is enforceable against the Mariner Entities in
their capacity as debtors in possession.

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

     6.10 EMPLOYMENT MATTERS. The SNH Entities shall have reviewed and approved
the contracts and agreements listed in SCHEDULE 9.15 hereof.

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

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

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

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

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

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

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

                                       12
<PAGE>

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

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

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

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

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

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

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

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

                                       13
<PAGE>

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

                                    ARTICLE 7

         CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE MARINER ENTITIES

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

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

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

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

     7.4 LIEN REPORTS. With respect to each of the Transferred Facilities,
Mariner shall have received a satisfactory lien report showing that, as of the
Effective Time, such Transferred Facility is not subject to any liens, claims or
encumbrances other than the Permitted Encumbrances.

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

     7.6 TRUE AND COMPLETE REPRESENTATIONS. All representations and warranties
of the SNH Entities shall be true, complete and correct in all material respects
as of the date hereof and as of the Effective Time.

     7.7 APPROVAL ORDER. The condition set forth in SECTION 6.13 shall have been
satisfied.

                                       14
<PAGE>

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

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

                                    ARTICLE 8

                 REPRESENTATIONS AND WARRANTIES OF SNH ENTITIES

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

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

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

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

                                       15
<PAGE>

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

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

     8.7 TRANSFERRED FACILITIES CONVEYED "AS IS". THE MARINER ENTITIES
ACKNOWLEDGE THAT THE TRANSFERRED REAL ESTATE BEING CONVEYED OR TRANSFERRED TO
AMS PROPERTIES OR ITS DESIGNEE HEREUNDER IS BEING CONVEYED AND TRANSFERRED "AS
IS, WHERE IS" WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, MERCHANTABILITY OR FITNESS FOR USE OF SUCH PROPERTY
AND NO SNH ENTITY HAS MADE, OR SHALL BE DEEMED TO HAVE MADE, ANY OTHER
REPRESENTATION OR WARRANTY, OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT
OR ANY OTHER SETTLEMENT DOCUMENT. Without limiting the generality of the
foregoing, except for representations and warranties expressly set forth in this
Agreement or in any other Settlement Document, the transactions contemplated by
this Agreement are without any statutory, express or implied warranty,
representation, agreement, statement or expression of opinion on the part of any
SNH Entity of or with respect to (i) the condition or title of the assets or any
aspect thereof, including, without limitation, any and all statutory, express or
implied representations or warranties related to suitability for habitation,
merchantability or fitness for a particular use or purpose, (ii) the nature or
quality of construction, structural design or engineering of the improvements
located on the Transferred Real Estate, (iii) the quality of the labor or
materials included in the improvements located on the Transferred Real Estate,
(iv) the soil conditions, drainage, topographical features, flora, fauna or
other conditions of or which affect the Transferred Real Estate, (v) any
conditions at or which affect the Transferred Real Estate with respect to any
particular use, purpose development potential or otherwise, (vi) area, size,
shape, configuration, location, access, capacity, quantity, quality, cash flow,
expenses, value, condition, make, model, composition, accuracy, completeness,
applicability, assignability, enforceability, exclusivity, usefulness,
authenticity or amount, (vii) any statutory, express, or implied,
representations or warranties created by any affirmation of fact or promise, by
any description of the assets or by operation of law, (viii) any environmental,
structural, or other condition or hazard or the absence thereof heretofore, now,
or hereafter affecting in any manner any of the Transferred Real Estate, and
(ix) all other statutory, express or implied representations and warranties
whatsoever.

                                    ARTICLE 9

             REPRESENTATIONS AND WARRANTIES OF THE MARINER ENTITIES

                                       16
<PAGE>

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

     9.2 ORGANIZATION. Each of the Mariner Entities is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Subject to the entry of the Approval Order,
each of the Mariner Entities has full power, authority and legal right to
execute, deliver and perform under this Agreement, to enter into the Interim
Occupancy Agreements, Interim Management Agreement and the other Settlement
Documents and to take all other actions necessary to carry out the intents and
purposes of this Agreement.

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

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

     9.5 PERSONAL PROPERTY. The Mariner Entities own all the tangible and
intangible personal property necessary to operate each Retained Facility (other
than those assets subject to personal property leases (complete and accurate
copies of which shall be provided to the SNH Entities for review within fifteen
(15) Business Days of the execution hereof) and the tangible and intangible
personal property necessary to operate the Subleased Facilities, which personal

                                       17
<PAGE>

property is owned by the Subtenants at the Subleased Facilities) with the number
of beds, and providing such services, as are described in SCHEDULE 9.5, free and
clear of all liens, encumbrances, charges, restrictions, conditions and adverse
claims of any kind or nature, except for Permitted Personal Property
Encumbrances. The Consumables located at each Retained Facility as of the
Effective Date and included in the personal property being transferred by the
Mariner Entities pursuant to SECTION 3.2 are sufficient for at least three (3)
days' operations at such Retained Facility as currently operated, which reserve
is typical and otherwise in accordance with sound business and care practices
for such Retained Facilities.

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

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

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

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

                                       18
<PAGE>

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

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

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

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

          (e) Except as set forth in Schedule 9.9(e), each Retained Facility is
duly and properly licensed under all applicable federal, state and local laws,
ordinances and regulations and in conformance with all insurance requirements
and requirements of Third Party Payor Programs, and holds all other Permits and
approvals issued, and has satisfied all eligibility and other similar
requirements imposed, by hospital, health or similar regulatory bodies,
administrative agencies or other governmental bodies, agencies or officials, or
that relate to all Third Party Payor Programs or other private or governmental
programs for the reimbursement or payment of health care costs or charges to
provide the services and operate the number of beds at such Retained Facility as
described in SCHEDULE 9.5 in the ordinary course of business consistent with
past practices. Other than the Approval Order and the Chase consents required as
provided in SECTION 6.13 and SECTION 6.15 hereof, no consents, approvals or
other authorizations, registrations, declarations or filings, except those with
respect to which application has heretofore been made and received, or will have
been so received by the Effective Time, are required for the transfer of the
property to the SNH Entities and the other transactions contemplated by this
Agreement, including, without limitation, ARTICLE 3, ARTICLE 4 and ARTICLE 10
hereof, and for the Approval Order. There is no action pending or recommended or
threatened by any state or federal agency having jurisdiction thereof, either to
revoke, withdraw or suspend any license to operate any Retained Facility, nor is

                                       19
<PAGE>

there any decision or threat, or action, pending, recommended or threatened, not
to renew or to revoke any Medicare or Medicaid certification or Provider
Agreements related to any Retained Facility, or any action of any other type
which would have a material adverse effect on any Retained Facility, its
operations or business. No liability or obligations with respect to any matters
referred to herein is being, or shall be deemed to have been, assumed by SPTMNR
or by any SNH Entity.

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

               (i) the Mariner Entities have not received any notice that any
buildings and improvements on the property have not been constructed in
compliance with the requirements of all material laws, ordinances, rules,
regulations and restrictions of record applicable thereto, or that any bills for
labor and materials in connection with the construction thereof have not been
paid in full or provided for;

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

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

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

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

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

     9.10 NON-FOREIGN STATUS. No Mariner Entity is a "foreign person" within the
meaning of Section 1445(f) of the Internal Revenue Code.

     9.11 FILING OF REPORTS AND CLAIMS. Each of the Mariner Entities has filed
with all applicable Third Party Payor Programs all required cost reports and
claims for payment with respect to each of the Retained Facilities. All such
reports and claims for payment have been

                                       20
<PAGE>

prepared and retained in material compliance with all applicable governmental
and program statutes, rules and regulations and are true and correct in all
material respects. All services to which such cost reports and claims relate
have been at all times provided in material compliance with all applicable
governmental and program statutes, rules and regulations. The Mariner Entities
have retained all records necessary to document that all facility services have
been provided as claimed. Each of the Mariner Entities has paid or
simultaneously with the Closing shall have paid any liabilities assessed against
it or any of its assets under any regulation, claim, settlement agreement,
judgment, order, decree or regulation of any administrative agency, Third Party
Payor, Third Party Payor Program, court or arbitrator to which it may be
subject, in each case, to the extent that such liabilities are enforceable
against the Mariner Entities in their capacity as debtors in possession.

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

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

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

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

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

                                       21
<PAGE>

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

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

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

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

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

                                       22
<PAGE>

                                   ARTICLE 10

              CERTAIN MATTERS RELATING TO TRANSITION OF PROPERTIES

     10.1 EMPLOYEES; EMPLOYEE BENEFITS.

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

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

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

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

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

          The Mariner Operator of each Retained Facility shall, as of the
Effective Time, deliver to the New Manager all personnel records for employees
at such Retained Facility. Each Mariner Operator shall have the right to retain
copies of any files which are delivered to the New

                                       23
<PAGE>

Manager. The Mariner Operators, the New Operators and the New Manager, as the
case may be, each further acknowledge and agree that, in order to facilitate the
application of the proration provisions of this SECTION 10.1, they shall
generate terminating payrolls and make corresponding payments to employees with
respect thereto for each Retained Facility on both the Effective Date and the
date that the New Manager shall hire all or substantially all of the employees
at such Retained Facility.

     10.2 PRORATIONS.

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

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

          10.2.3 The accounts of the Mariner Entities and SNH Entities created
pursuant hereto shall be netted against each other. If (i) the result is a net
positive balance for the Mariner Entities, the SNH Entities shall pay to the
Mariner Entities the amount of such balance by corporate check, and (ii) if the
result is a net positive balance for the SNH Entities, the Mariner Entities
shall pay to SPTMNR the amount of such balance by corporate check.

          10.2.4 There shall be no prorations with respect to the Transferred
Facilities (other than with respect to rent and other amounts payable under the
Master Lease), as all such

                                       24
<PAGE>

expenses with respect to the Transferred Facilities are the responsibility of
the Mariner Entities prior to the Effective Time, as lessee under the Master
Lease, and thereafter, as owner of the Transferred Facilities.

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

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

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

                                       25
<PAGE>

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

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

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

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

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

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

                                       26
<PAGE>

          is otherwise expressly affirmed and assumed by separate instrument in
          writing executed by SPTMNR; or

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

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

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

     10.7 FINANCIAL RECORDS, ETC. Each of the SNH Entities and the Mariner
Entities agree that they shall provide such other party access to the books and
records and other financial

                                       27
<PAGE>

information maintained by such party with respect to the operation of the
Facilities (both before and after the Effective Time) as such party may
reasonably request. The Mariner Entities shall provide the SNH Entities and
their accountants with such certifications with respect to such financial
information as the SNH Entities may from time to time reasonably request.

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

     10.9 SURVIVAL. The provisions of this ARTICLE 10 shall survive the Closing
hereunder.

                                   ARTICLE 11

                   DAMAGE TO PROPERTY FROM CASUALTY OR TAKING

     11.1 In the event of any casualty or damage to any Facility prior to the
Effective Time (which shall not be fully restored prior to the Effective Time),
all sums recovered on account of such insurance shall be held in trust for the
benefit of and in order to be paid over to, and all sums recoverable on such
account shall be assigned to, the appropriate SNH Entity or Mariner Entity at
the Effective Time. The SNH Entity and the Mariner Entity which owns, leases or
manages such Facility shall execute and deliver such further instruments of
assignment of insurance proceeds and other documents (including, without
limitation, appropriate endorsement of checks) as any SNH Entity or Mariner
Entity may from time to time reasonably request in order to make such insurance
proceeds payable to such SNH Entity or Mariner Entity.

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

                                       28
<PAGE>

appropriate endorsements of checks and pleadings) as any SNH Entity may from
time to time reasonably request in connection with the foregoing.

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

                                   ARTICLE 12

                                    RELEASES

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

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

     None of the Mariner Entities is releasing any SNH Entity from any claims,
debts, liabilities, demands, obligations, costs, expenses, actions or causes of
action arising out of this

                                       29
<PAGE>

Agreement, any Settlement Document or the transactions contemplated hereby, or
otherwise, except as expressly provided herein.

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

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

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

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

                                   ARTICLE 13

                               GENERAL PROVISIONS

     13.1 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT, OR ANY OF THE AGREEMENTS,
INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; OR (II) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN OR AMONG THEM; OR (III) ANY CONDUCT, ACTS OR

                                       30
<PAGE>

OMISSIONS OF ANY PARTY HERETO OR ANY OF THEIR DIRECTORS, TRUSTEES, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH THEM; IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

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

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

          (a) if to an SNH Entity:

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

          (b) with copy to:

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

          (c) if to any Mariner Entity:

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

          (d) with a copy to:

                                       31
<PAGE>

              POWELL, GOLDSTEIN, FRAZER & MURPHY LLP.
              191 Peachtree Street
              Atlanta, GA 30303
              Attention:  Douglas S. Gosden, Esq.

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

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

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

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

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

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

     13.8 ATTORNEYS' FEES. If any legal action is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be

                                       32
<PAGE>

entitled to recover attorneys' fees and other costs incurred in that action in
addition to any other relief to which it or they may be entitled.

     13.9 NON-DISCLOSURE. Until this Agreement is publicly announced by SNH (i)
the Mariner Entities, the SNH Entities, and each of their officers, directors,
employees, agents, consultants and advisors, shall keep confidential all terms
hereof and information contained herein (except to the extent required either
(a) in connection with the satisfaction of the conditions contained herein
(including, without limitation, providing such information to its creditors and
their advisors), (b) by the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "EXCHANGE Act"), or (c)
reporting requirements, if any, of the New York Stock Exchange ("NYSE
REQUIREMENTS")), and (ii) neither any Mariner Entity nor any persons or entities
affiliated with any of them or their officers, directors, employees, agents,
consultants and advisors (within the meaning of Rule 405 under the Securities
Act of 1933, as amended) shall trade in SNH's stock. In addition, each Mariner
Entity and each SNH Entity shall obtain the approval of Mariner or SPTMNR
(respectively), which approval shall not be unreasonably withheld, prior to
making any public announcements concerning this Agreement or the transactions
contemplated hereby. Each Mariner Entity, however, acknowledges that SNH may
disclose the existence of this Agreement and the transactions contemplated
hereby in appropriate public filings under the Exchange Act, or pursuant to the
NYSE Requirements, and each Mariner Entity further agrees that it shall provide
such financial statements as are available to such Mariner Entity, as SNH shall
determine necessary for SNH to comply with reporting requirements under the
Exchange Act or NYSE Requirements, if any, with respect to this transaction.

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

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

     13.12 LIMITATION ON LIABILITY. THE DECLARATION OF TRUST OF SPTMNR, DATED
JANUARY 14, 1999, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"SPTMNR DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"SPTMNR PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SPTMNR DECLARATION
COLLECTIVELY

                                       33
<PAGE>

AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF SPTMNR SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
SPTMNR. ALL PERSONS DEALING WITH SPTMNR, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF SPTMNR, FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.

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

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

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

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

                                       34
<PAGE>

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

                                       SENIOR HOUSING PROPERTIES TRUST,
                                       a Maryland real estate investment trust

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

                                       SPTMNR PROPERTIES TRUST,
                                       a Maryland real estate investment trust

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

                                       FIVE STAR QUALITY CARE, INC.,
                                       a Delaware corporation

                                       By:
                                          -------------------------------------
                                          Ajay Saini, Treasurer and Assistant
                                          Secretary

                                       SHOPCO-AZ, LLC,
                                       a Delaware limited liability company

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

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

                                       SHOPCO-CA, LLC,
                                       a Delaware limited liability company

                                       35
<PAGE>

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

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

                                       SHOPCO-COLORADO, LLC,
                                       a Delaware limited liability company

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

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

                                       SHOPCO-WI, LLC,
                                       a Delaware limited liability company

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

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

                                       36
<PAGE>

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

                                       By:
                                          -------------------------------------
                                            Name:
                                            Its:

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

                                       By:
                                          -------------------------------------
                                            Name:
                                            Its:

                                       AMS PROPERTIES, INC.,
                                       a Delaware corporation

                                       By:
                                          -------------------------------------
                                            Name:
                                            Its:

                                       GCI HEALTH CARE CENTERS, INC,
                                       a Delaware corporation

                                       By:
                                          -------------------------------------
                                            Name:
                                            Its:

                                       37
<PAGE>

                                 SCHEDULE 1.1.1

                    PERMITTED PERSONAL PROPERTY ENCUMBRANCES

                                      None.

                                       38
<PAGE>

                                 SCHEDULE 1.1.2

                               RETAINED FACILITIES
<TABLE>
<CAPTION>
--------------------------------------------------- --------------------------------------- --------------------------
                  PROPERTY NAME                                PROPERTY ADDRESS                      TENANT

--------------------------------------------------- --------------------------------------- --------------------------
<S>                                                 <C>                                     <C>
Cedars Health Care Center                           1599 Ingalls Street                     AMS Properties
                                                    Lakewood, CO
--------------------------------------------------- --------------------------------------- --------------------------
Cherrelyn Manor Nursing Home                        5555 South Elati                        AMS Properties
                                                    Littleton, CO
--------------------------------------------------- --------------------------------------- --------------------------
Christopher East Health Care Center                 1132 East Knapp Street                  AMS Properties
                                                    Milwaukee, WI 53202
--------------------------------------------------- --------------------------------------- --------------------------
Greentree Health Care Center                        70 Greentree Road                       AMS Properties
                                                    Clintonville, WI 54929
--------------------------------------------------- --------------------------------------- --------------------------
La Mesa Healthcare Center                           2470 S. Arizona Avenue                  GCIHCC
                                                    Yuma, AZ 85364
--------------------------------------------------- --------------------------------------- --------------------------
La Salette Health Care & Rehabilitation Center      537 E. Fulton                           GCIHCC
                                                    Stockton, CA 95204
--------------------------------------------------- --------------------------------------- --------------------------
Lancaster Health Care Center                        1642 West Avenue "J"                    AMS Properties
                                                    Lancaster, CA
--------------------------------------------------- --------------------------------------- --------------------------
Northwest Health Care Center                        7800 West Fond du Lac Avenue            AMS Properties
                                                    Milwaukee, WI 53218
--------------------------------------------------- --------------------------------------- --------------------------
Pine Manor Health Care Center                       East Side of County Y Highway           AMS Properties
                                                    Embarrass (Clintonville), WI
--------------------------------------------------- --------------------------------------- --------------------------
River Hills West Health Care Center                 321 Riverside Drive                     AMS Properties
                                                    Pewaukee, WI 53072
--------------------------------------------------- --------------------------------------- --------------------------
Sunny Hill Health Care Center                       4325 Nakoma Road                        AMS Properties
                                                    Madison, WI
--------------------------------------------------- --------------------------------------- --------------------------
Sunquest Village of Yuma                            265 East 24th Street                    GCIHCC
                                                    Yuma, AZ 85364
--------------------------------------------------- --------------------------------------- --------------------------
Thousand Oaks Health Care Center                    93 West Avenida de los Arobules         AMS Properties
                                                    Thousand Oaks, CA 91360
--------------------------------------------------- --------------------------------------- --------------------------
Van Nuys Health Care Center                         6835 Hazeltine Avenue                   AMS Properties
                                                    Van Nuys, CA 91405
--------------------------------------------------- --------------------------------------- --------------------------
Village Green Nursing Home                          2932 North 14th Street                  GCIHCC
                                                    Phoenix, AZ 85094
--------------------------------------------------- --------------------------------------- --------------------------
Virginia Health Care Center                         1471 Waukesha Avenue                    AMS Properties
                                                    Waukesha, WI
--------------------------------------------------- --------------------------------------- --------------------------
Woodland Health Care Center                         18740 W. Bluemound Road                 AMS Properties
                                                    Brookfield, WI
--------------------------------------------------- --------------------------------------- --------------------------
</TABLE>

                                       39
<PAGE>

                                 SCHEDULE 1.1.3

                              SUBLEASED FACILITIES
<TABLE>
<CAPTION>
----------------------------------------------- ------------------------------------------- --------------------------
                PROPERTY NAME                                PROPERTY ADDRESS                        TENANT
----------------------------------------------- ------------------------------------------- --------------------------
<S>                                             <C>                      <C>                <C>
Huron Nursing Home:                             1251 Arizona SW          15th & Michigan    GCIHCC
Sunquest Village                                Huron, SD 57530          Huron, SD 57350
----------------------------------------------- ------------------------------------------- --------------------------
Southridge Health Care Center:                  3600 S. Norton                              GCIHCC
Mom & Dad's Health Care Center                  Sioux Falls, SD 57105
----------------------------------------------- ------------------------------------------- --------------------------
Pacific Gardens Nursing and Rehabilitation      577 South Peach Street                      AMS Properties
Center: Pleasant Care                           Fresno, CA
----------------------------------------------- ------------------------------------------- --------------------------
</TABLE>

                                       40
<PAGE>

                                 SCHEDULE 1.1.4

                             TRANSFERRED FACILITIES
<TABLE>
<CAPTION>
----------------------------------------------- ------------------------------------------- --------------------------
                PROPERTY NAME                                PROPERTY ADDRESS                        TENANT

----------------------------------------------- ------------------------------------------- --------------------------
<S>                                             <C>                                         <C>
Brian Centers-Carbarrus                         250 Bishop Lane                             AMS Properties
                                                Concord, NC 28025
----------------------------------------------- ------------------------------------------- --------------------------
Brian Centers-Wilson                            2501 Downing Street Extension               AMS Properties
                                                Wilson, NC 53702
----------------------------------------------- ------------------------------------------- --------------------------
Brian Centers-Winston-Salem                     6000 Brian Center Lane                      AMS Properties
                                                Winston-Salem, NC 47106
----------------------------------------------- ------------------------------------------- --------------------------
Flagship Health Care Center                     466 Flagship Road                           AMS Properties
                                                Newport Beach, CA
----------------------------------------------- ------------------------------------------- --------------------------
Tarzana Health Care Center                      5640 Reseda Avenue (5650 Reseda Road)       AMS Properties
                                                Tarzana, CA
----------------------------------------------- ------------------------------------------- --------------------------
</TABLE>

                                       41
<PAGE>

                                  SCHEDULE 2.1

                               EXISTING DOCUMENTS

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

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

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

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

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

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

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

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

9.   UCC Financing Statements/Fixture Filings by AMS Properties, showing AMS
     Properties, as

                                       42
<PAGE>

     debtor, and HRP, as secured party, filed with the appropriate UCC filing
     office and registries of deeds to perfect the interests of HRP as a secured
     creditor under the security instruments referred to above.

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       43
<PAGE>

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

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

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

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

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

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

29.  A Stock Power relating to GCIHCC Stock.

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

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

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

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

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

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

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

                                       44
<PAGE>

                                  SCHEDULE 9.5

                                BEDS AND SERVICES

<TABLE>
<CAPTION>
----------------------------------------------- ----------------- ----------------------------------------------------
                PROPERTY NAME                         BEDS                             SERVICES
----------------------------------------------- ----------------- ----------------------------------------------------
<S>                                                  <C>          <C>
Cedars Health Care Center                            175/14       Skilled Nursing Facility/Assisted Living Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Cherrelyn Manor Health Care Center                    230         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Christopher East Health Care Center                   215         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Greentree Health Care Center                           69         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
La Mesa Health Care Center                            128         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
La Salette Health Care and Rehab. Center              120         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Lancaster Health Care Center                           99         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Northwest Health Care Center                          101         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Pine Manor Health Care Center                        83/25        Skilled Nursing Facility/Facility for Dev. Disabled
----------------------------------------------- ----------------- ----------------------------------------------------
River Hills West Health Care Center                   237         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Sunny Hill Health Care Center                          73         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Sunquest Village of Yuma                               80         Assisted Living Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Thousand Oaks Health Care Center                      124         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Van Nuys Health Care Center                            58         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Village Green Health Care Center                      127         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Virginia Health Care Center                           105         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
Woodland Health Care Center                           226         Skilled Nursing Facility
----------------------------------------------- ----------------- ----------------------------------------------------
</TABLE>

<PAGE>

                                  SCHEDULE 9.15

                       LABOR UNION CONTRACTS OR AGREEMENTS

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

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

                                       46
<PAGE>

                          INTERIM MANAGEMENT AGREEMENT

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

                              W I T N E S S E T H:

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

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

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

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

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

     WHEREAS, the Proposed SNH Licensees and the Mariner Licensees desire to
enter into certain arrangements regarding the management of the Facilities and,
more specifically, to provide for the Mariner Licensees to operate the
Facilities pending, and in anticipation of, the receipt by the Proposed SNH
Licensees or the Manager of the Necessary Licenses (the date on

                                       -2-
<PAGE>

which any Proposed SNH Licensee or the Manager shall have received all such
Necessary Licenses with respect to a Facility being referred to herein as such
Facility's "SNH LICENSING DATE"), and to consult and cooperate with the Proposed
SNH Licensees' designee, the Manager, in connection therewith;

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

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

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

     The Mariner Licensees, the Proposed SNH Licensees and the Manager agree
that, subject in all events to the provisions of the first paragraph of this
SECTION 0, the SNH Proposed Licensees or the Manager may from time to time,
notify the Mariner Licensees that the Manager is prepared to provide any one or
more of those services (the "DESIGNATED SERVICES") designated in SCHEDULE D
attached hereto (the "DESIGNATED SERVICES SCHEDULE"), with respect to any one or
more of the Facilities, and from and after the date specified in such notice,
the Mariner Licensee shall delegate to Manager and the Manager shall assume and
perform such Designated Services. The Mariner Licensees, the Proposed SNH
Licensees and the Manager shall reasonably cooperate in the transition of the
responsibility for such Designated Service(s) to the Manager, subject to the
continued authority and responsibility of the Mariner Licensee referred to
herein.

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

                                       -3-
<PAGE>

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

     SPECIFIC DUTIES. The Mariner Licensees shall have the following specific
duties:

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

                                      -4-
<PAGE>

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

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

     PURCHASING. The Mariner Licensees shall (subject to SECTION 0) purchase, in
the name, and for the account, of the Proposed SNH Licensees, all necessary
supplies, foodstuffs, materials, appliances, tools, and equipment customarily
used in the operation of the Facilities. The Mariner Licensees shall use
commercially reasonable efforts to limit purchasing costs and to maintain such
costs at a level reasonably calculated to allow the Facilities to operate
profitably. The Mariner Licensees may, but shall not be obligated to, make such
purchases in bulk under a centralized purchasing system established by them for
other facilities under their operation or management in order to minimize costs.
The Mariner Licensees shall arrange contracts for electricity, gas, telephone,
and any other utility or service necessary to the operation of the Facilities,
in each case in the name, and for the account, of the Proposed SNH Licensees.
The Mariner Licensees shall, on their own behalf and/or on behalf of the owner
of the buildings and real property in and on which the Facilities are located
(the "REAL PROPERTY OWNER"), contract for and supervise the making of any
necessary repairs, alterations, and improvements to the Facilities, provided
that in the case of any repair, alteration or improvement, the cost of which
exceeds $5,000, the Mariner Licensees shall obtain the prior approval of the
Proposed SNH Licensee/Manager, except that no such prior approval shall be
required if the expenditure is made under circumstances reasonably requiring
emergency action. The Mariner Licensees shall prepare such certifications as to
expenses incurred in the operation of the Facilities as may be required in order
to comply with applicable law and regulations, including, without limitation,
law and regulations applicable to preparation and submission of cost reports.

     BOOKKEEPING. The Mariner Licensees shall establish and maintain a record
and bookkeeping system for the operation and conduct of the Facilities in
accordance with generally

                                      -5-
<PAGE>

accepted accounting principles. Full books of account with entries of all
receipts and expenditures of the Facilities shall be open for inspection by
representatives of Proposed SNH Licensees and Manager upon reasonable notice and
at reasonable times.

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

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

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

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

                                      -6-
<PAGE>

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

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

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

     COLLECTIONS, ACCOUNTS, DISBURSEMENTS AND TERMINATION ACCOUNTING.

     BILLING. The Mariner Licensees shall prepare and submit bills for all
moneys owing, whether from patients or third party payors, for services provided
by or at the Facilities at any time, whether prior to ______ o'clock p.m. on
[DAY PRECEDING THE CLOSING] (the "EFFECTIVE TIME") or after the Effective Time.

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

                                      -7-
<PAGE>

transfer the New A/R Accounts to the Proposed SNH Licensees, and (vii) the
Mariner Licensees shall disburse all proceeds attributable to Post-Effective A/R
deposited in the Existing A/R Accounts or the New A/R Accounts or otherwise
received or held by the Mariner Licensees to the Proposed SNH Licensees (or to
such other Person as the Proposed SNH Licensees may direct) within five (5) days
of the Mariner Licensees' receipt thereof.

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

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

     PATIENT TRUST ACCOUNTS. At such time as a Proposed SNH Licensee has
received all Necessary Licenses with respect to a Facility and has given the
Mariner Licensee notice as provided in SECTION 0, the Mariner Licensee will
transfer the patient trust accounts held for the benefit of residents of such
Facility to the Proposed SNH Licensee, together with all records and an
accounting regarding such accounts.

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

     Until the Agreed Deficiency shall have been reduced to zero (0), payment of
the Fee shall be made by dollar-for-dollar reduction of the Reduced Deficiency
(as such term is defined in the Settlement Agreement). Notwithstanding anything
to the contrary contained in this SECTION 0, in each of the first three (3)
months of the term hereof, the Fee earned by the Mariner Licensees

                                      -8-
<PAGE>

hereunder shall be not less than Four Hundred Thousand ($400,000) (regardless of
the amount of net patient revenues at the Facilities for such month or whether
the Manager shall have elected to discontinue the Mariner Licensees' provision
of any services specified herein during such period).

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

                                    EXPENSES.

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

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

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

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

                                      -9-
<PAGE>

business of the Proposed SNH Licensees, on the other)); and

          all other costs, expenses and liabilities arising out of the
operation, maintenance and management of the Facilities, including, without
limitation, fees of professionals engaged to fulfill the Mariner Licensees'
obligations under SECTION 0 and SECTION 0, but excluding those costs, expenses
and liabilities arising out of any such Mariner Licensee's gross negligence or
willful misconduct.

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

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

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

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

                                      -10-
<PAGE>

clause requiring the subcontractor to retain and allow access to its records on
the same terms and conditions as required by such Mariner Licensee.

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

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

                              TERM AND TERMINATION

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

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

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

     From and after the effective date of termination of this Agreement in
accordance with SECTION 0, the Mariner Licensees shall not be entitled to
compensation for further services hereunder (and, in the case of the
discontinuation of services at a Facility in accordance with SECTION 0, from and
after the effective date of such discontinuance, the Mariner Licensees shall not
be entitled to compensation for further services with respect to such Facility).
Upon termination or discontinuance, the relevant Mariner Licensees shall
forthwith:

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

     deliver to the relevant Proposed SNH Licensees and the Manager a full

                                      -11-
<PAGE>

accounting, including a statement showing all payments collected by it and a
statement of all money held by it, covering the period following the date of the
last accounting furnished to them; and

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

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

          if to the Manager:

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

          with copy to:

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

          if to the Mariner Licensees:

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

               and to:

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

          If to the Proposed SNH Licensees:

               SHOPCO-AZ, LLC
               400 Centre Street

                                      -12-
<PAGE>

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

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

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

               SHOPCO-WI, LLC

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

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

                                 INDEMNIFICATION

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

     PROPOSED SNH LICENSEES' AND MANAGER'S INDEMNIFICATION. The Proposed SNH
Licensees and the Manager (collectively referred to as the SNH Indemnitors),
jointly and

                                      -13-
<PAGE>

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

     The provisions of this SECTION 0 shall survive the termination of this
Agreement.

                                  MISCELLANEOUS

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

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

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

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

     ATTORNEY'S FEES AND COSTS. If any action is brought for the enforcement of
this Agreement, or because of a dispute, breach, default or misrepresentation in
connection with any

                                      -14-
<PAGE>

of the provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action in
addition to any other relief to which it may be entitled.

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

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

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

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

                                      -15-
<PAGE>

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

                                        MARINER POST-ACUTE NETWORK, INC.

                                        By:
                                            -----------------------------------
                                                 Its (Vice) President

                                        AMS PROPERTIES, INC.

                                        By:
                                            -----------------------------------
                                                 Its (Vice) President

                                        GCI HEALTH CARE CENTERS, INC.

                                        By:
                                           ------------------------------------
                                                 Its (Vice) President

                                        SHOPCO-AZ, LLC

                                        By:
                                           ------------------------------------
                                                 Its (Vice) President

                                        SHOPCO-CA, LLC

                                        By:
                                           ------------------------------------
                                                 Its (Vice) President

                                        SHOPCO-COLORADO, LLC

                                        By:
                                           ------------------------------------
                                                 Its (Vice) President

                                      -16-
<PAGE>

                                        SHOPCO-WI, LLC

                                        By:
                                           ------------------------------------
                                                 Its (Vice) President

                                        FIVE STAR QUALITY CARE, INC.

                                        By:
                                           ------------------------------------
                                                 Its (Vice) President

                                      -17-
<PAGE>

                                   SCHEDULE D

                               DESIGNATED SERVICES

-----------------------------------------------  ---------------
        Information Technology Support                 1.0%
-----------------------------------------------  ---------------
                 Reimbursement                         0.5%
-----------------------------------------------  ---------------
    Accounts Payable and Payroll Processing            1.5%
-----------------------------------------------  ---------------
   Facility, Regional and Clinical (Quality            2.0%
             Assurance) Operations
-----------------------------------------------  ---------------

<PAGE>

                           INTERIM OCCUPANCY AGREEMENT

     This Interim Occupancy Agreement (this "INTERIM OCCUPANCY AGREEMENT") is
made this ___ day of 2000, between [INSERT NAME OF APPLICABLE NEW Operator], a
Delaware corporation ("SUBLESSOR"), and [INSERT NAME OF APPLICABLE MARINER
LICENSEE], a Delaware corporation ("SUBLESSEE").

                                   WITNESSETH

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

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

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

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

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

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

     RENT. Sublessee shall pay to Sublessor as the rent under this Interim
Occupancy Agreement (the

                                      -2-
<PAGE>

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

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

     NO SUBLETTING OR ASSIGNMENT. Sublessee shall not sublet or assign any or
all of the Facility without the prior consent of Sublessor; PROVIDED, HOWEVER,
that the foregoing shall not be deemed to prohibit Sublessee from permitting
patients or residents to occupy the Facility in the ordinary course of
Sublessee's business.

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

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

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

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

                                      -3-
<PAGE>

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

                                  MISCELLANEOUS

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

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

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

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

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

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

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

                            [SIGNATURES ON NEXT PAGE]

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

SUBLESSOR:                                  SUBLESSEE:

                                      -4-
<PAGE>

[INSERT NAME OF APPLICABLE NEW OPERATOR]    [INSERT NAME OF MARINER LICENSEE]

By:                                         By:
   ----------------------------------          --------------------------------
Its:                                        Its:
   ----------------------------------          --------------------------------

                                      -5-<PAGE>   1

                                                                 EXHIBIT "10.18"

                                     CHARTER
                                     OF THE
                                 AUDIT COMMITTEE
                                     OF THE
                        AMERICAN NATIONAL FINANCIAL, INC.
                            BOARD OF DIRECTORS, INC.

I.       Audit Committee Purpose

         The Audit Committee (hereinafter sometimes referred to as the
"Committee") is appointed by the Board of Directors (the "Board") to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:

         o  Monitor the integrity of the Company's financial reporting process
            and systems of internal controls regarding finance, and accounting.

         o  Monitor the independence and performance of the Company's
            independent auditors and internal auditing department.

         o  Provide an avenue of communication among the independent auditors,
            management, the internal auditing department, and the Board of
            Directors.

         The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, legal, accounting or other
consultants or experts it deems necessary in the performance of its duties.

II.      Audit Committee Composition and Meetings

         Audit Committee members shall meet the requirements of the National
Association of Securities Dealers Automated Quotation ("NASDAQ"). The Audit
Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall be independent non-executive directors, free from any
relationship that would interfere with the exercise of his or her independent
judgment. The NASDAQ requires annual written affirmation of the Audit Committee
independence. The criteria for assessing independence are:

<PAGE>   2

         I.    Former employees and family members of former employees. Must be
               a minimum of three years since employment with the Company,
               except that NASDAQ rules allow one former employee or one family
               member of a former employee, with less than three years
               separation, to be an audit committee member if it is determined
               by the Board to be in the Company's best interest.

         II.   Business Relationships. If a director's employer receives revenue
               in excess of $200,000 per year, or five (5%) percent of its total
               revenue from the Company, the director is not considered
               independent.

         III.  Cross-directorships. An audit committee member's compensation
               cannot be impacted by an employee of the Company.

         All members of the Committee shall have a basic understanding of
finance and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise.

         Audit Committee members shall be appointed by the Board on
recommendation of the Nominating Committee. If the Chairman of the Audit
Committee (the "Committee Chairman") is not designated or present, the members
of the Committee may designate a Committee Chairman by majority vote of the
Committee membership.

         The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chairman shall prepare
and/or approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the director
of the internal auditing department, the independent auditors, and as a
committee to discuss any matters that the Committee or each of these groups
believe should be discussed. In addition, the Committee, or at least its
Committee Chairman, should communicate with management and the independent
auditors quarterly to review the Company's financial statements and significant
findings based upon the auditors limited review procedures.

III.     Audit Committee Responsibilities and Duties

         Review Procedures

         I.    Review and reassess the adequacy of this Charter at least
               annually. Submit the charter to the Board for approval and have
               the document published at least every three years in accordance
               with Securities and Exchange Commission ("SEC") regulations.

<PAGE>   3

         II.   Review the Company's annual audited financial statements prior to
               filing or distribution. Review should include discussion with
               management and independent auditors of significant issues
               regarding accounting principles, practices, and judgments.

         III.  In consultation with the management, the independent auditors,
               and the internal auditors, consider the integrity of the
               Company's financial reporting processes and controls. Discuss
               significant financial risk exposures and the steps management has
               taken to monitor, control, and report such exposures. Review
               significant findings prepared by the independent auditors and the
               internal auditing department together with management's
               responses.

         IV.   Review with financial management and the independent auditors the
               Company's quarterly financial results prior to the release of
               earnings and/or the Company's quarterly financial statements
               prior to filing or distribution. Discuss any significant changes
               to the Company's accounting principles and any items required to
               be communicated by the independent auditors in accordance with
               SAS 61 (see item 9 below). The Committee Chairman may represent
               the entire Audit Committee for purposes of this review.

         Independent Auditors

         V.    The independent auditors are ultimately accountable to the Audit
               Committee and the Board. The Committee shall review the
               independence and performance of the auditors and annually
               recommend to the Board the appointment of the independent
               auditors or approve any discharge of auditors when circumstances
               warrant.

         VI.   Approve the fees and other significant compensation to be paid to
               the independent auditors. Review and approve requests for
               significant management consulting engagements to be performed by
               the independent auditors' firm and be advised of any other
               significant study undertaken at the request of management that is
               beyond the scope of the audit engagement letter.

         VII.  On an annual basis, the Committee shall review and discuss with
               the independent auditors all significant relationships they have
               with the Company that could impair the auditors' independence.

         VIII. Review the independent auditors' audit plan. Discuss scope,
               staffing, locations, reliance upon management, and internal audit
               and general audit approach.

         IX.   Prior to releasing the year-end earnings, discuss the results of
               the audit with the independent auditors. Discuss certain matters
               required to be communicated to audit committees in accordance
               with AICPA SAS 61.

<PAGE>   4

         X.    Consider the independent auditors' judgments about the quality
               and appropriateness of the Company's accounting principles as
               applied in its financial reporting.

         Internal Audit Department and Legal Compliance

         XI.   Review the budget, plan, changes in plan, activities,
               organizational structure, and qualifications of the internal
               audit department, as needed.

         XII.  Review the appointment, performance, and replacement of the
               senior internal audit executive.

         XIII. Review significant reports prepared by the internal audit
               department together with management's response and follow-up to
               these reports.

         XIV.  On at least an annual basis, review with the Company's counsel,
               any legal matters that could have a significant impact on the
               organization's financial statements, the Company's compliance
               with applicable laws and regulations, and inquiries received from
               regulators or governmental agencies.

         Other Audit Committee Responsibilities

         XV.   Annually prepare a report to stockholders as required by the SEC.
               The report should be included in the Company's annual proxy
               statement.

         XVI.  Perform any other activities consistent with this Charter, the
               Company's by-laws, and governing law, as the Committee or the
               Board deems necessary or appropriate.

         XVII. Maintain minutes of meetings and periodically report to the Board
               on significant results of the foregoing activities.

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