10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                        to                         

Commission file number 1-9028

NATIONWIDE HEALTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland	95-3997619
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

610 Newport Center Drive, Suite 1150 Newport Beach, California (Address of principal executive offices) 92660 (Zip Code)

Registrant’s telephone number, including area code: (949) 718-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.10 Par Value	New York Stock Exchange
7.677% Series A Cumulative Preferred	None

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange  Rule 12b-2).    Yes x    No ¨

The aggregate market value of the voting and non-voting stock held by non-affiliates was approximately $914,039,000 as of the last business day of the registrant’s most recently completed second fiscal quarter.

49,172,216

(Number of shares of common stock outstanding as of February 28, 2003)

Items 10, 11, 12 and 13 of Part III are incorporated by reference from the registrant’s definitive proxy statement for the Annual Meeting of Stockholders to be held on May 29, 2003.

PART I

Item 1.    Business.

Nationwide Health Properties, Inc., a Maryland corporation incorporated on October 14, 1985, is a real estate investment trust (REIT) that invests primarily in healthcare related facilities and provides financing to healthcare providers. Whenever we refer herein to “the Company” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries. At December 31, 2002, we had investments in 387 facilities located in 38 states. As of December 31, 2002, we had direct ownership of:

• 158 skilled nursing facilities;

• 132 assisted and independent living facilities;

• 11 continuing care retirement communities;

• one rehabilitation hospital;

• one long-term acute care hospital; and

• five buildings held for sale.

At December 31, 2002, we held 24 mortgage loans secured by:

• 25 skilled nursing facilities;

• four assisted and independent living facilities; and

• one continuing care retirement community.

We also have a 25% interest in an unconsolidated joint venture that owns 49 assisted living facilities located in twelve states.

Other than the five buildings held for sale, substantially all of our owned facilities are leased under “triple-net” leases, which are accounted for as operating leases, to 58 healthcare providers.

Our facilities are operated by 67 different operators, including the following publicly traded companies:

• Alterra Healthcare Corporation (Alterra);

• American Retirement Corporation (ARC);

• ARV Assisted Living, Inc.;

• Beverly Enterprises, Inc. (Beverly);

• Harborside Healthcare Corporation;

• HEALTHSOUTH Corporation;

• Integrated Health Services, Inc.;

• Mariner Health Care, Inc.; and

• Sun Healthcare Group, Inc.

Of the operators of our facilities, only Alterra and ARC accounted for 10% or more of our revenues for the twelve months ended December 31, 2002 or are expected to account for more than 10% of our revenues in 2003. In addition, our joint venture has direct ownership of 49 assisted living facilities, all of which are leased to Alterra. See “Information Regarding Certain Operators” in Item 7 for a discussion of Alterra’s current bankruptcy proceedings.

1

The following table summarizes our major operators, the number of facilities each operates and the percentage of our revenues received from each operator as of the end of 2002, as adjusted for facilities acquired and disposed during 2002:

Operator	Number of Facilities Operated	Percentage of Revenue
Alterra Healthcare Corporation	59	14	%
American Retirement Corporation	16	12	%
ARV Assisted Living, Inc.	16	9	%
Beverly Enterprises, Inc.	30	9	%
Complete Care Services	33	5	%

We have historically provided lease or mortgage financing for healthcare facilities to qualified operators and acquired additional senior housing and long-term care facilities, including skilled nursing facilities, assisted and independent living facilities, rehabilitation hospitals and long-term acute care hospitals. Financing for these investments was provided by borrowings under our bank line of credit, private placements or public offerings of debt or equity and the assumption of secured indebtedness.

The leases generally have initial terms ranging from five to 21 years, and generally have two or more multiple-year renewal options. We earn fixed monthly minimum rents and may earn periodic additional rents. The additional rent payments are generally computed as a percentage of facility net patient revenues in excess of base amounts or as a percentage of the increase in the Consumer Price Index. Additional rents are generally calculated and payable monthly or quarterly. While the calculations and payments of additional rents contingent upon revenue are generally made on a quarterly basis, SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB No. 101), which we adopted during the fourth quarter of 2000, does not allow for the recognition of this revenue until all possible contingencies have been eliminated. Most of our leases with additional rents contingent upon revenue are structured as quarterly calculations so that all contingencies for revenue recognition have been eliminated at each of our quarterly reporting dates. Also, the majority of our leases contain provisions that the total rent cannot decrease from one year to the next. Approximately 79% of our facilities are leased under master leases. In addition, the majority of our leases contain cross collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and, if purchase options exist, grouped purchase options. Leases covering 250 facilities are backed by security deposits consisting of irrevocable letters of credit or cash most of which cover from three to six months, of initial monthly minimum rents. Under the terms of the leases, the tenant is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

During 2002, we acquired 34 skilled nursing facilities, eleven assisted and independent living facilities and one continuing care retirement community for an aggregate investment of approximately $165,428,000. Additionally, we funded approximately $13,870,000 in capital improvements at a number of facilities in accordance with existing lease provisions. These capital improvements generally result in an increase in the minimum rents we earn on these facilities. In addition, our unconsolidated joint venture, in which we have a 25% interest, acquired 52 assisted living facilities.

At December 31, 2002, we held 24 mortgage loans secured by 25 skilled nursing facilities, four assisted and independent living facilities and one continuing care retirement community. These loans had an aggregate outstanding principal balance of approximately $101,232,000 and a net book value of approximately $99,292,000 at December 31, 2002, net of an aggregate discount totaling approximately $1,940,000. The mortgage loans have individual outstanding balances ranging from approximately $66,000 to $12,983,000 and have maturities ranging from 2003 to 2031.

Taxation

We believe we have operated in such a manner as to qualify for taxation as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and we intend to continue to operate in such a manner. If we qualify for taxation as a REIT, we will generally not be subject to federal corporate income taxes on our net income that is currently distributed to stockholders. This treatment substantially eliminates the

2

“double taxation” (e.g. at the corporate and stockholder levels) that usually results from investment in the stock of a corporation. Please see the heading “REIT Status” under the caption “Risk Factors” for more information.

In January 2002, President Bush proposed changes to the tax laws that, if enacted, would exclude from an individual’s taxable income corporate dividends paid out of certain previously taxed corporate income. Many aspects of this proposal have yet to be described, but it is most likely that dividends paid to shareholders of REITs will not be eligible for the exclusion. We are unable to predict whether or in what form the proposal may be enacted or, if enacted, any effect it may have on us.

Properties

Of the 387 facilities in which we have investments, we have direct ownership of:

• 158 skilled nursing facilities;

• 132 assisted living facilities;

• 11 continuing care retirement communities;

• one rehabilitation hospital;

• one long-term acute care hospital; and

• five buildings held for sale.

In addition, our unconsolidated joint venture owns 49 assisted living facilities. Other than the five buildings held for sale, substantially all of the properties are leased to other parties under terms that require the tenant, in addition to paying rent, to pay all additional charges, taxes, assessments, levies and fees incurred in the operation of the leased properties.

Skilled Nursing Facilities

Skilled nursing facilities provide rehabilitative, restorative, skilled nursing and medical treatment for patients and residents who do not require the high-technology, care-intensive, high-cost setting of an acute care or rehabilitative hospital. Treatment programs include physical, occupational, speech, respiratory and other therapeutic programs, including sub-acute clinical protocols such as wound care and intravenous drug treatment.

Assisted and Independent Living Facilities

Assisted and independent living facilities offer studio, one bedroom and two bedroom apartments on a month-to-month basis primarily to elderly individuals with various levels of assistance requirements. Assisted and independent living residents are provided meals and eat in a central dining area; assisted living residents may also be assisted with some daily living activities with programs and services that allow residents certain conveniences and make it possible for them to live independently; staff is also available when residents need assistance and for group activities. Services provided to residents who require more assistance with daily living activities, but who do not require the constant supervision skilled nursing facilities provide, include personal supervision and assistance with eating, bathing, grooming and administering medication. Charges for room, board and services are generally paid from private sources.

Continuing Care Retirement Communities

Continuing care retirement communities provide a broad continuum of care. At the most basic level, independent living residents might receive meal service, maid service or other services as part of their monthly rent. Services which aid in everyday living are provided to other residents, much like in an assisted living facility. At the far end of the spectrum, skilled nursing, rehabilitation and medical treatment are provided to residents who need those services. This type of facility consists of independent living units, dedicated assisted living units and licensed skilled nursing beds on one campus, and considered by many to be the ultimate senior housing alternative.

Rehabilitation Hospitals

Rehabilitation hospitals provide inpatient and outpatient medical care to patients requiring high intensity physical, respiratory, neurological, orthopedic and other treatment protocols and for intermediate periods in their recovery. These programs are often the most effective in treating severe skeletal or neurological injuries and traumatic diseases such as stroke and acute arthritis.

3

Long-Term Acute Care Hospitals

Long-term acute care hospitals serve medically complex, chronically ill patients. These hospitals have the capability to treat patients who suffer from multiple systemic failures or conditions such as neurological disorders, head injuries, brain stem and spinal cord trauma, cerebral vascular accidents, chemical brain injuries, central nervous system disorders, developmental anomalies and cardiopulmonary disorders. Chronic patients are often dependent on technology for continued life support, such as mechanical ventilators, total parenteral nutrition, respiration or cardiac monitors and dialysis machines. While these patients suffer from conditions that require a high level of monitoring and specialized care, they may not necessitate the continued services of an intensive care unit. Due to their severe medical conditions, these patients generally are not clinically appropriate for admission to a skilled nursing facility or rehabilitation hospital.

The following table sets forth certain information regarding our owned facilities as of December 31, 2002:

Facility Location	Number of Facilities	Number of Beds/Units (1)	Gross Investment		2002 Rent (2)
			(Dollars in Thousands)
Assisted and Independent Living Facilities:
Alabama	2	166	$	5,953	$	575
Arizona	2	142		7,868		798
Arkansas	1	32		2,150		202
California	13	1,590		79,578		11,271
Colorado	7	843		76,654		6,195
Delaware	1	54		5,301		411
Florida	20	1,345		96,667		8,384
Idaho	1	158		11,826		1,299
Indiana	1	50		4,666		327
Kansas	4	231		13,557		1,242
Kentucky	1	44		2,782		301
Louisiana	1	104		7,385		616
Maryland	1	56		5,248		38
Massachusetts	1	118		11,007		1,021
Michigan	1	143		7,306		1,159
Nevada	2	154		13,616		1,292
New Jersey	2	104		7,615		422
New York	1	200		21,426		1,395
North Carolina	5	274		14,028		1,910
Ohio	11	635		39,115		3,099
Oklahoma	3	178		8,271		809
Oregon	6	559		28,874		3,108
Pennsylvania	4	286		29,965		615
Rhode Island	3	274		30,240		2,787
South Carolina	7	331		24,910		1,516
Tennessee	5	278		25,316		810
Texas	17	950		77,936		7,269
Virginia	2	153		12,974		1,262
Washington	4	341		22,834		2,443
West Virginia	1	60		6,177		44
Wisconsin	2	422		29,061		2,079
Subtotals	132	10,275	$	730,306	$	64,699

4

Facility Location	Number of Facilities	Number of Beds/Units (1)	Gross Investment		2002 Rent (2)
			(Dollars in Thousands)
Skilled Nursing Facilities:
Arizona	1	130	$	3,540	$	639
Arkansas	8	833		34,912		3,321
California	6	599		19,125		3,678
Connecticut	3	351		12,080		1,669
Florida	6	825		20,317		2,259
Georgia	1	100		4,342		325
Idaho	1	64		792		84
Illinois	2	210		5,549		600
Indiana	7	886		27,335		2,873
Kansas	9	680		13,928		1,524
Maryland	5	911		30,074		2,748
Massachusetts	14	1,511		76,372		6,403
Minnesota	3	568		19,809		1,773
Mississippi	1	120		4,467		462
Missouri	1	108		2,740		517
Nevada	1	140		4,034		616
North Carolina	1	150		2,360		333
Ohio	5	733		27,606		2,743
Oklahoma	3	253		3,939		436
Tennessee	5	508		18,509		2,015
Texas	59	6,770		135,967		12,733
Virginia	4	604		18,568		2,910
Washington	5	525		25,408		2,854
Wisconsin	7	568		12,874		2,406
Subtotals	158	18,147	$	524,647	$	55,921
Continuing Care Retirement Communities:
Arizona	1	182	$	10,331	$	477
California	1	279		12,427		1,659
Colorado	1	119		3,115		378
Florida	1	405		18,617		333
Georgia	1	190		11,492		984
Kansas	1	200		13,204		1,396
Massachusetts	1	178		14,292		1,379
Tennessee	1	80		3,178		364
Texas	1	352		30,870		3,042
Wisconsin	2	942		64,638		6,077
Subtotals	11	2,927	$	182,164	$	16,089

5

Facility Location	Number of Facilities	Number of Beds/ Units(1)	Gross Investment		2002 Rent(2)
			(Dollars in Thousands)
Rehabilitation Hospitals:
Arizona	1	60	$	10,710	$	1,513
Long-Term Acute Care Hospitals:
Arizona	1	56		6,361		851
Total All Owned Facilities	303	31,465	$	1,454,188	$	139,073

(1) Assisted and independent living facilities are measured in units, continuing care retirement communities are measured in beds and units and all other facilities are measured by bed count.

(2) Rental income for 2002 for each of the properties we owned at December 31, 2002, excluding assets held for sale.

Competition

We generally compete with other REITs, including Health Care Property Investors, Inc., Senior Housing Properties Trust, Healthcare Realty Trust Incorporated and Health Care REIT, Inc., real estate partnerships, healthcare providers and other investors, including, but not limited to, banks, insurance companies and opportunity funds, in the acquisition, leasing and financing of healthcare facilities. The operators of the healthcare facilities compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for patients based on quality of care, reputation, physical appearance of facilities, price, services offered, family preferences, physicians and staff.

Regulation

Payments for healthcare services provided by the operators of our facilities are received principally from four sources: Medicaid, a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government; Medicare, a federal health insurance program for the aged and certain chronically disabled individuals; private funds; and health and other insurance plans. Government revenue sources, particularly Medicaid programs, are subject to statutory and regulatory changes, administrative rulings, and government funding restrictions, all of which may materially increase or decrease the rates of payment to skilled nursing facilities which in turn might affect the amount of additional rents payable to us under our leases. Effective for years beginning after July 1, 1998, the payment methodology for skilled nursing facilities under the Medicare program was changed. Under the revised methodology, Medicare reimburses skilled nursing facility operators for nursing care, ancillary services and capital costs at a flat per diem rate. Prior to July 1, 1998, a cost-based system of reimbursement was used. This changed reimbursement methodology was phased in over four years. Payments under the new methodology are generally lower than the payments the facilities had historically received, however there was some relief during 2000 and 2001 as a portion of the reduction in payments was reversed. On October 1, 2002, some of the relief implemented in 2000 and 2001 expired, which resulted in a reduction in Medicare payments during 2002 and will result in a reduction in 2003. Payments under reimbursement programs allocable to patients may not remain at levels comparable to the present levels or be sufficient to cover all the operating and fixed costs allocable to patients. Decreases in reimbursement levels could have an adverse impact on the revenues of the operators of our facilities, which could in turn adversely impact their ability to make their monthly lease or debt payments to us.

There exist various federal and state regulations prohibiting fraud and abuse of healthcare providers, including those governing reimbursements under Medicaid and Medicare as well as referrals and financial relationships. Federal and state governments are devoting increasing attention to anti-fraud initiatives. Our operators may not be able to comply with these current or future regulations, which could affect their ability to operate or to continue to make lease or mortgage payments.

6

Healthcare facilities in which we invest are also generally subject to federal, state and local licensure statutes and regulations and statutes which may require regulatory approval, in the form of a certificate of need (CON), prior to the addition or construction of new beds, the addition of services or certain capital expenditures. CON requirements generally apply to skilled nursing facilities. CON requirements are not uniform throughout the United States and are subject to change. We cannot predict the impact of regulatory changes with respect to licensure and CONs on the operations of our operators.

Executive Officers of the Company

The table below sets forth the name, position and age of each executive officer of the Company. Each executive officer is appointed by the Board of Directors (the Board), serves at its pleasure and holds office until a successor is appointed, or until the earliest of death, resignation or removal. There is no “family relationship” between any of the named executive officers or with any director. All information is given as of February 28, 2003:

Name	Position	Age
R. Bruce Andrews	President and Chief Executive Officer	62
Donald D. Bradley	Senior Vice President and General Counsel	47
Mark L. Desmond	Senior Vice President and Chief Financial Officer	44
David M. Boitano	Vice President of Development	41
Steven J. Insoft	Vice President of Development	39
John J. Sheehan, Jr.	Vice President of Development	45

R. Bruce Andrews—President and Chief Executive Officer since September 1989 and a director since October 1989. Mr. Andrews had previously served as a director of American Medical International, Inc., a hospital management company, and served as its Chief Financial Officer from 1970 to 1985 and its Chief Operating Officer in 1985 and 1986. From 1986 through 1989, Mr. Andrews was engaged in various private investments.

Donald D. Bradley—Senior Vice President and General Counsel since March 2001. From January 2000 to February 2001, Mr. Bradley was engaged in various personal interests. Mr. Bradley was formerly the General Counsel of Furon Company, a NYSE-listed international, high performance polymer manufacturer from 1990 to December 1999. Previously, Mr. Bradley served as a Special Counsel of O’Melveny & Myers LLP, an international law firm with which he had been associated since 1982. Mr. Bradley is a member of the Executive Board of the American Seniors Housing Association (ASHA).

Mark L. Desmond—Senior Vice President and Chief Financial Officer since January 1996. Mr. Desmond was Vice President and Treasurer from May 1990 to December 1995 and Controller, Chief Accounting Officer and Assistant Treasurer from June 1988 to April 1990. From 1986 until joining our company, Mr. Desmond held various accounting positions with Beverly Enterprises, Inc., an operator of skilled nursing facilities, pharmacies and pharmacy related outlets. Mr. Desmond is a certified public accountant.

David M. Boitano—Vice President of Development since February 2002. From June 2000 until November 2001, Mr. Boitano was the Chief Operating Officer for Essential Markets, Inc., an information technology company. Mr. Boitano was the Senior Vice President of Finance and Acquisitions and Treasurer of Alterra Healthcare Corporation, an operator of assisted and independent living facilities, from November 1999 until May 2000. Prior to that, Mr. Boitano was the Senior Vice President of Finance and Acquisitions from October 1998 until October 1999 and the Vice President of Finance from May 1996 until September 1998, both also of Alterra. From March 1994 until May 1996, Mr. Boitano was the Chief Financial Officer of Crossings International Corporation, an operator of assisted living facilities.

Steven J. Insoft—Vice President of Development since February 1998. From 1991 to 1997, Mr. Insoft served as President of CMI Senior Housing & Healthcare, Inc., an operator of skilled nursing facilities. From 1988 to 1991, Mr. Insoft was an Associate in the Capital Markets Group of Prudential Insurance Company of America.

7

John J. Sheehan, Jr.—Vice President of Development since February 1996. From April 1990 until joining our company, Mr. Sheehan was Vice President, Mortgage Finance for Life Care Centers of America, an operator and manager of skilled nursing facilities. From September 1987 through April 1990, Mr. Sheehan served as Director of Asset Management for Southmark Corporation, a real estate syndication company.

Employees

As of February 28, 2003, we had 14 employees.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website at www.nhp-reit.com, the same day as those reports are available on the SEC’s website. In addition, our Business Code of Conduct & Ethics, Governance Principles and the charters of our Audit, Corporate Governance and Compensation Committees are available on our website.

8

RISK FACTORS

You should carefully consider the risks described below before making an investment decision in our company. The risks and uncertainties described below are not the only ones facing us and there may be additional risks that we do not presently know of or that we currently consider immaterial. All of these risks could adversely affect our business, financial condition, results of operations and cash flows.

Operator Obligations

Our income would be adversely affected if any of our operators were unable to meet their obligations to us or if we were unable to lease our facilities or make mortgage loans on economically favorable terms. If a tenant does not exercise its option to renew its lease upon the expiration of the initial term or that if a failure to renew were to occur, we may not be able to lease the facility to another operator on favorable terms.

Operator Governmental Regulations

Our operators are subject to regulation by federal, state and local governments. These laws and regulations are subject to frequent and substantial changes resulting from legislation, adoption of rules and regulations, and administrative and judicial interpretations of existing law. These changes may have a dramatic effect on our operators’ costs associated with doing business and the amount of reimbursement by both government and other third-party payors. These changes may be applied retroactively. The ultimate timing or effect of these changes cannot be predicted. The failure of any of our operators to comply with these laws, requirements and regulations could adversely affect an operator’s ability to meet its obligations to us.

Operator Reimbursement Rates

The ability of our operators to generate revenue and profit affects the underlying value of our facilities. Revenues of our operators are generally derived from payments for patient care from the federal Medicare program, state Medicaid programs, private insurance carriers, health care service plans, health maintenance organizations, preferred provider arrangements, self-insured employers as well as the patients themselves.

A significant portion of our skilled nursing facility operators’ revenue is derived from governmentally-funded reimbursement programs, such as Medicare and Medicaid. Federal and state governments have adopted and continue to consider various health care reform proposals to control health care costs. In recent years, there have been fundamental changes in the Medicare program that have resulted in reduced levels of payment for a substantial portion of health care services. In many instances, revenues from Medicaid programs are already insufficient to cover the actual costs incurred in providing care to those patients. In addition, reimbursement from private payors has in many cases effectively been reduced to levels approaching those of government payors.

State and federal governmental concern regarding health care costs and the impact of these costs on their budgets may result in significant reductions in payment to health care facilities, and future reimbursement rates for either governmental or private payors may not be sufficient to cover cost increases in providing services to patients. Any changes in reimbursement policies that reduce reimbursement to levels that are insufficient to cover the cost of providing patient care could adversely affect revenues of our operators and thereby adversely affect their ability to meet their obligations to us.

Operator Financial Difficulties

Our financial position and our ability to make distributions may be adversely affected by financial difficulties experienced by any of our major operators, including bankruptcy, insolvency or general downturn in business of any of our major operators, or in the event any of our major operators do not renew or extend their relationship with us as their lease terms expire.

9

We are exposed to the risk that our operators may not be able to meet their obligations, which may result in their bankruptcy or insolvency. Although our leases and loans provide us the right to terminate an investment, evict an operator, demand immediate repayment and other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization. An operator in bankruptcy may be able to restrict our ability to collect unpaid rent and interest during the bankruptcy proceeding.

If one of our lessees seeks bankruptcy protection, the lessee can either assume or reject the lease. Generally, the operator is required to make rent payments to us during their bankruptcy until they reject the lease. If the lessee assumes the lease, the court cannot change the rental amount or any other lease provision that could financially impact us. However, if the lessee rejects the lease, the facility would be returned to us. If the facility is returned to us, our financial condition could be adversely affected by delays in leasing the facility to a new operator.

In the event of a default by our operators under mortgage loans, we may have to foreclose on the mortgage or protect our interest by acquiring title to a property and thereafter making substantial improvements or repairs in order to maximize the facility’s investment potential. Operators may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against an enforcement and/or bring claims for lender liability in response to actions to enforce mortgage obligations. If an operator seeks bankruptcy protection, the automatic stay of the federal bankruptcy law would preclude us from enforcing foreclosure or other remedies against the operator unless relief is obtained from the court. High “loan to value” ratios or declines in the value of the facility may prevent us from realizing an amount equal to our mortgage loan upon foreclosure.

For a discussion of current operator financial difficulties and bankruptcy proceedings, please see the caption “Information Regarding Certain Operators” in Item 7.

The receipt of liquidation proceeds or the replacement of an operator that has defaulted on its lease or loan could be delayed by the approval process of any federal, state or local agency necessary for the replacement of the operator licensed to manage the facility. In some instances, we may take possession of a property that may expose us to successor liabilities. If any of these events occur, our revenue and operating cash flow could be adversely affected.

Concentration of Revenues

Two of the operators of our facilities account for 10% or more of our revenues. As of the end of 2002, as adjusted for facilities acquired and disposed during 2002, Alterra accounted for 14% and ARC accounted for 12%. In January 2003, Alterra filed for protection under the United States bankruptcy laws. Alterra operates 59 of our facilities and all 49 of the facilities owned by our joint venture, in which we are a 25% equity partner. ARC operates 16 of our facilities. If Alterra decides to reject our leases in bankruptcy or if ARC experiences financial difficulties, our revenues and operating cash flow could be adversely affected.

Fraud and Abuse Regulations

There are various federal and state laws prohibiting fraud by healthcare providers, including criminal provisions that prohibit filing false claims or making false statements to receive payment or certification under Medicare and Medicaid, or failing to refund overpayments or improper payments.

There are also laws that govern referrals and financial relationships. A wide array of relationships and arrangements, including ownership interests in a company by persons who refer or who are in a position to refer patients, as well as personal services agreements, have under certain circumstances, been alleged or been found to violate these provisions. The federal and state laws and regulations regarding fraud and abuse are extremely complex, and little judicial or regulatory interpretation exists.

In addition, state and federal governments are devoting increasing attention and resources to anti-fraud initiatives against health care providers. The Health Insurance Portability and Accountability Act of 1996 and the

10

Balanced Budget Act of 1997 expand the penalties for health care fraud, including broader provisions for the exclusion of providers from the Medicare and Medicaid programs. Further, under Operation Restore Trust, a major anti-fraud demonstration project, the Office of Inspector General of the U.S. Department of Health and Human Services, in cooperation with other federal and state agencies, has focused on the activities of skilled nursing facilities in certain states in which we have properties.

These governmental fraud and abuse regulations affect us because findings of violations of these regulations may jeopardize an operator’s ability to operate a facility or to make lease and mortgage payments, thereby potentially adversely affecting us.

Licensing, Certification and Accreditation

Our operators and facilities are subject to regulatory and licensing requirements of federal, state and local authorities. In granting and renewing licenses, regulatory agencies consider, among other things, the physical buildings and equipment, the qualifications of the administrative personnel and nursing staff, the quality of care and the continuing compliance with the laws and regulations relating to the operation of the facilities. In the ordinary course of business, the operators receive notices of deficiencies for failure to comply with various regulatory requirements and take appropriate corrective and preventive actions.

Our facilities are also subject to state licensure statutes and regulations and statutes which may require regulatory approval, in the form of a CON, prior to the addition or construction of new beds, the addition of services or certain capital expenditures. CON requirements are not uniform throughout the United States and are subject to change. Our facilities may not be able to satisfy current and future CON requirements and this could adversely affect our operators and facilities.

Failure to obtain licensure or loss of licensure would prevent a facility from operating. Failure to maintain certification in the Medicare and Medicaid programs would result in a loss of funding from those programs. Although accreditation is generally voluntary, loss of accreditation could result in a facility failing to meet eligibility requirements to participate in various reimbursement programs. These events could adversely affect the facility operator’s ability to meet its obligations to us.

Healthcare Operations are Subject to Litigation Risks and Increasing Insurance Costs

In some states, advocacy groups have been created to monitor the quality of care at skilled nursing facilities, and these groups have brought litigation against operators. Also, in several instances, private litigation by skilled nursing facility patients has succeeded in winning very large damage awards for alleged abuses. The effect of this litigation and potential litigation has been to materially increase the costs of monitoring and reporting quality of care compliance incurred by our tenants. In addition, the cost of liability and medical malpractice insurance has increased and may continue to increase so long as the present litigation environment affecting the operations of skilled nursing facilities continues. Continued cost increases could adversely affect our tenants’ abilities to pay their lease or mortgage payments.

Competition

The healthcare industry is highly competitive and we expect that it may become more competitive in the future. Our operators are competing with numerous other companies providing similar health care services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. In addition, overbuilding in the assisted and independent living market has caused a slow-down in the fill-rate of newly constructed buildings and a reduction in the monthly rate many newly built and previously existing facilities were able to obtain for their services. This resulted in lower revenues for the operators of certain of our facilities. It may also have contributed to the financial difficulties of some of our operators. While we believe that overbuilt markets should reach stabilization in the next couple of

11

years due to minimal new development, we cannot be certain the operators of all of our facilities will be able to achieve occupancy and rate levels that will enable them to meet all of their obligations to us. Our operators may encounter increased competition in the future that could limit their ability to attract residents or expand their businesses and therefore affect their ability to meet their obligations to us.

Legislative Developments

Each year, legislative proposals are introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level. Among the proposals under consideration are cost controls on state Medicaid reimbursements, a “Patient Bill of Rights” to increase the liability of insurance companies as well as the ability of patients to sue in the event of a wrongful denial of claim, a Medicare prescription drug benefit, hospital cost-containment initiatives by public and private payors, uniform electronic data transmission standards for healthcare claims and payment transactions, and higher standards to protect the security and privacy of health-related information. We cannot predict whether any proposals will be adopted or, if adopted, what effect, if any, these proposals would have on our business.

External Sources of Capital

In order to qualify as a REIT under the Internal Revenue Code, we are required, among other things, each year to distribute to our stockholders at least 90% of our REIT taxable income. Because of this distribution requirement, we may not be able to fund all future capital needs, including capital needs in connection with acquisitions, from cash retained from operations. As a result, we rely on other sources of capital, which we may not be able to obtain on favorable terms or at all. Our access to capital depends upon a number of factors, including general market conditions and the market’s perception of our growth potential and our current and potential future earnings and cash distributions and the market price of the shares of our capital stock. Additional debt financing may substantially increase our leverage.

Investment Level

With the exception of 2002, difficult capital market conditions in our industry during the past several years have limited our access to capital. As a result, in recent years other than 2002, the level of our new investments decreased. We currently expect difficult market conditions to prevail during 2003, which will limit our access to capital for the coming year and we are not currently planning any significant additional investments beyond our actual commitments. If the level of our new investments does not increase our ability to increase our revenues could be impacted.

Debt Obligations

We are subject to risks normally associated with debt financing, including the risks that our cash flow will be insufficient to make distributions to our stockholders, that we will be unable to refinance existing indebtedness and that the terms of refinancing will not be as favorable as the terms of existing indebtedness.

If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds from other capital transactions, our cash flow may not be sufficient in all years to pay distributions to our stockholders and to repay all maturing debt. Furthermore, if prevailing interest rates, changes in our debt ratings or other factors at the time of refinancing result in higher interest rates upon refinancing, the interest expense relating to that refinanced indebtedness would increase. This increased interest expense would adversely affect our financial condition and results of operations.

Leverage

Financing for our future investments may be provided by borrowings under our bank line of credit, private or public offerings of debt, the assumption of secured indebtedness, mortgage financing on a portion of our owned portfolio or through joint ventures. Accordingly, we could become more leveraged. The degree of leverage could have important consequences to stockholders, including affecting our ability to obtain additional

12

financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes and making us more vulnerable to a downturn in business or the economy generally.

Stock Price

As with other publicly-traded equity securities, the market price of our common stock will depend upon various market conditions, which may change from time to time. Among the market conditions that may affect the market price of our stock are the following:

• the extent of investor interest;

• the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

• our financial performance and that of our operators;

• the contents of analyst reports about us and the REIT industry; and

• general stock and bond market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions. An increase in the required yield from distributions may adversely affect the market price of our common stock.

Other factors such as governmental regulatory action and changes in REIT tax laws could also have a significant impact on the future market price of our common stock.

Our failure to maintain or increase our dividend could reduce the market price of our common stock. The ability to maintain or raise our dividend is dependent, to a large part, on growth of funds from operations. This growth in turn depends upon increased revenues from additional investments and rental increases.

The market value of the equity securities of a REIT is generally based upon the market’s perception of the REIT’s growth potential and its current and potential future earnings and cash distributions. For that reason, shares of our common stock may trade at prices that are higher or lower than the net asset value per share. Our failure to meet the market’s expectation with regard to future earnings and cash distributions likely would adversely affect the market price of our common stock. Another factor that may influence the price of our common stock will be the distribution yield on our common stock as a percentage of the price of our common stock relative to market interest rates. An increase in market interest rates might lead prospective purchasers of our common stock to expect a higher distribution yield, which would adversely affect the market price of our common stock.

REIT Status

We intend to operate in a manner to qualify as a REIT under the Internal Revenue Code. We believe that we have been organized and have operated in a manner, which would allow us to qualify as a REIT under the Internal Revenue Code. However, it is possible that we have been organized or have operated in a manner that would not allow us to qualify as a REIT, or that our future operations could cause us to fail to qualify. Qualification as a REIT requires us to satisfy numerous requirements established under highly technical and complex Internal Revenue Code provisions. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources, and we must pay dividends to stockholders aggregating at least 90% of our annual REIT taxable income. Legislation, new regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of qualification as a REIT. However, we are not aware of any pending tax legislation that would adversely affect our ability to operate as a REIT.

If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates. Unless we are entitled to relief under statutory provisions, we would be

13

disqualified from treatment as a REIT for the four taxable years following the year during which we lost qualification. If we lose our REIT status, our net earnings available for investment or distribution to stockholders would be significantly reduced for each of the years involved. In addition, we would no longer be required to make distributions to stockholders.

Our Acquisitions May be Unsuccessful

Our business strategy contemplates future acquisitions. The acquisitions we make may not prove to be successful. We might encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities. Further, newly acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. We might never realize the anticipated benefits of any acquisition. In order to finance future acquisitions, we might issue equity securities or incur additional debt, or both, which may reduce our per share financial results.

With respect to certain acquired properties, we enter into development funding arrangements requiring us to provide the funding to enable healthcare operators to build, expand or renovate facilities on our properties. If the developer or contractor fails to complete the project under the terms of the development agreement, we could be forced to become involved in the development to ensure completion or we could lose the property.

Key Personnel

We depend on the efforts of our executive officers, particularly Mr. R. Bruce Andrews, Mr. Mark L. Desmond and Mr. Donald D. Bradley. While we believe that we could find suitable replacements for these key personnel, the loss of their services or the limitation of their availability could have an adverse impact on our operations. Although we have entered into employment and security agreements with these executive officers, these agreements may not assure their continued service.

Environmental Matters

Under various laws, owners of real estate may be required to investigate and clean up hazardous substances present at a property, and may be held liable for property damage or personal injuries that result from environmental contamination. These laws also expose us to the possibility that we become liable to reimburse the government for damages and costs it incurs in connection with the contamination. We review environmental surveys of the facilities we own prior to their purchase. Based upon those surveys we do not believe that any of our properties are subject to material environmental contamination. However, environmental liabilities may be present in our properties and we may incur costs to remediate contamination that could have a material adverse effect on our business or financial condition.

Change of Control Provisions

Our charter and bylaws contain provisions that may delay, defer or prevent a change in control or other transactions that could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price for our common stock.

In order to protect us against the risk of losing our REIT status for federal income tax purposes, our charter prohibits the ownership by any single person of more than 9.9% of the issued and outstanding shares of our voting stock. We can redeem shares acquired or held in excess of the ownership limit. In addition, any acquisition of our common stock or preferred stock that would result in our disqualification as a REIT is null and void. The ownership limit may have the effect of delaying, deferring or preventing a change in control and, therefore, could adversely affect our stockholders’ ability to realize a premium over the then-prevailing market price for the shares of our common stock in connection with a stock transaction. The Board of Directors has increased the ownership limit applicable to our voting stock to 20% with respect to Cohen & Steers Capital Management, Inc. As of December 31, 2002, Cohen & Steers Capital Management, Inc. owned 14% of our common stock.

14

Our charter authorizes us to issue additional shares of common stock and one or more series of preferred stock and to establish the preferences, rights and other terms of any series of preferred stock that we issue. Although our Board of Directors has no intention to do so at the present time, it could establish a series of preferred stock that could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

Our charter also contains other provisions that may delay, defer or prevent a transaction, including a change in control, that might involve payment of a premium price for our common stock or otherwise be in the best interests of our stockholders. Those provisions include the following:

• in certain circumstances, a proposed consolidation, merger, share exchange or transfer must be approved by two-thirds of the votes of our preferred stockholders entitled to be cast on the matter;

• the requirement that any business combination be approved by 90% of the outstanding shares unless the transaction receives a unanimous vote or a consent of the Board of Directors or is a combination solely with a wholly-owned subsidiary; and

• the Board of Directors is classified into three groups whereby each group of Directors is elected for successive terms ending at the annual meeting of stockholders the third year after election.

These provisions may impede various actions by stockholders without approval of our Board of Directors, which in turn may delay, defer or prevent a transaction involving a change of control.

Item 2.    Properties.

See Item 1 for details.

Item 3.    Legal Proceedings.

There are various legal proceedings pending to which we are a party or to which some of our properties are subject arising in the normal course of business. We do not believe that the ultimate resolution of these proceedings will have a material adverse effect on our consolidated financial position or results of operations.

Item 4.    Submission of Matters to a Vote of Security Holders.

None.

15

PART II

Item 5.    Market for the Company’s Common Equity and Related Stockholder Matters.

Our common stock is listed on the New York Stock Exchange. It has been our policy to declare quarterly dividends to holders of our common stock in order to comply with applicable sections of the Internal Revenue Code governing real estate investment trusts. Set forth below are the high and low sales prices of our common stock from January 1, 2001 to December 31, 2002 as reported by the New York Stock Exchange and the cash dividends per share paid with respect to such periods. Future dividends will be declared and paid at the discretion of our Board and will depend upon cash generated by operating activities, our financial condition, relevant financing instruments, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board deems relevant, however, we currently expect to pay comparable cash dividends in the future.

	High		Low		Dividend
2002
First quarter	$	20.38	$	18.40	$	0.46
Second quarter		22.80		17.10		0.46
Third quarter		19.15		14.90		0.46
Fourth quarter		17.85		14.64		0.46
2001
First quarter	$	16.80	$	12.81	$	0.46
Second quarter		20.20		16.08		0.46
Third quarter		20.29		16.33		0.46
Fourth quarter		20.95		18.36		0.46

As of February 28, 2003 there were approximately 900 holders of record of our common stock.

Equity compensation plan information is incorporated herein by reference to the information under the caption “Equity Compensation Plan Information” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 29, 2003, filed or to be filed pursuant to Regulation 14A.

16

Item 6.    Selected Financial Data.

The following table presents our selected financial data. Certain of this financial data has been derived from our audited financial statements included elsewhere in this Annual Report on Form 10-K and should be read in conjunction with those financial statements and accompanying notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Years ended December 31,
	2002			2001			2000			1999			1998
	(In thousands, except per share data)
Operating Data:
Revenues	$	156,461		$	163,249		$	167,637		$	157,845		$	136,441
Income from continuing operations		44,357			60,630			68,601			67,715			62,883
Gain (loss) on sale of facilities		—			11,245			1,149			(335	)		2,321
Discontinued operations		(7,803	)		(3,537	)		1,412			3,433			4,544
Net income		36,554			68,338			71,162			70,813			69,748
Preferred stock dividends		(7,677	)		(7,677	)		(7,677	)		(7,677	)		(7,677	)
Income available to common stockholders		28,877			60,661			63,485			63,136			62,071
Dividends paid on common stock		90,585			87,093			85,889			83,480			75,128
Per Share Data:
Basic/diluted income from continuing operations available to common stockholders		0.75			1.13			1.32			1.30			1.24
Basic/diluted income available to common stockholders		0.59			1.30			1.37			1.37			1.39
Dividends paid on common stock		1.84			1.84			1.84			1.80			1.68
Balance Sheet Data:
Investments in real estate, net	$	1,345,195		$	1,228,987		$	1,333,026		$	1,372,064		$	1,316,685
Total assets		1,409,933			1,289,838			1,381,007			1,430,056			1,357,303
Borrowings under unsecured revolving credit facility		107,000			35,000			79,000			75,300			42,000
Senior notes due 2003-2038		614,750			564,750			627,900			657,900			545,150
Convertible debentures		—			—			—			—			57,431
Notes and bonds payable		111,303			91,590			62,857			64,048			64,623
Stockholders’ equity		529,140			555,312			563,472			585,590			605,558
Other Data:
Net cash provided by operating activities	$	85,664		$	83,187		$	99,940		$	94,659		$	106,067
Net cash provided by (used in) investing activities		(147,626	)		75,721			11,258			(89,753	)		(282,968	)
Net cash provided by (used in) financing activities		61,287			(155,995	)		(121,188	)		(4,949	)		182,891
Diluted weighted average shares outstanding		48,869			46,836			46,228			46,216			44,645
Reconciliation of Funds from Operations (1):
Income available to common stockholders	$	28,877		$	60,661		$	63,485		$	63,136		$	62,071
Depreciation and amortization		36,859			33,157			35,077			33,555			26,377
Depreciation and amortization in discontinued operations		963			2,713			2,219			2,576			1,599
Depreciation and amortization in income from unconsolidated joint venture		486			—			—			—			—
Depreciation and amortization in joint venture discontinued operations		7			—			—			—			—
Impairment of assets		12,472			7,223			—			—			5,000
Impairment of assets in discontinued operations		10,828			3,972			—			—			—
(Gain) loss on sale of facilities		—			(11,245	)		(1,149	)		335			(2,321	)
Gain on sale of facilities in discontinued operations		(2,603	)		—			—			—			—
Funds from operations available to common stockholders	$	87,889		$	96,481		$	99,632		$	99,602		$	92,726

(1) We believe that funds from operations is an important supplemental measure of operating performance. We therefore disclose funds from operations, although it is a measurement that is not defined by accounting principles generally accepted in the United States. We generally use the National Association of Real Estate Investment Trusts (NAREIT) measure of funds from operations. We define funds from operations as income before extraordinary items adjusted for certain non-cash items, primarily real estate depreciation, less gains/losses on sales of facilities. Our measure may not be comparable to similarly titled measures used by other REITs. Consequently, our funds from operations may not provide a meaningful measure of our performance as compared to that of other REITs. Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

17

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

To facilitate your review and understanding of this section of our report and the financial statements that follow, we are providing this overview of what management believes are the most important considerations for understanding our company and its business – the key factors that drive our business and the principal associated risks.

The Company

We are a public equity REIT that invests in senior housing and long-term care properties. As such:

• Passive Investments: Our investments are passive – i.e., we do not operate the properties;

• Investor Flexibility & Liquidity: Investors desiring to invest in this real estate sector can do so with an investment flexibility and liquidity that is not available in most direct investments; and

• No Double Taxation: Our income is not taxed at the corporate level as long as we continue to distribute to our shareholders at least 90% of our taxable income and meet other REIT tax requirements.

Business Purpose

Our long-term corporate goal is clearly defined – to provide shareholders with an increasing dividend from a safe, secure asset base. Our business model for achieving this goal is equally straightforward. We invest passively in geographically diversified senior housing and long-term care properties (primarily, assisted and independent living facilities and skilled nursing facilities). In making these investments, we generally give equal weighting to facility attributes and operator quality, drawing on our extensive management expertise and experience in this real estate sector. We continue to focus on this sector because we continue to believe in its growth potential, as evidenced by the favorable demographics of a rapidly growing elderly population and the corresponding recognized need for additional and improved senior housing and long-term care alternatives.

Operations

We primarily make our investments by acquiring an ownership interest in facilities and leasing them to unaffiliated operators under “triple-net” leases that pass all facility operating costs (insurance, property taxes, utilities, maintenance, capital improvements, etc.) through to the tenant operator. In addition, but intentionally to a much lesser extent because we view the risks of this activity to be greater, we from time to time extend mortgage loans to operators. Currently, about 93% or our revenues are derived from our leases, with the remaining 7% coming from our mortgage loans.

Last Three Years

After a decade of annual increases, our annual dividend has remained at $1.84 per share since 2000. While that is not necessarily negative given the extensive financial difficulties experienced by operators of assisted and independent living facilities and skilled nursing facilities – our core holdings – during that period, which forced many of our competitors focused on the same market sectors to reduce or eliminate their dividend, it is still disappointing to us because it falls short of our long-term corporate goal.

Over the last two years, our “funds from operations” (FFO, which is defined and described in more detail below and, like most REITs, is the key measurement tool that management looks to in running our business) decreased almost 12% primarily due to the developments outlined below. Most of this reduction occurred in 2002 when the full impact of these developments was realized. This in turn has increased our FFO dividend payout (i.e., the percent of our FFO that the dividend represents) from 85% in 2000 to 102% for 2002 (although it had improved to 100% for the third and fourth quarter 2002 dividends per share).

18

We generally use the NAREIT measure of funds from operations. We define funds from operations as income before extraordinary items adjusted for certain non-cash items, primarily real estate depreciation, less gains/losses on sales of facilities. Our measure may not be comparable to similarly titled measures used by other REITs. Consequently, our funds from operations may not provide a meaningful measure of our performance as compared to that of other REITs. Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

• Operator Financial Problems.    The past three years have been very challenging for many of our tenants as they have had to work through, with varying degrees of success, financial problems largely caused by skilled nursing facility and assisted and independent living facility capital market excesses in the late 1990’s and government funding issues. Overly enamored with the sector’s long-term favorable demographics, a wide range of debt and equity investors flooded this market with large sums of readily available capital that led to excessive levels of operator debt and overbuilding in the late 1990’s.

• Skilled Nursing Facilities.    We saw unprecedented debt-financed merger and acquisition activity with the large, publicly traded skilled nursing facility operators at a time when the federal government was changing the structure and amount of its reimbursement program in a way that did not support the debt incurred. This led to a number of bankruptcies of these operators (including five of the seven largest publicly traded skilled nursing facility operators) that depressed this market. This in turn adversely affected us by reducing our FFO as a result of lost revenues from (i) negotiated rent reductions, (ii) lower rentals on re-leased facilities acquired through lease terminations in and out of bankruptcy and (iii) facility closures in a few circumstances, coupled with related bankruptcy and other costs, including substantially increased general and administrative (primarily legal) expenses.

• Assisted and Independent Living Facilities.    In our view, investors became “irrationally exuberant” with the assisted and independent living facility senior housing alternative, especially since unlike skilled nursing facilities, there generally were no requirements to obtain a Certificate of Need (CON) or other significant governmental barriers for the construction of new facilities. Consequently, the enormous growth in supply rapidly exceeded market demand. This resulted in newly constructed facilities incurring substantial losses and being unable to pay their rents as they experienced prolonged low occupancy rates. We were forced either to restructure our leases of these facilities or find new operators, in many cases with rent deferrals or reductions to reflect depressed occupancy levels and market conditions. Our FFO in turn was adversely affected because there were less rental revenues to offset the additional interest expense incurred to finance construction and increased restructuring expenses.

• Beverly Enterprises Portfolio Restructuring.    In connection with the expiration of the initial term of many of our leases with Beverly Enterprises, Inc. (Beverly), effective January 1, 2000, we restructured our entire leased portfolio of skilled nursing facilities operated by them (which accounted for about 10% of our revenues for 1999). These leases were entered into with Beverly in 1985 through 1987 after we were formed to invest primarily in Beverly’s facilities. The leases contained some provisions not found in our leases today, including the ability of Beverly to selectively renew the leases by “cherry picking” the portfolio. In other words, Beverly was able to enter into new leases with us covering the best performing properties and terminate the leases for about 18 under-performing properties. Given the generally poorer quality of these properties, we in turn were forced to close some of them and re-lease the others for less rent, in several cases to unproven or lower quality operators. Many of these arrangements failed, resulting in further closures and restructurings, and some continue to have problems that may lead to further restructurings (although to a much lesser extent). Our FFO has been adversely impacted by the cumulative effect of this Beverly restructuring.

19

• Capital Redeployment from Mortgage Loan Prepayments and Purchase Option Exercises.    We experienced a substantial increase in mortgage loan prepayments and purchase option exercises, especially in 2000 and 2001. The mortgage prepayments largely resulted from a program we initiated to make our asset base more safe and secure by increasing the relative mix of leased versus mortgaged properties. Unlike leases, in bankruptcy a debtor does not need to determine timely whether to assign, affirm or reject the mortgage in its entirety or to make mortgage payments timely until it makes that determination, but rather can ignore its obligations, challenge the economics of the mortgage and “cram down” terms – including principal amount, interest rate and payment terms – to those reflecting typically distressed market levels. To lower our overall exposure to this scenario, we encouraged prepayments by waiving any prepayment fees. Our FFO was adversely affected by the mortgage loan prepayments and purchase option exercises because we were unable to replace the significant lost revenues from the high yielding leases and loans. Rather, because there were not any desirable new investments available to us at that time (in fact, not until 2002), we instead were forced to re-deploy the capital to fulfill existing construction commitments for new assisted and independent living facilities that were not yet yielding revenue and otherwise pay down our lower-cost debt.

• Restricted Growth.    Because of the factors noted above, we have had no net internal growth in revenues from our existing portfolio over the past three years and have seen our FFO decrease. Similarly, we had virtually no external growth in revenues from acquisitions during 2000 and 2001. In 2002, a number of attractive investment opportunities became available largely as a result of industry-wide restructurings. To supplement our capital sources and take advantage of these opportunities, we formed a joint venture with an institutional investor. By the end of 2002, we had made a total of about $288 million in new investments, $165 million for our own account and $123 million by our joint venture. It was primarily the addition of revenues from these acquisitions that enabled us to cover our $0.46 per share dividend by the end of the third quarter, as noted above.

Focus and Outlook for 2003

Our focus for 2003 is on maintaining our current dividend and endeavoring to increase our FFO to provide greater dividend coverage. In that regard, we are cautiously optimistic about our internal growth prospects for 2003. We believe that the worst of the restructurings is behind us and, accordingly, that the annual rent increases built into our leases should overcome any reasonably foreseeable further restructurings. We expect this modest internal growth to be bolstered by rents received from restructured leases and loans that produced little or no revenue for all or most of 2002. Many of these involve the newly constructed assisted and independent living facilities referred to above that are beginning to see increased occupancies now that further development has substantially moderated. Because maintaining our investment grade rating is of paramount importance to us, we do not desire to increase our debt levels materially until we raise further equity capital. However, in our view equity capital currently is not available at a reasonable price, so we see little potential for external growth for our own account until that changes.

In management’s view, there are two principal near term risks we face in maintaining and then growing our dividend. The first is more serious operator financial problems leading to more extensive restructurings or tenant disruptions than we currently expect. This could be unique to a particular operator – such as if Alterra is unable to emerge from bankruptcy with our leases intact. On the other hand, it could be more industry wide, such as further federal or state governmental reimbursement reductions in the case of our skilled nursing facilities as governments work through their budget deficits, continuing reduced occupancies or slow lease-ups for our assisted and independent living facilities due to general economic and other factors, continuing increases in liability, workers compensation and other insurance premiums and other expenses. The second principal near term risk is a continued depressed stock price that inhibits our ability to grow externally by taking advantage of what we expect will be the availability of a number of attractive investments in the near term.

20

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact our most critical accounting policies. We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. We believe the following are our most critical accounting policies.

Revenue Recognition

Our rental revenue is accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 13 Accounting for Leases (SFAS No. 13) and SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB No.101) among other authoritative pronouncements. These pronouncements require us to account for the rental income on a straight-line basis unless a more appropriate method exists. We believe that the method most reflective of the use of a healthcare facility is the straight-line method. Straight-line accounting requires us to calculate the total fixed rent to be paid over the life of the lease and recognize that revenue evenly over that life. In a situation where a lease calls for fixed rental increases during the life of a lease or there is a period of free rent at the beginning of a lease, rental income recorded in the early years of a lease is higher than the actual cash rent received which creates an asset on the balance sheet called deferred rent receivable. At some point during the lease, depending on the rent levels and terms, this reverses and the cash rent payments received during the later years of the lease are higher than the rental income recognized, which reduces the deferred rent receivable balance to zero by the end of the lease. The majority of our leases do not contain fixed increases or provide for free or reduced rent at the beginning of the lease term. However, certain leases for facilities we have constructed have free rent for the first three to six months and certain leases we have entered into, primarily with regard to facilities returned to us by certain operators discussed below under the caption “Information Regarding Certain Operators,” have reduced or free rent in the early months of the lease or fixed increases in future years. We record the rent for these facilities on a straight-line basis in accordance with SFAS No. 13. However, we also assess the collectibility of the deferred portion of the rent that is to be collected in a future period in accordance with SAB No. 101. This assessment is based on several factors, including the financial strength of the lessee and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the facility and whether we intend to continue to lease the facility to the current operator, among others. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we provide a reserve against the current rental income as an offset to revenue, and depending on the circumstances, we may provide a reserve against the existing deferred rent balance for the portion, up to its full value, that we estimate will not be recovered. This assessment requires us to determine whether there are factors indicating the future rent payments may not be fully collectible and to estimate the amount of the rent that will not be collected. If our assumptions or estimates regarding a lease change in the future, we may have to record a reserve to reduce or further reduce the rental revenue recognized and/or deferred rent receivable balance.

Additional rents are generally computed as a percentage of facility net patient revenues in excess of base amounts or as a percentage of the increase in the Consumer Price Index. Additional rents are generally calculated and payable monthly or quarterly, and most of our leases contain provisions such that total rent cannot decrease from one year to the next. While the calculations and payments of additional rents contingent upon revenue are generally made on a quarterly basis, SAB No. 101 does not allow for the recognition of such revenue until all possible contingencies have been eliminated. Most of our leases with additional rents contingent upon revenue are structured as quarterly calculations so that all contingencies for revenue recognition have been eliminated at each of our quarterly reporting dates.

21

Depreciation and Useful Lives of Assets

We calculate depreciation on our buildings and improvements using the straight-line method based on estimated useful lives ranging up to 40 years, generally 30 to 40 years. A significant portion of the cost of each property is allocated to building (generally approximately 90%). The allocation of the cost between land and building, and the determination of the useful life of a property, are based on management’s estimates. We calculate depreciation and amortization on equipment and lease costs using the straight-line method based on estimated useful lives of up to five years or the lease term, whichever is appropriate. We review and adjust useful lives periodically. If we do not allocate appropriately between land and building or we incorrectly estimate the useful lives of our assets, our computation of depreciation and amortization will not appropriately reflect the usage of the assets over future periods.

Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with SFAS No. 144 Accounting for the Impairment of Disposal of Long-Lived Assets (SFAS No. 144). Indicators may include the tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by the tenant that they will not renew their lease, a decision to dispose of an asset or changes in the market value of the property, among others. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. If the sum of the undiscounted cash flows is higher than the current net book value, SFAS No. 144 concludes no impairment exists. If the sum of the undiscounted cash flows is lower than the current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair market value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less costs to sell. The above analyses require us to make a determination about whether there are indicators of impairment for individual assets, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of such asset.

Collectibility of Receivables

We evaluate the collectibility of our mortgage and other receivables on a regular basis. We evaluate the collectibility of the receivables based on factors including payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, and current economic conditions, among others. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate will not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that will not be collected. If our assumptions or estimates regarding the collectibility of a receivable change in the future, we may have to record a reserve to reduce or further reduce the carrying value of the receivable.

Impact of New Accounting Pronouncements

In August 2001, SFAS No. 144 was issued. This pronouncement supersedes SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121) and a portion of Accounting Principles Board (APB) Opinion No. 30 Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB No. 30) and became effective for us on January 1, 2002. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 as it relates to assets to be held and used and assets to be sold, but adds provisions for assets to be disposed of other than by sale. It also changes the accounting for the disposal of a segment under APB No. 30 by requiring the operations of any assets with their own identifiable cash flows that are disposed of or held for sale to be removed from income from continuing operations and reported as discontinued operations. Treating such assets as discontinued operations also requires the reclassification of the

22

operations of any such assets for any prior periods presented. The adoption of SFAS No. 144 has not had a material impact on our financial condition or the results of our operations and does not impact net income; however, it has resulted in a caption for discontinued operations being included on our consolidated statements of operations to report the results of operations of assets sold or classified as held for sale during the current period. The prior period statements of operations presented have been reclassified to reflect the results of operations for these same facilities as discontinued operations in the prior periods.

Operating Results

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Rental income decreased $1,616,000, or 1%, in 2002 as compared to 2001. The decrease was primarily due to reserving straight-lined rent on certain facilities discussed below, the disposal of 29 facilities since January 2001 and rent reductions on certain facilities that were returned to us and leased to other operators in 2001 and 2002. The decrease was partially offset by the acquisition of 46 facilities during 2002, the conversion of eight facilities totaling $39,288,000 from mortgage loans receivable to owned real estate properties since January 1, 2001 and rent increases at existing facilities. Interest and other income decreased by $6,359,000, or 31%, in 2002 as compared to 2001. The decrease was primarily due to the payoff at par of mortgage loans receivable totaling approximately $49,712,000 securing ten facilities, the conversion of eight facilities totaling approximately $39,288,000 from mortgage loans receivable to owned real estate properties mentioned above and principal repayment of notes receivable, all since January 1, 2001. Income from unconsolidated joint venture of $1,187,000 represents our 25% share of the income generated by the joint venture and our management fee of 2.5% of the revenues of the unconsolidated joint venture. Please see the caption “Investment in Unconsolidated Joint Venture” below for more information regarding the unconsolidated joint venture.

Interest and amortization of deferred financing costs increased $141,000, or less than 1%, in 2002 as compared to 2001. The increase was primarily due to the issuance of $115,000,000 of fixed rate medium-term notes since January 1, 2001, increases in the balance on our bank line of credit, mortgages totaling $40,000,000 secured by existing buildings since December 2001 and the assumption of a $14,227,000 mortgage note on one facility acquired during the second quarter of 2002. The increase was partially offset by the payoff of $128,150,000 of fixed rate medium-term notes since January 2001 and a reduction in the average interest rates on our bank line of credit. Depreciation and amortization increased $3,702,000, or 11%, in 2002 as compared to 2001. The increase was attributable to increased depreciation on the acquisition of 46 facilities during 2002 and the conversion of eight facilities totaling $49,712,000 from mortgage loans receivable to owned real estate properties since January 1, 2001 offset by the disposal of 29 facilities since January 2001. General and administrative costs increased $393,000, or 5%, in 2002 as compared to 2001 primarily due to approximately $506,000 of expense related to the severance of an executive officer partially offset by a reduction in legal expenses related to the prior bankruptcies of certain operators discussed below under the caption “Information Regarding Certain Operators” and reductions in other general corporate expenses.

During 2002, we became aware of facts and circumstances indicating that certain assets may have become impaired. After analyzing the assets and the facts, we recorded an impairment of assets charge in continuing operations totaling $12,472,000. As a result of lower than expected operating results for the first quarter at the former Balanced Care Corporation (BCC) facilities discussed below under the caption “Information Regarding Certain Operators” and six facilities operated by another operator, we changed our estimate of the recoverability of the deferred rent related to these facilities during 2002. We determined that the most appropriate method of recognizing revenues for these facilities, given the recent operating results, is to record revenues only to the extent cash is actually received. Accordingly, we fully reserved the deferred rent balance outstanding and all related notes receivable outstanding, totaling approximately $8,305,000, as part of the impairment of assets charge in continuing operations. In addition, the impairment of assets charge reported in continuing operations also included a reserve of $4,167,000 against a loan previously made to the operator of a large continuing care retirement community in Florida. The collectibility of that loan became uncertain due to developments at the facility during 2002 that we believed might necessitate a change in operators. During 2002, we entered into an agreement with a new operator to take over the facility effective September 1, 2002.

23

During 2002, we classified ten unoccupied buildings and eight land parcels as assets held for sale. As required by SFAS No. 144, the net book values of these assets have been transferred to assets held for sale and the operations of these assets have been included in discontinued operations for the years ended December 31, 2002, 2001 and 2000. Please see the caption “Impact of New Accounting Pronouncements” above for more information regarding this treatment. The impairment of assets charge in discontinued operations totals $10,828,000 and represents the write-down of 12 of these assets to their individual estimated fair values less costs to sell.

Discontinued operations reflects a loss of $7,803,000 in 2002 versus a loss of $3,537,000 in 2001. The loss in 2002 is primarily due to the impairment of assets charge of $10,828,000 discussed above, partially offset by net gains on the sale of operating assets and assets held for sale during the year of $2,603,000. The income of $422,000 for 2002, excluding the impairment of assets and gains on sale of facilities in discontinued operations, reflects the revenues less the depreciation and amortization and other expenses related to the facilities sold or classified as assets held for sale in 2002. The loss in 2001 is primarily due to an impairment of assets charge of $3,972,000 related to the write down of three skilled nursing facilities to their fair values less costs to sell in 2001 that are now reflected in discontinued operations since the facilities were either sold or classified as assets held for sale during 2002. The income of $435,000 for 2001, excluding the impairment of assets in discontinued operations, reflects the revenues less the depreciation and amortization and other expenses related to the facilities sold or classified as assets held for sale in 2002. The income in discontinued operations, excluding the impairment of assets and gains on sale of facilities, is consistent between the two years as there were no significant changes from 2001 to 2002 in the revenues and expenses related to the facilities sold or classified as assets held for sale in 2002.

We expect to receive increased rent and interest at individual facilities because our leases and mortgages generally contain provisions under which rents or interest income increase with increases in facility revenues and/or increases in the Consumer Price Index. If revenues at our facilities and/or the Consumer Price Index do not increase, our revenues may not continue to increase. Sales of facilities or repayments of mortgage loans receivable would serve to offset revenue increases, and if sales and repayments exceed additional investments this could actually reduce revenues. Our leases could renew below or above the aggregate existing rent level, so the impact of lease renewals may cause a decrease or an increase in the total rent we receive. The exercise of purchase options by tenants would also cause a decrease in the total rent we receive. Additional investments in healthcare facilities would increase rental and/or interest income, however, at this time we do not expect any significant additional investments during the coming year. As additional investments in facilities are made, depreciation and/or interest expense will also increase. We expect any such increases to be at least partially offset by rent or interest income associated with the investments.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Rental income increased $238,000, or less than 1%, in 2001 as compared to 2000. The increase was primarily a result of one development completed during 2001, a full year of revenues earned by investments in additional facilities in 2000, the conversion of three facilities from mortgage loans receivable to owned real estate properties and the reclassification of rental income to discontinued operations related to facilities disposed of or classified as assets held for sale in 2002. The increase was offset by the disposal of 18 facilities during the year, eleven of which were sold in the fourth quarter and a reduction of the rent at certain facilities related to the settlement with certain operators in bankruptcy proceedings as discussed below. Interest and other income decreased by $4,626,000, or 18%, in 2001 as compared to 2000. The decrease was primarily due to the payoff at par of mortgage loans receivable totaling approximately $32,290,000 secured by five facilities, the conversion of three facilities and four land parcels totaling approximately $13,339,000 from mortgage loans receivable to ownership mentioned above and amortization of notes receivable.

Interest and amortization of deferred financing costs decreased $3,545,000, or 6%, in 2001 as compared to 2000. The decrease was primarily due to a reduction in overall debt levels accomplished with the funds received from the facility sales and mortgage loan receivable payoffs discussed above, and decreases in the average interest rates on our $100,000,000 bank line of credit. The decrease was partially offset by a reduction in interest

24

capitalized on construction projects. Depreciation and amortization decreased $1,920,000, or 5%, in 2001 as compared to 2000. The decrease was primarily attributable to the disposal of 18 facilities during the year and the reclassification of depreciation and amortization to discontinued operations related to facilities disposed of or classified as assets held for sale in 2002, partially offset by three facilities converted from mortgage loans receivable to ownership during 2001 and a full year of depreciation related to facilities acquired in 2000. General and administrative costs increased $1,825,000, or 33%, in 2001 as compared to 2000 primarily due to increases in legal fees and other costs related to five operators in bankruptcy discussed below and general cost increases.

During 2001, we recorded an impairment of assets charge of $7,223,000 in continuing operations. This charge included the provision of a reserve against mortgage loans receivable of $1,500,000, the write-off of $1,449,000 of deferred rent related to the facilities returned by BCC discussed below under the caption “Information Regarding Certain Operators” and $4,274,000 of receivable write-offs and reserves against other assets which we believed had become impaired.

We recorded a net gain of $11,245,000 in 2001 related to the disposal of 18 facilities during the year.

Discontinued operations reflected a loss of $3,537,000 in 2001 versus income of $1,412,000 in 2000. The loss in 2001 is primarily due to an impairment of assets charge of $3,972,000 related to the write-down of three skilled nursing facilities to their fair values less costs to sell in 2001 that are now reflected in discontinued operations because the facilities were either sold or classified as assets held for sale during 2002. The income of $435,000 for 2001, excluding the impairment of assets in discontinued operations, reflects the revenues less the depreciation and amortization and other expenses related to the facilities sold or classified as assets held for sale in 2002. The 2000 amount reflects only the revenues less the depreciation and other expenses related to the facilities sold or classified as assets held for sale in 2002. The decrease in income in discontinued operations, excluding the impairment of assets, is due to lower revenues and higher costs related to the facilities sold or classified as assets held for sale in 2002 as some of these facilities were unoccupied in 2001.

Information Regarding Certain Operators

We have now concluded our negotiations with all five of our operators that had filed for protection under the United States bankruptcy laws from 1999 to 2001. These operators included Sun Healthcare Group, Inc. (Sun), Mariner Health Care, Inc. (Mariner), Integrated Health Services, Inc. (Integrated), SV/Home Office Inc. and certain affiliates (SV) and Assisted Living Concepts, Inc. (ALC). Over-leveraging of balance sheets, increased wage and salary costs and changes in reimbursement levels during 1999 had an adverse impact on the financial performance of some of the companies that operate skilled nursing facilities we own. In addition, overbuilding in the assisted and independent living sector resulted in lower than anticipated fill rates and rental rates for some of the companies that operate assisted and independent living facilities owned by us. During 2002, Sun, Mariner and ALC emerged from bankruptcy. In March 2002, the bankruptcy court approved our final settlement with Sun that included its assumption of five leases and rejection of one lease. In April 2002, the bankruptcy court approved Mariner’s Second Amended Joint Plan of Reorganization that resulted in us obtaining ownership of the facility securing our only mortgage loan with Mariner. Also in April 2002, the bankruptcy court approved our final settlement with Integrated that resulted in the assumption by Integrated of the amended leases on five facilities and the rejection of two leases. Over the course of these proceedings, (A) Sun has returned 20 facilities and agreed to a master lease of the remaining five facilities involved in the bankruptcy; (B) Mariner has returned 15 facilities, given us a deed in lieu of foreclosure for a facility that secured a mortgage loan receivable and assumed leases on six facilities; (C) Integrated has returned two facilities and agreed to a master lease of the remaining five facilities; (D) SV has agreed to assume the lease on one facility, return one facility and extend for five years its mortgage secured by one facility and we agreed to allow it to sell a second closed facility that previously secured the mortgage; and (E) ALC assumed the leases on two facilities and transferred title to us and signed leases on two facilities that had previously secured mortgage loans receivable from ALC. As of December 31, 2002, we have leased 35 of the 38 facilities returned to us to new operators, as well as the facility for which we received a deed in lieu of foreclosure, sold three facilities and expect to sell the remaining facility. Subsequent to our final settlement, Sun, in February 2003, announced that it had begun a restructuring of its lease portfolio. Sun has approached many of its landlords, including us, in hopes of obtaining rent

25

moratoriums, rent concessions or lease terminations for certain of its leased facilities. While we cannot predict the final outcome of Sun’s restructuring process, it is possible there may be rent concessions, or, some or all of the five remaining facilities we lease to Sun may be returned to us. We believe we have identified parties interested in leasing any of these facilities that might be returned to us, however, the return of the facilities or rent concessions could result in lower rental rates.

In October 2002, one operator of five of our facilities which were previously leased by Beverly, Alpha Healthcare Foundation, Inc. (Alpha) filed for protection under the United States bankruptcy laws. Under bankruptcy statutes, the tenant must either assume our leases or reject them and return the properties to us. If the tenant assumes the leases, it is required to assume the leases under the existing terms; the court cannot change the rental amount or other lease provisions that could financially impact us. The tenant’s decision whether to assume leases is usually based primarily on whether the properties it operates are providing positive cash flows. To date, Alpha has rejected the lease on one facility that the state it was located in decided to close. This facility was classified as held for sale and written down to its fair value less costs to sell as part of the impairment of assets charge in discontinued operations. Three of the four remaining facilities provide adequate cash flows to cover the rent under the lease, but there is a possibility that the tenant may decide to reject the leases on any or all of these properties. While we believe we have identified parties interested in leasing these facilities, any new leases may be at lower rental rates. All rent due after the filing date has been paid.

In January 2003, Alterra, our largest operator, filed for protection under the United States bankruptcy laws. Alterra operates 59 of our facilities, 52 of which are under a master lease with six other individual leases and one mortgage loan receivable cross-defaulted to it, and all 49 of the facilities owned by our joint venture which are under two master leases. We understand that Alterra has been restructuring out of court for over two years with a goal of going into the final bankruptcy phase with a selected portfolio of properties that for the most part is intended to be the core of its restructured business. Based on discussions we have had with Alterra, we expect that it will continue to pay the rent on and affirm all of our leases. The two master leases in the joint venture, our master lease and six of our seven leases cross-defaulted with our master lease generate sufficient cash flows to cover the rent due under the leases. Alterra has paid all monthly rent to date on a timely basis. If Alterra decides to reject the leases, we believe we could lease the facilities covered by the leases to a new operator at rates substantially consistent with what we currently receive, however, it is possible that any such new leases may be at lower rental rates.

Effective April 1, 2001, we leased ten facilities that had previously been leased by BCC to a new private operator, Senior Services of America, after BCC defaulted on its leases in December 2000. The facilities were constructed and opened during 1999 and 2000 with an aggregate investment of approximately $68,712,000. The BCC leases were terminated effective as of January 1, 2001. During 2001, we recognized revenues on a straight-lined basis related to these buildings in excess of cash received of approximately $5,200,000. As a result of lower than expected operating results in 2002, we fully reserved the deferred rent receivable balance outstanding as discussed above under the caption “Operating Results” and are now recognizing revenue from this lease on a cash basis.

Investment in Unconsolidated Joint Venture

During 2001, we entered into a joint venture with an institutional investor that may invest up to $130,000,000 in health care facilities similar to those already owned by us. We are a 25% equity partner in the venture. The financial statements of the joint venture are not consolidated with our financial statements and our investment is accounted for using the equity method. No investments were made by or into this joint venture prior to 2002.

In 2002, the joint venture acquired 52 assisted living facilities in 12 states for a total cost of approximately $123,200,000 that are leased to Alterra. The joint venture also incurred deferred financing costs of approximately

26

$1,900,000 and is committed to fund an additional $2,000,000 of capital improvements. The acquisitions were financed with secured non-recourse debt of approximately $60,860,000, a capital contribution from our joint venture partner of approximately $49,100,000 and a capital contribution from us of approximately $16,400,000. In October 2002, the joint venture sold three facilities for $2,100,000, or approximately their book value. We do not expect to make any additional contributions to the joint venture related to the facilities it acquired during 2002.

Liquidity and Capital Resources

During 2002, we acquired 34 skilled nursing facilities, eleven assisted and independent living facilities and one continuing care retirement community in six separate transactions for an aggregate investment of approximately $165,428,000, including the assumption of approximately $14,227,000 of secured debt on one facility. Additionally, we funded approximately $13,870,000 in capital improvements at certain facilities in accordance with certain existing lease provisions. Such capital improvements generally result in an increase in the minimum rents earned by us on these facilities. The acquisitions and capital improvements were funded by the issuance of $100,000,000 of fixed rate medium-term notes, borrowings on our bank line of credit and cash on hand.

During 2002, we sold eleven buildings and one land parcel in twelve separate transactions for aggregate cash proceeds of approximately $14,359,000. We also recorded receivables totaling approximately $2,000,000 related to three of these sales. We provided a mortgage loan with a net amount of $6,409,000 related to the sale of one of the skilled nursing facilities. Three buildings were written down to their estimated fair value less costs to sell during 2001 and two buildings and the land parcel were written down during 2002. The sale of these buildings resulted in an aggregate gain of $2,603,000 that is included in discontinued operations on the consolidated statement of operations. The proceeds from the sales were used to repay borrowings on our bank line of credit.

During 2002, one mortgage loan receivable with an aggregate net book value of approximately $3,815,000 secured by one skilled nursing facility and one continuing care retirement community was prepaid in full. In addition, portions of three mortgage loans receivable totaling $13,607,000 secured by two skilled nursing facilities, one assisted and independent living facility and one continuing care retirement community were also prepaid at par. The proceeds from the repayments were used to repay borrowings on our bank line of credit.

During 2002, we repaid $50,000,000 in aggregate principal amount of medium-term notes. The notes bore fixed interest at a weighted average interest rate of 7.35%. We funded the repayments with borrowings on our bank line of credit, cash on hand and the issuance of $100,000,000 in aggregate principal amount of medium-term notes that bear interest at a fixed rate of 8.25% and mature on July 1, 2012. We have $66,000,000 of medium-term notes maturing in the second and third quarters of 2003. In addition, $40,000,000 of medium-term notes with a rate of 6.59% due in 2038 may be put back to us at their face amounts at the option of the holders on July 7, 2003 and $41,500,000 of medium-term notes with a rate of 7.6% due in 2028 may be put back to us at their face amounts at the option of the holders on November 20, 2003. While we do not expect these notes will be put back to us because the holders’ next put opportunity is in five years and we believe the current interest coupon on these notes exceeds the rate at which we believe we could currently issue 5-year notes, the holders may elect to do so. We anticipate repaying the medium-term notes maturing and any that are put back to us with a combination of additional medium-term notes under the shelf registration statements discussed below, borrowings on our bank line of credit, cash on hand, potential mortgage loans receivable payoffs and asset sales, the potential issuance of common stock or cash from operations. Our medium-term notes have been investment grade rated since 1994. Our current ratings are Baa3 from Moody’s, BBB- from Standard & Poor’s and BBB from Fitch.

During 2002, we issued 1,000,000 shares of common stock to Cohen & Steers Quality Income Realty Fund, Inc. and 869,565 shares of common stock to a unit investment trust sponsored by Salomon Smith Barney. The shares were sold based on the market closing price of our stock of $19.58 on February 25, 2002 and resulted in net proceeds of approximately $34,609,000 after underwriting, legal and other fees of approximately $1,997,000. The proceeds received were used to repay borrowings on our bank line of credit.

27

During 2002, we arranged for a new $150,000,000 unsecured revolving credit facility, maturing November 7, 2005, that replaced our previous $100,000,000 bank line of credit. At December 31, 2002, we had $43,000,000 available under our $150,000,000 unsecured bank line of credit. At our option, borrowings under the bank line of credit bear interest at prime or at LIBOR plus 1.2%. We pay a facility fee of 0.3% per annum on the total commitment under the bank line of credit. Under covenants contained in the credit agreement, we are required to maintain, among other things: (i) a minimum net asset value of $500,000,000; (ii) a ratio of total indebtedness to capitalization value of not more than 60%; (iii) an interest coverage ratio of at least 2.5 to 1.0; (iv) a fixed charge coverage ratio of at least 1.75 to 1.0; (v) a secured indebtedness ratio of not more than 15%; (vi) an unsecured interest coverage ratio of at least 2.5 to 1.0; (vii) floating rate debt of no more than 25% of total debt; (viii) an unencumbered asset value ratio of no more than 60%; and (ix) a minimum rent/mortgage interest coverage ratio of at least 1.25 to 1.0. As of December 31, 2002, we were in compliance with all of the above covenants.

During 2002, we obtained $10,000,000 of mortgage financing for one year at a floating rate of not less than 7.25% secured by two assisted living facilities. We used the proceeds to repay borrowings on our bank line of credit.

At December 31, 2002, we have shelf registration statements on file with the SEC under which we may issue (a) up to $316,000,000 in aggregate principal amount of medium-term notes and (b) up to $123,640,000 of securities including debt, convertible debt, common and preferred stock.

We did not utilize any off-balance sheet financing arrangements or have any unconsolidated subsidiaries prior to the second quarter of 2002. The only off-balance sheet financing arrangement that we currently use is the unconsolidated joint venture discussed above under the caption “Investment in Unconsolidated Joint Venture.”

As of December 31, 2002, our contractual obligations are as follows:

	2003		2004 - 2005		2006 - 2007		Thereafter		Total
	(In thousands)
Contractual Obligations:
Long Term Debt	$	78,167	$	210,105	$	152,722	$	392,059	$	833,053
Commitments:
Capital Expenditures	$	25,000	$	4,000		—		—	$	29,000

We do not anticipate making any significant acquisitions of healthcare related facilities or significant additional investments beyond our actual commitments during 2003 as access to equity capital is not currently available under favorable terms as discussed in more detail under the caption “Overview” above. The level of our new investments has been depressed during the prior four years, although we did make significant acquisitions during 2002. Financing for future investments may be provided by borrowings under our bank line of credit, private placements or public offerings of debt or equity, the assumption of secured indebtedness, obtaining mortgage financing on a portion of our owned portfolio or through joint ventures. We anticipate the potential repayment of certain mortgage loans receivable and the possible sale of certain facilities during 2003. In the event that there are mortgage loan receivable repayments or facility sales in excess of new investments, revenues may decrease. We anticipate using the proceeds from any mortgage loans receivable repayments or facility sales to reduce the outstanding balance on our bank line of credit, to repay other borrowings as they mature or to provide capital for future investments. Any such reduction in debt levels would result in reduced interest expense that we believe would partially offset any decrease in revenues. We believe we have sufficient liquidity and financing capability to finance anticipated future investments, maintain our current dividend level and repay borrowings at or prior to their maturity, for at least the next twelve months.

28

Statement Regarding Forward Looking Disclosure

Certain information contained in this report includes forward-looking statements. Forward looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. These statements may be identified, without limitation, by the use of forward looking terminology such as “may”, “will”, “anticipates”, “expects”, “believes”, “intends”, “should” or comparable terms or the negative thereof. All forward-looking statements included in this report are based on information available to us on the date hereof. Such statements speak only as of the date hereof and we assume no obligation to update such forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include (without limitation) the following:

• the effect of economic and market conditions and changes in interest rates;

• the general distress of the healthcare industry;

• government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs;

• continued deterioration of the operating results or financial condition, including bankruptcies, of our tenants;

• our ability to attract new operators for certain facilities;

• occupancy levels at certain facilities;

• the ability of our operators to repay deferred rent or loans in future periods;

• our ability to sell certain facilities for their book value;

• the amount and yield of any additional investments;

• changes in tax laws and regulations affecting real estate investment trusts;

• access to the capital markets and the cost of capital;

• changes in the ratings of our debt securities;

• and the risk factors set forth under the caption “Risk Factors” in Item 1.

Item 7a.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks related to fluctuations in interest rates on our mortgage loans receivable and debt. We do not utilize interest rate swaps, forward or option contracts on foreign currencies or commodities, or other types of derivative financial instruments. The purpose of the following analyses is to provide a framework to understand our sensitivity to hypothetical changes in interest rates as of December 31, 2002. Readers are cautioned that many of the statements contained in these paragraphs are forward looking and should be read in conjunction with our disclosures under the heading “Statement Regarding Forward Looking Disclosure” set forth above.

We provide mortgage loans to operators of healthcare facilities as part of our normal operations. The majority of the loans have fixed rates. Three of our mortgage loans have adjustable rates; however, the rates adjust only once or twice over the term of the loans and the minimum adjusted rates are equal to the then current rates. Therefore, all mortgage loans receivable are treated as fixed rate notes in the table and analysis below.

We utilize debt financing primarily for the purpose of making additional investments in healthcare facilities. Historically, we have made short-term borrowings on our variable rate bank line of credit to fund our acquisitions until market conditions were appropriate, based on management’s judgment, to issue stock or fixed rate debt to provide long-term financing.

29

A portion of our secured debt is variable rate debt in the form of housing revenue bonds that were assumed in connection with the acquisition of certain healthcare facilities. Pursuant to the associated lease arrangements, increases or decreases in the interest rates on the housing revenue bonds would be substantially offset by increases or decreases in the rent received by us on the properties securing this debt. Therefore, there is substantially no market risk associated with this variable rate secured debt.

We have $10,000,000 of secured debt at a floating rate with a floor of 7.25% that has been at the floor since it was issued in 2002. We do not believe there is any significant market risk related to this debt as it matures in 2003.

For fixed rate debt, changes in interest rates generally affect the fair market value, but do not impact earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value, but do affect the future earnings and cash flows. We generally cannot prepay fixed rate debt prior to maturity. Therefore, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until we would be required to refinance such debt. Holding the variable rate debt balance constant, and including the bank borrowings as variable rate debt due to its nature, each one percentage point increase in interest rates would result in an increase in interest expense for the coming year of approximately $1,290,000.

The table below details the principal amounts and the average interest rates for the mortgage loans receivable and debt for each category based on the final maturity dates. Certain of the mortgage loans receivable and certain items in the various categories of debt require periodic principal payments prior to the final maturity date. The fair value estimates for the mortgage loans receivable are based on the estimates of management and on rates currently prevailing for comparable loans. The fair market value estimates for debt securities are based on discounting future cash flows utilizing current rates offered to us for debt of a similar type and remaining maturity.

	Maturity Date
	2003			2004			2005			2006			2007			Thereafter			Total			Fair Value
	(Dollars in thousands)
Assets
Mortgage loans receivable	$	2,658			—		$	4,882		$	14,206		$	17,909		$	59,637		$	99,292		$	99,146
Average interest rate		10.88	%		—			11.91	%		10.56	%		10.73	%		10.02	%		10.36	%
Liabilities
Debt
Fixed rate	$	66,000		$	67,750		$	32,019		$	63,500		$	85,000		$	389,816		$	704,085		$	700,135
Average interest rate		7.49	%		9.08	%		8.20	%		7.42	%		7.40	%		7.62	%		7.73	%
Variable rate	$	10,000			—			—			—					$	11,968		$	21,968		$	21,968
Average interest rate		7.25	%		—			—			—						1.77	%		4.26	%
Bank borrowings		—			—		$	107,000			—						—		$	107,000		$	107,000
Average interest rate		—			—			2.89	%		—						—			2.89	%

Decreases in interest rates during 2002 resulted in a decrease in interest expense related to our bank line of credit. These interest rate decreases have made it less expensive for us to borrow on our bank line of credit. Any future interest rate increases will increase the cost of borrowings on our bank line of credit and any borrowings to refinance long-term debt as it matures or finance future acquisitions.

30

Item 8.    Financial Statements and Supplementary Data.

Report of Independent Auditors	32
Consolidated Balance Sheets	33
Consolidated Statements of Operations	34
Consolidated Statements of Stockholders’ Equity	35
Consolidated Statements of Cash Flows	36
Notes to Consolidated Financial Statements	37

31

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of

    Nationwide Health Properties, Inc.:

We have audited the accompanying consolidated balance sheets of Nationwide Health Properties, Inc. as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule beginning on page 56. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nationwide Health Properties, Inc. as of December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/    ERNST & YOUNG LLP

Irvine, California

January 24, 2003

32

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2002			2001
	(In thousands)
A S S E T S
Investments in real estate
Real estate properties:
Land	$	154,563		$	144,869
Buildings and improvements		1,299,625			1,150,780
		1,454,188			1,295,649
Less accumulated depreciation		(224,400	)		(207,136	)
		1,229,788			1,088,513
Mortgage loans receivable, net		99,292			140,474
Investment in unconsolidated joint venture		16,115			—
		1,345,195			1,228,987
Cash and cash equivalents		8,387			9,062
Receivables		4,429			9,274
Assets held for sale		9,682			—
Other assets		42,240			42,515
	$	1,409,933		$	1,289,838
L I A B I L I T I E S  A N D  S T O C K H O L D E R S ’  E Q U I T Y
Borrowings under unsecured revolving credit facility	$	107,000		$	35,000
Senior notes due 2003-2038		614,750			564,750
Notes and bonds payable		111,303			91,590
Accounts payable and accrued liabilities		47,740			43,186
Commitments and contingencies
Stockholders’ equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized; issued and outstanding: 1,000,000 as of December 31, 2002 and 2001; stated at liquidation preference of $100 per share		100,000			100,000
Common stock $0.10 par value; 100,000,000 shares authorized; issued and outstanding: 49,160,216 and 47,240,651 as of December 31, 2002 and 2001, respectively		4,916			4,724
Capital in excess of par value		610,173			574,829
Cumulative net income		680,511			643,957
Cumulative dividends		(866,460	)		(768,198	)
Total stockholders’ equity		529,140			555,312
	$	1,409,933		$	1,289,838

See accompanying notes.

33

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Years ended December 31,
	2002			2001			2000
Revenues:
Rental income	$	141,020		$	142,636		$	142,398
Interest and other income		14,254			20,613			25,239
Income from unconsolidated joint venture		1,187			—			—
		156,461			163,249			167,637
Expenses:
Interest and amortization of deferred financing costs		54,987			54,846			58,391
Depreciation and amortization		36,859			33,157			35,077
General and administrative		7,786			7,393			5,568
Impairment of assets		12,472			7,223			—
		112,104			102,619			99,036
Income from continuing operations		44,357			60,630			68,601
Gain on sale of facilities		—			11,245			1,149
Discontinued operations		(7,803	)		(3,537	)		1,412
Net income		36,554			68,338			71,162
Preferred stock dividends		(7,677	)		(7,677	)		(7,677	)
Income available to common stockholders	$	28,877		$	60,661		$	63,485
Per share amounts:
Basic/diluted income from continuing operations available to common stockholders	$	0.75		$	1.13		$	1.32
Basic/diluted income available to common stockholders	$	0.59		$	1.30		$	1.37
Diluted weighted average shares outstanding		48,869			46,836			46,228

See accompanying notes.

34

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Preferred Stock			Common stock			Capital in excess of par value		Cumulative net income		Cumulative dividends			Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balances at December 31, 1999	1,000	$	100,000	46,216	$	4,622	$	556,373	$	504,457	$	(579,862	)	$	585,590
Issuance of common stock	—		—	10		1		225		—		—			226
Stock option amortization	—		—	—		—		60		—		—			60
Net income	—		—	—		—		—		71,162		—			71,162
Preferred dividends	—		—	—		—		—		—		(7,677	)		(7,677	)
Common dividends	—		—	—		—		—		—		(85,889	)		(85,889	)
Balances at December 31, 2000	1,000		100,000	46,226		4,623		556,658		575,619		(673,428	)		563,472
Issuance of common stock	—		—	1,015		101		18,083		—		—			18,184
Stock option amortization	—		—	—		—		88		—		—			88
Net income	—		—	—		—		—		68,338		—			68,338
Preferred dividends	—		—	—		—		—		—		(7,677	)		(7,677	)
Common dividends	—		—	—		—		—		—		(87,093	)		(87,093	)
Balances at December 31, 2001	1,000		100,000	47,241		4,724		574,829		643,957		(768,198	)		555,312
Issuance of common stock	—		—	1,919		192		35,196		—		—			35,388
Stock option amortization	—		—	—		—		148		—		—			148
Net income	—		—	—		—		—		36,554		—			36,554
Preferred dividends	—		—	—		—		—		—		(7,677	)		(7,677	)
Common dividends	—		—	—		—		—		—		(90,585	)		(90,585	)
Balances at December 31, 2002	1,000	$	100,000	49,160	$	4,916	$	610,173	$	680,511	$	(866,460	)	$	529,140

See accompanying notes.

35

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years ended December 31,
	2002			2001			2000
Cash flows from operating activities:
Net income	$	36,554		$	68,338		$	71,162
Depreciation and amortization		36,859			33,157			35,077
Depreciation and amortization in discontinued operations		963			2,713			2,219
Gain on sale of facilities		—			(11,245	)		(1,149	)
Gain on sale of facilities in discontinued operations		(2,603	)		—			—
Impairment of assets		12,472			7,223			—
Impairment of assets in discontinued operations		10,828			3,972			—
Amortization of deferred financing costs		1,031			952			1,011
Net change in other assets and liabilities		(10,440	)		(21,923	)		(8,380	)
Net cash provided by operating activities		85,664			83,187			99,940
Cash flows from investing activities:
Investment in real estate facilities		(165,071	)		(7,412	)		(20,843	)
Disposition of real estate facilities		14,359			50,831			21,004
Investment in unconsolidated joint venture		(16,375	)		—			—
Investment in mortgage loans receivable		—			(2,261	)		(2,929	)
Principal payments on mortgage loans receivable		19,461			34,563			14,026
Net cash provided by (used in) investing activities		(147,626	)		75,721			11,258
Cash flows from financing activities:
Borrowings under unsecured revolving credit facility		300,500			209,300			180,800
Repayment of borrowings under unsecured revolving credit facility		(228,500	)		(253,300	)		(177,100	)
Issuance of senior unsecured debt		100,000			15,000			—
Repayments of senior unsecured debt		(50,000	)		(78,150	)		(30,000
Issuance of notes and bonds payable		10,000			30,000			—
Principal payments on notes and bonds payable		(4,704	)		(1,262	)		(1,082	)
Issuance of common stock, net		35,194			18,034			—
Dividends paid		(98,262	)		(94,770	)		(93,566	)
Other, net		(2,941	)		(847	)		(240	)
Net cash provided by (used in) financing activities		61,287			(155,995	)		(121,188	)
Increase (decrease) in cash and cash equivalents		(675	)		2,913			(9,990	)
Cash and cash equivalents, beginning of period		9,062			6,149			16,139
Cash and cash equivalents, end of period	$	8,387		$	9,062		$	6,149
Supplemental schedule of cash flow information:
Cash interest paid	$	50,235		$	55,149		$	57,995

See accompanying notes.

36

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2002, 2001 and 2000

1.    Organization

Nationwide Health Properties, Inc. was incorporated on October 14, 1985 in the State of Maryland. Whenever we refer herein to “the Company” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. We operate as a real estate investment trust specializing in investments in health care related senior housing and long-term care properties and, as of December 31, 2002, had investments in 387 health care facilities. At December 31, 2002, we owned 158 skilled nursing facilities, 132 assisted and independent living facilities, 11 continuing care retirement communities, one rehabilitation hospital, one long-term acute care hospital and five buildings held for sale. We also held 24 mortgage loans secured by 25 skilled nursing facilities, four assisted and independent living facilities and one continuing care retirement community. We have a 25% interest in a joint venture that owns 49 assisted living facilities. We have no foreign facilities or operations.

2.    Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its investment in its majority owned and controlled joint ventures. All material intercompany accounts and transactions have been eliminated. Certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by Statement of Financial Accounting Standards (SFAS) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).

Land, Buildings and Improvements

We record properties at cost and use the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years, generally 30 to 40 years. We review and adjust facility useful lives periodically. We evaluate our properties for potential impairment in accordance with SFAS No. 144 by comparing our net book values to the expected future cash flows from the properties.

Cash and Cash Equivalents

Cash in excess of daily requirements is invested in money market mutual funds, commercial paper and repurchase agreements with original maturities of three months or less. Such investments are deemed to be cash equivalents for purposes of presentation in the financial statements.

Federal Income Taxes

We believe we have operated in such a manner as to qualify as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. We intend to continue to qualify as such and therefore to distribute at least 90% of our real estate investment trust taxable income to our stockholders. If we qualify for taxation as a REIT, we will generally not be subject to federal income taxes on our income that is distributed to stockholders. Therefore, no provision for federal income taxes has been made in our financial statements.

Revenue Recognition

Rental income from operating leases is accrued as earned over the life of the lease agreements in accordance with accounting principles generally accepted in the United States. The majority of our leases do not contain step

37

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

rent provisions. Interest income on real estate mortgages is recognized using the effective interest method based upon the expected payments over the lives of the mortgages. Additional rent and additional interest, included in the captions “Rental income” and “Interest and other income,” respectively, are generally computed as a percentage of facility net patient revenues in excess of base amounts or as a percentage of the increase in the Consumer Price Index. Additional rent and interest are generally calculated and payable monthly or quarterly, and the majority of our leases contain provisions such that total rent cannot decrease from one year to the next. While the calculations and payments are generally made on a quarterly basis, SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB No. 101) does not allow for the recognition of such revenue until all possible contingencies have been eliminated. Most of our leases with additional rents contingent upon revenue are structured as quarterly calculations so that all contingencies for revenue recognition have been eliminated at each of our quarterly reporting dates.

We have historically deferred the payment of rent for the first few months on leases for certain buildings we have constructed. These deferred amounts are repaid over the remainder of the lease term. During 2001, we began, in certain instances, to provide similar terms for leases on buildings that we have taken or received back from certain operators. Although the payment of cash rent is deferred, rental income is recorded on a straight-line basis over the life of the lease. We evaluate the collectibility of the deferred rent balances on an ongoing basis and provide reserves against receivables that may not be fully recoverable. We currently have reserves against 50% of our deferred rent balance. We recognized approximately $2,400,000, $7,200,000, and $700,000 of revenues in excess of cash rent received during 2002, 2001 and 2000, respectively and there is approximately $8,979,000 and $12,700,000 of deferred rent, net of reserves, recorded under the caption “Other assets” on the balance sheet at December 31, 2002 and 2001, respectively. The ultimate amount of deferred rent we realize could be less than amounts recorded. For more detail regarding deferred rent impairments and reserves, see Note 15 below.

Accounting for Stock-Based Compensation

In 1999, we adopted the accounting provisions of SFAS No. 123 Accounting for Stock-Based Compensation (SFAS No. 123). SFAS No. 123 established a fair value based method of accounting for stock-based compensation. Accounting for stock-based compensation under SFAS No. 123 causes the fair value of stock options granted to be amortized into expense over the vesting period of the stock and causes any dividend equivalents earned to be treated as dividends for financial reporting purposes.

Capitalization of Interest

We capitalize interest on facilities under construction. The capitalization rates used are based on rates for our senior unsecured notes and bank line of credit, as applicable. Capitalized interest in 2002, 2001 and 2000 was $554,000, $613,000, and $1,245,000 respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

38

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents approximates fair value because of the short maturities of these instruments. The fair values of mortgage loans receivable are based upon the estimates of management and on rates currently prevailing for comparable loans, and approximates the carrying amount. The fair value of long-term debt is estimated based on discounting future cash flows utilizing current rates offered to us for debt of a similar type and remaining maturity, and approximates the carrying amount.

Impact of New Accounting Pronouncements

In August 2001, SFAS No. 144 was issued. This pronouncement supersedes SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121) and a portion of Accounting Principles Board (APB) Opinion No. 30 Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB No. 30) and became effective for us on January 1, 2002. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 as it relates to assets to be held and used and assets to be sold, but adds provisions for assets to be disposed of other than by sale. It also changes the accounting for the disposal of a segment under APB No. 30 by requiring the operations, including any depreciation in the period, of any assets with their own identifiable cash flows that are disposed of or held for sale to be removed from income from continuing operations and reported as discontinued operations. Treating such assets as discontinued operations also requires the reclassification of the operations, including any depreciation, of any such assets for any prior periods presented. The adoption of SFAS No. 144 has not had a material impact on our financial condition or the results of our operations and does not impact net income; however, it has resulted in a caption for discontinued operations being included on our consolidated statements of operations to report the results of operations of assets sold or classified as held for sale during the current period. The prior period statements of operations presented have been reclassified to reflect the results of operations for these same facilities as discontinued operations.

3.    Earnings Per Share (EPS)

Basic EPS is computed by dividing income from continuing operations available to common stockholders by the weighted average common shares outstanding. Income from continuing operations available to common stockholders is calculated by deducting dividends declared on preferred stock from income from continuing operations. Diluted EPS includes the effect of any potential shares outstanding, which for us is only comprised of dilutive stock options. The calculation below excludes 307,000, 361,500 and 404,000 of stock options with option prices that would not be dilutive in 2002, 2001 and 2000, respectively. The table below details the components of the basic and diluted EPS from continuing operations available to common stockholders calculations:

	Years Ended December 31,
	2002				2001				2000
	Income			Shares	Income			Shares	Income			Shares
	(Amounts in thousands)
Income from continuing operations	$	44,357			$	60,630			$	68,601
Less: preferred stock dividends		(7,677	)			(7,677	)			(7,677	)
Amounts used to calculate Basic EPS		36,680		48,829		52,953		46,793		60,924		46,226
Effect of dilutive securities:
Stock options		—		40		—		43		—		2
Amounts used to calculate Diluted EPS	$	36,680		48,869	$	52,953		46,836	$	60,924		46,228

39

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

4.    Real Estate Properties

Substantially all of our owned facilities are leased under “triple-net” leases which are accounted for as operating leases. The leases generally have initial terms ranging from five to 21 years, and generally have two or more multiple-year renewal options. Approximately 79% of our facilities are leased under master leases. In addition, the majority of our leases contain cross-collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. Leases covering 250 facilities are backed by security deposits consisting of irrevocable letters of credit or cash, most of which cover from three to six months, of initial monthly minimum rents. Under the terms of the leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

Future minimum rentals on non-cancelable leases as of December 31, 2002 are as follows:

Year	Rentals	Year	Rentals
	(In thousands)		(In thousands)
2003	$155,134	2009	$122,162
2004	154,579	2010	113,311
2005	143,112	2011	103,895
2006	135,410	2012	87,965
2007	129,074	Thereafter	406,979
2008	123,268

During 2002, we acquired 34 skilled nursing facilities, eleven assisted and independent living facilities and one continuing care retirement community for an aggregate investment of approximately $165,428,000, including the assumption of approximately $14,227,000 of secured debt on one facility. We also funded approximately $13,870,000 in capital improvements at a number of facilities in accordance with existing lease provisions. Such capital improvements generally result in an increase in the minimum rents earned by us on these facilities. At December 31, 2002, we have committed to fund additional capital improvements of approximately $29,000,000.

During 2001, we completed the construction of one assisted and independent living facility in which our aggregate investment was approximately $10,438,000. Upon completion of construction, the facility was leased under terms generally similar to our existing leases. During this period, we also funded approximately $6,270,000 in capital improvements at a number of facilities in accordance with existing lease provisions. Such capital improvements generally result in an increase in the minimum rents we earn on these facilities.

During 2002, we sold six buildings in six separate transactions for aggregate cash proceeds of approximately $10,061,000. One of these buildings was written down to its fair value less costs to sell during 2001. We also recorded receivables totaling approximately $1,650,000 related to two of these sales for which no gain was recorded. We provided a mortgage loan with a net amount of $6,409,000 related to the sale of one skilled nursing facility for which no gain was recorded. The sale of these buildings resulted in an aggregate gain of approximately $3,050,000 that is included in discontinued operations on the consolidated statement of operations. In addition, we acquired title to two skilled nursing facilities, two assisted and independent living facilities and one continuing care retirement community for which we previously had provided mortgage loans receivable having an aggregate mortgage balance of $29,146,000.

During 2001, we sold 15 skilled nursing facilities, our final two residential care facilities for the elderly and one assisted and independent living facility in 12 separate transactions for aggregate cash proceeds of approximately $50,831,000. We recognized an aggregate gain of $11,245,000 related to the disposal of these

40

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

facilities. We provided the mortgage financing for one of the skilled nursing facilities we sold in the amount of $642,000. In addition, we acquired title to three skilled nursing facilities and four land parcels for which we previously had provided mortgage loans receivable having an aggregate mortgage balance of $13,339,000.

The following table lists our real estate properties as of December 31, 2002:

Facility Location	Number of Facilities	Land		Buildings and Improvements		Total Investment		Accumulated Depreciation		Notes and Bonds Payable
	(Dollar amounts in thousands)
Assisted and Independent Living Facilities:
Alabama	2	$	1,681	$	4,272	$	5,953	$	713	$	—
Arizona	2		1,024		6,844		7,868		1,183		—
Arkansas	1		182		1,968		2,150		258		—
California	13		15,105		64,473		79,578		13,792		39,624
Colorado	7		5,815		70,839		76,654		6,224		—
Delaware	1		345		4,956		5,301		465		—
Florida	20		13,498		83,169		96,667		9,539		—
Idaho	1		544		11,282		11,826		1,831		—
Indiana	1		805		3,861		4,666		451		—
Kansas	4		1,885		11,672		13,557		1,569		—
Kentucky	1		110		2,672		2,782		334		—
Louisiana	1		831		6,554		7,385		519		—
Maryland	1		533		4,715		5,248		389		—
Massachusetts	1		1,758		9,249		11,007		1,034		—
Michigan	1		300		7,006		7,306		1,562		—
Nevada	2		1,219		12,397		13,616		1,641		6,330
New Jersey	2		1,757		5,858		7,615		369		—
New York	1		6,000		15,426		21,426		254		14,019
North Carolina	5		2,048		11,980		14,028		503		—
Ohio	11		3,623		35,492		39,115		4,401		—
Oklahoma	3		745		7,526		8,271		1,695		—
Oregon	6		2,077		26,797		28,874		5,294		8,548
Pennsylvania	4		2,260		27,705		29,965		2,451		—
Rhode Island	3		2,877		27,363		30,240		2,020		—
South Carolina	7		2,402		22,508		24,910		1,460		—
Tennessee	5		2,664		22,652		25,316		2,307		—
Texas	17		7,561		70,375		77,936		8,373		—
Virginia	2		1,651		11,323		12,974		759		—
Washington	4		1,840		20,994		22,834		3,078		—
West Virginia	1		705		5,472		6,177		425		—
Wisconsin	2		4,843		24,218		29,061		3,372		17,832
Subtotals	132		88,688		641,618		730,306		78,265		86,353

41

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

Facility Location	Number of Facilities	Land		Buildings and Improvements		Total Investment		Accumulated Depreciation		Notes and Bonds Payable
	(Dollar amounts in thousands)
Skilled Nursing Facilities:
Arizona	1	$	650	$	2,890	$	3,540	$	1,099	$	—
Arkansas	8		2,505		32,407		34,912		4,819		2,100
California	6		5,846		13,279		19,125		4,327		—
Connecticut	3		560		11,520		12,080		1,322		—
Florida	6		2,462		17,855		20,317		6,509		—
Georgia	1		562		3,780		4,342		462		—
Idaho	1		15		777		792		311		—
Illinois	2		157		5,392		5,549		2,052		—
Indiana	7		752		26,583		27,335		9,999		—
Kansas	9		772		13,156		13,928		3,777		—
Maryland	5		2,315		27,759		30,074		10,015		—
Massachusetts	14		6,088		70,284		76,372		13,579		—
Minnesota	3		1,783		18,026		19,809		6,644		—
Mississippi	1		750		3,717		4,467		443		—
Missouri	1		51		2,689		2,740		1,307		—
Nevada	1		740		3,294		4,034		927		—
North Carolina	1		116		2,244		2,360		1,090		—
Ohio	5		1,233		26,373		27,606		10,279		—
Oklahoma	3		98		3,841		3,939		1,942		—
Tennessee	5		1,878		16,631		18,509		3,311		—
Texas	59		9,679		126,288		135,967		17,838		—
Virginia	4		1,036		17,532		18,568		8,518		—
Washington	5		2,315		23,093		25,408		4,458		—
Wisconsin	7		865		12,009		12,874		5,689		—
Subtotals	158		43,228		481,419		524,647		120,717		2,100
Continuing Care Retirement Communities:
Arizona	1		1,980		8,351		10,331		101
California	1		1,600		10,827		12,427		2,237		—
Colorado	1		400		2,715		3,115		792		—
Florida	1		1,300		17,317		18,617		617
Georgia	1		723		10,769		11,492		1,103		—
Kansas	1		687		12,517		13,204		1,878		2,300
Massachusetts	1		1,351		12,941		14,292		1,692		—
Tennessee	1		174		3,004		3,178		175		—
Texas	1		1,848		29,022		30,870		3,864		—
Wisconsin	2		11,067		53,571		64,638		8,315		20,550
Subtotals	11		21,130		161,034		182,164		20,774		22,850
Rehabilitation Hospitals:
Arizona	1		1,275		9,435		10,710		2,487		—

42

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

Facility Location	Number of Facilities	Land		Buildings and Improvements		Total Investment		Accumulated Depreciation		Notes and Bonds Payable
	(Dollar amounts in thousands)
Long-Term Acute Care Hospitals:
Arizona	1		242		6,119		6,361		2,157		—
Total Facilities	303	$	154,563	$	1,299,625	$	1,454,188	$	224,400	$	111,303

We have now concluded our negotiations with all five of our operators that had filed for protection under the United States bankruptcy laws from 1999 to 2001. These operators included Sun Healthcare Group, Inc. (Sun), Mariner Health Care, Inc. (Mariner), Integrated Health Services, Inc. (Integrated), SV/Home Office Inc. and certain affiliates (SV) and Assisted Living Concepts, Inc. (ALC). During 2002, Sun, Mariner and ALC emerged from bankruptcy. In March 2002, the bankruptcy court approved our final settlement with Sun that included its assumption of five leases and rejection of one lease. In April 2002, the bankruptcy court approved Mariner’s Second Amended Joint Plan of Reorganization that resulted in us obtaining ownership of the facility securing our only mortgage loan with Mariner. Also in April 2002, the bankruptcy court approved our final settlement with Integrated that resulted in the assumption by Integrated of the amended leases on five facilities and the rejection of two leases. Over the course of these proceedings, (A) Sun has returned 20 facilities and agreed to a master lease of the remaining five facilities involved in the bankruptcy; (B) Mariner has returned 15 facilities, given us a deed in lieu of foreclosure for a facility that secured a mortgage loan receivable and assumed leases on six facilities; (C) Integrated has returned two facilities and agreed to a master lease of the remaining five facilities; (D) SV has agreed to assume the lease on one facility, return one facility and extend for five years its mortgage secured by one facility and we agreed to allow it to sell a second closed facility that previously secured the mortgage; and (E) ALC assumed the leases on two facilities and transferred title to us and signed leases on two facilities that had previously secured mortgages loans receivable from ALC. As of December 31, 2002, we have leased 35 of the 38 facilities returned to us to new operators, as well as the facility for which we received a deed in lieu of foreclosure, sold three facilities and expect to sell the remaining facility. Subsequent to our final settlement, Sun, in February 2003, announced that it had begun a restructuring of its lease portfolio. Sun has approached many of its landlords, including us, in hopes of obtaining rent moratoriums, rent concessions or lease terminations for certain of its leased facilities. While we cannot predict the final outcome of Sun’s restructuring process, it is possible there may be rent concessions, or, some or all of the five remaining facilities we lease to Sun may be returned to us. We believe we have identified parties interested in leasing any of these facilities that might be returned to us, however, the return of the facilities or rent concessions could result in lower rental rates.

In October 2002, one operator of five of our facilities which were previously leased by Beverly Enterprises, Inc., Alpha Healthcare Foundation, Inc. (Alpha) filed for protection under the United States bankruptcy laws. Under bankruptcy statutes, the tenant must either assume our leases or reject them and return the properties to us. If the tenant assumes the leases, it is required to assume the leases under the existing terms; the court cannot change the rental amount or other lease provisions that could financially impact us. The tenant’s decision whether to assume leases is usually based primarily on whether the properties it operates are providing positive cash flows. To date, Alpha has rejected the lease on one facility that the state it was located in decided to close. This facility was classified as held for sale and written down to its fair value less costs to sell as part of the impairment of assets charge in discontinued operations. Three of the four remaining facilities provide adequate cash flows to cover the rent under the lease, but there is a possibility that the tenant may decide to reject the leases on any or all of these properties. While we believe we have identified parties interested in leasing these facilities, any new leases may be at lower rental rates. All rent due after the filing date has been paid.

43

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

In January 2003, Alterra Healthcare Corporation (Alterra), our largest operator, filed for protection under the United States bankruptcy laws. Alterra operates 59 of our facilities, 52 of which are under a master lease with six other individual leases and one mortgage loan receivable cross-defaulted to it, and all 49 of the facilities owned by our joint venture which are under two master leases. We understand that Alterra has been restructuring out of court for over two years with a goal of going into the final bankruptcy phase with a selected portfolio of properties that for the most part is intended to be the core of its restructured business. Based on discussions we have had with Alterra, we expect that it will continue to pay the rent on and affirm all of our leases. The two master leases in the joint venture, our master lease and six of our seven leases cross-defaulted with our master lease generate sufficient cash flows to cover the rent due under the leases. Alterra has paid all monthly rent to date on a timely basis. If Alterra decides to reject the leases, we believe we could lease the facilities covered by the leases to a new operator at rates substantially consistent with what we currently receive, however, it is possible that any such new leases may be at lower rental rates.

In 2001, we leased ten facilities that had previously been leased by Balanced Care Corporation (BCC) to a new private operator, Senior Services of America, after BCC defaulted on its leases in December 2000. The facilities were constructed and opened during 1999 and 2000 with an aggregate investment of approximately $68,712,000. During 2001, we recognized revenues on a straight-lined basis related to these buildings in excess of cash received of approximately $5,200,000. As a result of lower than expected operating results in 2002, we fully reserved this deferred rent receivable balance and are now recognizing revenue from this lease on a cash basis. For more detail regarding the reserve, please see Note 15 below.

5.    Mortgage Loans Receivable

During 2002, we financed the sale of one skilled nursing facility with a mortgage loan with a net amount of $6,409,000. Also during 2002, one mortgage loan receivable with a net book value of approximately $3,815,000 secured by one skilled nursing facility and one continuing care retirement community was prepaid in full. In addition, portions of three mortgage loans receivable totaling $13,607,000 secured by two skilled nursing facilities, one assisted and independent living facility and one continuing care retirement community were also prepaid at par. During 2002, we acquired title to two skilled nursing facilities, two assisted living facilities and one continuing care retirement community having an aggregate mortgage balance of $29,146,000.

At December 31, 2002, we held 24 mortgage loans receivable secured by 25 skilled nursing facilities, four assisted and independent living facilities and one continuing care retirement community. The mortgage loans receivable have an aggregate principal balance of approximately $101,232,000 and are reflected in our consolidated balance sheets net of an aggregate discount totaling approximately $1,940,000. The principal balances of mortgage loans receivable as of December 31, 2002 mature as follows:

Year	Maturities	Year	Maturities
2003	$6,476,000	2006	$14,913,000
2004	1,449,000	2007	19,106,000
2005	4,640,000	Thereafter	54,648,000

44

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

The following table lists our mortgage loans receivable at December 31, 2002:

Location of Facilities	Number of Facilities	Interest Rate		Final Maturity Date	Estimated Balloon Payment(1)		Original Face Amount of Mortgages		Carrying Amount of Mortgages
	(Dollar amounts in thousands)
Assisted and Independent Living Facilities:
Florida	1	10.31	%	08/03	$	—	$	7,230	$	124
Massachusetts	1	9.52	%	06/23		8,500		8,500		8,500
North Carolina	1	10.44	%	05/07		2,950		2,950		2,950
Washington	1	9.95	%	12/15		6,432		6,557		6,557
Subtotals	4					17,882		25,237		18,131
Skilled Nursing Facilities:
Arkansas	3	10.00	%	12/06		4,946		5,500		5,103
Florida	—	11.55	%	07/03		—		4,400		141
Florida	1	11.85	%	07/06		4,400		4,400		4,400
Florida	1	10.00	%	12/06		4,850		4,850		4,704
Florida	1	10.00	%	12/03		1,408		1,430		1,327
Florida	1	10.65	%	11/07		6,913		7,051		6,409
Illinois	1	9.00	%	01/24		—		9,500		8,646
Illinois	1	12.00	%	12/03		1,000		1,000		1,000
Indiana	1	11.55	%	07/03		—		785		66
Louisiana	1	10.89	%	04/15		2,407		3,850		3,669
Massachusetts	1	8.75	%	02/24		4,474		9,000		8,252
Michigan	2	14.24	%	01/05		2,506		3,000		2,509
Michigan	1	9.00	%	01/05		1,222		1,800		1,353
Missouri	2	11.95	%	08/11		5,623		17,250		5,623
Oregon	1	10.00	%	01/05		—		642		466
South Dakota	1	11.15	%	05/05		—		4,275		341
Tennessee	1	10.89	%	01/07		8,550		8,550		8,550
Washington	4	11.00	%	10/19		—		6,000		5,406
Wisconsin	1	11.15	%	05/05		—		1,350		213
Subtotals	25					48,299		94,633		68,178
Continuing Care Retirement Communities:
Oklahoma	1	9.55	%	03/31		2,250		14,200		12,983
Total	30				$	68,431	$	134,070	$	99,292

(1) Most mortgage loans receivable require monthly principal and interest payments at level amounts over life to maturity. Some mortgage loans receivable have interest rates which periodically adjust, but cannot decrease, which results in varying principal and interest payments over life to maturity, in which case the balloon payments reflected are an estimate. Five of the mortgage loans receivable have decreasing principal and interest payments over the life of the loans. Most mortgage loans receivable require a prepayment penalty based on a percentage of principal outstanding or a penalty based upon a calculation maintaining the yield we would have earned if prepayment had not occurred. Six mortgage loans receivable do not allow prepayments.

45

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

The following table summarizes the changes in mortgage loans receivable during 2002, 2001 and 2000:

	2002			2001			2000
	(In thousands)
Balance at January 1,	$	140,474		$	185,623		$	203,362
New mortgage loans		6,409			2,903			8,746
Accretion of discount on loans		1,016			1,350			1,801
Reclassification of loans to leases		(29,146	)		(13,339	)		(14,260	)
Collection of principal		(19,461	)		(34,563	)		(14,026	)
Mortgage loan reserve		—			(1,500	)		—
Balance at December 31,	$	99,292		$	140,474		$	185,623

6.    Investment in Unconsolidated Joint Venture

During 2001, we entered into a joint venture with an institutional investor that may invest up to $130,000,000 in health care facilities similar to those already owned by us. We are a 25% equity partner in the venture. The financial statements of the joint venture are not consolidated with our financial statements and our investment is accounted for using the equity method. No investments were made by or into this joint venture prior to 2002.

In 2002, the joint venture acquired 52 assisted living facilities in 12 states for a total cost of approximately $123,200,000 that are leased to Alterra. The joint venture also incurred deferred financing costs of approximately $1,900,000 and is committed to fund an additional $2,000,000 of capital improvements. The acquisitions were financed with secured non-recourse debt of approximately $60,860,000, capital contributions from our joint venture partner of approximately $49,100,000 and capital contributions from us of approximately $16,400,000. In October 2002, the joint venture sold three facilities for $2,100,000, or approximately their book value. We do not expect to make any additional contributions to the joint venture related to the facilities it acquired during 2002.

In addition to our 25% share of the income from the joint venture, we receive a management fee of 2.5% of the joint venture revenues. This fee is included in our income from unconsolidated joint venture and in the general and administrative expenses below on the joint venture’s income statement.

46

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

The balance sheet and income statement for the joint venture below present its financial position as of December 31, 2002 and its results of operations for the year then ended in thousands.

BALANCE SHEET

A S S E T S
Real estate:
Land	$	13,410
Buildings and improvements		107,720
		121,130
Less accumulated depreciation		(1,944	)
		119,186
Cash and cash equivalents		8,312
Other assets		1,697
	$	129,195
L I A B I L I T I E S  A N D  E Q U I T Y
Notes and bonds payable	$	60,831
Accounts payable and accrued liabilities		3,904
Equity:
Capital contributions		65,501
Distributions		(4,900	)
Cumulative net income		3,859
Total equity		64,460
	$	129,195

INCOME STATEMENT

Rental income	$	8,777
Expenses:
Interest and amortization of deferred financing costs		2,732
Depreciation and amortization		1,944
General and administrative		350
		5,026
Income from continuing operations		3,751
Discontinued operations		108
Net income	$	3,859

47

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

7.    Assets Held for Sale

During 2002, we classified ten unoccupied buildings and eight land parcels as assets held for sale. As required by SFAS No. 144, the net book values of these assets have been transferred to assets held for sale and the operations of these assets have been included in discontinued operations for the years ended December 31, 2002, 2001 and 2000. The impairment of assets charge in discontinued operations totals $10,828,000 and represents the write-down of 12 of these assets to their individual estimated fair values less costs to sell. During 2002, we sold five buildings and one land parcel in six separate transactions for net proceeds of approximately $4,298,000. Two of these buildings were written down to their estimated fair value less costs to sell during 2001 and two buildings and the land parcel were written down during 2002. These sales resulted in a net loss of approximately $447,000 that is included in discontinued operations on our consolidated statement of operations.

8.    Borrowings Under Senior Unsecured Revolving Credit Facility

During 2002, we entered into a new $150,000,000 unsecured credit agreement with certain banks that matures on November 7, 2005. This facility replaced our previous $100,000,000 bank line of credit. At our option, borrowings under the agreement bear interest at prime (4.25% at December 31, 2002) or LIBOR plus 1.2% (2.64% at December 31, 2002). We pay a facility fee of 0.3% per annum on the total commitment under the agreement.

Under covenants contained in the credit agreement, we are required to maintain, among other things: (i) a minimum net asset value of $500,000,000; (ii) a ratio of total indebtedness to capitalization value of not more than 60%; (iii) an interest coverage ratio of at least 2.5 to 1.0; (iv) a fixed charge coverage ratio of at least 1.75 to 1.0; (v) a secured indebtedness ratio of not more than 15%; (vi) an unsecured interest coverage ratio of at least 2.5 to 1.0; (vii) floating rate debt of no more than 25% of total debt; (viii) an unencumbered asset value ratio of no more than 60%; and (ix) a minimum rent/mortgage interest coverage ratio of at least 1.25 to 1.0. As of December 31, 2002, we were in compliance with all of the above covenants.

9.    Notes and Bonds Payable

Notes and bonds payable are due through the year 2035, at interest rates ranging from 1.6% to 10.5% and are secured by real estate properties with an aggregate net book value as of December 31, 2002 of approximately $139,673,000. During 2002, we obtained $10,000,000 of mortgage financing. The mortgage is secured by two assisted living facilities and has a term of one year at a floating rate of not less than 7.25%. In addition, we assumed mortgage financing of approximately $14,227,000 upon the acquisition of one assisted living facility. The principal balances of the notes and bonds payable as of December 31, 2002 mature as follows:

Year	Maturities		Year	Maturities
2003	$	12,167,000	2006	$	2,039,000
2004		2,201,000	2007		2,183,000
2005		15,154,000	Thereafter		77,559,000

48

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

10.    Senior Unsecured Notes Due 2003-2038

During 2002, we repaid $50,000,000 in aggregate principal amount of medium-term notes and issued $100,000,000 in aggregate principal amount of medium-term notes. The aggregate principal amount of Senior Notes outstanding at December 31, 2002 was $614,750,000. The weighted average interest rate on the Senior Notes was 7.78% and the weighted average maturity was 10.8 years. The principal balances of the Senior Notes as of December 31, 2002 mature as follows:

Year	Maturities		Year	Maturities
2003	$	66,000,000	2006	$	63,500,000
2004		67,750,000	2007		85,000,000
2005		18,000,000	Thereafter		314,500,000

There are $55,000,000 of medium-term notes due in 2037 which may be put back to us at their face amount at the option of the holder on October 1st of any of the following years: 2004, 2007, 2009, 2012, 2017, or 2027. There are $41,500,000 of medium-term notes due in 2028 which may be put back to us at their face amount at the option of the holder on November 20th of any of the following years: 2003, 2008, 2013, 2018, or 2023. There are $40,000,000 of medium-term notes due in 2038 which may be put back to us at their face amount at the option of the holder on July 7th of any of the following years: 2003, 2008, 2013, 2018, 2023, or 2028.

11.    Preferred Stock

During 1997, we sold 1,000,000 shares of 7.677% Series A Cumulative Preferred Step-Up REIT securities (Preferred Stock) with a liquidation preference of $100 per share. Dividends on the Preferred Stock are cumulative from the date of original issue and are payable quarterly in arrears, commencing December 31, 1997 at the rate of 7.677% per annum of the liquidation preference per share (equivalent to $7.677 per annum per share) through September 30, 2012 and at a rate of 9.677% of the liquidation preference per annum per share (equivalent to $9.677 per annum per share) thereafter. The Preferred Stock is not redeemable prior to September 30, 2007. On or after September 30, 2007, the Preferred Stock may be redeemed for cash at our option, in whole or in part, at a redemption price of $100 per share, plus accrued and unpaid dividends, if any, thereon.

12.    Stock Incentive Plan

Under the terms of a stock incentive plan (the Plan), we have reserved for issuance 1,600,000 shares of common stock. Under the Plan, as amended, we may issue stock options, restricted stock, dividend equivalents and stock appreciation rights. We began accounting for the Plan under SFAS No. 123 during 1999 for options granted in 1999 and thereafter. Prior to 1999, we accounted for the Plan under APB Opinion No. 25 Accounting for Stock Issued to Employees. As the options vest over three years and we adopted SFAS No. 123 during 1999, the pro forma affect was fully amortized at the end of 2000. Had compensation cost for the Plan been determined consistent with SFAS No. 123 for the years prior to 1999, our income available to common stockholders and per share amounts in 2000 would have been the following on a pro forma basis:

	2000
Income available to common stockholders:
As reported	$63,485,000
Pro forma	63,387,000
Basic/diluted income available to common stockholders per share:
As reported	$             1.37
Pro forma	1.37

49

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

A summary of the status of the Plan at December 31, 2002, 2001 and 2000 and changes during the years then ended are as follows:

	2002			2001			2000
	Shares		Weighted Average Exercise Price	Shares		Weighted Average Exercise Price	Shares		Weighted Average Exercise Price
Options:
Outstanding at beginning of year	609,000		$19.37	529,000		$20.62	404,000		$22.53
Granted	140,000		19.64	135,000		14.98	125,000		14.38
Exercised	(40,000	)	14.63	(4,167	)	14.38	—		—
Forfeited	(84,500	)	21.95	(50,833	)	21.20	—		—
Expired	—		—	—		—	—		—
Outstanding at end of year	624,500		19.38	609,000		19.37	529,000		20.62
Exercisable at end of year	394,500		$20.54	361,500		$21.92	287,334		$22.72
Weighted average fair value of options granted	$1.70			$0.60			$0.45
Restricted Stock:
Outstanding at beginning of year	28,000			26,000			53,000
Awarded	10,000			10,000			10,000
Vested	(14,000	)		(8,000	)		(37,000	)
Forfeited	—			—			—
Outstanding at end of year	24,000			28,000			26,000
Weighted average fair value of restricted stock awarded	$19.60			$14.88			$14.38

Stock options granted under the Plan become exercisable each year following the date of grant in annual increments of one-third and are exercisable at the market price of our common stock on the date of grant. Options at December 31, 2002 have a weighted average contractual life of 6 years. The exercise prices of the options range from $14.38 to $26.19.

The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions:

	2002	2001	2000
Risk free rate of return	4.9%	5.15%	6.79%
Dividend yield	9.37%	12.30%	12.52%
Option term	10	10	10
Volatility	28.84%	27.21%	22.21%

Expense recorded in 2002, 2001 and 2000 related to stock options was approximately $148,000, $88,000 and $60,000, respectively.

50

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

The restricted stock awards are granted at no cost. Restricted stock awards vest at the third anniversary of the award date with respect to non-employee directors and at the fifth anniversary with respect to officers and employees. Subsequent to 1995, only non-employee directors receive restricted stock awards, and the remaining restricted stock issued to officers and employees fully vested in 2000. The restricted stock awards are amortized over their respective vesting periods. Expense is determined based upon the market value at the date of award of the restricted stock and is recognized over the vesting period. Expense recorded in 2002, 2001 and 2000 related to restricted stock awards was approximately $194,000, $150,000 and $226,000, respectively.

Awards of dividend equivalents accompany the stock option grants beginning in 1996 on a one-for-one basis. Such dividend equivalents are payable in cash until such time as the corresponding stock option is exercised, based upon a formula approved by the Compensation Committee of the Board of Directors. That formula depends on our performance measured for a minimum of a three-year period and up to a five-year period by total return to stockholders (increase in stock price and dividends paid) compared to peer companies and other select financial measures compared to peer companies, in each case as selected by the Compensation Committee. SFAS No. 123 provides that payments related to the dividend equivalents are treated as dividends.

No stock appreciation rights have been issued under the Plan.

51

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

13.    Pension Plan

During 1991, we adopted an unfunded benefit pension plan covering the current non-employee members of our Board of Directors upon completion of five years of service on the Board. The benefits, limited to the number of years of service on the Board, are based upon the then current annual retainer in effect.

The following tables set forth the amounts recognized in our financial statements:

	2002			2001
Change in projected benefit obligations:
Benefit obligation at beginning of year	$	1,084,000		$	965,000
Service cost		61,000			52,000
Interest cost		73,000			70,000
Actuarial loss		32,000			71,000
Benefits paid		(75,000	)		(74,000	)
Benefit obligation at end of year	$	1,175,000		$	1,084,000

	2002			2001
Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		75,000			74,000
Benefits paid		(75,000	)		(74,000	)
Fair value of plan assets at end of year	$	—		$	—
Reconciliation of funded status:
Benefit obligation at end of year	$	(1,175,000	)	$	(1,084,000	)
Fair value of plan assets at end of year		—			—
Funded status at end of year		(1,175,000	)		(1,084,000	)
Unrecognized net actuarial (gain) loss		16,000			(16,000	)
Accrued benefit cost	$	(1,159,000	)	$	(1,100,000	)
Net periodic pension cost:
Service cost	$	61,000		$	52,000
Interest cost		73,000			70,000
Amortization of prior service cost		—			19,000
Net periodic pension cost	$	134,000		$	141,000

Discount rates of 6.5% and 7.0% in 2002 and 2001, respectively, and a 5.0% increase in the annual retainer every other year, were used in the calculation of the amounts above.

14.    Transactions with Significant Lessees

As of December 31, 2002, 58 of our owned facilities are leased to and operated by subsidiaries of Alterra. Additionally, Alterra is the borrower on one of our mortgage loans. Revenues from Alterra were approximately $21,709,000, $19,430,000 and $19,148,000 for the years ended December 31, 2002, 2001 and 2000, respectively. In addition, all 49 of the facilities owned by our joint venture are leased to Alterra. For more detail about the joint venture, see Note 6 above.

52

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

As of December 31, 2002, 16 of our owned facilities are leased to and operated by American Retirement Corporations (ARC). Revenues from ARC were approximately $15,122,000, $12,594,000 and $12,530,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

15.    Impairment of Assets

During 2002, we became aware of facts and circumstances indicating that certain assets may have become impaired. After analyzing the assets and the facts, we recorded an impairment of assets charge in continuing operations totaling $12,472,000. As a result of lower than expected operating results at the former BCC facilities and six facilities operated by another operator, we changed our estimate of the recoverability of the deferred rent related to these facilities during 2002. We determined that the most appropriate method of recognizing revenues for these facilities, given the recent operating results, is to record revenues only to the extent cash is actually received. Accordingly, we fully reserved the deferred rent balance outstanding and all related notes receivable outstanding, totaling approximately $8,305,000, as part of the impairment of assets charge in continuing operations. In addition, the impairment of assets charge reported in continuing operations also included a reserve of $4,167,000 against a loan previously made to the operator of a large continuing care retirement community in Florida. The collectibility of that loan became uncertain due to developments at the facility during 2002 that we believed might necessitate a change in operators. During 2002, we entered into an agreement with a new operator to take over the facility effective September 1, 2002, the effective date of our taking title to the building.

During 2002, we classified ten unoccupied buildings and eight land parcels as assets held for sale. We recorded an impairment of assets charge included in discontinued operations of $10,828,000 related to the write-down of 12 of these assets to their individual estimated fair values less costs to sell. See Note 7 for additional information regarding these assets.

During 2001, we became aware of facts and circumstances indicating that certain assets had become impaired. After analyzing these assets, we recorded an impairment of assets charge totaling $11,195,000. Included in this amount is $3,972,000 for the write-down of three skilled nursing facilities to their fair values less costs to sell that is reported in discontinued operations because the facilities were either sold or classified as held for sale during 2002. The impairment of assets charge in continuing operations totaling $7,223,000 included the provision of a reserve against mortgage loans receivable of $1,500,000, the write-off of $1,449,000 of deferred rent balance related to facilities returned by BCC and $4,274,000 of receivable write-offs and reserves against other assets that we believed had become impaired.

53

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

16.    Discontinued Operations

SFAS No. 144 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale to be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. See Note 4 and Note 7 for more detail regarding the facilities sold and classified as held for sale during 2002. The following table details the amounts reclassified to discontinued operations:

	Years ended December 31,
	2002			2001			2000
	(In thousands)
Rental income	$	2,057		$	3,537		$	3,759
Interest and other income		413			51			—
		2,470			3,588			3,759
Depreciation and amortization		963			2,713			2,219
General and administrative		1,085			440			128
Impairment of assets		10,828			3,972			—
		12,876			7,125			2,347
Income (loss) from operations		(10,406	)		(3,357	)		1,412
Gain on sale of facilities		2,603			—			—
Discontinued operations	$	(7,803	)	$	(3,357	)	$	1,412

17.    Dividends

Dividend payments per share to the common stockholders were characterized in the following manner for tax purposes:

	2002		2001		2000
Ordinary income	$	0.71	$	1.07	$	1.25
Capital gain		—		0.19		0.19
Return of capital		1.13		0.58		0.40
Total dividends paid	$	1.84	$	1.84	$	1.84

54

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years ended December 31, 2002, 2001 and 2000

18.    Quarterly Financial Data (unaudited)

Amounts in the tables below may not add across due to rounding differences and discontinued operations reclassifications.

	Three months ended,
	March 31,			June 30,		September 30,		December 31,
	(In thousands except per share amounts)
2002:
Revenues	$	37,688		$	37,972	$	41,085	$	41,230
Income (loss) available to common stockholders		(2,053	)		13,284		12,334		5,313
Basic/diluted income (loss) available to common stockholders per share		(0.04	)		0.27		0.25		0.11
Dividends per share		0.46			0.46		0.46		0.46
2001:
Revenues	$	41,346		$	42,139	$	40,981	$	40,258
Income available to common stockholders		13,248			15,790		17,910		13,714
Basic/diluted income available to common stockholders per share		0.29			0.34		0.38		0.29
Dividends per share		0.46			0.46		0.46		0.46

55

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Assisted Living Facilities:
Decatur	AL	$	1,825	$	—	$	1,484	$	1,825	$	3,309	$	326	1987	1996
Hanceville	AL		2,447		—		197		2,447		2,644		387	1996	1996
Benton	AR		1,479		489		182		1,968		2,150		258	1990	1998
Chandler	AZ		2,753		—		505		2,753		3,258		304	1998	1998
Mesa	AZ		1,391		2,700		519		4,091		4,610		879	1985	1996
Carmichael	CA		7,929		755		1,500		8,684		10,184		2,172	1984	1995
Chula Vista (3)	CA		6,281		72		950		6,353		7,303		1,295	1989	1995
Encinitas (4)	CA		5,017		126		1,000		5,143		6,143		1,200	1984	1995
Mission Viejo (3)	CA		3,544		89		900		3,633		4,533		786	1985	1995
Novato (4)	CA		3,658		403		2,500		4,061		6,561		957	1978	1995
Placentia	CA		3,801		184		1,320		3,985		5,305		988	1982	1995
Rancho Cucamonga (4)	CA		4,156		269		610		4,425		5,035		945	1987	1995
San Dimas	CA		3,577		225		1,700		3,802		5,502		888	1975	1995
San Jose	CA		7,252		—		850		7,252		8,102		861	1998	1998
San Juan Capistrano (4)	CA		3,834		172		1,225		4,006		5,231		867	1985	1995
San Juan Capistrano	CA		6,344		235		700		6,579		7,279		1,310	1985	1995
Santa Maria	CA		2,649		118		1,500		2,767		4,267		658	1967	1995
Vista	CA		3,701		82		350		3,783		4,133		865	1980	1996
Aurora	CO		7,923		3		919		7,926		8,845		1,848	1983	1995
Aurora	CO		10,119		—		715		10,119		10,834		949	1999	1999
Boulder	CO		4,738		—		184		4,738		4,922		948	1992	1995
Boulder	CO		4,811		4		833		4,815		5,648		842	1985	1995
Brighton	CO		2,158		—		210		2,158		2,368		297	1997	1997
Denver	CO		28,682		—		2,350		28,682		31,032		410	1987	2002
Lakewood	CO		12,401		—		604		12,401		13,005		930	2000	2000
Hockessin	DE		4,956		—		345		4,956		5,301		465	1999	1999
Clearwater	FL		3,790		—		1,231		3,790		5,021		47	1998	2002
Gainesville	FL		2,699		4		356		2,703		3,059		366	1997	1997
Gainesville	FL		3,313		—		310		3,313		3,623		331	1998	1998
Hudson	FL		8,139		550		1,665		8,689		10,354		1,674	1986	1996
Jacksonville	FL		2,376		12		366		2,388		2,754		342	1997	1997
Jacksonville	FL		2,770		8		226		2,778		3,004		364	1997	1997
LeHigh Acres	FL		2,600		10		307		2,610		2,917		336	1997	1997
Naples	FL		4,084		—		1,182		4,084		5,266		553	1997	1997
Naples	FL		10,797		—		1,140		10,797		11,937		1,035	1999	1999
Palm Coast	FL		2,580		6		406		2,586		2,992		322	1997	1997
Panama City	FL		2,659		1		353		2,660		3,013		294	1998	1998
Pensacola	FL		5,626		782		408		6,408		6,816		480	1999	1999
Port Charlotte	FL		2,655		11		245		2,666		2,911		354	1997	1997
Punta Gorda	FL		2,691		18		210		2,709		2,919		365	1997	1997
Rotunda	FL		2,628		14		123		2,642		2,765		329	1997	1997
St Petersburg	FL		2,396		985		2,000		3,381		5,381		583	1993	1995
Tallahassee	FL		9,084		163		696		9,247		9,943		752	1999	1999
Tavares	FL		2,466		1		156		2,467		2,623		349	1997	1997
Titusville	FL		4,706		—		1,742		4,706		6,448		336	1987	2000
Venice	FL		2,535		10		376		2,545		2,921		327	1997	1997
Boise	ID		5,586		5,696		544		11,282		11,826		1,831	1978	1995
Carmel	IN		3,861		—		805		3,861		4,666		451	1998	1998
Lawrence	KS		3,822		—		932		3,822		4,754		446	1995	1998

56

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Assisted Living Facilities: (continued)
Salina	KS	$	1,921	$	—	$	200	$	1,921	$	2,121	$	276	1996	1997
Salina	KS		2,887		—		329		2,887		3,216		385	1989	1998
Topeka	KS		2,955		87		424		3,042		3,466		462	1986	1998
Murray	KY		2,547		125		110		2,672		2,782		334	1998	1998
Mandeville	LA		6,554		—		831		6,554		7,385		519	1999	1999
Pittsfield	MA		9,052		197		1,758		9,249		11,007		1,034	1998	1998
Hagerstown	MD		3,785		930		533		4,715		5,248		389	1999	1999
Riverview	MI		6,939		67		300		7,006		7,306		1,562	1987	1995
Charlotte	NC		1,924		—		342		1,924		2,266		41	1998	2002
Charlotte	NC		2,406		—		471		2,406		2,877		51	1998	2002
Greensboro	NC		1,847		—		293		1,847		2,140		40	1997	2002
Greensboro	NC		3,262		—		557		3,262		3,819		70	1998	2002
Hickory	NC		2,531		10		385		2,541		2,926		301	1997	1998
Brick	NJ		2,428		—		1,102		2,428		3,530		5	1999	2002
Deptford	NJ		3,430		—		655		3,430		4,085		364	1998	1998
Sparks (5)	NV		5,119		—		505		5,119		5,624		731	1991	1997
Sparks (6)	NV		7,278		—		714		7,278		7,992		910	1993	1997
Centereach (7)	NY		15,204		222		6,000		15,426		21,426		254	1973	2002
Dayton	OH		1,917		1		270		1,918		2,188		243	1997	1997
Dublin	OH		5,793		10		356		5,803		6,159		641	1998	1998
Fairfield	OH		1,917		1		270		1,918		2,188		260	1997	1997
Greenville	OH		2,311		—		215		2,311		2,526		313	1997	1997
Hilliard	OH		7,056		1,892		652		8,948		9,600		753	1999	1999
Lancaster	OH		2,084		10		350		2,094		2,444		226	1998	1998
Newark	OH		2,047		2		225		2,049		2,274		281	1997	1997
Sharonville	OH		4,013		37		225		4,050		4,275		903	1986	1995
Springdale	OH		2,092		—		440		2,092		2,532		275	1997	1997
Urbana	OH		2,118		—		150		2,118		2,268		273	1997	1997
Youngstown	OH		2,191		—		470		2,191		2,661		233	1998	1998
Broken Arrow	OK		1,445		1		178		1,446		1,624		217	1996	1997
Oklahoma City	OK		3,897		648		392		4,545		4,937		1,248	1982	1994
Oklahoma City	OK		1,531		4		175		1,535		1,710		230	1996	1997
Albany	OR		3,657		4,548		511		8,205		8,716		1,706	1968	1995
Albany (8)	OR		2,465		8		92		2,473		2,565		575	1984	1995
Forest Grove (9)	OR		3,152		—		401		3,152		3,553		631	1994	1995
Gresham	OR		4,647		—		—		4,647		4,647		929	1988	1995
McMinnville (10)	OR		3,976		—		760		3,976		4,736		696	1989	1995
Medford	OR		4,325		19		313		4,344		4,657		757	1990	1995
Bridgeville	PA		8,023		1,339		653		9,362		10,015		832	1999	1999
Center Square	PA		11,078		—		1,000		11,078		12,078		1,103	2001	2001
Indiana	PA		2,706		—		194		2,706		2,900		77	1997	2002
York	PA		3,790		769		413		4,559		4,972		439	1999	1999
E. Greenwich	RI		8,277		235		1,200		8,512		9,712		633	2000	2000
Lincoln	RI		9,612		—		477		9,612		10,089		641	2000	2000
Portsmouth	RI		9,154		85		1,200		9,239		10,439		746	1999	1999
Clinton	SC		2,560		—		87		2,560		2,647		326	1997	1998
Columbia	SC		2,664		11		210		2,675		2,885		316	1997	1998
Goose Creek	SC		2,336		—		619		2,336		2,955		67	1998	2002
Greenville	SC		6,397		—		613		6,397		7,010		80	2000	2002

57

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Assisted Living Facilities: (continued)
Greenwood	SC	$	2,648	$	—	$	107	$	2,648	$	2,755	$	337	1997	1998
Greer	SC		2,389		13		375		2,402		2,777		259	1998	1998
Mount Pleasant	SC		3,490		—		391		3,490		3,881		75	1998	2002
Brentwood	TN		2,302		—		600		2,302		2,902		436	1995	1995
Bristol	TN		4,130		1,126		406		5,256		5,662		474	1999	1999
Germantown	TN		4,623		10		755		4,633		5,388		502	1998	1998
Johnson City	TN		4,289		959		404		5,248		5,652		435	1999	1999
Murfreesboro	TN		4,240		973		499		5,213		5,712		460	1999	1999
College Station	TX		1,726		—		278		1,726		2,004		191	1994	1998
Corsicana	TX		1,494		10		117		1,504		1,621		227	1996	1996
Dallas	TX		3,500		809		308		4,309		4,617		1,199	1981	1994
Denton	TX		1,425		—		185		1,425		1,610		217	1996	1996
Ennis	TX		1,409		18		119		1,427		1,546		214	1996	1996
Houston	TX		7,194		—		1,235		7,194		8,429		809	1998	1998
Houston	TX		8,945		—		985		8,945		9,930		839	1999	1999
Houston	TX		7,184		—		1,089		7,184		8,273		659	1999	1999
Houston	TX		7,052		—		1,089		7,052		8,141		661	1999	1999
Lakeway	TX		10,542		—		579		10,542		11,121		1,032	1999	1999
Lewisville	TX		1,892		18		260		1,910		2,170		264	1997	1997
Mansfield	TX		1,575		52		225		1,627		1,852		236	1996	1997
Paris	TX		1,465		—		166		1,465		1,631		223	1996	1996
Pearland	TX		7,892		—		493		7,892		8,385		888	1998	1998
Richland Hills	TX		1,616		—		223		1,616		1,839		242	1996	1997
Richland Hills	TX		2,211		739		65		2,950		3,015		246	1998	1998
Weatherford	TX		1,596		11		145		1,607		1,752		226	1996	1997
Martinsville	VA		3,049		5		1,001		3,054		4,055		191	2000	2000
Midlothian	VA		8,269		—		650		8,269		8,919		568	2000	2000
Bellevue	WA		4,467		—		766		4,467		5,233		493	1998	1998
Richland	WA		6,052		145		172		6,197		6,369		1,229	1990	1995
Tacoma	WA		5,208		—		402		5,208		5,610		716	1997	1997
Yakima	WA		5,122		—		500		5,122		5,622		640	1998	1998
Menomonee Falls (11)	WI		13,190		—		4,161		13,190		17,351		1,978	1989	1997
West Allis (12)	WI		8,117		2,911		682		11,028		11,710		1,394	1996	1997
Hurricane	WV		4,475		997		705		5,472		6,177		425	1999	1999
			607,367		34,251		88,688		641,618		730,306		78,265
Skilled Nursing Facilities:
Benton	AR		4,659		9		685		4,668		5,353		611	1992	1998
Bryant	AR		4,889		16		320		4,905		5,225		641	1989	1998
Hot Springs	AR		2,320		—		54		2,320		2,374		1,088	1978	1986
Lake Village	AR		4,317		15		261		4,332		4,593		496	1998	1998
Monticello	AR		3,295		8		300		3,303		3,603		378	1995	1998
Morrilton	AR		3,703		7		250		3,710		3,960		486	1988	1998
Morrilton	AR		4,995		2		308		4,997		5,305		573	1996	1998
Wynne (13)	AR		4,165		7		327		4,172		4,499		546	1990	1998
Scottsdale	AZ		2,790		100		650		2,890		3,540		1,099	1963	1991
Chowchilla	CA		1,119		—		109		1,119		1,228		427	1965	1987
Gilroy	CA		1,892		—		714		1,892		2,606		709	1968	1991
Hayward	CA		1,222		221		795		1,443		2,238		528	1968	1991
Orange	CA		5,059		23		1,141		5,082		6,223		1,320	1987	1992

58

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Skilled Nursing Facilities: (continued)
San Jose	CA	$	1,136	$	571	$	1,595	$	1,707	$	3,302	$	606	1968	1991
Santa Cruz	CA		1,596		440		1,492		2,036		3,528		737	1964	1991
Hartford	CT		4,153		200		350		4,353		4,703		155	1969	2001
Torrington	CT		2,555		500		140		3,055		3,195		1,022	1969	1987
Winstead	CT		3,494		618		70		4,112		4,182		145	1960	2001
Ft. Pierce	FL		2,758		280		125		3,038		3,163		1,508	1960	1985
Jacksonville	FL		2,787		140		498		2,927		3,425		602	1965	1996
Jacksonville	FL		1,759		4		1,503		1,763		3,266		246	1997	1997
Live Oak	FL		3,217		1,750		50		4,967		5,017		1,883	1983	1986
Maitland	FL		3,327		—		209		3,327		3,536		1,560	1982	1986
Pensacola	FL		1,833		—		77		1,833		1,910		710	1962	1987
Flowery Branch	GA		3,115		665		562		3,780		4,342		462	1970	1997
Buhl	ID		777		—		15		777		792		311	1913	1986
Lasalle	IL		2,703		—		127		2,703		2,830		1,029	1975	1991
Litchfield	IL		2,689		—		30		2,689		2,719		1,023	1974	1991
Brookville	IN		4,120		—		81		4,120		4,201		1,047	1987	1992
Evansville	IN		5,324		—		280		5,324		5,604		2,026	1968	1991
New Castle	IN		5,173		—		43		5,173		5,216		1,969	1972	1991
Petersburg	IN		2,352		—		33		2,352		2,385		1,103	1970	1986
Richmond	IN		2,519		—		114		2,519		2,633		1,182	1975	1986
Rochester	IN		4,055		250		161		4,305		4,466		1,610	1969	1991
Wabash	IN		2,790		—		40		2,790		2,830		1,062	1974	1991
Belleville	KS		1,887		—		213		1,887		2,100		613	1977	1993
Colby	KS		599		117		50		716		766		312	1974	1986
Derby	KS		2,482		—		133		2,482		2,615		889	1978	1992
Hiawatha	KS		788		34		150		822		972		97	1974	1998
Hutchinson	KS		1,855		161		75		2,016		2,091		594	1964	1994
Onaga	KS		652		88		6		740		746		359	1959	1986
Salina	KS		2,463		135		27		2,598		2,625		768	1981	1994
Topeka	KS		1,137		58		100		1,195		1,295		140	1973	1998
Yates Center	KS		700		—		18		700		718		5	1967	2002
Amesbury	MA		4,241		607		229		4,848		5,077		858	1971	1997
Beverly	MA		6,578		975		392		7,553		7,945		414	1998	1998
Brockton	MA		3,591		16		525		3,607		4,132		1,102	1971	1993
Buzzards Bay	MA		4,815		279		415		5,094		5,509		2,433	1910	1985
Danvers	MA		2,891		487		305		3,378		3,683		599	1969	1997
Danvers	MA		3,211		1,144		327		4,355		4,682		750	1962	1997
Danvers	MA		7,222		1,004		392		8,226		8,618		465	1998	1998
Haverhill	MA		5,707		1,764		660		7,471		8,131		1,992	1973	1993
Melrose	MA		4,029		531		432		4,560		4,992		650	1967	1998
N. Billerica	MA		3,137		300		800		3,437		4,237		981	1970	1994
New Bedford	MA		2,357		109		93		2,466		2,559		1,179	1888	1985
Northborough	MA		2,509		1,538		300		4,047		4,347		430	1968	1998
Saugus	MA		5,262		514		374		5,776		6,150		1,030	1967	1997
Sharon	MA		1,097		4,369		844		5,466		6,310		696	1963	1996
Clinton	MD		5,017		595		400		5,612		6,012		1,985	1965	1987
Cumberland	MD		5,260		—		150		5,260		5,410		2,556	1968	1985
Hagerstown	MD		4,140		176		215		4,316		4,531		2,117	1971	1985
Kensington	MD		5,737		39		1,470		5,776		7,246		56	1954	2002

59

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Skilled Nursing Facilities: (continued)
Westminster	MD	$	6,795	$	—	$	80	$	6,795	$	6,875	$	3,301	1973	1985
Duluth	MN		7,047		330		1,014		7,377		8,391		1,261	1971	1997
Minneapolis	MN		5,752		713		333		6,465		6,798		3,197	1941	1985
Minneapolis	MN		4,184		—		436		4,184		4,620		2,186	1961	1985
Maryville	MO		2,689		—		51		2,689		2,740		1,307	1972	1985
Columbus	MS		3,520		197		750		3,717		4,467		443	1976	1998
Hendersonville	NC		2,244		—		116		2,244		2,360		1,090	1979	1985
Sparks	NV		3,294		—		740		3,294		4,034		927	1988	1991
Boardman	OH		7,046		—		60		7,046		7,106		2,681	1962	1991
Columbus	OH		4,333		—		343		4,333		4,676		1,756	1984	1988
Galion	OH		3,419		—		24		3,419		3,443		1,301	1967	1991
Warren	OH		7,489		—		450		7,489		7,939		2,849	1967	1991
Wash Ct House	OH		4,086		—		356		4,086		4,442		1,692	1984	1988
Maud	OK		803		—		12		803		815		323	1960	1986
Sapulpa	OK		2,243		—		68		2,243		2,311		897	1970	1986
Tonkawa	OK		795		—		18		795		813		722	1962	1987
Celina	TN		853		—		150		853		1,003		261	1975	1993
Clarksville	TN		3,479		—		350		3,479		3,829		1,063	1967	1993
Decatur	TN		3,330		—		193		3,330		3,523		428	1981	1998
Jonesborough	TN		2,551		3		65		2,554		2,619		780	1982	1993
Madison	TN		6,415		—		1,120		6,415		7,535		779	1967	1998
Albany	TX		865		—		6		865		871		13	1978	2002
Austin	TX		3,726		—		360		3,726		4,086		56	1968	2002
Balch Springs	TX		2,135		—		64		2,135		2,199		32	1977	2002
Baytown	TX		1,902		154		61		2,056		2,117		615	1970	1990
Baytown	TX		2,388		296		90		2,684		2,774		768	1975	1990
Bogota	TX		1,820		36		13		1,856		1,869		854	1963	1986
Bowie	TX		3,205		—		127		3,205		3,332		50	1955	2002
Center	TX		1,424		229		22		1,653		1,675		471	1972	1990
Clarksville	TX		1,583		—		4		1,583		1,587		23	1965	2002
Cleburne	TX		1,615		—		128		1,615		1,743		24	1972	2002
Clyde	TX		874		—		10		874		884		12	1963	2002
Crowell	TX		960		—		2		960		962		14	1975	2002
Dallas	TX		2,644		—		64		2,644		2,708		38	1976	2002
Eagle Lake	TX		1,833		150		25		1,983		2,008		593	1972	1990
El Paso	TX		1,888		—		166		1,888		2,054		755	1980	1988
El Paso	TX		1,628		—		206		1,628		1,834		23	1975	2002
Flowery Mound	TX		4,871		—		488		4,871		5,359		12	1995	2002
Fort Worth	TX		1,993		—		230		1,993		2,223		28	1969	2002
Fort Worth	TX		2,460		—		201		2,460		2,661		35	1971	2002
Garland	TX		1,619		148		238		1,767		2,005		528	1970	1990
Gilmer	TX		3,033		1,870		248		4,903		5,151		507	1990	1998
Gladewater	TX		2,018		33		125		2,051		2,176		646	1971	1993
Greenville	TX		1,680		—		95		1,680		1,775		25	1976	2002
Henderson	TX		1,713		—		90		1,713		1,803		24	1966	2002
Houston	TX		4,155		336		408		4,491		4,899		1,378	1982	1993
Houston	TX		1,342		—		101		1,342		1,443		19	1977	2002
Humble	TX		1,821		221		140		2,042		2,182		592	1972	1990
Huntsville	TX		1,930		126		135		2,056		2,191		622	1968	1990

60

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Skilled Nursing Facilities: (continued)
Jacksonville	TX	$	2,041	$	—	$	54	$	2,041	$	2,095	$	34	1973	2002
Linden	TX		2,520		70		25		2,590		2,615		808	1968	1993
Lubbock	TX		2,064		—		633		2,064		2,697		30	1977	2002
Marshall	TX		865		—		19		865		884		488	1964	1986
McAllen	TX		1,115		—		153		1,115		1,268		18	1966	2002
McAllen	TX		2,850		—		171		2,850		3,021		46	1982	2002
McKinney	TX		1,456		39		1,318		1,495		2,813		574	1967	1987
McKinney	TX		4,797		—		1,263		4,797		6,060		453	1967	2000
Mesquite	TX		2,658		—		153		2,658		2,811		37	1974	2002
Mineral Wells	TX		1,635		—		52		1,635		1,687		28	1975	2002
Mount Pleasant	TX		2,505		141		40		2,646		2,686		807	1970	1993
Munday	TX		498		—		2		498		500		7	1967	2002
Nacogdoches	TX		1,104		138		135		1,242		1,377		369	1973	1990
New Boston	TX		2,366		65		44		2,431		2,475		759	1966	1993
Omaha	TX		1,579		73		28		1,652		1,680		507	1970	1993
Rosenberg	TX		2,013		—		112		2,013		2,125		33	1977	2002
Rusk	TX		1,549		—		23		1,549		1,572		26	1972	2002
San Antonio	TX		2,033		128		32		2,161		2,193		654	1965	1990
San Antonio	TX		1,636		126		221		1,762		1,983		532	1965	1990
San Antonio	TX		4,536		—		—		4,536		4,536		65	1988	2002
San Antonio	TX		2,224		—		268		2,224		2,492		31	1975	2002
Sherman	TX		2,075		17		67		2,092		2,159		664	1971	1993
Sulphur Springs	TX		1,649		—		72		1,649		1,721		24	1969	2002
Texarkana	TX		1,244		—		87		1,244		1,331		583	1983	1986
Texas City	TX		1,389		—		54		1,389		1,443		20	1973	2002
Vernon	TX		608		—		14		608		622		12	1952	2002
Waxahachie	TX		3,493		27		319		3,520		3,839		1,347	1976	1987
Weatherford	TX		2,252		—		346		2,252		2,598		36	1967	2002
White Settlement	TX		2,258		—		66		2,258		2,324		32	1969	2002
Wichita Falls	TX		3,041		—		51		3,041		3,092		47	1969	2002
Wichita Falls	TX		687		—		10		687		697		10	1965	2002
Annandale	VA		7,752		—		487		7,752		8,239		3,766	1963	1985
Charlottesville	VA		4,620		—		362		4,620		4,982		2,245	1964	1985
Petersburg	VA		2,215		—		93		2,215		2,308		1,076	1972	1985
Petersburg	VA		2,945		—		94		2,945		3,039		1,431	1976	1985
Kennewick	WA		4,459		—		297		4,459		4,756		793	1959	1997
Moses Lake	WA		4,307		1,326		304		5,633		5,937		1,240	1972	1994
Moses Lake	WA		2,385		—		164		2,385		2,549		662	1988	1994
Seattle	WA		5,752		182		1,223		5,934		7,157		1,231	1993	1994
Shelton	WA		4,382		300		327		4,682		5,009		532	1998	1998
Chilton	WI		2,275		148		55		2,423		2,478		1,156	1963	1986
Florence	WI		1,529		—		15		1,529		1,544		717	1970	1986
Green Bay	WI		2,255		—		300		2,255		2,555		1,058	1965	1986
Sheboygan	WI		1,697		—		219		1,697		1,916		792	1967	1986
St. Francis	WI		535		—		80		535		615		250	1960	1986
Tomah	WI		1,745		128		115		1,873		1,988		924	1974	1985
Wisconsin Dells	WI		1,697		—		81		1,697		1,778		792	1972	1986
			452,803		28,616		43,228		481,419		524,647		120,717

61

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Building and Improvements		Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period (1)						Accum. Depr.		Original Construction Date	Date Acquired
						Land (2)		Buildings and Improvements		Total
Continuing Care Retirement
Communities:
Chandler	AZ	$	7,039	$	1,312	$	1,980	$	8,351	$	10,331	$	101	1992	2002
Palm Desert	CA		9,097		1,730		1,600		10,827		12,427		2,237	1989	1994
Sterling	CO		2,715		—		400		2,715		3,115		792	1979	1994
Largo	FL		17,027		290		1,300		17,317		18,617		617	1972	2002
Lawrenceville	GA		10,769		—		723		10,769		11,492		1,103	1988	1998
Andover (14)	KS		12,517		—		687		12,517		13,204		1,878	1987	1997
Norton	MA		8,272		4,669		1,351		12,941		14,292		1,692	1972	1997
Trenton	TN		3,004		—		174		3,004		3,178		175	1974	2000
Corpus Christi	TX		14,929		14,093		1,848		29,022		30,870		3,864	1985	1997
Glendale (15)	WI		22,905		—		3,834		22,905		26,739		3,314	1988	1997
Waukesha (16)	WI		28,562		2,104		7,233		30,666		37,899		5,001	1973	1997
			136,836		24,198		21,130		161,034		182,164		20,774
Rehabilitation Hospitals:
Tucson	AZ		9,435		—		1,275		9,435		10,710		2,487	1992	1992
Long-Term Acute Care Facilities:
Scottsdale	AZ		5,924		195		242		6,119		6,361		2,157	1986	1988
GRAND TOTAL		$	1,212,365	$	87,260	$	154,563	$	1,299,625	$	1,454,188	$	224,400

(1) Also represents the approximate cost for federal income tax purposes.

(2) Gross amount at which land is carried at close of period also represents initial cost to the Company.

(3) Real estate is security for notes payable in the aggregate of $10,000,000 at December 31, 2002.

(4) Real estate is security for notes payable in the aggregate of $29,624,000 at December 31, 2002.

(5) Real estate is security for notes payable in the aggregate of $3,385,000 at December 31, 2002.

(6) Real estate is security for notes payable in the aggregate of $2,945,000 at December 31, 2002.

(7) Real estate is security for notes payable in the aggregate of $14,019,000 at December 31, 2002.

(8) Real estate is security for notes payable in the aggregate of $1,995,000 at December 31, 2002.

(9) Real estate is security for notes payable in the aggregate of $3,206,000 at December 31, 2002.

(10) Real estate is security for notes payable in the aggregate of $3,347,000 at December 31, 2002.

(11) Real estate is security for notes payable in the aggregate of $9,949,000 at December 31, 2002.

(12) Real estate is security for notes payable in the aggregate of $7,883,000 at December 31, 2002.

(13) Real estate is security for notes payable in the aggregate of $2,100,000 at December 31, 2002.

(14) Real estate is security for notes payable in the aggregate of $2,300,000 at December 31, 2002.

(15) Real estate is security for notes payable in the aggregate of $12,636,000 at December 31, 2002.

(16) Real estate is security for notes payable in the aggregate of $7,914,000 at December 31, 2002.

62

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2002

(Dollar amounts in thousands)

	Real Estate Properties			Accumulated Depreciation
	(in thousands)
Balances at December 31, 1999:	$	1,331,373		$	162,671
Acquisitions		21,547			33,293
Improvements		15,114			2,364
Reclassifications		10,851			—
Sales		(45,276	)		(12,122	)
Balances at December 31, 2000:		1,333,609			186,206
Acquisitions		14,464			32,620
Improvements		6,270			2,640
Reclassifications		1,323			—
Impairment of Assets		(3,536	)		—
Sales		(56,481	)		(14,330	)
Balances at December 31, 2001:		1,295,649			207,136
Acquisitions		165,428			33,532
Improvements		13,870			3,212
Reclassifications		37,414			—
Assets Held for Sale		(39,623	)		(14,344	)
Sales		(18,550	)		(5,136	)
Balances at December 31, 2002:	$	1,454,188		$	224,400

63

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

PART III

Item 10.    Directors and Executive Officers of the Registrant.

Information required regarding executive officers is included under the caption “ Executive Officers of the Company” in Item 1.

Incorporated herein by reference to the information under the caption “Election of Directors” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 29, 2003, filed or to be filed pursuant to Regulation 14A.

Item 11.    Executive Compensation.

Incorporated herein by reference to the information under the caption “Executive Compensation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 29, 2003, filed or to be filed pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Incorporated herein by reference to the information under the caption “Stock Ownership” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 29, 2003, filed or to be filed pursuant to Regulation 14A.

Item 13.    Certain Relationships and Related Transactions.

Incorporated herein by reference to the information under the captions “Certain Relationships and Related Transactions” and “Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 29, 2003, filed or to be filed pursuant to Regulation 14A.

Item 14.    Controls and Procedures

Within the 90 days prior to the filing date of this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out this evaluation.

64

PART IV

Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)(1)  Financial Statements.

Report of Independent Auditors	32
Consolidated Balance Sheets at December 31, 2002 and 2001	33
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000	34
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2002, 2001 and 2000	35
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000	36
Notes to Consolidated Financial Statements	37

(2)  Financial Statement Schedules

Schedule III Real Estate and Accumulated Depreciation 56

(b)  Reports on Form 8-K

None.

(c)  Exhibits

Exhibit No.		Description
2.		Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
2.1		Agreement to Merge, dated August 19, 1997, among the Company, Laureate Investments, Inc. and Laureate Properties, Inc., filed as Exhibit 2.1 to the Company’s Form 8-K dated October 7, 1997, and incorporated herein by this reference.
3.		Articles of Incorporation and Bylaws
3.1	(a)	Restated Articles of Incorporation, filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-11 (No. 33-1128), effective December 19, 1985, and incorporated herein by this reference.
3.1	(b)	Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended March 31, 1989, and incorporated herein by this reference.
3.1	(c)	Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1(c) to the Company’s Registration Statement on Form S-11 (No. 33-32251), effective January 23, 1990, and incorporated herein by this reference.
3.1	(d)	Articles of Amendment of Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1(d) to the Company’s Form 10-K for the year ended December 31, 1994, and incorporated herein by this reference.
3.1	(e)	Articles Supplementary to the Registrant’s Amended and Restated Articles of Incorporation, dated September 24, 1997, filed as Exhibit 3.1 to the Company’s Form 8-K dated September 24, 1997, and incorporated herein by this reference.
3.2		Amended and Restated Bylaws of the Company.
4.		Instruments Defining Rights of Security Holders, Including Indentures
4.1		Indenture dated as of November 16, 1992, between Nationwide Health Properties, Inc., Issuer to The Chase Manhattan Bank (National Association), Trustee, filed as Exhibit 4.1 to the Company’s Form S-3 (No. 33-54870) dated November 24, 1992, and incorporated herein by this reference.

65

Exhibit No.		Description
4.2		Indenture dated as of June 30, 1993, between the Company and First Interstate Bank of California, as Trustee, filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-3 (No. 33-64798), effective July 12, 1993, and incorporated herein by this reference.
4.3		First Supplemental Indenture dated November 15, 1993, between the Company and First Interstate Bank of California, as Trustee, filed as Exhibit 4.1 to the Company’s Form 8-K dated November 15, 1993, and incorporated herein by this reference.
4.4		Indenture dated as of January 12, 1996, between the Company and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 33-65423) dated December 27, 1995, and incorporated herein by this reference.
4.5		Indenture dated as of January 13, 1999, between the Company and Chase Manhattan Bank and Trust Company, National Association, as Trustee, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-70707) dated January 15, 1999, and incorporated herein by this reference.
10.		Material Contracts
10.1		1989 Stock Option Plan of the Company as Amended and Restated April 20, 2001, filed as Exhibit 10.4 to the Company’s 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.
10.2		The Company’s Retirement Plan for Directors effective July 26, 1991 filed as Exhibit 10.13 to the Company’s Form 10-K for the year ended December 31, 1991, and incorporated herein by this reference.
10.3		Deferred Compensation Plan of the Company effective September 1, 1991 filed as Exhibit 10.14 to the Company’s Form 10-K for the year ended December 31, 1991, and incorporated herein by this reference.
10.4		Credit Agreement dated as of November 8, 2002 among the Company and JPMorgan Chase Bank, Bank of America, N.A., Wells Fargo Bank National Association, The Bank of New York, UBS AG, Stamford Branch and KBC Bank N.V.
10.5		First Amendment to Credit Agreement dated as of January 1, 2003 among the Company and JPMorgan Chase Bank, as administrative agent.
10.6		Form of Indemnity Agreement for officers and directors of the Company including David R. Banks, William K. Doyle, Charles D. Miller, Robert D. Paulson, Keith P. Russell, Jack D. Samuelson, R. Bruce Andrews, David M. Boitano, Donald D. Bradley, Mark L. Desmond, Steven J. Insoft, Don M. Pearson, John J. Sheehan, Jr., and T. Andrew Stokes, filed as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference.
10.7		Executive Employment Security Policy as Amended and Restated April 20, 2001, filed as Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.
10.8		Employment agreement entered into by and between Nationwide Health Properties, Inc. and R. Bruce Andrews dated as of February 25, 1998, filed as Exhibit 10.13 to the Company’s Form 10-K for the year ended December 31, 1998, and incorporated herein by this reference.
10.10		Employment agreement entered into by and between Nationwide Health Properties, Inc. and Mark L. Desmond dated as of February 25, 1998, filed as Exhibit 10.15 to the Company’s Form 10-K for the year ended December 31, 1998, and incorporated herein by this reference.
10.10	(a)	First Amendment of Employment Agreement of Mark L. Desmond dated as of January 19, 2001, filed as Exhibit 10.12(a) to the Company’s Form 10-K for the year ended December 31, 2000, and incorporated herein by this reference.

66

Exhibit No.		Description
10.10	(b)	Second Amendment to Employment Agreement of Mark L. Desmond dated as of April 20, 2001, filed as exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.
10.11		Limited Liability Company Agreement of JER/NHP Senior Housing, LLC entered into as of August 28, 2001 by and among Nationwide Health Properties and JER Senior Housing, LLC filed as Exhibit 10.14 to the Company’s Form 10-K for the year ended December 31, 2001, and incorporated herein by this reference.
10.12		First Amendment to Limited Liability Company Agreement of JER/NHP Senior Housing, LLC dated February 7, 2002 by and among Nationwide Health Properties and JER Senior Housing, LLC.
10.13		Second Amendment to Limited Liability Company Agreement of JER/NHP Senior Housing, LLC dated October 28, 2002 by and among Nationwide Health Properties and JER Senior Housing, LLC.
21.		Subsidiaries of the Company
23.		Consents of Experts and Counsel
23.1		Consent of Ernst & Young LLP

67

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATIONWIDE HEALTH PROPERTIES, INC.
By:	/s/    R. BRUCE ANDREWS
	R. Bruce Andrews President and Chief Executive Officer

Dated: March 11, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    CHARLES D. MILLER       Charles D. Miller	Chairman and Director	March 10, 2003
/s/    R. BRUCE ANDREWS         R. Bruce Andrews	President, Chief Executive Officer and Director (Principal Executive Officer)	March 11, 2003
/s/    MARK L. DESMOND         Mark L. Desmond	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 11, 2003
David R. Banks	Director
/s/    WILLIAM K. DOYLE       William K. Doyle	Director	March 6, 2003
/s/    ROBERT D. PAULSON         Robert D. Paulson	Director	March 10, 2003
/s/    KEITH P. RUSSELL         Keith P. Russell	Director	March 6, 2003
/s/    JACK D. SAMUELSON         Jack D. Samuelson	Director	March 10, 2003

68

CERTIFICATIONS

I, R. Bruce Andrews, certify that:

1.    I have reviewed this annual report on Form 10-K of Nationwide Health Properties, Inc.;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)  Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)  All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	March 11, 2003	/S/    R. BRUCE ANDREWS
		R. Bruce Andrews President and Chief Executive Officer

69

I, Mark L. Desmond, certify that:

1.    I have reviewed this annual report on Form 10-K of Nationwide Health Properties, Inc.;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)  Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)  All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	March 11, 2003	/S/    MARK L. DESMOND
		Mark L. Desmond Senior Vice President and Chief Financial Officer

70

EX-3.2

                                                                     Exhibit 3.2

                                     BYLAWS
                                       OF
                       NATIONWIDE HEALTH PROPERTIES, INC.
                    AS AMENDED AND RESTATED JANUARY 28, 2003

                                    ARTICLE I

                                     OFFICES

                  Section 1. Registered office. The registered office of the
corporation shall be established and maintained at the office of THE CORPORATION
TRUST INCORPORATED, 32 South Street, Baltimore, Maryland 21202, and said THE
CORPORATION TRUST INCORPORATED be the registered agent of this corporation in
charge thereof.

                  Section 2. Other Offices. The corporation may establish such
other offices, within or without the State of Maryland, at such place or places
as the Board of Directors from time to time may designate, or which the business
of the corporation may require.

                                   ARTICLE II

                                  STOCKHOLDERS

                  Section 1. Annual Meetings. Annual meetings of stockholders
for the election of Directors and for such other business as may be stated in
the notice of the meeting, shall be held on a date and at a time designated by
the Board of Directors at such place, within or without the State of Maryland,
as the Board of Directors by resolution shall determine, and as set forth in the
notice of the meeting.

                  If the date of the annual meeting shall fall on a legal
holiday of the state in which the meeting is to be held, the meeting shall be
held on the next succeeding business day.

                  Section 2. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, may be called by the Chairman, the
Chief Executive Officer, the President, by a majority of the Board of Directors
or by a majority of the Independent Directors and shall be called by an officer
upon written request of stockholders holding in the aggregate not less than 10%
of the outstanding shares entitled to vote on the business proposed to be
transacted thereat. Such meetings may be held at such time and place, within or
without the State of Maryland, as shall be stated in the notice of the meeting.
The call of a special meeting shall state the nature of the business to be
transacted and no other business shall be considered at the meeting. A Special
meeting may be called for the purpose of removing a Director.

                                       1



                  Section 3. Notice of Meetings. Written or printed notice,
stating the place, date and time of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, by the United States mail, postage
prepaid, not less than twenty (20) nor more than ninety (90) days before the
date of the meeting. No business other than that stated in the notice shall be
transacted at any meeting without the unanimous consent of all stockholders
entitled to vote thereat.

                  Section 4. Voting. At each annual meeting the stockholders
entitled to vote shall elect a Board of Directors, and they may transact such
other corporate business as shall be stated in the notice of the meeting. The
vote for Directors, and, upon the demand of any stockholder, the vote upon any
question before the meeting, shall be by ballot. All elections of Directors
shall be by a plurality of the votes cast, and all questions shall be decided by
a majority vote, except as otherwise provided by the Articles of Incorporation
or by the laws of the State of Maryland.

                  The Directors may fix a day not more than sixty (60) days
prior to the holding of any such meeting as the date as of which stockholders
entitled to notice of and to vote at such meeting shall be determined; and only
stockholders of record on such day shall be entitled to notice of or to vote at
any such meeting.

                  Each stockholder entitled to vote, in accordance with the
terms of the Articles of Incorporation and the provisions of these Bylaws, shall
be entitled to one vote, in person or by proxy, for each share of stock entitled
to vote held by such stockholder, but no proxy shall be voted after eleven (11)
months from its date unless such proxy provides for a longer period. In no case
shall any proxy be given for a period in excess of ten (10) years from the date
of its execution.

                  Section 5. Quorum. Except as provided in the next section
hereof, any number of stockholders together holding a majority of the stock
issued and outstanding and entitled to vote thereat, who shall be present in
person or represented by proxy at any meeting duly called, shall constitute a
quorum for the transaction of business. If, at any meeting, less than a quorum
shall be present or represented, those present, either in person or by proxy,
shall have the power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until the requisite amount of stock
shall be present, at which time any business may be transacted which might have
been transacted at the meeting as originally noticed.

                  Section 6. Action Without Meeting. Except for the election of
Directors, any action to be taken by the stockholders may be taken without a
meeting, if, prior to such action, all stockholders entitled to vote thereon
shall consent in writing to such action being taken, and such consent shall be
treated for all purposes as a vote at a meeting.

                                       2



                                   ARTICLE III

                                    DIRECTORS

         Section 1. Number and Term. The number of Directors shall not be less
than five (5) nor more than nine (9) until changed by amendment of these Bylaws.
The exact number of Directors shall be seven (7) until changed, within the limit
specified, by a Bylaw amending this section duly adopted by the Board of
Directors or stockholders. The Directors shall be elected at the annual meeting
of stockholders, and each Director shall be elected to serve until his successor
shall be elected and shall have qualified. In no case shall the number of
Directors be less than five (5), unless changed by an amendment to the Articles
of Incorporation.

                  The Board of Directors of this corporation shall be classified
into three groups. Each group of Directors shall be elected for successive terms
ending at the annual meeting of stockholders the third year after election.

                  Directors need not be stockholders.

                  Section 2. Independent Directors. At least a majority of the
entire Board of Directors shall be Independent Directors. An Independent
Director shall mean a Director who is not, directly or indirectly, an Affiliate
of the Advisor of the corporation. An Affiliate of the Advisor shall mean a
person who: (a) is an officer or director or employee of the Advisor; (b)
beneficially owns 5% or more of any class of equity securities of the Advisor
because of the power to vote, sell, or exercise a right to acquire such
securities; (c) is an officer, director or employee of, or beneficially owns 5%
or more of any class of equity securities of, an entity that controls, is
controlled by or is under common control with the Advisor; or (d) has a member
of his or her immediate family who has one of the foregoing relationships with
the Advisor.

                  Section 3. Quorum. A majority of the Directors shall
constitute a quorum for the transaction of business. If, at any meeting of the
Board, there shall be less than a quorum present, a majority of those present
may adjourn the meeting, from time to time, until a quorum is obtained, and no
further notice thereof need be given other than by announcement at said meeting
which shall be so adjourned.

                  Section 4. First Meeting. The newly elected Directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after the annual meeting of
stockholders or the time and place of such meeting may be fixed by written
consent of the entire Board.

                  Section 5. Election of Officers. At the first meeting, or at
any subsequent meeting called for that purpose, the Directors shall elect the
officers of the

                                       3



corporation, as more specifically set forth in ARTICLE V of these Bylaws. Such
officers shall hold office until the next annual election of officers, or until
their successors are elected and shall have qualified.

                  Section 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held, without notice, at such places and times as shall be
determined, from time to time, by resolution of the Board of Directors.

                  Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman, the Chief Executive Officer, the
President, or by the Secretary on four (4) days' notice to each Director. In
case such notice is delivered personally, or by telephone or telegram, it shall
be delivered at least twenty-four (24) hours prior to the time of the holding of
the meeting.

                  Section 8. Place of Meetings. The Directors may hold their
meetings, and have one or more offices, and keep the books of the corporation
outside the State of Maryland at any office or offices of the corporation, or at
any other place as they from time to time by resolution may determine.

                  Section 9. Dispensing with Notice. The transactions of any
meeting of the Board of Directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice if a quorum be present and if, either before or after the meeting, each
of the Directors not present signs a written waiver of notice, a consent to
holding the meeting or an approval of the minutes thereof. The waiver of notice
or consent need not specify the purpose of the meeting. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting. Notice of a meeting need not be given to any
Director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such Director.

                  Section 10. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if, prior to such action, a written
consent thereto is signed by all members of the Board or of such committee, as
the case may be, and such written consent is filed with the minutes of the
proceedings of the Board of Directors or committee.

                  Section 11. Telephonic Meetings. Unless otherwise restricted
by the Articles of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.

                                       4



                  Section 12. Approval By Independent Directors. For all
purposes, a transaction which is subject to approval by a majority of the
Independent Directors shall be approved if such transaction is approved by a
majority of the Directors present and entitled to vote at a meeting at which a
quorum is present, provided that the Independent Directors voting to approve the
transaction constitute an absolute majority of all independent Directors serving
at such time.

                  Section 13. Duties of Independent Directors and/or Investment
Committee. The Independent Directors and/or the Investment Committee of the
corporation shall have the special duties described in this section.

                  (a) The Independent Directors and/or the Investment Committee
shall supervise the relationship of the corporation with the Advisor and shall
evaluate the capability and performance of the Advisor before entering into or
renewing any advisory agreement ("Advisory Agreement"). The criteria used to
evaluate the performance of the Advisor shall be set forth in the minutes of a
meeting of the Board of Directors. The Independent Directors and/or the
Investment Committee shall supervise the performance of the Advisor and the
compensation paid to it by the corporation to determine that the provisions of
any Advisory Agreement between the corporation and the Advisor are being carried
out. The Independent Directors and/or the Investment Committee shall determine
at least annually that the compensation which the corporation agrees to pay to
the Advisor is reasonable in relation to the nature and the quality of services
performed. In connection with the duties set forth in this subsection 13(a), the
Independent Directors shall evaluate any competitive relationship among the
Company, Beverly Enterprises and the Company's officers and directors affiliated
with Beverly Enterprises.

                  (b) The Independent Directors and/or the Investment Committee
shall review the corporation's investment policies at least annually to
determine that the policies are being followed by the corporation and are in the
best interests of its stockholders. The findings of the Independent Directors
and/or the Investment Committee shall be set forth in the minutes of meetings of
the Board of Directors. Such investment policies may be altered from time to
time by the Board of Directors with the consent of a majority of the Independent
Directors and/or the Investment Committee and without approval of the
stockholders upon a determination that such a change is in the best interests of
the corporation and the stockholders.

                  (c) The Independent Directors and/or the Investment Committee
shall determine, from time to time, but at least annually, that the total fees
and expenses of the corporation are reasonable in light of the investment
experience of the corporation, its net assets, its net income, and the fees and
expenses of other comparable advisers in real estate. The findings of the
Independent Directors and/or the Investment Committee shall be set forth in the
minutes of meetings of the Board of

                                       5



Directors.

         (d) A majority of the Independent Directors must approve all matters in
which a Beverly Enterprises related entity is involved, and must approve any
acquisition from or sale to any director, officer or employee of the Company, or
of the Advisor or any affiliate thereof, of any of the assets or other property
of the Company.

                  Section 14. General Powers of Directors. The Board of
Directors shall have the management of the business of the corporation, and,
subject to the restrictions imposed by law exercise all the powers of the
corporation.

                  Section 15. Specific Powers of Directors. Without prejudice to
such general powers, it hereby is expressly declared that the Directors shall
have the following powers:

                           (1) To make and change regulations, not inconsistent
                  with these Bylaws, for the management of the business and
                  affairs of the corporation.

                           (2) To purchase or otherwise acquire for the
                  corporation any property; rights or privileges which the
                  corporation is authorized to acquire.

                           (3) To pay for any property purchased for the
                  corporation, either wholly or partly in money, stock, bonds,
                  debentures or other securities of the corporation.

                           (4) To borrow money and make and issue notes, bonds
                  and other negotiable and transferable instruments, mortgages,
                  deeds of trust and trust agreements, and to do every act and
                  thing necessary to effectuate the same.

                           (5) To remove any officer for cause, or any officer,
                  other than the President, summarily, without cause, and, in
                  their discretion, from time to time to devolve the powers and
                  duties of any officer upon any other person for the time
                  being.

                           (6) To appoint and remove or suspend subordinate
                  officer or agents as they may deem necessary, and to determine
                  their duties, and to fix and from time to time to change their
                  salaries or remuneration, and to require security as and when
                  they think fit.

                           (7) To confer upon any officer of the corporation the
                  power to appoint, remove and suspend subordinate officers and
                  agents.

                                       6



                           (8) To determine who shall be authorized, on behalf
                  of the corporation, to make and sign bills, notes,
                  acceptances, endorsements, contracts and other instruments.

                           (9) To determine who shall be entitled, in the name
                  and on behalf of the corporation, to vote upon or to assign
                  and transfer any shares of stock, bonds or other securities of
                  other corporations held by this corporation.

                           (10) To delegate any of the powers of the Board, in
                  relation to the ordinary business of the corporation, to any
                  standing or special committee, or to any officer or agent
                  (with power to sub-delegate), upon such terms as they deem
                  fit.

                           (11) To call special meetings of the stockholders for
                  any purpose or purposes.

                           (12) To appoint the accountants and attorneys for the
                  corporation.

                  Section 16. Compensation. Directors shall receive a stated
salary for their services as Directors and, by resolution of the Board, a fixed
fee and expenses for attendance at each meeting.

                  Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, or otherwise, and as to Independent Directors, receiving compensation
therefor.

                                   ARTICLE IV

                                   COMMITTEES

                  Section 1. Appointments and Powers. The Board of Directors
may, by resolution or resolutions passed by a majority of the whole Board,
designate one or more committees. The Board of Directors may designate one or
more Directors as alternate members of a committee who may replace any absent or
disqualified member at any meeting of the committee. Such alternate members
shall not be counted for purposes of determining a quorum unless so appointed,
in which case they shall be counted in the place of the absent or disqualified
member. The committee, to the extent provided in said resolution or resolutions
or in these Bylaws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation and
may have power to authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in these Bylaws or as may be determined from time to
time by resolution adopted by the Board of Directors.

                                       7



                  Section 2. Minutes. Committees shall keep regular minutes of
their proceedings, and report the same to the Board of Directors when required.

                  Section 3. Audit Committee. The Audit Committee shall select
and engage in behalf of the corporation, and fix the compensation of, a firm of
certified public accountants whose duty it shall be to audit the books and
accounts of the corporation and its subsidiaries for the fiscal year in which
they are appointed, and who shall report to such Committee. The Audit Committee
shall confer with the auditors and shall determine, and from time to time shall
report to the Board of Directors upon the scope of the auditing of the books and
accounts of the corporation and its subsidiaries. The Audit Committee shall also
be responsible for determining that the business practices and conduct of
employees and other representatives of the corporation and its subsidiaries
comply with the policies and procedures of the corporation. None of the members
of the Audit Committee shall be officers or employees of the corporation.

                  Section 4. Investment Committee. The Investment Committee
shall consist solely of Independent Directors and shall have the power to
approve real estate acquisition and other investments in the best interests of
the corporation. The Investment Committee shall have such other powers as may be
delegated by the Board of Directors from time to time. The Investment Committee
shall also have the special duties described in ARTICLE III, SECTION 13.

                                    ARTICLE V

                                    OFFICERS

                  Section 1. Officers. The officers shall be elected at the
first meeting of the Board of Directors after each annual meeting of
stockholders. The Directors shall elect a Chairman, a Chief Executive Officer, a
President, a Secretary and a Treasurer and one or more Vice Presidents as they
may deem proper. Any person may hold two or more offices.

                  The Board of Directors may appoint such other officers and
agents as it may deem advisable, who shall hold office for such terms and shall
exercise such powers and perform such duties as shall from time to time be
determined by the Board of Directors.

                  Section 2. Chairman. The Chairman, if one be elected, shall
preside at all meetings of the Board of Directors and stockholders, and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.

                  Section 3. Chief Executive Officer. The Chief Executive
Officer

                                       8



shall have the general powers and duties of supervision and management usually
vested in the office of Chief Executive Officer of a corporation. He shall have
general supervision, direction and control of the business of the corporation.
Except as the Board of Directors shall authorize the execution thereof in some
other manner, he shall execute bonds, mortgages and other contracts on behalf of
the corporation, and he shall cause the corporate seal to be affixed to any
instrument requiring it, and when so affixed the seal shall be attested by the
Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer.

                  Section 4. President. The President shall have the general
powers and duties of supervision and management usually vested in the office of
President of a corporation. He shall have general supervision, direction and
control of the business of the corporation. Except as the Board of Directors
shall authorize the execution thereof in some other manner, he shall execute
bonds, mortgages and other contracts on behalf of the corporation, and he shall
cause the corporate seal to be affixed to any instrument requiring it, and when
so affixed the seal shall be attested by the Secretary or Treasurer, or an
Assistant Secretary or an Assistant Treasurer.

                  Section 5. Vice Presidents. Each Vice President shall have
such powers and shall perform such duties as are usually vested in the office of
Vice President of a corporation. He shall have general supervision, direction
and control of the business of the corporation. Except as the Board of Directors
shall authorize the execution thereof in some other manner, he shall execute
bonds, mortgages and other contracts on behalf of the corporation, and he shall
cause the corporate seal to be affixed to any instrument requiring it, and when
so affixed the seal shall be attested by the Secretary or Treasurer, or an
Assistant Secretary or an Assistant Treasurer.

                  Section 6. Secretary. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors, and all other
notices required by law or by these Bylaws, and, in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman, the Chief Executive Officer, the President,
the Board of Directors, or the stockholders, upon whose requisition the meeting
is called as provided in these Bylaws. He shall record all proceedings of
meetings of the stockholders and of the Board of Directors in a book to be kept
for that purpose, and shall perform such other duties as may be assigned to him
by the directors or the President. He shall have custody of the corporate seal,
and shall affix said seal to all instruments requiring it, when authorized by
the Board of Directors or the President, and shall attest the same.

                  Section 7. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
corporation in such depositories as

                                       9



may be designated by the Board of Directors.

                  The Treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors or the President, taking proper
vouchers for such disbursements. He shall render to the President and the Board
of Directors, at the regular meetings of the Board, or whenever they may request
it, an accounting of all his transactions as Treasurer, and of the financial
condition of the corporation.

                  If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties, in such amount and
with such surety as the Board shall prescribe.

                  Section 8. Assistant Secretaries and Assistant Treasurers.
Assistant Secretaries and Assistant Treasurers, if any, shall be appointed by
the Chief Executive Officer, the President or Vice President and shall have such
powers and shall perform such duties as shall be assigned to them, respectively,
by the Secretary and by the Treasurer.

                                   ARTICLE VI

                       RESIGNATIONS; FILLING OF VACANCIES;
                        INCREASE IN NUMBER OF DIRECTORS;
                               REMOVAL FROM OFFICE

                  Section 1. Resignations. Any Director, member of a committee,
or other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and, if no time be
specified, at the time of its receipt by the Board of Directors, the President
or the Secretary. The acceptance of a resignation shall not be necessary to make
it effective.

                  Section 2. Filling of Vacancies. If the office of any officer,
Director or member of a committee becomes vacant, the remaining Directors in
office, although less than a quorum, may appoint, by a majority vote, any
qualified person to fill such vacancy, who shall hold office for the unexpired
term of his predecessor, or until his successor is elected and shall have
qualified. Independent Directors shall fill vacancies among the Independent
Directors' positions. Each Independent Director shall hold office for the
unexpired term of his predecessor, or until his successor is elected and
qualified.

                  Any vacancy occurring by reason of an increase in the number
of Directors may be filled by action of a majority of the entire Board, for a
term of office

                                       10



continuing only until the next election by the stockholders of Directors within
the Group to which the new Director is appointed, or may be filled by the
affirmative vote of the holders of a majority of the shares then entitled to
vote at an election of Directors.

                  Section 3. Removal From Office. At a meeting of stockholders
expressly called for such purpose, any or all members of the Board of Directors
may be removed, with or without cause, by a vote of the holders of not less than
two-thirds (2/3) of the issued and outstanding capital stock entitled to vote
thereon or by a unanimous vote of all other members of the Board of Directors,
and said stockholders may elect a successor or successors to fill any resulting
vacancies, for the unexpired terms of the removed Directors.

                  Any officer or agent, or member of a committee elected or
appointed by the Board of Directors, may be removed by said Board whenever, in
its judgment, the best interests of the corporation shall be served thereby.

                                   ARTICLE VII

                                  CAPITAL STOCK

                  Section 1. Certificates of Stock. Certificates of stock,
numbered, and with the seal of the Corporation affixed, signed by the Chairman,
the Chief Executive Officer, the President or a Vice President, and the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
shall be issued to each stockholder, certifying to the number of shares owned by
him in the corporation. Whenever any certificate is countersigned, or otherwise
authenticated by a transfer agent or registrar, the signatures of such Chairman,
Chief Executive Officer, President or Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer may be facsimiles.

                  In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of its issue.

                  Section 2. Lost Certificates. A new certificate of stock may
be issued in place of any certificate theretofore issued by the corporation and
alleged to have been lost or destroyed, and the Directors may, at their
discretion, request the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
but not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate.

                  Section 3. Transfer of Shares. Subject to the restrictions
that may

                                       11



be contained in the Articles of Incorporation, the shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized representatives.

                  Section 4. Dividends. Subject to the provisions of the
Articles of Incorporation and the laws of the State of Maryland, the Board of
Directors may, at any regular or special meeting, declare dividends upon the
capital stock of the corporation, as and when they may deem expedient.

                                  ARTICLE VIII

                            MISCELLANEOUS PROVISIONS

                  Section 1. Corporate Seal. The Board of Directors shall adopt
a common seal of the corporation. Said seal shall be circular in form and shall
contain the name of the corporation, Nationwide Health Properties, Inc., the
date of its organization, and the words: "Incorporated-Maryland." It may be used
by causing it or a facsimile thereof to be impressed, affixed, or otherwise
reproduced.

                  Section 2. Fiscal Year. The fiscal year of the corporation
shall end on the 31st day of December of each calendar year.

                  Section 3. Checks, Drafts, Notes. All checks, drafts, or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation, and in such manner as from time to time
shall be determined by resolution of the Board of Directors.

                  Section 4. Corporate Records. The corporation shall keep
correct and complete books of account and minutes of the proceedings of its
stockholders and Directors.

                  The corporation shall keep and maintain at its principal
offices a certified copy of its Articles of Incorporation and all amendments
thereto, a certified copy of its Bylaws and all amendments thereto, a stock
ledger or duplicate stock ledger, revised annually, containing the names,
alphabetically arranged, of all stockholders, their residence addresses, and the
number of shares held by them, respectively. In lieu of the stock ledger or
duplicate stock ledger, a statement may be filed in the principal office stating
the name of the custodian of the stock ledger or duplicate stock ledger, and the
present and complete post office address (including street and number, if any)
where such stock ledger or duplicate stock ledger is kept.

                  The Independent Directors shall take all reasonable steps to
assure that a full and correct annual statement of the affairs of the
corporation is prepared annually,

                                       12



including a balance sheet and a financial statement of operations for the
preceding fiscal year which shall be certified by independent certified public
accountants, and distributed to stockholders within 120 days after the close of
the corporation's fiscal year and a reasonable period of time prior to the
annual meeting of stockholders. Such annual statement shall also be submitted at
the annual meeting and shall be filed within twenty (20) days thereafter at the
principal office of the corporation. The Independent Directors shall also be
responsible for scheduling the annual meeting of stockholders.

                  Section 5. Notice and Waiver of Notice. Whenever, pursuant to
the laws of the State of Maryland or these Bylaws, any notice is required to be
given, personal notice is not meant unless expressly so stated, and any notice
so required shall be deemed to be sufficient if given by depositing the same in
the United States mail, postage prepaid, addressed to the person entitled
thereto at his address as it appears on the records of the corporation, and such
notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.

                  Any notice required to be given may be waived, in writing by
the person or persons entitled thereto, whether before or after the time stated
therein.

                  Section 6. Inspectors. The Board of Directors may, in advance
of any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting may,
and on the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them. No
Director or candidate for the office of Director shall act as inspector of an
election of Directors. Inspectors need not be stockholders.

                  Section 7. Certain Policies of the Corporation.
Notwithstanding any other provisions of these Bylaws, the corporation shall not
engage in any of the following activities:

                  (i) investing in any junior mortgage loan unless by appraisal
or other

                                       13



method the Independent Directors determine that (a) capital invested in any such
loan is adequately secured on the basis of the equity of the borrower in the
property underlying such investment and the ability of the borrower to repay the
mortgage loan or (b) such loan is a financing device entered into by the Company
to establish the priority of its capital investment over the capital invested by
others investing with the Company in a real estate project;

                  (ii) investing in commodities or commodity future contracts
(other than interest rate futures, when used solely for hedging purposes);

                  (iii) investing more than 1% of the Company's total assets in
contracts for the sale of real estate unless such contracts are recordable in
the chain of title;

                  (iv) issuing securities that are redeemable at the option of
the holders thereof;

                  (v) granting warrants or options to purchase voting capital
stock of the Company unless such warrants or options (a) are issued at an
exercise price greater than or equal to the fair market value of the voting
capital stock of the Company on the date of the grant and for consideration
(including services) that in the judgment of a majority of the Independent
Directors has a market value at least equal to the value of the warrant or
option on the date of grant, (b) are exercisable within five years from the date
of grant and (c) when aggregated with all other outstanding options and warrants
are less than 10% of the then outstanding shares of the Company's voting capital
stock on the date of grant; provided that terms of warrants or options that are
issued ratably to the holders of all voting capital stock or as part of a
financing arrangement need not meet the above restrictions;

                  (vi) holding equity investments in unimproved, non-income
producing real property; except such properties as are currently undergoing
development or are presently intended to be developed within one year; together
with mortgage loans on such property (other then first mortgage development
loans), aggregating to more than 10% of the Company's assets;

                  (vii) engaging in trading (as compared with investment
activities) or engaging in the underwriting of or distributing as agent the
securities issued by others;

                  (viii) making secured and unsecured borrowings which in the
aggregate exceed 300% of the net assets of the Company; unless such borrowing is
approved by a majority of the Independent Directors;

                  (ix) undertaking any activity that would disqualify the
Company as a

                                       14



real estate investment trust under the provisions of the Code as long as a real
estate investment trust is accorded substantially that same treatment or
benefits under the United States tax laws from time to time in effect as under
Sections 856-860 of the Code at the date of adoption of the Company's Bylaws;
and

                  (x) acquiring any real property unless the consideration paid
for such real property is based on the fair market value of the property as
determined by a majority of the directors.

                                   ARTICLE IX

                              AMENDMENTS TO BYLAWS

                  Section 1. Amendment of Shareholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote.

                  Section 2. Amendment by Directors. Subject to the right of the
shareholders as provided in Section 1 of this Article IX, to adopt, amend, or
repeal Bylaws, Bylaws may be adopted, amended, or repealed by the Board of
Directors; provided, however, that the provisions of Sections 2, 12 and 13 of
Article III and of Section 4 of Article IV with respect to Independent Directors
may not be amended by the Board of Directors, and provided further that the
Board of Directors may adopt an amendment of a Bylaw changing the authorized
number of directors only within the limits specified in the Articles of
Incorporation or in Section 1 of Article III of these Bylaws.

                                       15



                                    ARTICLE X

                    INDEMNIFICATION OF OFFICERS AND DIRECTORS

         Section 1. Indemnification. The corporation shall indemnify and hold
harmless, and shall pay expenses incurred by or satisfy a judgement or fine
levied against, each officer, director and other person, in the manner and to
the full extent permitted by the General Corporation Law of the State of
Maryland.

         Section 2. Provisions Not Exclusive. This Article shall not be
construed as a limitation upon the power of the corporation to enter into
contracts or undertakings of indemnity with a director, officer, employee or
agent of the corporation, nor shall it be construed as a limitation upon any
other rights to which a person seeking indemnification may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to actions in his official capacity and as to action in another capacity while
holding office.

                                       16



                            CERTIFICATE OF SECRETARY

         I, DON M. PEARSON, Secretary of Nationwide Health Properties, Inc.,
hereby certify that the attached Bylaws, as Amended and Restated, comprising 16
pages, constitute the Bylaws of this corporation as Amended and Restated, and
the same are in full force and effect as of this 28th day of January, 2003.

         IN WITNESS WHEREOF, I have executed this certificate and caused the
seal of said corporation to be affixed hereto as of this 28th day of January,
2003.

                                                /s/ DON M. PEARSON
                                                ------------------------

(SEAL)

                                       17

EX-10.4

                                                                    EXHIBIT 10.4

================================================================================

                                CREDIT AGREEMENT

                                   dated as of

                                November 8, 2002

                                      among

                       NATIONWIDE HEALTH PROPERTIES, INC.,

                                  as Borrower,

                            The LENDERS Party Hereto,

                              JPMORGAN CHASE BANK,

                            as Administrative Agent,

                                       and

                     J.P. MORGAN SECURITIES INC. and BANC OF
                            AMERICA SECURITIES LLC,

                  as Joint Bookrunners and Joint Lead Arrangers

                               -------------------

                                  $150,000,000

                               -------------------

================================================================================



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
ARTICLE I. DEFINITIONS ...................................................    1

SECTION 1.01.  Defined Terms .............................................    1
SECTION 1.02.  Classification of Loans and Borrowings ....................   19
SECTION 1.03.  Terms Generally ...........................................   19
SECTION 1.04.  Accounting Terms; GAAP ....................................   19

ARTICLE II. THE CREDITS ..................................................   19

SECTION 2.01.  The Commitments ...........................................   19
SECTION 2.02.  Loans and Borrowings ......................................   20
SECTION 2.03.  Requests for Revolving Borrowings .........................   20
SECTION 2.04.  Competitive Bid Procedure .................................   21
SECTION 2.05.  [Intentionally Deleted] ...................................   22
SECTION 2.06.  Letters of Credit .........................................   22
SECTION 2.07.  Funding of Borrowings .....................................   25
SECTION 2.08.  Interest Elections ........................................   26
SECTION 2.09.  Termination, Reduction and Extension of the Commitments ...   27
SECTION 2.10.  Repayment of Loans; Evidence of Debt ......................   28
SECTION 2.11.  Prepayment of Loans .......................................   29
SECTION 2.12.  Fees ......................................................   30
SECTION 2.13.  Interest ..................................................   31
SECTION 2.14.  Alternate Rate of Interest ................................   31
SECTION 2.15.  Increased Costs ...........................................   32
SECTION 2.16.  Break Funding Payments ....................................   33
SECTION 2.17.  Taxes .....................................................   33
SECTION 2.18.  Payments Generally; Pro Rata Treatment; Sharing of Setoff..   34
SECTION 2.19.  Mitigation Obligations; Replacement of Lenders ............   36

ARTICLE III. REPRESENTATIONS AND WARRANTIES ..............................   36

SECTION 3.01.  Organization; Powers ......................................   36
SECTION 3.02.  Authorization; Enforceability .............................   36
SECTION 3.03.  Governmental Approvals; No Conflicts ......................   36
SECTION 3.04.  Financial Condition; No Material Adverse Change ...........   37
SECTION 3.05.  Properties ................................................   37
SECTION 3.06.  Litigation and Environmental Matters ......................   37
SECTION 3.07.  Compliance with Laws and Agreements .......................   38
SECTION 3.08.  Investment and Holding Company Status .....................   38
SECTION 3.09.  Taxes .....................................................   38
SECTION 3.10.  ERISA .....................................................   38
SECTION 3.11.  Disclosure ................................................   38
SECTION 3.12.  Use of Credit .............................................   38
SECTION 3.13.  Material Agreements and Liens .............................   38
SECTION 3.14.  Capitalization ............................................   39
SECTION 3.15.  Subsidiaries and Investments ..............................   39
SECTION 3.16.  Real Property .............................................   39
SECTION 3.17.  Solvency ..................................................   39
SECTION 3.18.  No Default ................................................   40
SECTION 3.19.  Insurance .................................................   40
SECTION 3.20.  Organizational Documents ..................................   40

                                      -i-


                                                                            Page
                                                                            ----
SECTION 3.21.  Executive Offices; Places of Organization .................   40
SECTION 3.22.  Securities Act ............................................   40
SECTION 3.23.  REIT Status ...............................................   40
SECTION 3.24.  Leases ....................................................   40
SECTION 3.25.  Brokers ...................................................   40

ARTICLE IV. CONDITIONS ...................................................   40

SECTION 4.01.  Effective Date ............................................   40
SECTION 4.02.  Each Credit Event .........................................   42

ARTICLE V. AFFIRMATIVE COVENANTS .........................................   42

SECTION 5.01.  Financial Statements and Other Information ................   42
SECTION 5.02.  Notices of Material Events ................................   43
SECTION 5.03.  Existence; Conduct of Business ............................   44
SECTION 5.04.  Payment of Obligations ....................................   44
SECTION 5.05.  Maintenance of Properties; Insurance ......................   44
SECTION 5.06.  Books and Records; Inspection Rights ......................   44
SECTION 5.07.  Compliance with Laws ......................................   45
SECTION 5.08.  Use of Proceeds and Letters of Credit .....................   45
SECTION 5.09.  Further Assurances ........................................   45
SECTION 5.10.  REIT Status ...............................................   45
SECTION 5.11.  Hazardous Materials .......................................   45

ARTICLE VI. NEGATIVE COVENANTS ...........................................   45

SECTION 6.01.  Indebtedness ..............................................   45
SECTION 6.02.  Liens .....................................................   45
SECTION 6.03.  Fundamental Changes .......................................   46
SECTION 6.04.  Investments ...............................................   46
SECTION 6.05.  Restricted Payments .......................................   47
SECTION 6.06.  Transactions with Affiliates ..............................   47
SECTION 6.07.  Certain Financial Covenants ...............................   48
SECTION 6.08.  Organizational Documents ..................................   48
SECTION 6.09.  Fiscal Year ...............................................   48
SECTION 6.10.  Senior Management .........................................   48
SECTION 6.11.  Dispositions ..............................................   49

ARTICLE VII. EVENTS OF DEFAULT ...........................................   49

ARTICLE VIII. THE ADMINISTRATIVE AGENT ...................................   51

ARTICLE IX. MISCELLANEOUS ................................................   52

SECTION 9.01.  Notices ...................................................   52
SECTION 9.02.  Waivers; Amendments .......................................   53
SECTION 9.03.  Expenses; Indemnity; Damage Waiver ........................   53
SECTION 9.04.  Successors and Assigns ....................................   54
SECTION 9.05.  Survival ..................................................   57
SECTION 9.06.  Counterparts; Integration; Effectiveness ..................   57
SECTION 9.07.  Severability ..............................................   57
SECTION 9.08.  Right of Setoff ...........................................   57

                                      -ii-



                                                                            Page
                                                                            ----
SECTION 9.09.  Governing Law; Jurisdiction; Etc ..........................   57
SECTION 9.10.  WAIVER OF JURY TRIAL ......................................   58
SECTION 9.11.  Headings ..................................................   58
SECTION 9.12.  Confidentiality ...........................................   58
SECTION 9.13.  Additional Commitments ....................................   59

                                     -iii-



SCHEDULE 2.01       -       Commitments
SCHEDULE 3.06       -       Litigation and Environmental Disclosed Matters
SCHEDULE 3.13       -       Material Agreements and Liens
SCHEDULE 3.14       -       Stock Options
SCHEDULE 3.15       -       Subsidiaries and Investments
SCHEDULE 3.16       -       Real Property
SCHEDULE 3.24       -       Leases
SCHEDULE 4.01(e) -  Organizational Documents


EXHIBIT A      -    Form of Assignment and Assumption
EXHIBIT B-1    -    Form of Revolving Note
EXHIBIT B-2    -    Form of Competitive Note
EXHIBIT C      -    Form of Revolving Borrowing Request
EXHIBIT D      -    Form of Revolving Interest Election Request
EXHIBIT E      -    Form of Competitive Bid Request
EXHIBIT F      -    Form of Opinion of Counsel to the Borrower
EXHIBIT G           Form of Opinion of Special New York Counsel to the Borrower
EXHIBIT H      -    Form of Compliance Certificate

                                      -iv-




          CREDIT AGREEMENT dated as of November 8, 2002, between NATIONWIDE
HEALTH PROPERTIES, INC., the LENDERS party hereto, and JPMORGAN CHASE BANK, as
Administrative Agent.

          The Borrower (as hereinafter defined) has requested that the Lenders
(as hereinafter defined) extend credit to it in an aggregate principal or face
amount not exceeding $150,000,000 (subject to increase up to a maximum aggregate
amount of $200,000,000 in accordance with the provisions of Section 9.13) at any
                                                            ------------
one time outstanding. The Lenders are prepared to extend such credit upon the
terms and conditions hereof, and, accordingly, the parties hereto agree as
follows:

                                   ARTICLE I.

                                   DEFINITIONS
                                   -----------

     SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
                   -------------
have the meanings specified below:

          "ABR", when used in reference to any Loan or Borrowing, refers to
           ---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.

          "Accepting Lender" has the meaning assigned to such term in Section
           ----------------                                           -------
9.13.
- ----

          "Additional Commitment Amount" has the meaning assigned to such term
           ----------------------------
in Section 9.13.
   ------------

          "Additional Syndication Notice" has the meaning assigned to such term
           -----------------------------
in Section 9.13.
   ------------

          "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
           ------------------
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.

          "Administrative Agent" means JPMorgan, in its capacity as
           --------------------
administrative agent for the Lenders hereunder.

          "Administrative Agent's Account" means an account designated by the
           ------------------------------
Administrative Agent in a notice to the Borrower and the Lenders.

          "Administrative Questionnaire" means an Administrative Questionnaire
           ----------------------------
in a form supplied by the Administrative Agent.

          "Affiliate" means, with respect to a specified Person, another Person
           ---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

          "Aggregate Investment Value" means for each permitted Investment
           --------------------------
identified in Section 6.04 of this Agreement (and any related Property referred
              ------------
to in such Section), the greater of (i) the purchase price of such Investment
(and related Property); or (ii) that portion of the Capitalization Value
represented by the relevant Investment (and related Property) as calculated in
the most recent Measuring Period.

          "Alternate Base Rate" means, for any day, a rate per annum equal to
           -------------------
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate for such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

          "Applicable Percentage" means, with respect to any Lender, the
           ---------------------

percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the

                                Credit Agreement
                                ----------------


                                       -2-


Applicable Percentages shall be determined based upon the Commitments most
recently in effect, giving effect to any assignments.

          "Applicable Rate" means, for any day, with respect to any ABR Loan or
           ---------------
Eurodollar Revolving Loan, or with respect to the facility fees payable
hereunder, as the case may be, the applicable rate per annum set forth below
under the caption "ABR Spread", "Eurodollar Spread" or "Facility Fee Rate", as
the case may be, based upon the ratings by Moody's, Fitch and S&P, respectively,
applicable on such date to the Index Debt:



================================================================================
    Index Debt Ratings:           ABR          Eurodollar        Facility Fee
    ------------------            ---          ----------        ------------
     S&P/Moody's/Fitch          Spread           Spread              Rate
                                ------           ------              ----
                                                        
- --------------------------------------------------------------------------------
         Category 1
         ----------
     A-/A3/A- or better         0.00%            0.825%              0.175%
- --------------------------------------------------------------------------------
         Category 2
         ----------
       BBB+/Baa1/BBB+           0.00%            0.90%               0.20%
- --------------------------------------------------------------------------------
         Category 3
         ----------
        BBB/Baa2/BBB            0.00%            1.00%               0.25%
- --------------------------------------------------------------------------------
         Category 4
         ----------
       BBB-/Baa3/BBB-           0.00%            1.20%               0.30%
- --------------------------------------------------------------------------------
         Category 5
         ----------
  Not rated or less than:       0.00%            1.50%               0.35%
       BBB-/Baa3/BBB-
================================================================================


          For purposes of the foregoing, (i) if any of Moody's, Fitch or S&P
shall not have in effect a rating for the Index Debt (other than by reason of
the circumstances referred to in the last sentence of this definition), then
such rating agency shall be deemed to have established a rating in Category 5;
(ii) if only two of the ratings established or deemed to have been established
by Moody's, Fitch and S&P for the Index Debt shall fall within the same
Category, the Applicable Rate shall be based on the two rating agencies that are
in agreement; (iii) if none of the ratings established or deemed to have been
established by Moody's, Fitch and S&P for the Index Debt shall fall within the
same Categories, the Applicable Rate shall be based on the lower of the two
highest ratings; and (iv) if the ratings established or deemed to have been
established by Moody's, Fitch and S&P for the Index Debt shall be changed (other
than as a result of a change in the rating system of Moody's, Fitch or S&P),
such change shall be effective as of the date on which it is first announced by
the applicable rating agency, irrespective of when notice of such change shall
have been furnished by the Borrower to the Agent and the Lenders pursuant to
Section 5.01 or otherwise. Each change in the Applicable Rate shall apply during
- ------------
the period commencing on the effective date of such change and ending on the
date immediately preceding the effective date of the next such change. If the
rating system of Moody's, Fitch or S&P shall change, or if either such rating
agency shall cease to be in the business of rating corporate debt obligations,
the Borrower and the Lenders shall negotiate in good faith to amend this
definition to reflect such changed rating system or the unavailability of
ratings from such rating agency and, pending the effectiveness of any such
amendment, the Applicable Rate shall be determined by reference to the rating
most recently in effect prior to such change or cessation.

          "Approved Fund" has the meaning assigned to such term in Section 9.04.
           -------------                                           ------------

          "Arrangers" means J.P. Morgan Securities Inc. and Banc of America
           ---------
Securities LLC.

          "Assignment and Assumption" means an assignment and assumption entered
           -------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
            ------------
of Exhibit A or any other form approved by the Administrative Agent.
   ---------

          "Availability Period" means the period from and including the
           -------------------
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.

          "Board" means the Board of Governors of the Federal Reserve System of
           -----
the United States of America.

                                Credit Agreement
                                ----------------



                                      -3-

          "Borrower" means Nationwide Health Properties, Inc., a Maryland
           --------
corporation.

          "Borrowing" means (a) Revolving Loans of the same Type, made,
           ---------
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, or (b) a Competitive Loan or
group of Competitive Loans of the same Type made on the same date and as to
which a single Interest Period is in effect.

          "Bullet Payment" shall mean any payment of the entire unpaid balance
           --------------
of any Indebtedness at its final maturity other than the final payment with
respect to a loan that is fully amortized over its term.

          "Business Day" means any day that is not a Saturday, Sunday or other
          ------------
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Borrowing,
continuation, a payment or prepayment of principal of or interest on, or
Interest Period for, a Eurodollar Loan, or a notice by a Borrower with respect
to any such Borrowing, continuation, payment, prepayment or Interest Period, the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.

          "Capitalization Value" means, at any date, solely with respect to the
           --------------------
Nationwide Entities, the sum of (without duplication):

          (a) EBITDA for the most recent Measuring Period divided by (b) 11%
     (expressed as a decimal);

     plus

          (b) all Cash and Cash Equivalents held by any Nationwide Entity at
     such time, and, in the case of Cash and Cash Equivalents not Wholly-Owned,
     multiplied by a percentage (expressed as a decimal) equal to the percentage
     of the total outstanding Equity Interest held by any Nationwide Entity
     holding title to such Cash and Cash Equivalents;

provided, however, (i) newly acquired Properties shall be valued at acquisition
cost for the first three fiscal quarters of ownership (ii) the determination of
Capitalization Value for any period shall not include any Property (or any
portion of EBITDA relating to any such Property) that has been sold or otherwise
disposed of at any time prior to or during such period.

          "Capitalized Loan Fees" means, with respect to the Nationwide
           ---------------------
Entities, and with respect to any period, any upfront, closing or similar fees
paid by such Person in connection with the incurrence or refinancing of
Indebtedness during such period that are capitalized on the balance sheet of
such Person.

          "Capital Lease Obligations" of any Person means the obligations of
           -------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

          "Cash and Cash Equivalents" means, with respect to any Person, (a)
           -------------------------
cash and (b) any unrestricted Investment that qualifies as a Permitted
Investment (other than, in either case, Restricted Cash).

          "Cash Flow" means, for any period, Net Income plus Depreciation and
           ---------
Amortization Expense, increases in deferred taxes and other non-cash charges and
expenses which were deducted in determining Net Income of the Consolidated
Entities determined on a consolidated basis, as determined in accordance with
GAAP, and including the Consolidated Entities pro rata share of the net income
(or loss) of any Joint Venture in which such Consolidated Entity owns a direct
or indirect Equity Interest.

          "Change in Control" means (a) the acquisition of ownership, directly
           -----------------
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of Equity
Interest representing

                                Credit Agreement
                                ----------------



                                      -4-

more than 20% of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interest of the Borrower; (b) occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were not approved in advance in writing by the Required Lenders; or
(c) the acquisition of direct or indirect Control of the Borrower by any Person
or group.

          "Change in Law" means (a) the adoption of any law, rule or regulation
           -------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Lender (or, for purposes of Section 2.15(b), by any lending office of such
                            ------------
Lender or by such Lender's or the Issuing Lender's holding company, if any) with
any request, guideline or directive (whether or not having the force of law) of
any Governmental Authority made or issued after the date of this Agreement.

          "Class", when used in reference to any Loan or Borrowing, refers to
           -----
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or Competitive Loans.

          "Code" means the Internal Revenue Code of 1986, as amended from time
           ----
to time, and the regulations promulgated and the rulings issued thereunder.

          "Commencement of Construction" means (a) with respect to any
           ----------------------------
unimproved Real Property, the commencement of material on-site work (including
grading) to initially construct a Healthcare Property, (b) with respect to any
improved Real Property which is not then a Healthcare Property, the commencement
of material on-site work to convert such Real Property to a Healthcare Property
or (c) with respect to any improved Real Property which is already a Healthcare
Property, the commencement of material reconstruction, restoration or renovation
with respect to such Healthcare Property in a manner that results in more than
twenty-five percent (25%) of the beds located in such Healthcare Property being
unusable for a period of time in excess of thirty (30) days.

          "Commitment" means, with respect to each Lender, the commitment of
           ----------
such Lender to make Revolving Loans and to acquire participations in Letters of
Credit hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Revolving Credit Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.09 or 2.11(c) and (b)
                                                 ------------    -------
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment
                   ------------
is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to
                -------------
which such Lender shall have assumed its Commitment, as applicable. The initial
aggregate amount of the Lenders' Commitments is $150,000,000, subject to
increase up to a maximum aggregate amount of $200,000,000 in accordance with the
provisions of Section 9.13.

          "Competitive", when used in reference to any Loan or Borrowing, refers
           -----------
to whether such Loan, or the Loans constituting such Borrowing, are made
pursuant to Section 2.04.
            ------------

          "Competitive Bid" means an offer by a Lender to make a Competitive
           ---------------
Loan in accordance with Section 2.04.
                        ------------

          "Competitive Bid Rate" means, with respect to any Competitive Bid, the
           --------------------
Margin offered by the Lender making such Competitive Bid.

          "Competitive Bid Request" means a request by the Borrower for
           -----------------------
Competitive Bids in accordance with Section 2.04.
                                    ------------

          "Competitive Loan" means a Loan made pursuant to Section 2.04.
           ----------------                                ------------

          "Competitive Notes" means the promissory notes provided for in Section
           -----------------                                             -------
2.10(f)(ii) and all promissory notes delivered in substitution or exchange
- -----------
therefor, in each case as the same shall be Modified and in effect from time to
time.

          "Compliance Certificate" shall mean a certificate in the form of that
           ----------------------
attached to the Credit

                                Credit Agreement
                                ----------------



                                      -5-

Agreement as Exhibit H, with such changes thereto as the Administrative Agent
             ---------
may from time to time reasonably request.

          "Consolidated Entities" means, collectively, (a) the Borrower, (b) the
           ---------------------
Borrower's Subsidiaries; and (c) any other Person the accounts of which are
consolidated with those of the Borrower in the consolidated financial statements
of the Borrower in accordance with GAAP.

          "Contingent Obligation" as to any Person means, without duplication,
           ---------------------
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation required
to be disclosed in the footnotes to such Person's financial statements in
accordance with GAAP, guaranteeing partially or in whole any Non-Recourse
Indebtedness, lease, dividend or other obligation, exclusive of contractual
indemnities (including, without limitation, any indemnity or price-adjustment
provision relating to the purchase or sale of securities or other assets), of
such Person or of any other Person. The amount of any Contingent Obligation
described in clause (ii) shall be deemed to be (a) with respect to a guaranty of
interest or interest and principal, or operating income guaranty, the sum of all
payments required to be made thereunder (which in the case of an operating
income guaranty shall be deemed to be equal to the debt service for the note
secured thereby), calculated at the interest rate applicable to such
Indebtedness, through (1) in the case of an interest or interest and principal
guaranty, the stated date of maturity of the obligation (and commencing on the
date interest could first be payable thereunder), or (2) in the case of an
operating income guaranty, the date through which such guaranty will remain in
effect, and (b) with respect to all guarantees not covered by the preceding
clause (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as recorded on the
balance sheet and on the footnotes to the most recent financial statements of
the applicable Person required to be delivered pursuant hereto. Notwithstanding
anything contained herein to the contrary, guarantees of completion and
non-recourse carve outs in secured loans shall not be deemed to be Contingent
Obligations unless and until a claim for payment has been made thereunder, at
which time any such guaranty of completion shall be deemed to be Indebtedness in
an amount equal to any such claim. Subject to the preceding sentence, (i) in the
case of a joint and several guaranty given by such Person and another Person
(but only to the extent such guaranty is recourse, directly or indirectly to the
applicable Borrower Party or their respective Subsidiaries), the amount of the
guaranty shall be deemed to be 100% thereof unless and only to the extent that
(X) such other Person has delivered cash or Cash Equivalents to secure all or
any part of such Person's guaranteed obligations or (Y) such other Person holds
an investment grade credit rating from either Moody's or S&P, and (ii) in the
case of a guaranty (whether or not joint and several) of an obligation otherwise
constituting Indebtedness of such Person, the amount of such guaranty shall be
deemed to be only that amount in excess of the amount of the obligation
constituting Indebtedness of such Person. Notwithstanding anything contained
herein to the contrary, "Contingent Obligations" shall not be deemed to include
guarantees of loan commitments or of construction loans to the extent the same
have not been drawn.

          "Control" means the possession, directly or indirectly, of the power
           -------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
 -----------       ----------

          "Default" means any event or condition which constitutes an Event of
           -------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.

          "Depreciation and Amortization Expense" means (without duplication),
           -------------------------------------
for any period, the sum for such period of (i) total depreciation and
amortization expense, whether paid or accrued, of the Consolidated Entities,
plus (ii) any Consolidated Entity's pro rata share of depreciation and
amortization expenses of Joint Ventures in which a Consolidated Entity owns a
direct or indirect Equity Interest. For purposes of this definition, the
Consolidated Entities' pro rata share of depreciation and amortization expense
of any Joint Venture in which a Consolidated Entity owns a direct or indirect
Equity Interest shall be deemed equal to the product of (i) the depreciation and
amortization expense of such Joint Venture, multiplied by (ii) the percentage of
the total outstanding Equity Interest of such Person held directly or indirectly
by any Consolidated Entity, expressed as a decimal.

                                Credit Agreement
                                ----------------



                                      -6-

          "Disclosed Matters" means (a) the actions, suits and proceedings and
           -----------------
(b) the environmental matters disclosed in Schedule 3.06.
                                           -------------

          "Disposition" means the sale, conveyance, pledge, hypothecation,
           -----------
ground lease, encumbrance, creation of a security interest with respect to, or
other transfer, whether voluntary or involuntary, direct or indirect, of any
legal or beneficial interest in a Property, including any sale, conveyance,
pledge, hypothecation, ground lease, encumbrance, creation of a security
interest with respect to, or other transfer, at any tier, of any ownership
interest in any Nationwide Entity; provided, however, that Disposition shall not
include any Permitted Encumbrances.

          "Disqualified Capital Stock" shall mean with respect to any Person any
           --------------------------
Equity Interest of such Person that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or
otherwise (including upon the occurrence of any event), is required to be
redeemed or is redeemable for cash at the option of the holder thereof, in whole
or in part (including by operation of a sinking fund), or is exchangeable for
Indebtedness (other than at the option of such Person), in whole or in part, at
any time.

          "dollars" or "$" refers to lawful money of the United States of
           -------      -
America.


          "EBITDA" means, for a Measuring Period, solely with respect to the
           ------
Nationwide Entities, (i) Net Income, plus (without duplication) (A) Interest
Expense, (B) Tax Expense, and (C) Depreciation and Amortization Expense, in each
case for such period.

          "Effective Date" means the date on which the conditions specified in
           --------------
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
- ------------                                             ------------

          "Environmental Laws" means all laws, rules, regulations, codes,
           ------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material.

          "Environmental Liability" means any liability, contingent or otherwise
           -----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities, and including any Lien filed against any Real Property
in favor of any governmental entity), of the Borrower or any Subsidiary Entity
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

          "Equity Interests" means shares of capital stock, partnership
           ----------------
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.

          "Equity Rights" means, with respect to any Person, any subscriptions,
           -------------
options, warrants, commitments, preemptive rights or agreements of any kind
(including any shareholders' or voting trust agreements) for the issuance, sale,
registration or voting of, or securities convertible into, any additional shares
of capital stock of any class, or partnership or other ownership interests of
any type in, such Person.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
           -----
amended from time to time, or any successor statute.

          "ERISA Affiliate" means any trade or business (whether or not
           ---------------
incorporated) that, together with any Consolidated Entity, is treated as a
single employer under Section 414(b) or (c) of the Code, or, solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

                                Credit Agreement
                                ----------------



                                      -7-

          "ERISA Event" means (a) any "reportable event", as defined in Section
           -----------
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by a Consolidated Entity or any of its ERISA Affiliates
of any liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by any Consolidate Entity or any ERISA Affiliate from the
PBGC or a plan administrator of any notice relating to an intention to terminate
any Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by a Consolidated Entity or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by a Consolidated Entity or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from a
Consolidated Entity or any ERISA Affiliate of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA.

          "Eurodollar", when used in reference to any Loan or Borrowing, refers
           ----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate (or in the
case of a Competitive Loan, the LIBO Rate).

          "Event of Default" has the meaning assigned to such term in Article
           ----------------                                           -------
VII.
- ---

          "Event of Loss" means with respect to any Property of any Nationwide
           -------------
Entity (a) any loss, destruction or damage of such Property, (b) any pending or
threatened institution of any proceedings for the condemnation or seizure of
such Property or of any right of eminent domain or (c) any actual condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such Property, or confiscation of such Property or requisition of the use of
such Property.

          "Excluded Taxes" means, with respect to the Administrative Agent, any
           --------------
Lender, the Issuing Lender or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts
               ---------------
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.17(e), except to the
                                             ---------------
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.17(a).
            ---------------

          "Existing Revolving Credit Facility" means that certain $100,000,000
           ----------------------------------
revolving credit facility evidenced by the Amended and Restated Credit Agreement
dated as of July 27, 1999 (as Modified from time to time) by and among the
Borrower, as borrower, the banks and other financial institutions party thereto
and Wells Fargo Bank, National Association, as agent.

          "Federal Funds Effective Rate" means, for any day, the weighted
           ----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

          "Financial Officer" means the chief financial officer, principal
           -----------------
accounting officer, treasurer or controller of the Borrower.

                                Credit Agreement
                                ----------------



                                      -8-

          "Fiscal Quarter" or "fiscal quarter" means any three-month period
           --------------      --------------
ending on March 31, June 30, September 30 or December 31 of any Fiscal Year.

          "Fiscal Year" or "fiscal year" means the 12-month period ending on
           -----------      -----------
December 31 in each year or such other period as the Borrower may designate and
the Administrative Agent may approve in writing.

          "Fitch" means Fitch Investors Service, Inc.
           -----

          "Fixed Charges Ratio" means, as at any date, the ratio of (a) EBITDA
           -------------------
for the Measuring Period ending on or most recently ended prior to such date to
(b) Fixed Charges for such period.

          "Fixed Charges" means, for any period, solely with respect to
           -------------
Nationwide Entities, the sum of the amounts for such period of (i) scheduled
payments of principal of Indebtedness of the Consolidated Entities (other than
any Bullet Payment), (ii) the Consolidated Entities' pro rata share of scheduled
payments of principal of Indebtedness of Joint Ventures in which a Consolidated
Entity owns a direct or indirect Equity Interest (other than any Bullet Payment)
that does not otherwise constitute Indebtedness of and is not otherwise recourse
to any of the Consolidated Entities or their assets, (iii) Interest Expense,
(iv) payments of dividends in respect of Disqualified Capital Stock; and (v) to
the extent not otherwise included in Interest Expense, dividends and other
distributions paid during such period by the Borrower with respect to preferred
stock or preferred operating units. For purposes of clauses (ii) and (v), the
                                                    ------------     ---
Consolidated Entities' pro rata share of payments by any Joint Venture in which
a Consolidated Entity owns a direct or indirect Equity Interest shall be deemed
equal to the product of (a) the payments made by such Joint Venture, multiplied
by (b) the percentage of the total outstanding Equity Interest of such Person
held directly or indirectly by any Consolidated Entity, expressed as a decimal.

          "Foreign Lender" means any Lender that is organized under the laws of
           --------------
a jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

          "GAAP" means generally accepted accounting principles in the United
           ----
States of America.

          "Governmental Authority" means the government of the United States of
           ----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

          "Guarantee" of or by any Person (the "guarantor") means any
           ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

          "Hazardous Materials" means all explosive or radioactive substances or
           -------------------
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

          "Healthcare Lease" means a lease of a Healthcare Property by the
           ----------------
Borrower or one of its Subsidiary Entities, as lessor, to an Operator, as
lessee.

                                Credit Agreement
                                ----------------



                                      -9-

          "Healthcare Property" means a property operating as a nursing home, an
           -------------------
acute care hospital, a rehabilitation hospital, an assisted living facility, an
adult congregate living facility, a personal care facility, a medical office
building, or any combination of the foregoing; provided that any of the
foregoing may also include independent living units as part of such property.

          "Healthcare Property Under Construction" means Real Property for which
           --------------------------------------
Commencement of Construction has occurred but either: (i) construction of such
Real Property is not substantially complete; or (ii) such Real Property is not
subject to a Healthcare Lease.

          "Indebtedness" of any Person means, without duplication, (a) all
           ------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit, letters of guaranty and similar instruments, (j)
all obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances, (k) all synthetic leases and (l) all Net Swap Obligations under or
in respect of Swap Agreements. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.

          "Indemnified Taxes" means Taxes other than Excluded Taxes.
           -----------------

          "Indemnitee" has the meaning assigned to such term in Section 9.03(b).
           ----------                                           ---------------

          "Index Debt" means senior, unsecured, long-term indebtedness for
           ----------
borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any other credit enhancement.

          "Information" has the meaning assigned to such term in Section 9.12.
           -----------                                           ------------

          "Information Memorandum" means the Confidential Information Memorandum
           ----------------------
dated September 2002 relating to the Borrower and the Transactions.

          "Interest Coverage Ratio" means, as at any date of determination
           -----------------------
thereof, the ratio of (a) EBITDA for the Measuring Period ending on or most
recently ended prior to such date to (b) Interest Expense for such period.

          "Interest Election Request" means a request by the Borrower to convert
           -------------------------
or continue a Revolving Borrowing in accordance with Section 2.08.
                                                     ------------

          "Interest Expense" means, for any period, the sum, for the Nationwide
           ----------------
Entities (determined on a consolidated basis without duplication in accordance
with GAAP), of the following: (a) all interest in respect of Indebtedness
(including the interest component of any payments in respect of Capital Lease
Obligations) of the Consolidated Entities accrued or capitalized during such
period (whether or not actually paid during such period), (b) the net amount
payable (or minus the net amount receivable) under Swap Agreements relating to
interest during such period (whether or not actually paid or received during
such period), (c) for purposes of determining Interest Expense as used in the
Fixed Charge Coverage Ratio (both numerator and denominator) only, amortization
of Capitalized Loan Fees, (d) interest incurred on any liability or obligation
that constitutes a Contingent Obligation of any Consolidated Entity and (e) to
the extent not included in clauses (a), (b), (c) and (d), any Consolidated
                           -----------  ---  ---     ---
Entities' pro rata share of interest expense and other amounts of the type
referred to in such clauses of the Joint Ventures in which such Consolidated
Entity owns a direct or indirect Equity Interest. For purposes of clause (e),
                                                                  ----------
any

                                Credit Agreement
                                ----------------



                                      -10-

Consolidated Entities' pro rata share of interest expense or other amount of any
Joint Venture in which such Consolidated Entity owns a direct or indirect Equity
Interest shall be deemed equal to the product of (a) the interest expense or
other relevant amount of such Joint Venture, multiplied by (b) the percentage of
the total outstanding Equity Interest of such Person held directly or indirectly
by any Consolidated Entity, expressed as a decimal.

          "Interest Payment Date" means (a) with respect to any ABR Loan, each
           ---------------------
Quarterly Date and (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurodollar Borrowing with an Interest Period of more than three
months' duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months' duration after the first day of such
Interest Period (provided that if such day is not a Business Day, then the next
day that is a Business Day).

          "Interest Period" means with respect to any Eurodollar Borrowing, the
           ---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or, with the
consent of each Lender, six months thereafter, as the Borrower may elect;
provided, that (i) if any Interest Period would end on a day other than a
- ---------
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, in the case of a Eurodollar Borrowing only, such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period pertaining to a Eurodollar Borrowing that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period. For
purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and, in the case of a Revolving Borrowing, thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.

          "Investment" means, for any Person: (a) any purchase or other
           ----------
acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (b) any purchase by that Person of a
Property or the assets of a business conducted by another Person, (c) any loan
(other than loans to employees), advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including, without limitation, all Indebtedness to such Person arising
from a sale of property by such Person other than in the ordinary course of its
business and (d) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person. The amount of any Investment shall be the original cost of such
Investment, plus the cost of all additions thereto less the amount of any return
of capital or principal to the extent such return is in cash with respect to
such Investment without any adjustments for increases or decreases in value or
write-ups, write-downs or write-offs with respect to such Investment.

          "Issuing Lender" means JPMorgan, in its capacity as the issuer of
           --------------
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.06(j). The Issuing Lender may, in its discretion, arrange for one or
- ---------------
more Letters of Credit to be issued by Affiliates of the Issuing Lender, in
which case the term "Issuing Lender" shall include any such Affiliate with
respect to Letters of Credit issued by such Affiliate.

          "Joint Venture" means, as to any Person: (i) any corporation fifty
           -------------
percent (50%) or less of the outstanding securities having ordinary voting power
of which shall at the time be owned or controlled, directly or indirectly, by
such Person or by one or more of its Subsidiaries or by such Person and one or
more of its Subsidiaries, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization fifty percent (50%)
or less of the ownership interests having ordinary voting power of which shall
at the time be so owned or controlled. Notwithstanding the foregoing, a Joint
Venture of the Borrower shall include each Person, other than a Subsidiary, in
which the Borrower owns a direct or indirect Equity Interest (excluding,
however, the unexercised subscription warrants in (a) Liberty Healthcare of
Oklahoma, Inc., a Georgia corporation, pursuant to Common Stock Purchase Warrant
dated February 9, 1996; (b) Liberty Healthcare of Indiana, Inc., an Indiana
corporation, pursuant to Common Stock Purchase Warrant dated February 9, 1996;
(c) Westview Manor Healthcare Associates, Inc., a Kansas corporation, pursuant
to a Common Stock Purchase Warrant dated February 9, 1996; and (d) Liberty
Healthcare, Inc., a Virginia corporation, pursuant to Common Stock Purchase
Warrant dated

                                Credit Agreement
                                ----------------


                                      -11-

February 9, 1996, until such time, if any, that such warrants are exercised).
Unless otherwise expressly provided, all references in the Loan Documents to a
"Joint Venture" shall mean a Joint Venture of the Borrower.

          "JPMorgan" means JPMorgan Chase Bank.
           --------

          "LC Disbursement" means a payment made by the Issuing Lender pursuant
           ---------------
to a Letter of Credit.

          "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
           -----------
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Lender at any time shall be
its Applicable Percentage of the total LC Exposure at such time.

          "Lenders" means the Persons listed on Schedule 2.01 and any other
           -------                              -------------
Person that shall have become a party hereto pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Assumption.

          "Letter of Credit" means any letter of credit issued pursuant to this
           ----------------
Agreement.

          "Letter of Credit Documents" means, with respect to any Letter of
           --------------------------
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be Modified and in effect from time to time.

          "LIBO Rate" means, for the Interest Period for any Eurodollar
           ---------
Borrowing, the rate appearing on Page 3750 of the Dow Jones Market Service (or
on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for the offering of dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

          "Lien" means, with respect to any asset, (a) any mortgage, deed of
           ----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, or any other type of preferential arrangement that has the
practical effect of creating a security interest, in, on or of such asset
(excepting Permitted Encumbrances), (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
(or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

          "Loan Documents" means, collectively, this Agreement, the Notes, the
           --------------
Letter of Credit Documents, and each other instrument, certificate or agreement
executed by the Borrower in connection herewith, as any of the same may be
Modified from time to time.

          "Loans" means the loans made by the Lenders to the Borrower pursuant
           -----
to this Agreement.

          "Low Coverage Property" means a Qualified Unencumbered Property with a
           ---------------------
Rent/Mortgage Interest Coverage Ratio of less than 1.00 to 1.00, provided that
any Stabilizing Property will not be included as a Low Coverage Property until
after the expiration of its respective four quarter period.

                                Credit Agreement
                                ----------------


                                      -12-

          "Margin" means, with respect to any Competitive Loan bearing interest
           ------
at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be
added to or subtracted from the LIBO Rate to determine the rate of interest
applicable to such Loan, as specified by the Lender making such Loan in its
related Competitive Bid.

          "Margin Stock" means "margin stock" within the meaning of Regulations
           ------------
T, U and X of the Board.

          "Material Adverse Effect" means a material adverse effect on (a) the
           -----------------------
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its material obligations under this Agreement or any
of the other Loan Documents to which it is a party or (c) the rights of or
benefits available to the Lenders under this Agreement or any of the other Loan
Documents.

          "Material Agreement" has the meaning assigned to such term in Section
           ------------------                                           -------
3.13(a).
- -------

          "Material Indebtedness" means Indebtedness (other than the Loans and
           ---------------------
Letters of Credit), or obligations in respect of one or more Swap Agreements,
that is recourse to any one or more of the Borrower and the Nationwide Core
Entities in an aggregate principal amount exceeding $10,000,000. For purposes of
determining Material Indebtedness, the "principal amount" of the obligations of
the Borrower and any Nationwide Core Entity in respect of any Swap Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Borrower or such Nationwide Core Entity would be required
to pay if such Swap Agreement were terminated at such time.

          "Maturity Date" means November 7, 2005, as the same may be extended in
           -------------
accordance with Section 2.09(e).
                ---------------

          "Measuring Period" means the period of four consecutive fiscal
           ----------------
quarters ended on (a) the last day of the Fiscal Quarter most recently ended.

          "Modifications" means any amendments, supplements, modifications,
           -------------
renewals, replacements, consolidations, severances, substitutions and extensions
of any document or instrument from time to time; "Modify", "Modified", or
related words shall have meanings correlative thereto.

          "Moody's" means Moody's Investors Service, Inc.
           -------

          "Mortgage Loan" means any loan owned or held by any of the Nationwide
           -------------
Entities secured by a mortgage or deed of trust on Healthcare Properties.

          "Multiemployer Plan" means a multiemployer plan as defined in Section
           ------------------                                           -------
4001(a)(3) of ERISA.
- ----------

          "Nationwide Core Entities" means collectively, (a) the Consolidated
           ------------------------
Entities, and (b) all Unconsolidated Joint Ventures of which any Consolidated
Entity is a general partner, managing member or of which any Consolidated Entity
owns more than 50% of the Equity Interest.

          "Nationwide Entities" means the Borrower and all Subsidiary Entities
           -------------------
of the Borrower.

          "Net Asset Value" means (a) Capitalization Value minus (b) Total
           ---------------
Liabilities.

          "Net Income" means, for any period, the net income (or loss), after
           ----------
provision for taxes, of the Consolidated Entities determined on a consolidated
basis for such period taken as a single accounting period as determined in
accordance with GAAP, and including the Consolidated Entities' pro rata share of
the net income (or loss) of any Joint Venture in which such Consolidated Entity
owns a direct or indirect Equity Interest for such period, but excluding (i) any
recorded losses and gains arising from the sale of any Real Property and/or
Mortgage Loans and other extraordinary items for such period; (ii) other
non-cash charges and expenses (including non-cash charges resulting from
accounting changes) and (iii) any gains or losses arising outside of the
ordinary course of

                                Credit Agreement
                                ----------------


                                      -13-

business. For purposes hereof the Consolidated Entities' pro rata share of the
net income (or loss) of any Joint Venture in which such Consolidated Entity owns
a direct or indirect Equity Interest shall be deemed equal to the product of (i)
the income (or loss) of such Joint Venture, multiplied by (ii) the percentage of
the total outstanding Equity Interest of such Person held directly or indirectly
by any Consolidated Entity, expressed as a decimal.

          "Net Swap Obligations" means, as of any date of determination, the
           --------------------
excess (if any) of all "unrealized losses" over all "unrealized profits" of such
Person arising from Swap Agreement as substantiated in writing by the Borrower
and approved by the Administrative Agent. "Unrealized losses" means the fair
market value of the cost to such Person of replacing such Swap Agreement as of
the date of determination (assuming the Swap Agreement were to be terminated as
of that date), and "unrealized profits" means the fair market value of the gain
to such Person of replacing such Swap Agreement as of the date of determination
(assuming such Swap Agreement were to be terminated as of that date).

          "Non-Recourse Indebtedness" means any Indebtedness: (a) under the
           -------------------------
terms of which the payee's remedies upon the occurrence of any event of default
are limited to specific, identified assets of the payor which secure such
Indebtedness and (b) for the repayment of which the payor has no personal
liability beyond the loss of such specified assets, except for liability for
fraud, material misrepresentation or misuse or misapplication of insurance
proceeds, condemnation awards or rents, existence of hazardous wastes and other
then customary exceptions to non-recourse provisions.

          "Notes" means the Revolving Notes and the Competitive Notes.
           -----

          "Obligations" means all obligations, liabilities and indebtedness of
           -----------
every nature of the Borrower, from time to time owing to the Administrative
Agent, the Issuing Lender or any Lender under or in connection with this
Agreement or any other Loan Document to which it is a party, including, without
limitation, principal, interest, fees (including fees of counsel), and expenses
whether now or hereafter existing under the Loan Documents.

          "Operator" means any Person who leases Real Property from the Borrower
           --------
or any of its Subsidiary Entities pursuant to a Healthcare Lease for the purpose
of operating such Real Property as a Healthcare Property.

          "Organizational Documents" means: (a) for any corporation, the
           ------------------------
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders of
such corporation, and all applicable resolutions of the board of directors (or
any committee thereof) of such corporation, (b) for any partnership, the
partnership agreement, any certificate of formation, and any other instrument or
agreement relating to the rights between the partners or pursuant to which such
partnership is formed, (c) for any limited liability company, the operating
agreement, any articles of organization or formation, and any other instrument
or agreement relating to the rights between the members, pertaining to the
manager, or pursuant to which such limited liability company is formed, and (d)
for any trust, the trust agreement and any other instrument or agreement
relating to the rights between the trustors, trustees and beneficiaries, or
pursuant to which such trust is formed.

          "Other Taxes" means any and all present or future stamp or documentary
           -----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

          "Participant" has the meaning set forth in Section 9.04.
           -----------                               ------------

          "PBGC" means the Pension Benefit Guaranty Corporation referred to and
           ----
defined in ERISA and any successor entity performing similar functions.

          "Permitted Encumbrances" means:
           ----------------------

          (a) Liens imposed by law for taxes, fees, assessments or other
governmental charges or levies that are not yet delinquent or are being
contested in compliance with Section 5.04;
                             -------------

                                Credit Agreement
                                ----------------


                                      -14-

          (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of business
and securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;
                             ------------

          (c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations;

          (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business;

          (e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (l) of Article VII;
                       ----------    -----------

          (f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not (i) secure any monetary obligations, (ii) materially
detract from the value of the affected property as it is then being used, (iii)
materially interfere with the ordinary conduct of business of any Nationwide
Entities or (iv) violate any terms or conditions of this Agreement; and

          (g) statutory landlord's Liens under leases to which the Borrower or
any of its Subsidiary Entities is a party.

provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.

          "Permitted Investments" means:
           ---------------------

          (a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

          (b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody's;

          (c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;

          (d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) of this definition and
                                         ----------
entered into with a financial institution satisfying the criteria described in
clause (c) of this definition; and
- ----------

          (e) money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio
assets of at least $5,000,000,000.

          "Person" means any natural person, corporation, limited liability
           ------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

          "Plan" means any employee pension benefit plan (other than a
           ----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which any
Consolidated Entity or any of their ERISA Affiliates is (or, if such plan were
terminated, would under Section 4069

                                Credit Agreement
                                ----------------


                                      -15-

of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

          "Prime Rate" means the rate of interest per annum publicly announced
           ----------
from time to time by JPMorgan as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective.

          "Process Agent" has the meaning assigned to such term in Section
           -------------                                           -------
9.09(d).
- -------

          "Property" means, collectively and severally, any and all Real
           --------
Property and all personal property owned or occupied by the subject Person.
"Property" shall include all Equity Interests owned by the subject Person in a
Subsidiary Entity.

          "Property Expense" means, for any Healthcare Property, all operating
           ----------------
expenses incurred by any Operator relating to such Healthcare Property, as
reported by such Operator to a Nationwide Entity in such Operator's most recent
report, which report shall not be more than one year old at the time of any
determination of Property NOI. "Property Expense" shall exclude, however,
depreciation expense, amortization expense, non-cash charges and expenses,
management fees, rent (in the case a Healthcare Lease exists) or interest
related to a Mortgage Loan (in the case a Mortgage Loan exists).

          "Property Income" means, for any Healthcare Property, all gross
           ---------------
revenue from the received by an Operator from the operation of such Healthcare
Property, as reported by such Operator to a Nationwide Entity in such Operator's
most recent report, which report shall not be more than one year old at the time
of any determination of Property NOI.

          "Property NOI" means, for any Healthcare Property for any period, (i)
           ------------
all Property Income for such period, minus (ii) all Property Expenses for such
period; provided, however, if the respective Operator's report of Property
Income and Property Expenses for such Healthcare Property is more than one year
old at the time of determination, Property NOI for such Healthcare Property will
be disregarded for purposes determining the Rent/Mortgage Interest Coverage
Ratio.

          "Qualified Unencumbered Properties" means Real Properties and/or
           ---------------------------------
Mortgage Loans that (a) are not encumbered by a Lien (other than a Permitted
Encumbrance), (b) Wholly-Owned by the Borrower or a Subsidiary Wholly-Owned by
the Borrower, (c) are located, or encumber real properties that are located, in
the United States and (d) are operated, or encumber real properties that are
operated, as a Healthcare Property.

          "Quarterly Dates" means the last Business Day of March, June,
           ---------------
September and December in each year, the first of which shall be the first such
day after the date hereof.

          "Real Property" means each of those parcels (or portions thereof) of
           -------------
real property, improvements and fixtures thereon and appurtenances thereto now
or hereafter owned or leased by the Nationwide Entities.

          "Register" has the meaning set forth in Section 9.04.
           --------                               ------------

          "REIT" means a domestic trust or corporation that qualifies as a real
           ----
estate investment trust under the provisions of Sections 856, et seq. of the
Code.

          "Related Parties" means, with respect to any specified Person, such
           ---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.

          "Rent/Mortgage Interest Coverage Ratio" means, as of any date of
           -------------------------------------
determination, (a) when used with respect to any Qualified Unencumbered Property
(provided that, with respect to Qualified Unencumbered Properties covered by a
single, master Healthcare Lease or Mortgage Loan, such calculation shall be
determined based upon the aggregate amount of rent received, or interest paid,
as applicable, under such single, master Healthcare Lease or Mortgage Loan
attributable to the applicable Qualified Unencumbered Property and the aggregate
Property NOI for all such Qualified Unencumbered Properties covered by such
single, master Healthcare

                                Credit Agreement
                                ----------------


                                      -16-

Lease or Mortgage Loan, as applicable, attributable to the applicable Qualified
Unencumbered Property) the ratio of (i) the Property NOI for such Qualified
Unencumbered Property for such period to (ii) the aggregate amount of rent
received under a Healthcare Lease or interest paid under a Mortgage Loan, as
applicable, for such Qualified Unencumbered Property for the Measuring Period
ending on or most recently ended prior to such date and (b) when used with
respect to all Qualified Unencumbered Properties in the aggregate, the ratio of
(i) the aggregate Property NOI for such Qualified Unencumbered Properties for
such period to (ii) the sum of (A) the aggregate rent received under all
Healthcare Leases for Qualified Unencumbered Properties and (B) the aggregate
interest paid under all Mortgage Loans for Qualified Unencumbered Properties for
the Measuring Period ending on or most recently ended prior to such date.

          "Required Lenders" means, at any time, Lenders having Revolving Credit
           ----------------
Exposures and unused Commitments representing at least 66.66% of the sum of the
total Revolving Credit Exposures and unused Commitments at such time; provided
                                                                      --------
that, for purposes of declaring the Loans to be due and payable pursuant to
Article VII, and for all purposes after the Loans become due and payable
- -----------
pursuant to Article VII or the Commitments expire or terminate, the outstanding
            -----------
Competitive Loans of the Lenders shall be included in their respective Revolving
Credit Exposures in determining the Required Lenders.

          "Restricted Cash" means any cash or cash equivalents held by any
           ---------------
Person with respect to which such Person does not have unrestricted access and
unrestricted right to expend such cash or expend or liquidate such permitted
Investments.

          "Restricted Payment" means any dividend or other distribution (whether
           ------------------
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any of its Subsidiaries, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such Equity Interests in the Borrower or any option, warrant
or other right to acquire any such Equity Interests in the Borrower or any of
its Subsidiaries.

          "Revolving Borrowing Request" means a request by the Borrower for a
           ---------------------------
Revolving Borrowing in accordance with Section 2.03.
                                       ------------

          "Revolving Credit Exposure" means, with respect to any Lender at any
           -------------------------
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure at such time.

          "Revolving Loan" means a Loan made pursuant to Section 2.03.
           --------------                                ------------

          "Revolving Notes" means the promissory notes provided for in Section
           ---------------                                             -------
2.10(f)(i) and all promissory notes delivered in substitution or exchange
- ----------
therefor, in each case as the same shall be Modified and in effect from time to
time.

          "S&P" means Standard & Poor's Ratings Service, a division of The
           ---
McGraw-Hill Companies, Inc.

          "Secured Indebtedness" means that portion of the Total Liabilities
           --------------------
that is, without duplication, secured by a Lien.

          "Secured Indebtedness Ratio" means, at any time, the ratio (expressed
           --------------------------
as a percentage) of (i) Secured Indebtedness, to (ii) Capitalization Value for
such period.

          "Securities" means any stock, shares, partnership interests,
           ----------
membership interests, voting trust certificates, certificates of interest or
participation in any profit sharing agreement or arrangement, bonds, debentures,
options, warrants, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.

                                Credit Agreement
                                ----------------


                                      -17-

          "Solvent" means, when used with respect to any Person, that at the
           -------
time of determination: (i) the fair saleable value of its assets is in excess of
the total amount of its liabilities (including, without limitation, contingent
liabilities); (ii) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become absolute and
matured; (iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and (iv) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.

          "Stabilizing Property" means a Qualified Unencumbered Property that
           --------------------
has been acquired or in operation for less than four quarters.

          "Statutory Reserve Rate" means a fraction (expressed as a decimal),
           ----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

          "Subsidiary" means, with respect to any Person (the "parent") at any
           ----------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent. Unless otherwise
specified, "Subsidiary" means a Subsidiary of the Borrower.

          "Subsidiary Entities" means a Subsidiary or Joint Venture of a Person.
           -------------------
Unless otherwise expressly provided, all references in the Loan Documents to a
"Subsidiary Entity" shall mean a Subsidiary Entity of the Borrower.

          "Swap Agreement" means any agreement with respect to any swap,
           --------------
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions; provided that
                                                                  --------
no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Borrower or its Subsidiaries shall be a Swap Agreement.

          "Taxes" means any and all present or future taxes, levies, imposts,
           -----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

          "Tax Expense" means (without duplication), for any period, total tax
           -----------
expense (if any) attributable to income and franchise taxes based on or measured
by income, whether paid or accrued, of the Consolidated Entities, including the
Consolidated Entities' pro rata share of tax expenses in any Joint Venture in
which a Consolidated Entity owns a direct or indirect Equity Interest. For
purposes of this definition, any Consolidated Entity's pro rata share of any
such tax expense of any Joint Venture in which a Consolidated Entity owns a
direct or indirect Equity Interest shall be deemed equal to the product of (i)
such tax expense of such Joint Venture, multiplied by (ii) the percentage of the
total outstanding Equity Interest of such Person held directly or indirectly by
such Consolidated Entity, expressed as a decimal.

                                Credit Agreement
                                ----------------


                                      -18-

          "Total Liabilities" means, as at any date, without duplication, the
           -----------------
aggregate amount of (i) all Indebtedness and other liabilities of the
Consolidated Entities reflected in the financial statements of the Borrower or
disclosed in the notes thereto (to the extent the same would constitute a
Contingent Obligation), plus (ii) all Indebtedness and other liabilities of all
Joint Ventures in which a Consolidated Entity owns a direct or indirect Equity
Interest reflected in the financial statements of such Joint Ventures or
disclosed in the notes thereto (to the extent the same would constitute a
Contingent Obligation) which are otherwise recourse to any Consolidated Entity
or any of its assets or that otherwise constitutes Indebtedness of any
Consolidated Entity (including any recourse obligations arising as a result of a
Consolidated Entity serving as a general partner, directly or indirectly, in
such Joint Ventures), plus (iii) all liabilities of the Consolidated Entities
with respect to purchase and repurchase obligations, provided that any
obligations to acquire fully-constructed Real Property shall not be included in
Total Liabilities prior to the transfer of title of such Real Property, plus
(iv) to the extent not included in clauses (i), (ii) and (iii), any Consolidated
                                   -----------  ----     -----
Entity's pro rata share of all Indebtedness, other amounts of the types referred
to in such clauses and other liabilities reflected in the financial statements
of any Joint Venture in which such Consolidated Entity owns a direct or indirect
Equity Interest or disclosed in the notes thereto (to the extent the same would
constitute a Contingent Obligation) not otherwise constituting Indebtedness of
or recourse to any Consolidated Entity or any of its assets. For purposes of
clause (iv), the Consolidated Entities' pro rata share of all Indebtedness and
- -----------
other liabilities of any Joint Venture in which a Consolidated Entity owns a
direct or indirect Equity Interest shall be deemed equal to the product of (a)
such Indebtedness or other liabilities, multiplied by (b) the percentage of the
total outstanding Equity Interest of such Person held directly or indirectly by
any Consolidated Entity, expressed as a decimal.

          "Transactions" means the execution, delivery and performance by the
           ------------
Borrower of this Agreement and the other Loan Documents, the borrowing of Loans,
the use of the proceeds thereof and the issuance of Letters of Credit hereunder.

          "Type", when used in reference to any Loan or Borrowing, refers to
           ----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate
Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate.

          "Unconsolidated Joint Venture" means (i) any Joint Venture of the
           ----------------------------
Borrower or any Subsidiary Entity in which the Borrower or such Subsidiary
Entity holds any Equity Interest but which would not be combined with the
Borrower in the consolidated financial statements of the Borrower in accordance
with GAAP, and (ii) any Investment of the Borrower or any Subsidiary Entity in
any Person that is not a Joint Venture.

          "Unencumbered Asset Value" means, at any date, solely with respect to
           ------------------------
the Borrower and its Wholly-Owned Subsidiaries, (a) EBITDA from Qualified
Unencumbered Properties for the most recent Measuring Period divided by (b) 11%
(expressed as a decimal); provided, however, (i) newly acquired Qualified
Unencumbered Properties shall be valued at acquisition cost until there have
been four fiscal quarters of ownership; (ii) prior to the first anniversary of
the Effective Date, no more than 20% of the Unencumbered Asset Value can result
from Low Coverage Properties; (iii) from and including the first anniversary of
the Effective Date to but excluding the second anniversary of the Effective
Date, no more than 15% of the Unencumbered Asset Value can result from Low
Coverage Properties; (iv) on and after the second anniversary of the Effective
Date, no more than 10% of the Unencumbered Asset Value can result from Low
Coverage Properties; (v) at no time may more than 10% of the Unencumbered Asset
Value result from Stabilizing Properties; (vi) to the extent that the average
Rent/Mortgage Interest Coverage Ratio is less than 1.25 to 1.00, EBITDA
attributable to Qualified Unencumbered Properties with a Rent/Mortgage Interest
Coverage Ratio of less than 1.25 to 1.00 shall be excluded from the computation
of Unencumbered Asset Value to the extent necessary to achieve an average
Rent/Mortgage Interest Coverage Ratio of 1.25 to 1.00; and (vii) the
determination of Unencumbered Asset Value for any period shall not include any
Qualified Unencumbered Property (or any portion of EBITDA relating to any such
Qualified Unencumbered Property) that has been sold or otherwise disposed of at
any time prior to or during such period.

          "Unencumbered Asset Value Ratio" means, at any date, the ratio
           ------------------------------
(expressed as a percentage) of (a) Total Liabilities (exclusive of Total
Liabilities of a Joint Venture provided that such Total Liabilities are not
Contingent Obligations of Borrower or any of its Wholly-Owned Subsidiaries)
which are unsecured by a Lien to (b) Unencumbered Asset Value.

                                Credit Agreement
                                ----------------


                                      -19-

          "Uniform Commercial Code" means the Uniform Commercial Code as in
           -----------------------
effect from time to time in the State of New York.

          "Unsecured Interest Coverage Ratio" means, as at any date of
           ---------------------------------
determination thereof, the ratio of (a) EBITDA arising from Qualified
Unencumbered Properties for the Measuring Period ending on or most recently
ended prior to such date to (b) Interest Expense (exclusive of Interest Expense
of a Joint Venture provided that such Interest Expense is not a Contingent
Obligation of Borrower or any of its Wholly-Owned Subsidiaries) not secured by a
Lien for such period.

          "Wholly-Owned" means, with respect to any Real Property, Equity
           ------------
Interest, or other Property owned or leased, that (i) title to such Property is
held directly by, or such Property is leased by, the Borrower or a Subsidiary of
the Borrower.

          "Withdrawal Liability" means liability to a Multiemployer Plan as a
           --------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.

     SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
                   --------------------------------------
Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving
Loan"), by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a
"Revolving Eurodollar Loan"). Borrowings also may be classified and referred to
by Class (e.g., a "Revolving Borrowing"), by Type (e.g., a "Eurodollar
Borrowing") or by Class and Type (e.g., a "Revolving Eurodollar Borrowing").

     SECTION 1.03. Terms Generally. The definitions of terms herein shall apply
                   ---------------
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

     SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
                   ----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

                                   ARTICLE II.

                                   THE CREDITS
                                   -----------

     SECTION 2.01. The Commitments. Subject to the terms and conditions set
                   ---------------
forth herein, each Lender agrees to make Revolving Loans to the Borrower from
time to time during the Availability Period in an aggregate principal amount
that will not result in (a) such Lender's Revolving Credit Exposure exceeding
such Lender's

                                Credit Agreement
                                ----------------


                                      -20-

Commitment or (b) the sum of the total Revolving Credit Exposures plus the
aggregate principal amount of outstanding Competitive Loans exceeding the total
Commitments. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.

     SECTION 2.02. Loans and Borrowings.
                   --------------------

          (a) Obligations of Lenders. Each Revolving Loan shall be made as part
              ----------------------
of a Borrowing consisting of Loans made by the Lenders ratably in accordance
with their respective Commitments. Each Competitive Loan shall be made in
accordance with the procedures set forth in Section 2.04. The failure of any
                                            ------------
Lender to make any Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder; provided that the Commitments and
Competitive Bids of the Lenders are several and no Lender shall be responsible
for any other Lender's failure to make Loans as required.

          (b) Type of Loans. Subject to Section 2.14, (i) each Revolving
              -------------             ------------
Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the
Borrower may request in accordance herewith, and (ii) each Competitive Borrowing
shall be comprised entirely of Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.

          (c) Minimum Amounts; Limitation on Number of Borrowings. At the
              ---------------------------------------------------
commencement of each Interest Period for any Eurodollar Revolving Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $3,000,000. At the time that each ABR Revolving
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $3,000,000; provided that an
ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Commitments or that is required to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.06(f). Each
                                                           ---------------
Competitive Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $25,000,000. Borrowings of more than
one Type and Class may be outstanding at the same time; provided that there
shall not at any time be more than a total of eight Eurodollar Revolving
Borrowings outstanding.

          (d) Limitations on Lengths of Interest Periods. Notwithstanding any
              ------------------------------------------
other provision of this Agreement, the Borrower shall not be entitled to
request, or to elect to convert or continue as any Borrowing if the Interest
Period requested therefor would end after the Maturity Date.

     SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving
                   ---------------------------------
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m.,
New York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Revolving Borrowing, not later than 1:00
p.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that any such notice of an ABR Revolving Borrowing to
finance the reimbursement of an LC Disbursement as contemplated by Section
                                                                   -------
2.06(f) may be given not later than 12:00 noon, New York City time, on the date
- -------
of the proposed Borrowing. Each such telephonic Revolving Borrowing Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Revolving Borrowing Request in
the form set forth in Exhibit C (or such other form approved by the
                      ---------
Administrative Agent) and signed by the Borrower. Each such telephonic and
written Revolving Borrowing Request shall specify the following information in
compliance with Section 2.02:
                ------------

               (i)   the aggregate amount of the requested Borrowing;

               (ii)  the date of such Borrowing, which shall be a Business Day;

               (iii) whether such Borrowing is to be an ABR Borrowing or a
     Eurodollar Borrowing;

               (iv)  in the case of a Eurodollar Borrowing, the initial Interest
     Period to be applicable thereto, which shall be a period contemplated by
     the definition of the term "Interest Period"; and

                                Credit Agreement
                                ----------------




                                      -21-

               (v)   the location and number of the Borrower's account to which
     funds are to be disbursed, which shall comply with the requirements of
     Section 2.07.

If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of a Revolving Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender
of the details thereof and of the amount of such Lender's Loan to be made as
part of the requested Borrowing.

     SECTION 2.04. Competitive Bid Procedure.
                   -------------------------

          (a) Requests for Bids by the Borrower. Subject to the terms and
              ---------------------------------
conditions set forth herein, from time to time during the Availability Period
the Borrower may request Competitive Bids and may (but shall not have any
obligation to) accept Competitive Bids and borrow Competitive Loans; provided
                                                                     --------
that (x) the sum of the total Revolving Credit Exposures plus the aggregate
principal amount of outstanding Competitive Loans at any time shall not exceed
the total Commitments and (y) the aggregate principal amount of outstanding
Competitive Loans at any time shall not exceed 50% of the aggregate amount of
the then existing Commitments. To request Competitive Bids, the Borrower shall
notify the Administrative Agent of such request by telephone, in the case of a
Eurodollar Borrowing, not later than 1:00 p.m., New York City time, four
Business Days before the date of the proposed Borrowing; provided that the
Borrower may submit up to (but not more than) one (1) Competitive Bid Request
within any thirty day period, unless any and all such previous Competitive Bid
Requests shall have been withdrawn or all Competitive Bids received in response
thereto rejected. Each such telephonic Competitive Bid Request shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Competitive Bid Request in the form of Exhibit K (or such other form
                                               ---------
approved by the Administrative Agent) and signed by the Borrower. Each such
telephonic and written Competitive Bid Request shall specify the following
information in compliance with Section 2.02:
                               ------------

               (i)   the aggregate amount of the requested Borrowing;

               (ii)  the date of such Borrowing, which shall be a Business Day;

               (iii) the Interest Period to be applicable to such Borrowing,
     which shall be a period contemplated by the definition of the term
     "Interest Period", provided that an Interest Period of six months shall not
     be available under a Competitive Loan; and

               (iv)  the location and number of the Borrower's account to which
     funds are to be disbursed, which shall comply with the requirements of
     Section 2.07.
     ------------

Promptly following receipt of a Competitive Bid Request in accordance with this
Section, the Administrative Agent shall notify the Lenders of the details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.

          (b) Making of Bids by Lenders. Each Lender may (but shall not have any
              -------------------------
obligation to) make one or more Competitive Bids to the Borrower in response to
a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form
approved by the Administrative Agent and must be received by the Administrative
Agent by telecopy, in the case of a Eurodollar Competitive Borrowing, not later
than 12:00 noon, New York City time, three Business Days before the proposed
date of such Competitive Borrowing. Competitive Bids that do not conform
substantially to the form approved by the Administrative Agent may be rejected
by the Administrative Agent, and the Administrative Agent shall notify the
applicable Lender of such rejection as promptly as practicable. Each Competitive
Bid shall specify (i) the principal amount (which shall be a minimum of
$5,000,000 and an integral multiple of $1,000,000 and which may equal the entire
principal amount of the Competitive Borrowing requested by the Borrower) of the
Competitive Loan or Loans that the Lender is willing to make, (ii) the
Competitive Bid Rate or Competitive Bid Rates at which the Lender is prepared to
make such Loan or Loans (expressed as a percentage rate per annum in the form of
a decimal to no more than four decimal places) and (iii) the Interest Period
applicable to each such Loan and the last day thereof.

                                Credit Agreement
                                ----------------



                                      -22-

          (c) Notification of Bids by Administrative Agent. The Administrative
              --------------------------------------------
Agent shall promptly notify the Borrower by telecopy of the Competitive Bid Rate
and the principal amount specified in each Competitive Bid, the applicable
Interest Period(s) and the identity of the Lender that shall have made such
Competitive Bid.

          (d) Acceptance of Bids by the Borrower. Subject only to the provisions
              ----------------------------------
of this paragraph, the Borrower may accept or reject any Competitive Bid. The
Borrower shall notify the Administrative Agent by telephone, confirmed by
telecopy in a form approved by the Administrative Agent, whether and to what
extent it has decided to accept or reject each Competitive Bid, in the case of a
Eurodollar Competitive Borrowing, not later than 1:30 p.m., New York City time,
three Business Days before the date of the proposed Competitive Borrowing;
provided that (i) the failure of the Borrower to give such notice shall be
deemed to be a rejection of each Competitive Bid, (ii) the Borrower shall not
accept a Competitive Bid made at a particular Competitive Bid Rate if the
Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii)
the aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the aggregate amount of the requested Competitive Borrowing specified in
the related Competitive Bid Request, (iv) to the extent necessary to comply with
clause (iii) of this proviso, the Borrower may accept Competitive Bids at the
- ------------
same Competitive Bid Rate in part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such Competitive Bid, and (v) except pursuant
to clause (iv) above, no Competitive Bid shall be accepted for a Competitive
   -----------
Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000
and an integral multiple of $1,000,000; provided further that if a Competitive
Loan must be in an amount less than $5,000,000 because of the provisions of
clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or
- -----------
any integral multiple thereof, and in calculating the pro rata allocation of
acceptances of portions of multiple Competitive Bids at a particular Competitive
Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral
                     -----------
multiples of $1,000,000 in a manner determined by the Borrower. A notice given
by the Borrower pursuant to this paragraph shall be irrevocable.

          (e) Notification of Acceptances by the Administrative Agent. The
              -------------------------------------------------------
Administrative Agent shall promptly notify each bidding Lender by telecopy
whether or not its Competitive Bid has been accepted (and, if so, the amount and
Competitive Bid Rate so accepted), and each successful bidder will thereupon
become bound, subject to the terms and conditions hereof, to make the
Competitive Loan in respect of which its Competitive Bid has been accepted.

          (f) Bids by the Administrative Agent. If the Administrative Agent
              --------------------------------
shall elect to submit a Competitive Bid in its capacity as a Lender, it shall
submit such Competitive Bid directly to the Borrower at least one quarter of an
hour earlier than the time by which the other Lenders are required to submit
their Competitive Bids to the Administrative Agent pursuant to paragraph (b) of
                                                               -------------
this Section.

          (g) Funding of Competitive Loans. Any Lender whose offer to make any
              ----------------------------
Competitive Loan has been accepted in accordance with the terms and conditions
of this Section 2.03 shall, not later than 12:00 noon., New York City time, on
the date specified for the making of such Loan, make available the amount of
such Loan to the Administrative Agent as specified by the Administrative Agent,
in immediately available funds, for account of the Borrower. The amount so
received by the Administrative Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Borrower by 1:00 p.m., New York City
time, on such date by depositing the same, in immediately available funds, in an
account of the Borrower maintained with the Administrative Agent in New York
City and designated by the Borrower at the time of its acceptance of a
Competitive Bid.

     SECTION 2.05. [Intentionally Deleted]

     SECTION 2.06. Letters of Credit.
                   -----------------

          (a) General. Subject to the terms and conditions set forth herein, the
              -------
Borrower may request the issuance of Letters of Credit for its own account, in a
form reasonably acceptable to the Administrative Agent and the Issuing Lender,
at any time and from time to time during the Availability Period. In the event
of any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with,
the Issuing Lender relating to any Letter of Credit, the terms and conditions of
this Agreement shall control. Letters of

                                Credit Agreement
                                ----------------




                                      -23-

Credit issued hereunder shall constitute utilization of the Commitments.

          (b) Notice of Issuance, Amendment, Renewal or Extension. To request
              ---------------------------------------------------
the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Lender) to the Issuing Lender and the Administrative
Agent (reasonably in advance of the requested date of issuance, amendment,
renewal or extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be
a Business Day), the date on which such Letter of Credit is to expire (which
shall comply with paragraph (d) of this Section), the amount of such Letter of
                  -------------
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Lender, the Borrower also shall submit a
letter of credit application on the Issuing Lender's standard form in connection
with any request for a Letter of Credit.

          (c) Limitations on Amounts. A Letter of Credit shall be issued,
              ----------------------
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the aggregate LC Exposure shall not exceed $30,000,000, (ii) the
sum of the total Revolving Credit Exposures plus the aggregate principal amount
of outstanding Competitive Loans shall not exceed the total Commitments and
(iii) the minimum face amount of a Letter of Credit shall be $250,000.

          (d) Expiration Date. Each Letter of Credit shall expire at or prior to
              ---------------
the close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) unless otherwise
consented to by the Administrative Agent and the Issuing Lender and (ii) the
date that is ten Business Days prior to the Maturity Date.

          (e) Participations. By the issuance of a Letter of Credit (or an
              --------------
amendment to a Letter of Credit increasing the amount thereof), and without any
further action on the part of the Issuing Lender or the Lenders, the Issuing
Lender hereby grants to each Lender, and each Lender hereby acquires from the
Issuing Lender, a participation in such Letter of Credit equal to such Lender's
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Administrative
Agent, for the account of the Issuing Lender, such Lender's Applicable
Percentage of each LC Disbursement made by the Issuing Lender (to the extent not
reimbursed by the Borrower in accordance with clause (f) of this Section)
                                              ----------
promptly upon the request of the Issuing Lender at any time from the time of
such LC Disbursement until such LC Disbursement is reimbursed by the Borrower or
at any time after any reimbursement payment is required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

          (f) Reimbursement. If the Issuing Lender shall make any LC
              -------------
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 3:00 p.m., New York City time, on the date that such
LC Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 1:00 p.m., New York City time, on such date, or, if such
notice has not been received by the Borrower prior to such time on such date,
then not later than 3:00 p.m., New York City time, on (i) the Business Day that
the Borrower receives such notice, if such notice is received prior to 1:00
p.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that,
                                                                 --------
if such LC Disbursement is not less than $3,000,000, the Borrower may, subject
to the conditions to borrowing set forth herein, request in accordance with
Section 2.03 or 2.05 that such payment be financed with an ABR Revolving
- ------------    ----
Borrowing in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing. If the Borrower fails to make such payment
when due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and

                                Credit Agreement
                                ----------------



                                      -24-

such Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and Section
            ------------                                                -------
2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
- ----              ----------------
and the Administrative Agent shall promptly pay to the Issuing Lender the
amounts so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Lender or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Lender, then to such Lenders and the Issuing
Lender as their interests may appear. Any payment made by a Lender pursuant to
this paragraph to reimburse the Issuing Lender for any LC Disbursement (other
than the funding of ABR Revolving Loans as contemplated above) shall not
constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.

          (g) Obligations Absolute. The Borrower's obligation to reimburse LC
              --------------------
Disbursements as provided in paragraph (f) of this Section shall be absolute,
                             -------------
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Lender under a Letter of
Credit against presentation of a draft or other document that does not comply
strictly with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower's obligations
hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Lender,
nor any of their Related Parties, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of Credit
or any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Lender; provided that the foregoing shall not be
construed to excuse the Issuing Lender from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Issuing Lender's
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of the Issuing Lender (as finally determined by a court
of competent jurisdiction), the Issuing Lender shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Lender may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

          (h) Disbursement Procedures. The Issuing Lender shall, promptly
              -----------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Lender shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Lender has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Lender and the Lenders with respect to any such LC
Disbursement.

          (i) Interim Interest. If the Issuing Lender shall make any LC
              ----------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (f) of this Section, then Section 2.13(d) shall apply.
            -------------                       ---------------
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Lender, except that interest accrued on and after the date of payment by
any Lender pursuant to paragraph (f) of this Section to reimburse the Issuing
                       -------------
Lender shall be for the account of such Lender to

                                Credit Agreement
                                ----------------



                                      -25-

the extent of such payment.

          (j) Replacement of the Issuing Lender. The Issuing Lender may be
              ---------------------------------
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Lender and the successor Issuing Lender. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Lender. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for account of the replaced Issuing
Lender pursuant to Section 2.12(b). From and after the effective date of any
                   ---------------
such replacement, (i) the successor Issuing Lender shall have all the rights and
obligations of the Issuing Lender under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Lender" shall be deemed to refer to such successor or to any previous
Issuing Lender, or to such successor and all previous Issuing Lenders, as the
context shall require. After the replacement of an Issuing Lender hereunder, the
replaced Issuing Lender shall remain a party hereto and shall continue to have
all the rights and obligations of an Issuing Lender under this Agreement with
respect to Letters of Credit issued by it prior to such replacement, but shall
not be required to issue additional Letters of Credit.

          (k) Cash Collateralization. If any Event of Default shall occur and be
              ----------------------
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 66.66%
of the total LC Exposure) demanding the deposit of cash collateral pursuant to
this paragraph, the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit
                                     --------
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to the Borrower
described in clause (i) or (j) of Article VII. Such deposit shall be held by the
             ----------    ---    -----------
Administrative Agent as collateral for the payment and performance of the
obligations of the Borrower under this Agreement. The Administrative Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Administrative Agent and at the Borrower's risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing Lender for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Lenders with LC Exposure
representing greater than 66.66% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower under this Agreement. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived. The Borrower shall,
concurrently with the deposit of the cash collateral, deliver to the
Administrative Agent such documents and agreements as shall be reasonably
required by the Administrative Agent in order to perfect a first priority
security interest in such cash collateral, duly executed by the Borrower and in
favor of the Administrative Agent (on behalf of the Lenders).

     SECTION 2.07. Funding of Borrowings.
                   ---------------------

          (a) Funding by Lenders. Each Lender shall make each Loan to be made by
              ------------------
it hereunder on the proposed date thereof by wire transfer of immediately
available funds by 12:00 noon, New York City time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders. The Administrative Agent will make such Loans available to the
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower maintained with the Administrative Agent in New York
City and designated by the Borrower in the applicable Revolving Borrowing
Request or Competitive Bid Request; provided that ABR Revolving Loans made to
finance the reimbursement of an LC Disbursement as provided in Section 2.06(f)
                                                               ---------------
shall be remitted by the Administrative Agent to the Issuing Lender.

          (b) Presumption by the Administrative Agent. Unless the Administrative
              ---------------------------------------
Agent shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender's share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
paragraph (a) of this Section and may, in
- -------------

                                Credit Agreement
                                ----------------



                                      -26-

reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender's Loan included in such
Borrowing.

     SECTION 2.08. Interest Elections.
                   ------------------

          (a) Elections by the Borrower for Revolving Borrowings. Each Revolving
              --------------------------------------------------
Borrowing initially shall be of the Type specified in the applicable Revolving
Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall
have an initial Interest Period as specified in such Revolving Borrowing
Request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing as a Borrowing of the same Type
and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods
therefor, all as provided in this Section. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing. This Section shall not apply to
Competitive Borrowings, which may not be converted or continued.

          (b) Notice of Elections. To make an election pursuant to this Section,
              -------------------
the Borrower shall notify the Administrative Agent of such election by telephone
by the time that a Revolving Borrowing Request would be required under Section
                                                                       -------
2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting
- ----
from such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Interest Election Request in the form set forth in Exhibit D (or such other form
                                                   ---------
approved by the Administrative Agent) and signed by the Borrower.

          (c) Information in Interest Election Requests. Each telephonic and
              -----------------------------------------
written Interest Election Request shall specify the following information in
compliance with Section 2.02:
                ------------

               (i)   the Borrowing to which such Interest Election Request
     applies and, if different options are being elected with respect to
     different portions thereof, the portions thereof to be allocated to each
     resulting Borrowing (in which case the information to be specified pursuant
     to clauses (iii) and (iv) below shall be specified for each resulting
     Borrowing);

               (ii)  the effective date of the election made pursuant to such
     Interest Election Request, which shall be a Business Day;

               (iii) whether the resulting Borrowing is to be an ABR Borrowing
     or a Eurodollar Borrowing; and

               (iv)  if the resulting Borrowing is a Eurodollar Borrowing, the
     Interest Period to be applicable thereto after giving effect to such
     election, which shall be a period contemplated by the definition of the
     term "Interest Period".

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.

          (d) Notice by the Administrative Agent to Lenders. Promptly following
              ---------------------------------------------
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender's portion of each
resulting Borrowing.

                                Credit Agreement
                                ----------------



                                      -27-

          (e) Failure to Elect; Events of Default. If the Borrower fails to
              -----------------------------------
deliver a timely Interest Election Request with respect to a Eurodollar
Revolving Borrowing prior to the end of the Interest Period applicable thereto,
then, unless such Borrowing is repaid as provided herein, at the end of such
Interest Period such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default has
occurred and is continuing and the Administrative Agent, at the request of the
Required Lenders, so notifies the Borrower, then, so long as an Event of Default
is continuing (i) no outstanding Revolving Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Revolving Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

     SECTION 2.09. Termination, Reduction and Extension of the Commitments.
                   -------------------------------------------------------

          (a) Scheduled Termination. Unless previously terminated, the
              ---------------------
Commitments shall terminate on the Maturity Date.

          (b) Voluntary Termination or Reduction. The Borrower may at any time
              ----------------------------------
terminate, or from time to time reduce, the Commitments; provided that (i) each
reduction of the Commitments shall be in an amount that is an integral multiple
of $1,000,000 and not less than $10,000,000, (ii) the Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.11, the sum of the total
Revolving Credit Exposures plus the aggregate principal amount of outstanding
Competitive Loans would exceed the total Commitments and (iii) terminations
and/or reductions may not be made more than one (1) time in any given calendar
quarter.

          (c) Notice of Voluntary Termination or Reduction. The Borrower shall
              --------------------------------------------
notify the Administrative Agent of any election to terminate or reduce the
Commitments under paragraph (b) of this Section at least five Business Days
                  -------------
prior to the effective date of such termination or reduction, specifying such
election and the effective date thereof. Promptly following receipt of any
notice, the Administrative Agent shall advise the Lenders of the contents
thereof. Each notice delivered by the Borrower pursuant to this Section shall be
irrevocable; provided that a notice of termination of the Commitments delivered
by the Borrower may state that such notice is conditioned upon the effectiveness
of a particular transaction or other credit facilities, in which case such
notice may be revoked by the Borrower (by notice to the Administrative Agent on
or prior to the specified effective date) if such condition is not satisfied.

          (d) Effect of Termination or Reduction. Any termination or reduction
              ----------------------------------
of the Commitments shall be permanent. Each reduction of the Commitments shall
be made ratably among the Lenders in accordance with their respective
Commitments.

          (e) Extension of Maturity Date. Subject to the provisions of this
              --------------------------
Section 2.09(e), the Borrower shall have one option to extend the Maturity Date
- ---------------
for one (1) year to November 7, 2006, subject to the satisfaction of each of the
following conditions:

               (i)   The Borrower shall notify the Administrative Agent of its
     exercise of the applicable option at least 90 days, but not more than 180
     days, prior to the originally scheduled Maturity Date;

               (ii)  No Default or Event of Default shall have occurred and be
     continuing at the time of giving such notice pursuant to clause (i) above
     or on the originally scheduled Maturity Date;

               (iii) unless otherwise disclosed to and approved by the Required
     Lenders, the representations and warranties made by the Borrower in the
     Loan Documents shall have been true and correct in all material respects
     when made and shall also be true and correct in all material respects on
     the originally scheduled Maturity Date (except, if any such representation
     or warranty is expressly stated to have been made as of a specific date, as
     of such specific date);

               (iv)  the Borrower shall have delivered updates to the
     Administrative Agent of all the Schedules referred to in Article III hereof
                                                              -----------
     and such updated Schedules shall be acceptable to Administrative

                                Credit Agreement
                                ----------------



                                      -28-

     Agent in its reasonable judgment;

               (v)   At the time of the exercise of the extension hereunder, the
     Borrower shall have delivered (A) a Compliance Certificate demonstrating
     that the Borrower is in compliance with the covenants set forth in Article
                                                                        -------
     VI as of the end of the most recent Measuring Period ending at least
     --
     forty-five days prior to such date and (B) a certificate of a Financial
     Officer of Borrower certifying that such Financial Officer has no knowledge
     of any change since the end of such applicable Measuring Period that would
     cause Borrower to not be in compliance with the covenants set forth in
     Article VI;

               (vi)  The Borrower shall have paid to the Administrative Agent
     (for the ratable benefit of the Lenders) a non-refundable extension fee
     equal to .25% of the aggregate amount of the Revolving Credit Exposure and
     unused Commitments of the Lenders prior to the originally scheduled
     Maturity Date; and

               (vii) The Borrower shall have paid all reasonable out-of-pocket
     costs and expenses incurred by the Administrative Agent and all reasonable
     fees and expenses paid to third party consultants (including reasonable
     attorneys' fees and expenses) by Administrative Agent in connection with
     such extension.

     SECTION 2.10. Repayment of Loans; Evidence of Debt.
                   ------------------------------------

          (a) Repayment. The Borrower hereby unconditionally promises to pay the
              ---------
Loans as follows:

               (i)   to the Administrative Agent for the account of each Lender
     the then unpaid principal amount of each Revolving Loan on the Maturity
     Date, and

               (ii)  to the Administrative Agent for the account of each
     respective Lender the then unpaid principal amount of each Competitive Loan
     of such Lender on the last day of the Interest Period applicable to such
     Loan.

          (b) Manner of Payment. Prior to any repayment or prepayment of any
              -----------------
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be paid and shall notify the Administrative Agent by telephone (confirmed by
telecopy) of such selection not later than 2:00 p.m., New York City time, three
Business Days before the scheduled date of such repayment in the case of a
Eurodollar Borrowing and one Business Day before the scheduled date of such
repayment in the case of an ABR Borrowing; provided that each repayment of
Borrowings shall be applied to repay any outstanding ABR Borrowings before any
other Borrowings. If the Borrower fails to make a timely selection of the
Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied,
first, to pay any outstanding ABR Borrowings and, second, to other Borrowings in
the order of the remaining duration of their respective Interest Periods (the
Borrowing with the shortest remaining Interest Period to be repaid first), and
for these purposes, Competitive Loans shall be deemed to be in the same Class as
Loans. Each payment of a Revolving Borrowing shall be applied ratably to the
Loans included in such Borrowing.

          (c) Maintenance of Loan Accounts by Lenders. Each Lender shall
              ---------------------------------------
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.

          (d) Maintenance of Loan Accounts by the Administrative Agent. The
              --------------------------------------------------------
Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Class and Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender's share thereof.

          (e) Effect of Entries. The entries made in the accounts maintained
              -----------------
pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence
            -------------    ---
of the existence and amounts of the obligations recorded therein;

                                Credit Agreement
                                ----------------



                                      -29-

provided that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of this
Agreement.

          (f) Promissory Notes. Any Lender may request that Loans made by it be
              ----------------
evidenced by promissory notes. In such cases, the Loans of such Lender shall be
evidenced as follows:

               (i)    Revolving Notes. The Revolving Loans made by each Lender
                      ---------------
     shall be evidenced by a single promissory note of the Borrower
     substantially in the form of Exhibit B-1, dated the date hereof, payable to
                                  -----------
     such Lender in a principal amount equal to the amount of its Commitment as
     originally in effect and otherwise duly completed.

               (ii)   Competitive Notes. The Competitive Loans made by any
                      -----------------
     Lender shall be evidenced by a single promissory note of the Borrower
     substantially in the form of Exhibit B-2, dated the date hereof, payable to
                                  -----------
     such Lender in an amount equal to 50% of the aggregate amount of the
     Commitments and otherwise duly completed.

               (iii)  Substitution, Exchange and Subdivision of Notes. No
                      -----------------------------------------------
     Lender shall be entitled to have its Notes substituted or exchanged for any
     reason, or subdivided for promissory notes of lesser denominations, except
     in connection with a permitted assignment of all or any portion of such
     Lender's relevant Commitment, Loans and Note pursuant to Section 9.04 (and,
                                                              ------------
     if requested by any Lender in connection with such permitted assignment,
     the Borrower agrees to so exchange any Note).

     SECTION 2.11. Prepayment of Loans.
                   -------------------

          (a) Optional Prepayments. The Borrower shall have the right at any
              --------------------
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with the requirements of this Section; provided
that the Borrower shall not have the right to prepay any Competitive Loan
without the prior consent of the Lender thereof.

          (b) Mandatory Prepayments and Commitment Reductions. The Borrower will
              -----------------------------------------------
prepay the Loans (and/or provide cover for LC Exposure as specified in Section
                                                                       -------
2.06(k)), and/or the Commitments shall be subject to automatic reduction, as
- -------
follows:

               (i)   Non-Compliance with Maximum Unencumbered Asset Value Ratio.
                     ----------------------------------------------------------
     If, at any time, the Unencumbered Asset Value Ratio exceeds 60%, then the
     Borrower shall, within five Business Days after such occurrence, prepay the
     Loans (and/or provide cover for LC Exposure as specified in Section
                                                                 -------
     2.06(k)), and/or the Commitments shall be subject to automatic reduction,
     -------
     in an aggregate amount to the extent necessary to achieve compliance with
     the maximum Unencumbered Asset Value covenant set forth in Section 6.07(h),
                                                                ---------------
     such prepayment and/or reduction to be effected in each case in the manner
     and to the extent specified in clause (ii) of this paragraph.
                                    -----------

               (ii)  Application. Prepayments and/or reductions of Commitments
                     -----------
     pursuant to this paragraph shall be applied to reduce the aggregate amount
     of the Commitments (and to the extent that, after giving effect to such
     reduction, the sum of the total Revolving Credit Exposures plus the
     aggregate principal amount of outstanding Competitive Loans would exceed
     the Commitments, the Borrower shall, first, prepay Revolving Loans, second,
     provide cover for LC Exposure as specified in Section 2.06(k) and third,
                                                   ---------------
     prepay Competitive Loans in an aggregate amount equal to such excess).

          (c) Notices, Etc. The Borrower shall notify the Administrative Agent
              ------------
by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurodollar Revolving Borrowing, not later than 2:00 p.m., New
York City time, three Business Days before the date of prepayment or (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 2:00 p.m., New
York City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date, the principal amount
of each Borrowing or portion thereof to be prepaid and, in the case of a
mandatory prepayment, a

                                Credit Agreement
                                ----------------



                                      -30-

reasonably detailed calculation of the amount of such prepayment; provided that,
if a notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.09, then such notice
                                                  ------------
of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09. Promptly following receipt of any such notice
                ------------
relating to a Revolving Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Borrowing shall
be in an amount that would be permitted in the case of an advance of a Revolving
Borrowing of the same Type as provided in Section 2.02, except as necessary to
                                          -------------
apply fully the required amount of a mandatory prepayment. Each prepayment of a
Revolving Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by (A) accrued interest to
the extent required by Section 2.13 and (B) any payments due pursuant to Section
                       ------------                                      -------
2.16 and shall be made in the manner specified in Section 2.10(b).
- ----                                              ---------------

     SECTION 2.12. Fees.
                   ----

          (a) Facility Fee. The Borrower agrees to pay to the Administrative
              ------------
Agent for the account of each Lender a facility fee, which shall accrue at the
Applicable Rate on the daily amount of the Commitment of such Lender (whether
used or unused) during the period from and including the Effective Date to but
excluding the date on which such Commitment terminates; provided that, if such
                                                        --------
Lender continues to have any Revolving Credit Exposure after its Commitment
terminates, then such facility fee shall continue to accrue on the daily amount
of such Lender's Revolving Credit Exposure from and including the date on which
its Commitment terminates to but excluding the date on which such Lender ceases
to have any Revolving Credit Exposure. Accrued facility fees shall be payable in
arrears on each Quarterly Date and on the date on which the Commitments
terminate, commencing on the first such date to occur after the date hereof;
provided that any facility fees accruing after the date on which the Commitments
- --------
terminate shall be payable on demand. All facility fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

          (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the
              ---------------------
Administrative Agent for account of each Lender a participation fee with respect
to its participations in Letters of Credit, which shall accrue at a rate per
annum equal to the same Applicable Rate used to determine the interest rate
applicable to Eurodollar Revolving Loans (plus 4% during the continuance of an
Event of Default) on the average daily amount of such Lender's LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date on which such Lender's Commitment terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Lender
a fronting fee, which shall accrue at the rate or rates per annum separately
agreed upon between the Borrower and the Issuing Lender on the average daily
amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date of termination of the
Commitments and the date on which there ceases to be any LC Exposure, as well as
the Issuing Lender's standard fees with respect to the issuance, amendment,
renewal or extension of any Letter of Credit or processing of drawings
thereunder. Participation fees and fronting fees accrued through and including
each Quarterly Date shall be payable on such Quarterly Date, commencing on the
first such date to occur after the Effective Date; provided that all such fees
shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable
on demand. Any other fees payable to the Issuing Lender pursuant to this
paragraph shall be payable within 10 days after demand. All participation fees
and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).

          (c) Administrative Agent Fees. The Borrower agrees to pay to the
              -------------------------
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrower and the Administrative
Agent.

          (d) Payment of Fees. All fees payable hereunder shall be paid on the
              ---------------
dates due, in immediately available funds, to the Administrative Agent (or to
the Issuing Lender, in the case of fees payable to it) for distribution, in the
case of facility fees and participation fees, to the Lenders entitled thereto.
Fees paid shall not be refundable under any circumstances.

                                Credit Agreement
                                ----------------



                                      -31-

     SECTION 2.13. Interest.
                   --------

          (a) ABR Loans. The Loans comprising each ABR Borrowing shall bear
              ---------
interest at the Alternate Base Rate plus the Applicable Rate.

          (b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing
              ----------------
shall bear interest (i) in the case of a Eurodollar Revolving Loan, at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Rate, or (ii) in the case of a Eurodollar Competitive Borrowing, at
the LIBO Rate for the Interest Period in effect for such Borrowing plus (or
minus, as applicable) the Margin applicable to such Loan.

          (c) Default Interest. Notwithstanding the foregoing, if any principal
              ----------------
of or interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid within 5 days of when due (except default interest shall
accrue immediately with respect to (x) principal payment from the date when such
payment is due and (y) any payments that are not made on the Maturity Date),
whether upon acceleration or otherwise, such overdue amount shall bear interest,
after as well as before judgment, at a rate per annum equal to (i) in the case
of overdue principal of any Loan, 4% plus the rate otherwise applicable to such
Loan as provided in the preceding paragraphs of this Section or (ii) in the case
of any other amount, 4% plus the rate applicable to ABR Loans as provided in
paragraph (a) of this Section.
- -------------

          (d) Payment of Interest. Accrued interest on each Loan shall be
              -------------------
payable in arrears on each Interest Payment Date for such Loan and, in the case
of Revolving Loans and Competitive Loans, upon termination of the Commitments;
provided that (i) interest accrued pursuant to paragraph (c) of this Section
                                               -------------
shall be payable on demand, (ii) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of
the Availability Period), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Revolving Loan prior to the end
of the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.

          (e) Computation. All interest hereunder shall be computed on the basis
              -----------
of a year of 360 days, except that interest computed by reference to the
Alternate Base Rate at times when the Alternate Base Rate is based on the Prime
Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate
Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.

     SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of
                   --------------------------
the Interest Period for a Eurodollar Borrowing:

          (a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period;

          (b) the Administrative Agent is advised by the Required Lenders (or,
in the case of a Eurodollar Competitive Loan, the Lender that is required to
make such Loan) that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (or Lender) of making or maintaining their Loans (or its Loan) included
in such Borrowing for such Interest Period; or

          (c) the Administrative Agent is advised by a Lender that it has become
unlawful for such Lender to honor its obligation to make or maintain Eurodollar
Loans hereunder;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as a Eurodollar Revolving Borrowing
shall be ineffective (in the case of clause (c) above, only as to the affected
                                     ----------
Lender), (ii) if any Revolving

                                Credit Agreement
                                ----------------



                                      -32-

Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing
shall be made as an ABR Revolving Borrowing (in the case of clause (c) above,
                                                            ----------
only as to the affected Lender), (iii) any request by the Borrower for a
Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the
circumstances giving rise to such notice do not affect all the Lenders, then
requests by the Borrower for Eurodollar Competitive Borrowings may be made to
Lenders that are not affected thereby and (B) if the circumstances giving rise
to such notice affect only one Type of Borrowings, then the other Types of
Borrowings shall be permitted and (iv) if in accordance with clause (c) above
                                                             ----------
any Lender determines that it is no longer lawful for such Lender or its
applicable lending office (subject to Section 2.19(a)) to maintain any existing
                                      ---------------
Eurodollar Loans, or to continue to charge interest rates based upon the LIBO
Rate, then, on notice thereof by such Lender to the Borrower through the
Administrative Agent, any obligation of such Lender to continue Eurodollar Loans
shall be suspended until such Lender notifies the Administrative Agent and the
Borrower that the circumstances giving rise to such determination no longer
exist and, in such event, all Eurodollar Loans of such Lender shall be converted
to ABR Loans, either on the last day of the Interest Period thereof, if such
Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day,
or immediately, if such Lender may not lawfully continue to maintain such
Eurodollar Rate Loans.

     SECTION 2.15. Increased Costs.
                   ---------------

          (a) Increased Costs Generally. If any Change in Law shall:
              -------------------------

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

               (ii)  impose on any Lender or the Issuing Lender or the London
     interbank market any other condition affecting this Agreement or Eurodollar
     Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lenders of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Lender of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Lender hereunder (whether of principal, interest or otherwise), then, in
accordance with and subject to Section 2.15(c), the Borrower will promptly on
                               ---------------
demand pay to such Lender or the Issuing Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Lender, as the case may be, for such additional costs incurred or reduction
suffered.

          (b) Capital Requirements. If any Lender or the Issuing Lender
              --------------------
determines that any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender's or the Issuing
Lender's capital or on the capital of such Lender's or the Issuing Lender's
holding company, if any, as a consequence of this Agreement or the Loans made
by, or participations in Letters of Credit held by, such Lender, or the Letters
of Credit issued by the Issuing Lender, to a level below that which such Lender
or the Issuing Lender or such Lender's or the Issuing Lender's holding company
could have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Lender's policies and the policies of such Lender's or
the Issuing Lender's holding company with respect to capital adequacy), then, in
accordance with and subject to Section 2.15(c), from time to time the Borrower
                               ---------------
will promptly on demand pay to such Lender or the Issuing Lender, as the case
may be, such additional amount or amounts as will compensate such Lender or the
Issuing Lender or such Lender's or the Issuing Lender's holding company for any
such reduction suffered.

          (c) Certificates from Lenders. A certificate of a Lender or the
              -------------------------
Issuing Lender setting forth, in reasonable detail, the amount or amounts
necessary to compensate such Lender or the Issuing Lender or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
                                             -------------    ---
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof. No Lender or Issuing Lender shall have the right to
collect payments from the Borrower pursuant to paragraph (a) or (b) of this
                                               -------------    ---
Section unless it is the policy of such Lender or Issuing Lender, as applicable,
at the time of collection, to collect similar payments from borrowers in
connection with credit facilities similar to those made available pursuant to
this

                                Credit Agreement
                                ----------------



                                      -33-

Agreement.

          (d) Delay in Requests. Failure or delay on the part of any Lender or
              -----------------
the Issuing Lender to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender's or the Issuing Lender's right to demand
such compensation; provided that the Borrower shall not be required to
compensate a Lender or the Issuing Lender pursuant to this Section for any
increased costs or reductions incurred more than 180 days prior to the date that
such Lender or the Issuing Lender, as the case may be, notifies the Borrower of
the Change in Law giving rise to such increased costs or reductions and of such
Lender's or the Issuing Lender's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

          (e) Competitive Loans. Notwithstanding the foregoing provisions of
              -----------------
this Section, a Lender shall not be entitled to compensation pursuant to this
Section in respect of any Competitive Loan if the Change in Law that would
otherwise entitle it to such compensation shall have been publicly announced
prior to submission of the Competitive Bid pursuant to which such Loan was made.

     SECTION 2.16. Break Funding Payments. In the event of (a) the payment of
                   ----------------------
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
                                                                        -------
2.11(c) and is revoked in accordance herewith), (d) the failure to borrow any
- -------
Competitive Loan after accepting the Competitive Bid to make such Loan, or (e)
the assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.19, then, in any such event, the Borrower shall compensate each Lender
- ------------
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof.

     SECTION 2.17. Taxes.
                   -----

          (a) Payments Free of Taxes. Any and all payments by or on account of
              ----------------------
any obligation of the Borrower hereunder or under any other Loan Document shall
be made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes; provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent, Lender or Issuing Lender (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.

          (b) Payment of Other Taxes by the Borrower. In addition, the Borrower
              --------------------------------------
shall pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable law.

          (c) Indemnification by the Borrower. The Borrower shall indemnify the
              -------------------------------
Administrative Agent, each Lender and the Issuing Lender, within 10 days after
written demand therefor, for the full amount of any

                                Credit Agreement
                                ----------------



                                      -34-

Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender
or the Issuing Lender, as the case may be, on or with respect to any payment by
or on account of any obligation of the Borrower hereunder (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Lender, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Lender, shall be conclusive absent manifest error.

          (d) Evidence of Payments. As soon as practicable after any payment of
              --------------------
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

          (e) Foreign Lenders. Any Foreign Lender that is entitled to an
              ---------------
exemption from or reduction of withholding tax under the law of the jurisdiction
in which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced rate.

          (f) Refunds. If the Administrative Agent or a Lender determines, in
              -------
its sole discretion, that it has received a refund of any Taxes or Other Taxes
as to which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay
                                                      ------------
over such refund to the Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrower under this Section 2.17 with
                                                             ------------
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority. This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
the Borrower or any other Person.

     SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs.
                   ----------------------------------------------------------

          (a) Payments by the Borrower. The Borrower shall make each payment
              ------------------------
required to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 2.15,
                                                               ------------
2.16 or 2.17, or otherwise) or under any other Loan Document (except to the
- ----    ----
extent otherwise provided therein) prior to 3:00 p.m., New York City time, on
the date when due, in immediately available funds, without set off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at the
Administrative Agent's Account, except as otherwise expressly provided in the
relevant Loan Document, and except payments to be made directly to the Issuing
Lender as expressly provided herein and except that payments pursuant to
Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons
- -------------  ----  ----     ----
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder or under any other Loan Document (except to the extent otherwise
provided therein) shall be made in dollars.

          (b) Application of Insufficient Payments. If at any time insufficient
              ------------------------------------
funds are received by and

                                Credit Agreement
                                ----------------



                                      -35-

available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.

          (c) Pro Rata Treatment. Except to the extent otherwise provided
              ------------------
herein: (i) each Revolving Borrowing shall be made from the Lenders, each
payment of commitment fee under Section 2.12 shall be made for the account of
                                ------------
the Lenders, and each termination or reduction of the amount of the Commitments
under Section 2.09 shall be applied to the respective Commitments of the
      ------------
Lenders, pro rata according to the amounts of their respective Commitments; (ii)
each Revolving Borrowing shall be allocated pro rata among the Lenders according
to the amounts of their respective Commitments (in the case of the making of
Revolving Loans) or their respective Loans (in the case of conversions and
continuations of Loans); (iii) each payment or prepayment of principal of
Revolving Loans by the Borrower shall be made for account of the Lenders pro
rata in accordance with the respective unpaid principal amounts of the Revolving
Loans held by them; and (iv) each payment of interest on Revolving Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance with
the amounts of interest on such Loans then due and payable to the respective
Lenders.

          (d) Sharing of Payments by Lenders. If any Lender shall, by exercising
              ------------------------------
any right of set-off or counterclaim or otherwise, obtain payment in respect of
any principal of or interest on any of its Revolving Loans or participations in
LC Disbursements resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements and accrued interest thereon then due than the proportion
received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Revolving Loans
and participations in LC Disbursements of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements;
provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans or participations in LC Disbursements to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

          (e) Presumptions of Payment. Unless the Administrative Agent shall
              -----------------------
have received notice from the Borrower prior to the date on which any payment is
due to the Administrative Agent for the account of the Lenders or the Issuing
Lender hereunder that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Lender, as the case may be, the amount
due. In such event, if the Borrower has not in fact made such payment, then each
of the Lenders or the Issuing Lender, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or the Issuing Lender with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

          (f) Certain Deductions by the Administrative Agent. If any Lender
              ----------------------------------------------
shall fail to make any payment required to be made by it pursuant to Section
                                                                     -------
2.06(e) or (f), 2.07(b) or 2.18(e), then the Administrative Agent may, in its
- -------    ---  -------    -------
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for account of such Lender to
satisfy such Lender's obligations under such Sections
until all such unsatisfied obligations are fully paid.

                                Credit Agreement
                                ----------------



                                      -36-

     SECTION 2.19. Mitigation Obligations; Replacement of Lenders.
                   ----------------------------------------------

          (a) Designation of a Different Lending Office. If any Lender requests
              -----------------------------------------
compensation under Section 2.15, or if the Borrower is required to pay any
                   ------------
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 2.17, then such Lender shall use reasonable
                       ------------
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not
   ------------    ----
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

          (b) Replacement of Lenders. If (i) any Lender is unable to make or
              ----------------------
maintain Eurodollar Loans pursuant to Section 2.14(c), (ii)any Lender requests
compensation under Section 2.15, (iii) the Borrower is required to pay any
                   ------------
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 2.17, or (iv) any Lender defaults in its
                       ------------
obligation to fund Loans hereunder, then the Borrower may, at its sole expense
and effort, upon notice to such Lender and the Administrative Agent, require
such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04), all its interests,
                                         ------------
rights and obligations under this Agreement (other than any outstanding
Competitive Loans held by it) to an assignee that shall assume such obligations
(which assignee may be another Lender, if a Lender accepts such assignment);
provided that (A) the Borrower shall have received the prior written consent of
the Administrative Agent, which consent shall not unreasonably be withheld, (B)
such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans (other than Competitive Loans) and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (C) in the case of any such assignment resulting from a claim
for compensation under Section 2.15 or payments required to be made pursuant to
                       ------------
Section 2.17, such assignment will result in a reduction in such compensation or
- ------------
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

                                  ARTICLE III.

                         REPRESENTATIONS AND WARRANTIES

                  The Borrower represents and warrants to the
                      Issuing Lender and the Lenders that:

     SECTION 3.01. Organization; Powers. Each of the Borrower and its Nationwide
                   --------------------
Core Entities is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.

     SECTION 3.02. Authorization; Enforceability. The Transactions are within
                   -----------------------------
the Borrower's organizational powers and have been duly authorized by all
necessary organizational and, if required, stockholder action under their
respective Organizational Documents. This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each of the other Loan Documents
to which it is a party when executed and delivered will constitute, a legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of affecting creditors' rights generally and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

     SECTION 3.03. Governmental Approvals; No Conflicts.
                   ------------------------------------

                                Credit Agreement
                                ----------------



                                      -37-

          The Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except for such as have been obtained or made and are in full force and effect,
(b) will not violate any applicable law or regulation or the Organizational
Documents of the Borrower or any of the Nationwide Core Entities or any order of
any Governmental Authority, (c) will not violate or result in a default under
any indenture, material agreement or other material instrument binding upon the
Borrower or any of the Nationwide Core Entities or their assets, or give rise to
a right thereunder to require any payment to be made by the Borrower or any of
the Nationwide Core Entities, and (d) will not result in the creation or
imposition of any Lien on any asset of the Borrower or any of the Nationwide
Core Entities.

     SECTION 3.04. Financial Condition; No Material Adverse Change.
                   -----------------------------------------------

          (a) Financial Condition. The Borrower has heretofore furnished to the
              -------------------
Lenders its consolidated balance sheet and statements of income, stockholders
equity and cash flows (i) as of and for the fiscal year ended December 31, 2001,
reported on by Arthur Andersen LLP, independent public accountants, and (ii) as
of and for the fiscal quarter and the portion of the fiscal year ended June 30,
2002, certified by its chief financial officer. Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of the Consolidated Entities as of such dates and for
such periods in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes in the case of the statements referred to in clause
(ii) above. Neither the Borrower nor any of its Subsidiaries has any Contingent
Obligation, contingent liability or liability for any taxes, long-term leases or
commitments, not reflected in its audited financial statements delivered to the
Administrative Agent on or prior to the Closing Date or otherwise disclosed to
the Administrative Agent in writing, which will have or is reasonably likely to
have a Material Adverse Effect.

          (b) No Material Adverse Change. Since June 30, 2002, there has been no
              --------------------------
material adverse change in the business, assets, operations, prospects or
condition, financial or otherwise, of the Borrower and the other Consolidated
Entities, taken as a whole.

     SECTION 3.05. Properties.
                   ----------

          (a) Property Generally. Each of the Nationwide Entities has good title
              ------------------
to, or valid leasehold interests in, all its real and personal property material
to its business, except for minor defects in title that do not materially
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.

          (b) Intellectual Property. Each of the Nationwide Entities owns, or is
              ---------------------
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Nationwide Entities does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.06. Litigation and Environmental Matters.
                   ------------------------------------

          (a) Actions, Suits and Proceedings. There are no actions, suits or
              ------------------------------
proceedings by or before any arbitrator or Governmental Authority now pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of the Nationwide Core Entities (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters) or (ii)
that involve this Agreement or the Transactions.

          (b) Environmental Matters. Except for the Disclosed Matters and except
              ---------------------
with respect to any other matters that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of the Nationwide Core Entities (i) has failed to comply in all
material respects with any Environmental Law or to obtain, maintain or comply in
all material respects with any permit, license or other approval required under
any Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any

                                Credit Agreement
                                ----------------



                                      -38-

Environmental Liability.

          (c) Disclosed Matters. Except as otherwise disclosed to and approved
              -----------------
by a majority of Required Lenders, since the date of this Agreement, there has
been no change in the status of the Disclosed Matters that, individually or in
the aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.

     SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and
                   -----------------------------------
the Nationwide Core Entities is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.

     SECTION 3.08. Investment and Holding Company Status. Neither the Borrower
                   -------------------------------------
nor any of the Nationwide Core Entities is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.

     SECTION 3.09. Taxes. Each of the Borrower and the Nationwide Core Entities
                   -----
has timely filed or timely caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower or Nationwide Core Entity,
as applicable, has set aside on its books adequate reserves in accordance with
GAAP or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.

     SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected
                   -----
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts, exceed
by more than $10,000,000 the fair market value of the assets of all such
underfunded Plans.

     SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all
                   ----------
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither the Information Memorandum nor any of the
reports, financial statements, certificates or other information furnished by or
on behalf of the Borrower to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement and the other Loan Documents
or delivered hereunder or thereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading in any material
respect; provided that, with respect to projected financial information, the
Borrower represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time.

     SECTION 3.12. Use of Credit. Neither the Borrower nor any of the Nationwide
                   -------------
Core Entities is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
any extension of credit hereunder will be used to buy or carry any Margin Stock.

     SECTION 3.13. Material Agreements and Liens.
                   -----------------------------

          (a) Material Agreements. Part A of Schedule 3.13 is a complete and
              -------------------            -------------
correct list of each credit agreement, loan agreement, indenture, purchase
agreement, guarantee, letter of credit or other arrangement providing for or
otherwise relating to any Indebtedness or any extension of credit (or commitment
for any extension of credit) to, or guarantee by, the Borrower or any of the
Nationwide Core Entities outstanding on the date hereof that is not disclosed on
the most recent financial statement delivered to the Administrative Agent
pursuant to Section
            -------

                                Credit Agreement
                                ----------------



                                      -39-

3.04 or 5.01, as applicable, the aggregate principal or face amount of which
- ----    ----
equals or exceeds (or may equal or exceed) $5,000,000 (each, a "Material
                                                                --------
Agreement"), and the aggregate principal or face amount outstanding or that may
- ---------
become outstanding under each such arrangement is correctly described in Part A
                                                                         ------
of Schedule 3.13. The Borrower is not in default in any material respect beyond
   -------------
any applicable grace period under or with respect to any Material Agreement to
which it is a party or by which it or any of its property is bound in any
respect, the existence of which default is likely to result in a Material
Adverse Effect.

          (b) Liens. Part B of Schedule 3.13 is a complete and correct list of
              -----  ------    -------------
each Lien securing Indebtedness of any Person outstanding on the date hereof
that is not disclosed on the most recent financial statement delivered to the
Administrative Agent pursuant to Section 3.04 or 5.01, as applicable, the
                                 ------------    ----
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $5,000,000 and covering any property of the Borrower or any of the
Nationwide Core Entities, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the property covered by each such Lien is
correctly described in Part B of Schedule 3.13.
                       ------    -------------

     SECTION 3.14. Capitalization. The Borrower has heretofore delivered to the
                   --------------
Lenders a true and complete copy of the Organizational Documents referred to in
Section 4.01(d). As of the date hereof, (x) except for stock options listed on
- ---------------
Schedule 3.14 and future stock options (so long as such future options do not
- -------------
otherwise have a Material Adverse Effect) granted pursuant to Borrower's 1989
Stock Option Plan, as amended and restated January 24, 1992 and October 14,
1999, there are no outstanding Equity Rights with respect to the Borrower and
(y) there are no outstanding obligations of the Borrower or any of the
Nationwide Core Entities to repurchase, redeem, or otherwise acquire any Equity
Interests in the Borrower nor are there any outstanding obligations of the
Borrower or any of its Subsidiaries to make payments to any Person, such as
"phantom stock" payments, where the amount thereof is calculated with reference
to the fair market value or equity value of the Borrower or any of its
Subsidiaries.

     SECTION 3.15. Subsidiaries and Investments.
                   ----------------------------

          (a) Subsidiaries. Set forth in Part A of Schedule 3.15 (such schedule
              ------------               ------    -------------
being subject to update from time to time as of the dates when this
representation is remade, or deemed to be remade) is a complete and correct
chart and list of all of the organizational structure of the Borrower and its
Subsidiary Entities, together with, for each such Person, (i) the jurisdiction
of organization of such Person, (ii) in the case of each such Subsidiary, each
Person holding Equity Interests in such Person and (iii) in the case of each
such Subsidiary, the nature of the ownership interests held by each such Person
and the percentage of ownership of the Borrower and Subsidiary Entity
represented by such ownership interests. Except as disclosed in Part A of
                                                                ------
Schedule 3.15, (x) each of the Borrower and its Subsidiary Entities owns, free
- -------------
and clear of Liens, and has the unencumbered right to vote, all outstanding
ownership interests in each Person shown to be held by it in Part A of Schedule
                                                             ------    --------
3.15, (y) all of the issued and outstanding capital stock of each such Person
- ----
organized as a corporation is validly issued, fully paid and nonassessable and
(z) there are no outstanding Equity Rights with respect to such Person.

          (b) Investments. Set forth in Part B of Schedule 3.15 is a complete
              -----------               ------    -------------
and correct list of all Investments (other than Investments disclosed in Part A
                                                                         ------
of Schedule 3.15 and other than Permitted Investments and operating deposit
   -------------
accounts with banks) held by the Borrower or any of its Subsidiary Entities in
any Person on the date hereof that are not disclosed on the most recent
financial statement delivered to the Administrative Agent pursuant to Section
                                                                      -------
3.04 or 5.01 and, for each such Investment, (x) the identity of the Person or
- ----    ----
Persons holding such Investment and (y) the nature of such Investment. Except as
disclosed in Part B of Schedule 3.15, each of the Borrower and its Subsidiary
             ------    -------------
Entities owns, free and clear of all Liens, all such Investments.

     SECTION 3.16. Real Property. Set forth on Schedule 3.16 is a list, as of
                   -------------               -------------
the date hereof, of all of the real property interests held by the Borrower and
its Subsidiary Entities, indicating in each case whether the respective property
is owned or leased, the identity of the owner or lessee and the location of the
respective property.

     SECTION 3.17. Solvency. On the Effective Date and after and giving effect
                   --------
to the Loans occurring on the Effective Date or such other date as Loans
requested hereunder are made, and the disbursement of the proceeds of such Loans
pursuant to the Borrower's instructions, the Borrower is and will be Solvent.

                                Credit Agreement
                                ----------------



                                      -40-

     SECTION 3.18. No Default. No Default or Event of Default has occurred and
                   ----------
is continuing.

     SECTION 3.19. Insurance. The Borrower and the Nationwide Core Entities
                   ---------
currently maintain all insurance which is required to be maintained pursuant to
Section 5.05.
- ------------

     SECTION 3.20. Organizational Documents. The Organizational Documents
                   ------------------------
heretofore delivered to the Administrative Agent pursuant to Section 4.01(e)
                                                             ---------------
constitute, as of the date hereof, all of the Organizational Documents (together
with all amendments and modifications thereof) of the Borrower. The Borrower
represents that it has delivered to the Administrative Agent true, correct and
complete copies of each of the documents set forth in this Section.

     SECTION 3.21. Executive Offices; Places of Organization. The principal
                   -----------------------------------------
offices, chief executive offices and principal places of business of the
Borrower are located at 610 Newport Center Drive, Suite 1150, Newport Beach,
California 92660. The Borrower was organized in the State of Maryland.

     SECTION 3.22. Securities Act. Neither the Borrower nor any of its
                   --------------
Subsidiary Entities have issued any unregistered securities in violation of the
registration requirements of Section 5 of the Securities Act of 1933, (as
amended from time to time) or any other law, nor are they in violation of any
rule, regulation or requirement under such act, or the Securities Exchange Act
of 1934, (as amended from time to time) other than violations which could not
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiary Entities is required to qualify an indenture under the
Trust Indenture Act of 1939, (as amended from time to time) in connection with
its execution and delivery of this Agreement or the incurrence of Indebtedness
hereunder.

     SECTION 3.23. REIT Status. The Borrower: (a) is a REIT, (b) has not revoked
                   -----------
its election to be a REIT, (c) has not engaged in any "prohibited transactions"
as defined in Section 856(b)(6)(iii) of the Code (or any successor provision
thereto), and (d) for its current "tax year" as defined in the Code is and for
all prior tax years subsequent to its election to be a REIT has been entitled to
a dividends paid deduction which meets the requirements of Section 857 of the
Code.

     SECTION 3.24. Leases. All of the leases of real property in which the
                   ------
Borrower or any of its Subsidiary Entities is the lessor, including Healthcare
Leases, are listed on Schedule 3.24. To the best of the Borrower's knowledge,
                      -------------
with respect to each such lease, the lease has been duly authorized, executed
and delivered by the lessee, is in full force and effect and the obligations of
the lessee are valid, binding and enforceable, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditors' rights
generally. To the best of the Borrower's knowledge except as otherwise disclosed
to and approved by the Required Lenders, there exists no material breach,
default, or event or condition which, with notice or lapse of time or both,
would constitute such a material breach or default by the lessee, and there are
no existing claims, defenses or offsets against rental due or to become due,
under the terms of any such lease, other than such breaches, defaults, claims,
defenses or offsets that could not reasonably be expected to result in a
Material Adverse Effect.

     SECTION 3.25. Brokers. The Borrower has not dealt with any broker or finder
                   -------
with respect to the Transactions or otherwise in connection with this Agreement.

                                   ARTICLE IV.

                                   CONDITIONS
                                   ----------

     SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans
                   --------------
and of the Issuing Lender to issue Letters of Credit hereunder shall not become
effective until the date on which (i) the Administrative Agent shall have
received each of the documents referred to below and (ii) each of the other
conditions listed below is satisfied, the satisfaction of each of such
conditions to be satisfactory to the Administrative Agent (and to the extent
specified below, to each Lender) in form and substance (or any such condition
shall have been waived in accordance with Section 9.02):
                                          ------------

                                Credit Agreement
                                ----------------


                                       -41-


          (a) Agreement. From each party hereto either (i) a counterpart of this
              ---------
Agreement signed on behalf of such party or (ii) written evidence satisfactory
to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.

          (b) Notes. The Notes duly completed and executed by the Borrower for
              -----
each respective Lender.

          (c) Opinion of Counsel to the Borrower. A favorable written opinion
              ----------------------------------
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of Sherry, Meyerhoff & Hanson LLP, counsel for the Borrower, substantially
in the form of Exhibit F, and covering such other matters relating to the
               ---------
Borrower, this Agreement or the Transactions as the Required Lenders
shall reasonably request. The Borrower hereby requests such counsel to deliver
such opinion to the Lenders and the Administrative Agent.

          (d) Opinion of Special New York Counsel to the Borrower. A favorable
              ---------------------------------------------------
written opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of Greenberg Traurig, LLP, special New York counsel for the
Borrower, substantially in the form of Exhibit G, and covering such other
                                       ---------
matters relating to the laws of the State of New York and to the Borrower, this
Agreement or the Transaction s as the Required Lenders shall reasonably request.
The Borrower hereby requests such counsel to deliver such opinion to the Lenders
and the Administrative Agent.

          (e) Organizational Documents. Copies of (i) the Certificate of
              ------------------------
Incorporation, Certificate of Formation, Certificate of Limited Partnership or
similar formation document of the Borrower, certified by the Secretary of State
of the state of formation of such Person as of a recent date, (ii) the
Organizational Documents of the Borrower (unless delivered pursuant to clause
                                                                       ------
(i) above) and the Persons identified in Schedule 4.01(e) and (iii) the
- ---                                      ----------------
applicable resolutions authorizing the delivery of the Loan Documents, certified
by the Secretary or an Assistant Secretary of such Person (or if such Person is
a limited partnership or limited liability company, an authorized representative
of its general partner or manager) as of the date of this Agreement as being
accurate and complete, in each case relating to the organization, existence and
good standing of such Person, the authorization of the Transactions and any
other legal matters relating to such Person, this Agreement or the Transactions,
all in form and substance satisfactory to the Administrative Agent and its
counsel.

          (f) Compliance Certificate. A certificate, dated the Effective Date
              ----------------------
and signed by a Financial Officer.

          (g) Material Adverse Effect. There shall not have occurred any change,
              -----------------------
event or development that could, in the opinion of the Lenders, have a Material
Adverse Effect.

          (h) Repayment of Existing Indebtedness. Evidence that the principal of
              ----------------------------------
and interest on, and all other amounts owing in respect of, the Existing
Revolving Credit Agreement (including any contingent or other amounts payable in
respect of letters of credit) shall have been (or shall be simultaneously) paid
in full on the Effective Date, that any commitments to extend credit under the
agreements or instruments relating to such Indebtedness shall have been canceled
or terminated and that all Guarantees in respect of, and all Liens securing, any
such Indebtedness shall have been released (or arrangements for such release
satisfactory to the Required Lenders shall have been made).

          (i) Third Party Approvals. All acts and conditions (including, without
              ---------------------
limitation, the obtaining of any third party consents and necessary regulatory
approvals and the making of any required filings, recordings or registrations)
required to be done and performed and to have happened precedent to the
execution, delivery and performance of the Loan Documents by the Borrower.

          (j) Other Documents. Such other documents as the Administrative Agent
              ---------------
or any Lender or special New York counsel to JPMorgan may reasonably request.

          The obligation of any Lender to make its initial extension of credit
hereunder is also subject to the payment or delivery by the Borrower of such
fees, expenses and other consideration as the Borrower shall have

                                Credit Agreement
                                ----------------


                                       -42-


agreed to pay or deliver to any Lender, the Arrangers or the Administrative
Agent in connection herewith, including the reasonable fees and expenses of
Morrison & Foerster LLP, special New York counsel to JPMorgan, in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the other Loan Documents and the extensions of credit hereunder (to the extent
that statements for such fees and expenses have been delivered to the Borrower).

          The Administrative Agent shall notify the Borrower and the Lenders of
the Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Lender to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) on or prior to 3:00 p.m., New York City time, on
            ------------
November 8, 2002 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).

     SECTION 4.02. Each Credit Event. The obligation of each Lender to make a
                   -----------------
Loan on the occasion of any Borrowing, and of the Issuing Lender to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:

          (a) receipt by the Administrative Agent of a Revolving Borrowing
Request pursuant to Section 2.03 or, if applicable, a request for a Letter of
Credit pursuant to Section 2.06(b);
                   ---------------

          (b) unless otherwise disclosed to and approved by the Required
Lenders, the representations and warranties of the Borrower set forth in this
Agreement and in the other Loan Documents shall be true and correct in all
material respects on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable (except, if any such representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date); and

          (c) at the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (b) and
                                                            --------------
(c) of the preceding sentence.
- ---

                                   ARTICLE V.

                              AFFIRMATIVE COVENANTS
                              ---------------------

          Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:

     SECTION 5.01. Financial Statements and Other Information. The Borrower will
                   ------------------------------------------
furnish to the Administrative Agent and each Lender:

          (a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, its audited consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by Ernst & Young US, LLP
or other independent public accountants of recognized national standing (without
a "going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;

                                Credit Agreement
                                ----------------


                                       -43-


          (b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;

          (c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a Compliance Certificate of a Financial Officer of the
- ----------    ---
Borrower representing and certifying (i) that the Financial Officer signatory
thereto has reviewed the terms of the Loan Documents, and has made, or caused to
be made under his/her supervision, a review in reasonable detail of the
transactions and consolidated financial condition of the Borrower and its
Subsidiaries, during the fiscal quarter covered by such reports, that such
review has not disclosed the existence during or at the end of such fiscal
quarter, and that such officer does not have knowledge of the existence as at
the date of such Compliance Certificate, of any condition or event which
constitutes an Event of Default or Default or mandatory prepayment event, or, if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what action the Borrower or its Subsidiaries has taken,
is taking and proposes to take with respect thereto, (ii) the calculations (with
such specificity as the Administrative Agent may reasonably request) for the
period then ended which demonstrate compliance with the covenants and financial
ratios set forth in Sections 6.01, 6.04 and 6.07, (iii) stating whether any
                    -------------  ----     ----
change in GAAP or in the application thereof has occurred since the date of the
audited financial statements referred to in Section 3.04 and, if any such change
                                            ------------
has occurred, specifying the effect of such change on the financial statements
accompanying such certificate, (iv) a schedule of Total Liabilities in respect
of borrowed money in the level of detail disclosed in the Borrower's Form 10-Q
filings with the Securities and Exchange Commission, as well as such other
information regarding such Indebtedness as may be reasonably requested by the
Administrative Agent, and (v) a schedule of EBITDA.

          (d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on such
- ----------
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);

          (e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any its Subsidiaries with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally;

          (f) to the extent not otherwise delivered pursuant to this Section
                                                                     -------
5.01, copies of all financial statements and financial information delivered by
- ----
the Borrower (or, upon Administrative Agent's request, any of its Subsidiary
Entities) from time to time to the holders of any unsecured Indebtedness for
borrowed money of such Persons;

          (g) promptly after Moody's, Fitch or S&P shall have announced a change
in the rating established or deemed to have been established for the Index Debt,
written notice of such rating change; and

          (h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower, any Subsidiary Entity, any of the Properties of the Borrower or any
Subsidiary Entity, or compliance with the terms of this Agreement and the other
Loan Documents, as the Administrative Agent or any Lender may reasonably
request.

     SECTION 5.02. Notices of Material Events. The Borrower will furnish to the
                   --------------------------
Administrative Agent and each Lender prompt written notice of the following:

          (a) the occurrence of any Default;

                                Credit Agreement
                                ----------------


                                       -44-


          (b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any of the Nationwide Core Entities that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;

          (c) the assertion of a claim of any Environmental Liability by any
Person against, or with respect to any activities of the Borrower or any
Nationwide Core Entity, and any alleged violation of or non-compliance by or on
behalf of the Borrower or any Nationwide Core Entity with any Environmental Laws
or any permits, licenses or authorizations, other than any claim of
Environmental Liability or alleged violation that, if adversely determined,
would not (either individually or in the aggregate) have a Material Adverse
Effect;

          (d) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and the Nationwide Core Entities in an aggregate
amount exceeding $1,000,000;

          (e) the occurrence of any Event of Loss aggregating $5,000,000 or
more;

          (f) the purchase or Disposition of any Healthcare Properties
aggregating $10,000,000 or more, together with (i) a description of such
transaction in reasonable detail and (ii) if requested by the Administrative
Agent, copies of all materials presented to the Borrower's board of directors in
connection with the approval of such transaction; and

          (g) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

     SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will
                   ------------------------------
cause each of the Nationwide Core Entities to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
                                                                      -------
6.03.
- ----

     SECTION 5.04. Payment of Obligations. The Borrower will, and will cause
                   ----------------------
each of the Nationwide Core Entities to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Borrower or such Nationwide Core Entity has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect.

     SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will or
                   ------------------------------------
will cause, and will cause each of the Nationwide Core Entities to, (a) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted and (b) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by companies engaged in the
same or similar businesses operating in the same or similar locations.

     SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and
                   ------------------------------------
will cause each of the Nationwide Core Entities to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of the Nationwide Core Entities to, permit any representatives
designated by the Administrative Agent or any Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.

                                Credit Agreement
                                ----------------


                                       -45-


     SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each
                   --------------------
of the Nationwide Core Entities to, comply in all material respects with all
laws, rules, regulations and orders of any Governmental Authority applicable to
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

     SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the
                   -------------------------------------
Loans will be used only for general corporate purposes. No part of the proceeds
of any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board, including
Regulations T, U and X. Letters of Credit will be issued only to support general
corporate purposes.

     SECTION 5.09. Further Assurances. The Borrower will, and will cause each of
                   ------------------
the Nationwide Core Entities to, promptly upon request by the Administrative
Agent or the Required Lenders, execute any and all further documents, agreements
and instruments, and take all such further actions which may be required under
any applicable law, or which either Agent or the Required Lenders may reasonably
request, to effectuate the Transactions, all at the expense of the Borrower.

     SECTION 5.10. REIT Status. The Borrower shall maintain its status as a REIT
                   -----------
and (a) all of the representations and warranties set forth in clauses (a), (b)
                                                               -----------  ---
and (d) of Section 3.23 shall remain true and correct at all times and (b) all
    ---    ------------
of the representations and warranties set forth in clause (c) of Section 3.23
                                                   ----------    ------------
shall remain true and correct in all material respects. The Borrower will do or
cause to be done all things necessary to maintain the listing of its Equity
Interest on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market System (or any successor thereof).

     SECTION 5.11. Hazardous Materials. The Borrower will, and will cause each
                   -------------------
of the Nationwide Core Entities to, do the following:

          (a) Keep and maintain all Real Properties in material compliance with
any Environmental Laws unless the failure to so comply would not be reasonably
expected to result in a Material Adverse Effect; and

          (b) Promptly cause the removal of any Hazardous Materials discharged,
disposed of, or otherwise released in, on or under any Real Properties that are
in violation of any Environmental Laws and which would be reasonably expected to
result in a Material Adverse Effect, and cause any remediation required by any
Environmental Laws or Governmental Authority to be performed, though no such
action shall be required if any action is subject to a good faith contest. In
the course of carrying out such actions, the Borrower shall provide the
Administrative Agent with such periodic information and notices regarding the
status of investigation, removal, and remediation, as the Administrative Agent
may reasonably require.

                                  Article VI.

                               NEGATIVE COVENANTS
                               ------------------

          Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Issuing
Lender and the Lenders that:

     SECTION 6.01. Indebtedness. The Borrower will not, and will not permit any
                   ------------
Nationwide Core Entity to, create, incur, assume or permit to exist any
Indebtedness, except Indebtedness to the extent the Borrower and the Nationwide
Core Entities maintain compliance with the covenants set forth in Sections 6.04
                                                                  -------------
and 6.07.
    ----

     SECTION 6.02. Liens. The Borrower will not, and will not permit any
                   -----
Nationwide Core Entity to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:

                                Credit Agreement
                                ----------------


                                       -46-


          (a) Liens that secure Secured Indebtedness to the extent that the
Borrower and the Nationwide Core Entities maintain compliance with the covenants
set forth in Sections 6.04 and 6.07;
             -------------     ----

          (b) Permitted Encumbrances; and

          (c) without limiting the provisions of clause (a) of this Section, any
                                                 ----------
Lien on any property or asset of the Borrower or any of the Nationwide Core
Entities existing on the date hereof and set forth in Part B of Schedule 3.13,
                                                      ------    -------------
or, to the extent not meeting the minimum thresholds for required listing on
Schedule 3.13 pursuant to Section 3.13, in an aggregate amount not exceeding
- -------------             ------------
$10,000,000 (excluding, however, following the making of the initial Loans
hereunder, Liens securing Indebtedness to be repaid with the proceeds of such
Loans, as indicated on Schedule 3.13); provided that, except with respect to
                       -------------
Secured Indebtedness permitted under clause (a) of this Section, (i) such Lien
                                     ----------
shall not apply to any other property or asset of the Borrower or any Nationwide
Core Entity, (ii) any such Lien shall secure only those obligations which it
secures on the date hereof, provided that in any case, the Borrower and the
Nationwide Core Entities shall maintain compliance with the covenants set forth
in Sections 6.04 and 6.07.
   -------------     ----

     SECTION 6.03. Fundamental Changes.
                   -------------------

          (a) Mergers, Consolidations, Disposal of Assets, Etc. The Borrower
              ------------------------------------------------
will not, and will not permit any Nationwide Core Entity to, merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or substantially all of its
Properties and assets whether now owned or hereafter acquired, or all or
substantially all of the Equity Interest of any of the Nationwide Core Entities
(in each case, whether now owned or hereafter acquired), or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any
Nationwide Core Entity (other than the Borrower) may merge into the Borrower in
a transaction in which the Borrower is the surviving corporation, (ii) any
Nationwide Core Entity (other than the Borrower) may merge into a Nationwide
Core Entity in a transaction in which the surviving entity is a Nationwide Core
Entity, (iii) subject to compliance with the provisions of Section 6.04, any
                                                           ------------
Person (other than a Nationwide Core Entity) may merge into any Nationwide Core
Entity (other than the Borrower in a transaction in which such Nationwide Core
Entity is the surviving entity) and (iv) to the extent not otherwise permitted
by clause (i), (ii) or (iii) above, the Borrower or any other Nationwide Core
   ----------  ----    -----
Entity may merge or consolidate with and into any Person, in each case with the
prior written approval of the Required Lenders and (v) any Nationwide Core
Entity may sell, transfer, lease or otherwise dispose of its assets to the
Borrower or to another Nationwide Core Entity; provided that any such merger
involving a Person that is not a Wholly-Owned Subsidiary of (x) the Borrower or
(y) any Wholly-Owned Subsidiary of a Subsidiary of the Borrower immediately
prior to such merger shall not be permitted unless also permitted by Section
                                                                     -------
6.04.
- ----

          (b) Lines of Business. The Borrower will not, and will not permit any
              -----------------
Nationwide Core Entity to, engage to any material extent in any business other
than businesses of the type conducted by the Borrower and the Nationwide Core
Entities on the date of execution of this Agreement and businesses reasonably
related thereto.

     SECTION 6.04. Investments.
                   -----------

               The Borrower will not, and will not permit any Nationwide Core
Entity to, make or permit to remain outstanding any Investments except:

               (a) subject to the limitations set forth in paragraph (c) below,
                                                           -------------
Investments outstanding on the date hereof and identified in Part B of Schedule
                                                             ------    --------
3.15;
- ----

               (b) subject to the limitations set forth in paragraph (c) below,
                                                           -------------
Investments by the Borrower and the Nationwide Core Entities in the Borrower and
the Nationwide Core Entities; and

               (c) subject to the limitations set forth below, Investments in
Healthcare Properties:


                                Credit Agreement
                                ----------------


                                       -47-



- ----------------------------------------------------- ---------------------------------------------
                     Asset Type                                       Limitations
- ----------------------------------------------------- ---------------------------------------------
                                                   
Individual Healthcare Properties                      No individual Healthcare Property or Equity
                                                      Interest in a Person owning an individual
                                                      Healthcare Property shall be acquired
                                                      without the consent of the Administrative
                                                      Agent and the Required Lenders if the
                                                      Aggregate Investment Value of such Property
                                                      exceeds 10% of the Capitalization Value
- ----------------------------------------------------- ---------------------------------------------
Portfolio of Healthcare Properties                    Equity Interest in Persons owning multiple
                                                      Healthcare  Properties shall not be
                                                      acquired in a single transaction or series
                                                      of related transactions without the consent
                                                      of the Administrative Agent and the
                                                      Required Lenders if the Aggregate
                                                      Investment Value of such Healthcare
                                                      Properties exceeds 33% of the
                                                      Capitalization Value
- ----------------------------------------------------- ---------------------------------------------
Mortgage Loans acquired by the Borrower or any        The Aggregate Investment Value of all such
Wholly-Owned Subsidiary which have first lien         Mortgage Loans shall not exceed 20% of the
priority on Healthcare Properties                     Capitalization Value
- ----------------------------------------------------- ---------------------------------------------
Healthcare Property Under Construction                The Aggregate Investment Value of all
                                                      Healthcare Property Under Construction
                                                      shall not exceed 7.5% of Capitalization
                                                      Value
- ----------------------------------------------------- ---------------------------------------------
Permitted Investments                                 Unlimited
- ----------------------------------------------------- ---------------------------------------------
Operating Deposit Accounts with Banks                 Unlimited
- ----------------------------------------------------- ---------------------------------------------



     SECTION 6.05. Restricted Payments. The Borrower will not, and will not
                   -------------------
permit any Nationwide Core Entity to, declare or make, or agree to pay or make,
directly or indirectly, (a) any Restricted Payment in any fiscal year in excess
of 100% of the aggregate amount of Cash Flow for such period; (b) Restricted
Payments to acquire, redeem or retire the Equity Interest in the Borrower to the
extent such Restricted Payments are proceeds received from a substantially
concurrent issue of new Equity Interests in the Borrower; (c) Restricted
Payments during any period while an Event of Default under paragraph (a) or (b)
                                                           -------------    ---
of Article VII has occurred and is continuing as a result of the Borrower's
   -----------
failure to pay any principal or interest due under this Agreement; or (d)
Restricted Payments during any period that any other material non-monetary Event
of Default, has occurred and is continuing, unless after taking into account all
available funds of the Borrower from all other sources, such Restricted Payments
are required in order to enable the Borrower to continue to qualify as a REIT.
Notwithstanding anything to the contrary contained in this Section or elsewhere
in this Agreement, so long as no Event of Default shall have occurred and be
continuing, the Borrower shall be permitted to make, with respect to the Fiscal
Quarter ending December 31, 2002, a preferred dividend payment in the amount of
$1.91925 per share and a common dividend payment in the amount of $.46 per
share.

     SECTION 6.06. Transactions with Affiliates. The Borrower will not, and will
                   ----------------------------
not permit any Nationwide Core Entity to, directly or indirectly, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other
transactions with, any of their Affiliates, except (a) in the ordinary course of
business at prices and on terms and conditions not less favorable to the
Borrower or such Nationwide Core Entity than could be obtained on an
arm's-length basis from unrelated third parties and (b) any Restricted Payment
permitted by Section 6.05.
             ------------

                                Credit Agreement
                                ----------------


                                       -48-


     SECTION 6.07. Certain Financial Covenants. The Borrower will not permit the
                   ---------------------------
non-compliance with any of the following covenants and ratios at any time, such
covenants and ratios to be tested (x) on the last day of each Fiscal Quarter and
(y) at any time acquisitions and Dispositions by the Borrower and its Subsidiary
Entities (provided, in the case of a Joint Venture, such calculation shall be
made based upon the Consolidated Entities' direct or indirect pro rata share of
such acquisition or Disposition) exceed $100,000,000 in any Fiscal Quarter, and
in the case of clause (y), the following covenants and ratios shall be adjusted
               ----------
to reflect any such acquisitions and Dispositions:

               (a) Minimum Net Asset Value. The Borrower will not permit Net
                   -----------------------
Asset Value to be less than the sum of $500,000,000.

               (b) Maximum Total Liabilities to Capitalization Value. The
                   -------------------------------------------------
Borrower will not permit the ratio of Total Liabilities to Capitalization Value
(expressed as a percentage) to be more than 60%.

               (c) Minimum Interest Coverage Ratio. The Borrower will not permit
                   -------------------------------
the Interest Coverage Ratio to be less than 2.50 to 1.00.

               (d) Minimum Fixed Charges Ratio. The Borrower will not permit the
                   ---------------------------
Fixed Charges Ratio to be less than 1.75 to 1.00.

               (e) Maximum Secured Indebtedness Ratio. The Borrower will not
                   ----------------------------------
permit the Secured Indebtedness Ratio to exceed 15%.

               (f) Minimum Unsecured Interest Coverage Ratio. The Borrower will
                   -----------------------------------------
not permit the Unsecured Interest Coverage Ratio to be less than 2.50 to 1.00.

               (g) Maximum Floating Rate Debt. The Borrower will maintain Swap
                   --------------------------
Agreements on a notional amount of Total Liabilities in respect of borrowed
Indebtedness so that such notional amount, when added to the aggregate principal
amount of such Total Liabilities which bears interest at a fixed rate, equals or
exceeds 75% of the aggregate principal amount of all such Total Liabilities;
provided, however, in no event shall the Borrower maintain, or permit any
Nationwide Core Entity to maintain, any Swap Agreement involving the hedging of
a fixed rate interest obligation of the Borrower or any Nationwide Core Entity
to a floating rate of interest.

               (h) Maximum Unencumbered Asset Value Ratio. The Borrower will not
                   --------------------------------------
permit the Unencumbered Asset Value Ratio to exceed 60%, provided that, the
Borrower shall not be in default under this Section if the Borrower timely
complies with the provisions of Section 2.11(b).
                                ---------------

               (i) Minimum Rent/Mortgage Interest Coverage Ratio. The Borrower
                   ---------------------------------------------
will not permit the Rent/Mortgage Interest Coverage Ratio of all Qualified
Unencumbered Properties in the aggregate to be less than 1.25 to 1.00.

     SECTION 6.08. Organizational Documents. Without the prior written consent
                   ------------------------
of Administrative Agent and the Required Lenders, the Borrower will not, and
will not permit any other Person to, Modify any of the terms or provisions in
the Organizational Documents delivered in connection with Section 4.01(e),
except: (a) any Modifications necessary for the Borrower to issue more Equity
Interests (provided such issuance does not otherwise violate the terms of this
Agreement); or (b) Modifications necessary to clarify existing provisions of
such Organizational Documents; or (c) Modifications which would have no material
adverse, substantive effect on the rights or interests of the Lenders or the
Issuing Lender in conjunction with the Loans or Letters of Credits or under the
Loan Documents.

     SECTION 6.09. Fiscal Year. The Borrower will not change its Fiscal Year for
                   -----------
accounting or tax purposes from a period consisting of the 12-month period
ending on December 31 of each calendar year.

     SECTION 6.10. Senior Management. The Borrower will cause R. Bruce Andrews
                   -----------------
to be the chief executive officer of the Borrower until the indefeasible payment
in full of the Obligations; provided, however, no

                                Credit Agreement
                                ----------------


                                       -49-


Default or Event of Default shall be deemed to have occurred if R. Bruce Andrews
ceases to be the chief executive officer of the Borrower so long as the Borrower
promptly takes all action necessary to replace R. Bruce Andrews with another
similarly qualified and experienced individual reasonably acceptable to the
Required Lenders in their sole determination.

     SECTION 6.11. Dispositions. The Borrower will not permit any Disposition
                   ------------
by the Borrower or its Subsidiary Entities of any of its respective Properties
if such Disposition would cause the Borrower to be in violation of any of (a)
the covenants set forth in Section 6.07 or (b) the limitations on Investments
                           ------------
set forth in Section 6.04.
             ------------

                                  Article VII.

                                EVENTS OF DEFAULT
                                -----------------

               If any of the following events ("Events of Default") shall occur:
                                                -----------------
               (a) the Borrower shall fail to pay any principal on any Loan or
any reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;

               (b) the Borrower shall fail to pay any interest, fee or any other
amount (other than an amount referred to in clause (a) of this Article) payable
                                            ----------
under this Agreement or under any other Loan Document, when and as the same
shall become due and payable, and such failure shall continue unremedied for a
period of five days;

               (c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiary Entities in or in connection
with this Agreement or any other Loan Document or any amendment or modification
hereof or thereof or any waiver hereunder or thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any other Loan Document or any amendment or
modification hereof or thereof or any waiver hereunder or thereunder, shall
prove to have been incorrect in any material respect when made or deemed made;

               (d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02, 5.03 (with respect to its
                                    ------------  ----
existence), 5.08, 5.10 or in Article VI;
            ----  ----       ----------

               (e) any Event of Default shall occur under any of the other Loan
Documents;

               (f) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in this Article, including clause (a), (b), (d) or (e) of this Article) or any
                           ----------  ---  ---    ---
other Loan Document and such failure shall continue unremedied for a period of
30 or more days after notice thereof from the Administrative Agent to the
Borrower (which notice shall be given at the request of any Lender); provided
                                                                     --------
that in the case of any such Default which is susceptible to cure but cannot be
cured within 30 days through the exercise of reasonable diligence, if (i) the
Required Lenders shall not have determined that such default is not susceptible
of being cured within a maximum of 90 days from the Administration Agent's
original notice of Default, and (ii) such Borrower commences such cure within
the initial 30 days period and diligently prosecutes same to completion, such
period of 30 days shall be extended for such additional period of time as may be
reasonably necessary to cure same, but in no event shall such extended period
exceed 60 days;

               (g) the Borrower or any Nationwide Core Entity shall fail to make
any payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become due and
payable, other than Non-Recourse Indebtedness of the Borrower and the Nationwide
Core Entities;

               (h) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material

                                Credit Agreement
                                ----------------


                                       -50-



Indebtedness to become due, or to require the prepayment, repurchase, redemption
or defeasance thereof, prior to its scheduled maturity; provided that this
clause (h) shall not apply to (i) Secured Indebtedness that becomes due as a
- ---------
result of the voluntary sale or transfer of the property or assets securing such
Indebtedness in accordance with this Agreement or (ii) Non-Recourse Indebtedness
of the Borrower and the Nationwide Core Entities;

               (i) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Nationwide Core Entities or its
debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Nationwide Core Entities
or for a substantial part of its assets, and, in any such case, such proceeding
or petition shall continue undismissed for a period of 90 days or an order or
decree approving or ordering any of the foregoing shall be entered;

               (j) the Borrower or any Nationwide Core Entities shall (i)
voluntarily commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii) consent
to the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (i) of this Article, (iii) apply
                                        ----------
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Nationwide
Core Entities or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi)
take any action for the purpose of effecting any of the foregoing;

               (k) the Borrower or any Nationwide Core Entities shall become
unable, admit in writing its inability or fail generally to pay its debts as
they become due;

               (l) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 shall be rendered against the
Borrower, any Nationwide Core Entities or any combination thereof and the same
shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Borrower or such
Nationwide Core Entity to enforce any such judgment;

               (m) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower,
any Nationwide Core Entities or any combination thereof in an aggregate amount
exceeding $10,000,000 for all periods;

               (n) a Change in Control shall occur;

               (o) the Borrower shall be terminated, dissolved or liquidated (as
a matter of law or otherwise) or proceedings shall be commenced by any Person
(including the Borrower) seeking the termination, dissolution or liquidation of
the Borrower and such proceeding shall continue undismissed for a period of 90
days; or

               (p) the occurrence of any event which results in a Material
Adverse Effect, as reasonably determined by the Administrative Agent;

then, and in every such event (other than an event described in clause (i) or
                                                                ----------
(j) of this Article), and at any time thereafter during the continuance of such
- ---
event, the Administrative Agent may, with the consent of the Required Lenders,
and at the request of the Required Lenders shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, (ii) declare the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other Obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event described in clause (i) or (j) of this
                                                    ----------    ---
Article, the Commitments shall automatically terminate

                                Credit Agreement
                                ----------------


                                     -51-

and the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower and
exercise all of its rights and remedies, whether provided at law or in equity.

                                 ARTICLE VIII.

                            THE ADMINISTRATIVE AGENT
                            ------------------------

         Each of the Lenders and the Issuing Lender hereby irrevocably appoints
the Administrative Agent as its agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto.

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

         The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, (a) the Administrative Agent shall not
be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing, (b) the Administrative Agent shall not
have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth herein and in the other
- ------------
Loan Documents, the Administrative Agent shall not have any duty to disclose,
and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiary Entities that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity. The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required Lenders
(or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 9.02), or in the absence of its own
                                 ------------
gross negligence or willful misconduct. The Administrative Agent shall be deemed
not to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the contents of
any certificate, report or other document delivered hereunder or thereunder or
in connection herewith or therewith, (iii) the performance or observance of any
of the covenants, agreements or other terms or conditions set forth herein or
therein, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or
document, or (v) the satisfaction of any condition set forth in Article IV or
                                                                ----------
elsewhere herein or therein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

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

         The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more subagents appointed
by the Administrative Agent. The Administrative Agent and any

                                Credit Agreement
                                ----------------


                                     -52-

such subagent may perform any and all its duties and exercise its rights and
powers through their respective Related Parties. The exculpatory provisions of
the preceding paragraphs shall apply to any such subagent and to the Related
Parties of the Administrative Agent and any such subagent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

         Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Lenders, the Issuing Lender and the Borrower. Upon any
such resignation, the Required Lenders shall have the right, with the approval
of the Borrower (so long as no Event of Default has occurred and is continuing),
to appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Lender, with the approval of the Borrower (so long as no Event of Default has
occurred and is continuing), appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
- ------------
Administrative Agent, its subagents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

         Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.

                                   ARTICLE IX.

                                  MISCELLANEOUS
                                  -------------

     SECTION 9.01. Notices.
                   -------

         (a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to paragraph (b) below), all
                                                   -------------
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

             (i)   if to the Borrower, to Nationwide Health Properties, Inc.,
     610 Newport Center Drive, Suite 1150, Newport Beach, California 92660,
     Attention of Mark L. Desmond (Telecopy No. (949) 759-6887; Telephone No.
     (949) 718-4412);

             (ii)  if to the Administrative Agent, to JPMorgan Chase Bank, One
     Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of
     Loan and Agency Services Group (Telecopy No. (212) 552-5658), with a copy
     to JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017,
     Attention of John Mix (Telecopy No. (212) 270-9562);

             (iii) if to the Issuing Lender, to JPMorgan Chase Bank, One Chase
     Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Loan and
     Agency Services Group (Telecopy No. (212) 552-5658), with a copy to
     JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017,

                                Credit Agreement
                                ----------------


                                     -53-

     Attention of John Mix (Telecopy No. (212) 270-9562); and

             (iv)  if to any other Lender, to it at its address (or telecopy
     number) set forth in its Administrative Questionnaire.

         (b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II unless otherwise agreed by the
                             ----------
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

         (c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

     SECTION 9.02. Waivers; Amendments.
                   -------------------

         (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the
             --------------------------------------
Administrative Agent, the Issuing Lender or any Lender in exercising any right
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent, the Issuing Lender and the Lenders
hereunderare cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
                                                -------------
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Lender may have had notice or knowledge of such
Default at the time.

         (b) Amendments. Neither this Agreement nor any provision hereof may be
             ----------
waived or Modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, except for the extension of the Maturity Date
pursuant to Section 2.09(e), (iv) change Section 2.18(b), (c) or (d) in a manner
            ---------------              ---------------  ---    ---
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (v) change any of the provisions of this
Section or the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or the Issuing Lender hereunder without the prior
written consent of the Administrative Agent or the Issuing Lender, as the case
may be.

     SECTION 9.03. Expenses; Indemnity; Damage Waiver.
                   ----------------------------------

         (a) Costs and Expenses. The Borrower shall pay (i) all reasonable
             ------------------
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of

                                Credit Agreement
                                ----------------


                                     -54-

counsel for the Administrative Agent, in connection with the syndication of the
credit facilities provided for herein, the preparation and administration of
this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the Issuing Lender in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder, (iii) all out-of-pocket expenses incurred by the
Administrative Agent, the Issuing Lender or any Lender, including the reasonable
fees, charges and disbursements of any counsel for the Administrative Agent, the
Issuing Lender or any Lender, in connection with the enforcement or protection
of its rights in connection with this Agreement and the other Loan Documents,
including its rights under this Section, or in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit and (iv) and all costs, expenses, taxes, assessments
and other charges incurred in connection with any filing, registration,
recording or perfection of any security interest contemplated by any document
referred to therein.

         (b) Indemnification by the Borrower. The Borrower shall indemnify the
             -------------------------------
Administrative Agent, the Arrangers, the Issuing Lender and each Lender, and
each Related Party of any of the foregoing Persons (each such Person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from, any
           ----------
and all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee, incurred by
or asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the
use of the proceeds therefrom (including any refusal by the Issuing Lender to
honor a demand for payment under a Letter of Credit if the documents presented
in connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Subsidiary Entities, or any Environmental Liability related in any way to
the Borrower or any of the its Subsidiary Entities, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulted from the gross
negligence or willful misconduct of such Indemnitee.

         (c) Reimbursement by Lenders. To the extent that the Borrower fails to
             ------------------------
pay any amount required to be paid by it to the Administrative Agent or the
Issuing Lender under paragraph (a) or (b) of this Section, each Lender severally
                     -------------    ---
agrees to pay to the Administrative Agent or the Issuing Lender, as the case may
be, such Lender's Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent or the Issuing Lender in its capacity
as such.

         (d) Waiver of Consequential Damages, Etc. To the extent permitted by
             ------------------------------------
applicable law, the Borrower shall not assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or
Letter of Credit or the use of the proceeds thereof.

         (e) Payments. All amounts due under this Section shall be payable not
             --------
later than 10 days after written demand therefor.

     SECTION 9.04. Successors and Assigns.
                   ----------------------

         (a) Assignments Generally. The provisions of this Agreement shall be
             ---------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Lender that issues any Letter of Credit), except that (i) the Borrower may not
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any

                                Credit Agreement
                                ----------------


                                     -55-

attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Lender that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of this
                                                           -------------
Section) and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent, the Issuing Lender and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

        (b)  Assignments by Lenders.
             ----------------------

        (i)  Subject to the conditions set forth in paragraph (b)(ii) below,
                                                    -----------------
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:

             (A) the Borrower, provided that no consent of the Borrower shall be
                               --------
     required for an assignment to a Lender, an Affiliate of a Lender, an
     Approved Fund or, if an Event of Default has occurred and is continuing,
     any other assignee; and

             (B) the Administrative Agent, provided that no consent of the
                                           --------
     Administrative Agent shall be required for an assignment of any Revolving
     Commitment to an assignee that is (x) a Lender with a Revolving Commitment
     immediately prior to giving effect to such assignment, (y) an Affiliate of
     a Lender or (z) an Approved Fund.

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

             (A) except in the case of an assignment to a Lender or an Affiliate
     of a Lender or an assignment of the entire remaining amount of the
     assigning Lender's Commitment or Loans of any Class, the amount of the
     Commitment or Loans of the assigning Lender subject to each such assignment
     (determined as of the date the Assignment and Assumption with respect to
     such assignment is delivered to the Administrative Agent) shall not be less
     than $5,000,000 unless each of the Borrower and the Administrative Agent
     otherwise consent, provided that no such consent of the Borrower shall be
                        --------
     required if an Event of Default has occurred and is continuing;

             (B) each partial assignment shall be made as an assignment of a
     proportionate part of all the assigning Lender's rights and obligations
     under this Agreement, provided that this clause shall not be construed to
                           --------
     prohibit the assignment of a proportionate part of all the assigning
     Lender's rights and obligations in respect of one Class of Commitments or
     Loans;

             (C) the parties to each assignment shall execute and deliver to the
     Administrative Agent an Assignment and Assumption, together with a
     processing and recordation fee of $3,500; and

             (D) the assignee, if it shall not be a Lender, shall deliver to the
     Administrative Agent an Administrative Questionnaire.

         For the purposes of this Section 9.04(b), the term "Approved Fund" has
                                  ---------------            -------------
the following meaning:

         "Approved Fund" means any Person (other than a natural person) that is
          -------------
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

         (iii) Subject to acceptance and recording thereof pursuant to paragraph
                                                                       ---------
(b)(iv) of this Section, from and after the effective date specified in each
- -------
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and

                                Credit Agreement
                                ----------------


                                     -56-

obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.15,
                                                                  -------------
2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or
- ----  ----     ----
obligations under this Agreement that does not comply with this Section 9.04
                                                                ------------
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
                                                                -------------
this Section.

         (iv) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the "Register"). The entries in the Register shall be
                        --------
conclusive, and the Borrower, the Administrative Agent, the Issuing Lender and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Lender and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

         (v) Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
                                                              -------------
this Section and any written consent to such assignment required by paragraph
                                                                    ---------
(b) of this Section, the Administrative Agent shall accept such Assignment and
- ---
Assumption and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.

         (c) Participations.
             --------------

         (i) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Lender, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
                            -----------
rights and/or obligations under this Agreement and the other Loan Documents
(including all or a portion of its Commitment and the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement and the other
Loan Documents shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Administrative Agent, the Issuing Lender and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. Any agreement or instrument pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and the other Loan Documents and to approve any
amendment, modification or waiver of any provision of this Agreement or any
other Loan Document; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
                                                                    -------
9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this
- -------                                           -----------------
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
            -------------  ----     ----
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
                                                               -------------
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
                            ------------
such Participant agrees to be subject to Section 2.18(c) as though it were a
                                         ---------------
Lender.

         (ii) A Participant shall not be entitled to receive any greater payment
under Section 2.15 or 2.17 than the applicable Lender would have been entitled
      ------------    ----
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower
                                                ------------
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as
                                                        ---------------
though it were a Lender.

         (d) Certain Pledges. Any Lender may at any time pledge or assign a
             ---------------
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment

                                Credit Agreement
                                ----------------


                                     -57-

to secure obligations to a Federal Reserve Bank, and this Section shall not
apply to any such pledge or assignment of a security interest; provided that no
such pledge or assignment of a security interest shall release a Lender from any
of its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

         (e) No Assignments to the Borrower or Affiliates. Anything in this
             --------------------------------------------
Section to the contrary notwithstanding, no Lender may assign or participate any
interest in any Loan or LC Exposure held by it hereunder to the Borrower, any
Nationwide Core Entity or any of their Affiliates without the prior consent of
each Lender.

     SECTION 9.05. Survival. All covenants, agreements, representations and
                   --------
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Lender or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article
                                 -------------  ----  ----     ----     -------
VIII shall survive and remain in full force and effect regardless of the
- ----
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

     SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may
                   ----------------------------------------
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
- ------------
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

     SECTION 9.07. Severability. Any provision of this Agreement held to be
                   ------------
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

     SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred
                   ---------------
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.

     SECTION 9.09. Governing Law; Jurisdiction; Etc.
                   --------------------------------

         (a) Governing Law. This Agreement shall be construed in accordance with
             -------------
and governed by the law of the State of New York.

         (b) Submission to Jurisdiction. The Borrower hereby irrevocably and
             --------------------------
unconditionally submits,

                                Credit Agreement
                                ----------------


                                      -58-

for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement or any other Loan Document, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, the Issuing Lender or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against the Borrower
or its properties in the courts of any jurisdiction.

         (c) Waiver of Venue. The Borrower hereby irrevocably and
             ---------------
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section. Each of the parties
                         -------------
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

         (d) Service of Process. The Borrower hereby irrevocably appoints CT
             ------------------
Corporation System (the "Process Agent") with an office on the date hereof at
                         -------------
111 8th Avenue, New York, New York 10011 as its agent to receive on behalf of it
and its property service of copies of the summons and complaint and any other
process which may be served in any such suit, action or proceeding. Such service
may be made by mailing or delivering a copy of such process to the Borrower, in
care of the Process Agent at the Process Agent's above address and the Borrower
hereby irrevocably authorizes and directs the Process Agent to accept such
service on its behalf. The Administrative Agent and each Lender agree to mail to
the Borrower at its address provided in Section 9.01 a copy of any summons,
                                        ------------
complaint, or other process mailed or delivered by it to the Borrower in care of
the Process Agent. As an alternate method of service, the Borrower also
irrevocably consents to the service of any and all process in any such suit,
action or proceeding in the manner provided for notices in Section 9.01. The
                                                           ------------
Borrower agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. All mailings under this Section 9.09 shall
                                                             ------------
be by certified mail, return receipt requested. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

     SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
                   --------------------
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     SECTION 9.11. Headings. Article and Section headings and the Table of
                   --------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

     SECTION 9.12. Confidentiality. Each of the Administrative Agent, the
                   ---------------
Issuing Lender and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or thereunder, (f)
subject to an

                                Credit Agreement
                                ----------------


                                      -59-

agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower and its obligations, (g) with
the consent of the Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii)
becomes available to the Administrative Agent, the Issuing Lender or any Lender
on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section, "Information" means all information received from or
                           -----------
on behalf of the Borrower relating to the Borrower, its Subsidiaries or
Affiliates or their respective businesses, other than any such information that
is available to the Administrative Agent, the Issuing Lender or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in the
case of information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

     SECTION 9.13. Additional Commitments.
                   ----------------------

         Upon the request of the Borrower (such request, the "Additional
                                                              ----------
Syndication Notice") given to the Administrative Agent within twenty-four (24)
- ------------------
months after the date of this Agreement, and provided that there is no Default
or Event of Default, the Administrative Agent shall use commercially reasonable
efforts to obtain additional Commitments in the aggregate amount of up to Fifty
Million Dollars ($50,000,000) (the "Additional Commitment Amount"), subject to
                                    ----------------------------
the following:

         (a) Promptly after delivery of the Additional Syndication Notice, the
Administrative Agent shall request that the existing Lenders accept a pro rata
share of the Additional Commitment Amount. If any Lender rejects the offer to
increase its respective Commitment or accepts only a portion thereof, which each
Lender may do in its sole and absolute discretion, the Administrative Agent
shall further offer the rejected shares (or rejected portions thereof) to the
Lenders that have accepted the proposed increase in their Commitments (each an
"Accepting Lender"), pro rata based on the sum of their then existing
 ----------------
Commitments plus any additional portion of the Additional Commitment Amount
which they have previously accepted. If any Lender shall not respond to a
request by the Administrative Agent pursuant to this clause (a) within ten (10)
                                                     ----------
Business Days after receipt of an offer (including any offer for a portion of
the Additional Commitment Amount rejected by another Lender), such Lender shall
be deemed to have rejected such offer. The Administrative Agent shall notify the
Borrower of all acceptances and rejections with respect to the Additional
Commitment Amount by the Lenders. If such acceptances are satisfactory to the
Borrower, the Commitments of the Accepting Lenders shall be increased by their
respective portions of the Additional Commitment Amount without the consent of
any other Lender, subject, however, to (i) no Default or Event of Default being
in existence at such time, (ii) the Borrower issuing substitute Notes, (iii) the
Accepting Lenders paying to the Administrative Agent (on behalf of the other
Lenders) the aggregate amount determined by the Administrative Agent to be
necessary so that each Initial Accepting Lender's pro rata share of outstanding
Loans and LC Exposure matches the ratio of its increased Commitment to the
aggregate amount of all revised Commitments after giving effect to the
Additional Commitment Amount, (iv) the Borrower, the Accepting Lenders and the
Administrative Agent executing such other documents evidencing such adjustments
in the Commitments and the Loans as shall be reasonable acceptable to the
Borrower, the Accepting Lenders, the Administrative Agent and the Issuing Lender
and (v) the Borrower paying all of the Administrative Agent's reasonable
out-of-pocket expenses in connection with the foregoing. The Administrative
Agent shall promptly pay to the applicable Lenders their share of any payments
received from the Accepting Lenders in accordance with the immediately preceding
sentence.

         (b) Notwithstanding anything to the contrary contained herein, if the
Lenders do not accept increases in their aggregate Commitments in the full
amount of the Additional Commitment Amount in accordance with paragraph (a)
                                                              -------------
above, the Borrower may designate one or more proposed lenders to the
Administrative Agent and the Issuing Lender to become Lenders under this
Agreement with respect to such balance of the Additional Commitment Amount (but
in no event with proposed commitments of less than $5,000,000 unless the
Administrative Agent consents thereto), subject in each case to the prior
approval of the Administrative Agent and the Issuing Lender, which approvals
shall not be unreasonably withheld or delayed if such proposed lenders meet the
standards of an Eligible Assignee. If such proposed lenders are so approved,
such lenders shall become

                                Credit Agreement
                                ----------------


                                     -60-

additional Lenders under this Agreement in accordance with their respective
Commitments without the consent of any other Lenders, subject, however, to (i)
no Default or Event of Default being in existence at such time, (ii) the
Borrower issuing substitute Notes to the new Lenders, (iii) such new Lenders
paying to the Administrative Agent (on behalf of the other Lenders) the
aggregate amount determined by the Administrative Agent to be necessary so that
each new Lender's pro rata share of outstanding Loans and LC Exposure matches
the ratio of its Commitment to the aggregate amount of all Commitments after
giving effect to the Additional Commitment Amount, (iv) the Borrower, the new
Lenders and the Administrative Agent executing such other documents evidencing
their addition as Lenders hereunder and the adjustment of the Commitments and
Loans as shall be reasonably acceptable to the Borrower, the Administrative
Agent and the Issuing Lender, including each such new Lender's compliance with
the provisions of clauses (ii), (iii) and (v) of Section 9.04(b), and (v) the
                  ------------  -----     ---    ---------------
Borrower paying all of the Administrative Agent's reasonable out-of-pocket
expenses in connection with the foregoing. The Administrative Agent shall
promptly pay to the applicable Lenders their share of any payments received from
such new Lenders in accordance with the immediately preceding sentence.

                            [Signature Pages Follow]




















                                Credit Agreement
                                ----------------


                                      -61-

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

                                            BORROWER:
                                            --------

                                            NATIONWIDE HEALTH PROPERTIES, INC.,
                                            a Maryland corporation

                                            By: /s/ MARK L. DESMOND
                                               ---------------------------------
                                                Name:  Mark L. Desmond
                                                Title: Senior Vice President and
                                                       Chief Financial Officer


                                Credit Agreement
                                ----------------


                                      -62-

                                       ADMINISTRATIVE AGENT:
                                       --------------------

                                       JPMORGAN CHASE BANK,
                                         as Administrative Agent

                                       By: /s/ JOHN F. MIX
                                          --------------------------------------
                                           Name:  John F. Mix
                                           Title: Vice President


                                Credit Agreement
                                ----------------


                                      -63-

                                                LENDERS
                                                -------

                                                JPMORGAN CHASE BANK



                                                By /s/ JOHN F. MIX
                                                  ------------------------------
                                                   Name:  John F. Mix
                                                   Title: V.P.


                                Credit Agreement
                                ----------------


                                      -64-

                                            BANK OF AMERICA, N.A.


                                            By /s/ KEVIN WAGLEY
                                               -------------------
                                               Name: Kevin Wagley
                                               Title: Principal



                                Credit Agreement
                                ----------------


                                      -65-

                                          WELLS FARGO BANK, NATIONAL ASSOCATION


                                          By /s/ RONALD K. PETERS
                                            ------------------------
                                             Name: Ronald K. Peters
                                             Title: Vice President



                                Credit Agreement
                                ----------------




                                                THE BANK OF NEW YORK


                                                By /s/ REBECCA K. LEVINE
                                                  -----------------------
                                                   Name: Rebecca K. Levine
                                                   Title: Vice President




                                Credit Agreement
                                ----------------



                                        UBS AG, STAMFORD BRANCH


                                        By /s/ PATRICIA O'KICKI
                                          -------------------------
                                           Name: Patricia O'Kicki
                                           Title: Director


                                        By /s/ WILFRED SAINT
                                          ---------------------------
                                           Name: Wilfred Saint
                                           Title: Associate Director



                                Credit Agreement
                                ----------------


                                      -2-

                                               KBC BANK N.V.


                                               By /s/ ROBERT SNAUFFER
                                                 -------------------------------
                                                  Name:  Robert Snauffer
                                                  Title: First Vice President


                                               By /s/ RAYMOND F. MURRAY
                                                 -------------------------------
                                                  Name:  Raymond F. Murray
                                                  Title: First Vice President



                                Credit Agreement
                                ----------------



                     List of Omitted Exhibits and Schedules

The following exhibits and schedules to the Credit Agreement have been omitted
and shall be furnished supplementally to the Commission upon request:




SCHEDULES
                              
Schedule 2.01              -        Commitments
Schedule 3.06              -        Litigation and Environmental Disclosed Matter
Schedule 3.13              -        Material Agreements and Liens
Schedule 3.14              -        Stock Options
Schedule 3.15              -        Subsidiaries and Investments
Schedule 3.16              -        Real Property
Schedule 3.24              -        Leases
Schedule 4.01(d)           -        Organizational Documents


EXHIBITS

Exhibit A                  -        Assignment and Assumption
Exhibit B-1                -        Form of Note for Revolving Loans
Exhibit B-2                -        Form of Note for Competitive Loans
Exhibit C                  -        Form of Revolving Borrowing Request
Exhibit D                  -        Form of Revolving Interest Election Request
Exhibit E                  -        Form of Competitive Bid Request
Exhibit F                  -        Form of Opinion of Counsel to the Borrower
Exhibit G                  -        Form of Opinion of Special New York Counsel to the Borrower
Exhibit H                  -        Form of Compliance Certificate

EX-10.5

                                                                    EXHIBIT 10.5

                       FIRST AMENDMENT TO CREDIT AGREEMENT

                  FIRST AMENDMENT TO CREDIT AGREEMENT (this "Agreement") dated
                                                             ---------
as of January 31, 2003, among NATIONWIDE HEALTH PROPERTIES, INC. (the
"Borrower") and JPMORGAN CHASE BANK, as administrative agent (in such capacity,
 --------
together with its successors in such capacity, the "Administrative Agent").
                                                    --------------------

                                    RECITALS:

                  A. The Borrower, the Administrative Agent and certain lenders
(the "Lenders") are parties to a Credit Agreement dated as of November 8, 2002
      -------
(said Credit Agreement, as the same may be amended, modified and supplemented
and in effect from time to time, being herein called the "Credit Agreement";
                                                          ----------------
and, except as otherwise herein expressly provided, all capitalized terms used
herein shall have the meaning assigned to such terms in the Credit Agreement),
which Credit Agreement provides, among other things, for Loans to be made by the
Lenders to the Borrowers in an aggregate principal amount not exceeding
$150,000,000.

                  B. The parties hereto desire, among other things, to amend the
definition of Total Liabilities.

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

                  Section 1. Amendment of Credit Agreement. Effective as of the
                             -----------------------------
         date hereof, the definition of "Total Liabilities" in Section 1.01 of
         the Credit Agreement shall be deemed amended by inserting the following
         sentence at the end of such definition:

                  "Notwithstanding anything to the contrary in this definition,
                  accounts payable and accrued expenses arising in the ordinary
                  course of business shall not be included in the computation of
                  Indebtedness and other liabilities of the Consolidated
                  Entities or any Joint Venture in which a Consolidated Entity
                  owns a direct or indirect Equity Interest."

                  Section 2. Borrower's Representations. The Borrower hereby
                             --------------------------
represents and warrants to the Administrative Agent and the Lenders, as follows:

                  (a) Each of the representations and warranties of the Borrower
contained or incorporated in the Credit Agreement, as amended by this Agreement
or any of the other Loan Documents, are true and correct in all material
respects on and as of the date hereof (except if any such representation or
warranty is expressly stated to have been made as of a specific date, then as of
such specific date);

                  (b) As of the date hereof and immediately after giving effect
to this Agreement and the actions contemplated hereby, no Default or Event of
Default has occurred and is continuing; and

                  (c) The Borrower has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement;
the Borrower has been duly authorized by all necessary corporate action on their
part; and this Agreement has been duly and validly executed and delivered by the
Borrower and constitutes each Borrower's legal, valid and binding obligation,
enforceable in accordance with its respective terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (ii) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

                  Section 3. Ratification. Except as modified herein, all of the
                             ------------
Loan Documents are hereby ratified and confirmed on behalf of the parties hereto
and thereto.

                  Section 4.  Miscellaneous.
                              -------------


                                      -2-


                  (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
                      -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                  (b) Amendments, Etc. The terms of this Agreement may be
                      ---------------
waived, modified and amended only by an instrument in writing duly executed by
the Borrower and the Administrative Agent (with any required consent of the
Lenders pursuant to the Credit Agreement). Any such waiver, modification or
amendment shall be binding upon the Borrower, the Administrative Agent, each
Lender and each holder of any of the Notes.

                  (c) Successors and Assigns. This Agreement shall be binding
                      ----------------------
upon and inure to the benefit of the respective successors and assigns of the
Borrower, the Administrative Agent, the Lenders and any holder of any of the
Notes.

                  (d) Captions. The captions and section headings appearing
                      --------
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.

                  (e) Counterparts. This Agreement may be executed in any number
                      ------------
of counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart. Delivery of an executed signature page of this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.

                  (f) Severability. If any provision hereof is invalid and
                      ------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.

                  (g) Agent's Authority. The Administrative Agent is hereby
                      -----------------
entering into this Agreement on behalf of, and with the consent of, the Required
Lenders, in accordance with Section 9.02(b) of the Credit Agreement.

                            [Signature pages follow]




                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.

                                    BORROWER:
                                    --------

                                    NATIONWIDE HEALTH PROPERTIES, INC.,
                                    a Maryland corporation, as Borrower

                                    By: /s/ MARK L. DESMOND
                                       -----------------------------------------
                                        Name:   Mark L. Desmond
                                        Title:  Senior Vice President and
                                                Chief Financial Officer


                                    ADMINISTRATIVE AGENT:
                                    --------------------


                                    JPMORGAN CHASE BANK, as Administrative Agent


                                    By: /s/ JOHN F. MIX
                                       -----------------------------------------
                                        Name:   John F. Mix
                                        Title:  Vice President

EX-10.12

                                                                   EXHIBIT 10.12

                               FIRST AMENDMENT TO
                       LIMITED LIABILITY COMPANY AGREEMENT
                         OF JER/NHP SENIOR HOUSING, LLC

     THIS AMENDMENT (this "Amendment") is made and entered into as of the 7th
day of February, 2002, by and among NATIONWIDE HEALTH PROPERTIES, INC., a
Maryland corporation ("NHP"), and JER SENIOR HOUSING, LLC, a Delaware limited
liability company ("JER"), as members.

                              B A C K G R O U N D:

     A. NHP and JER are parties to that certain limited liability company
agreement (the "LLC Agreement") of JER/NHP Senior Housing, LLC, a Delaware
limited liability company ("Company"), which agreement is captioned "LIMITED
LIABILITY COMPANY AGREEMENT OF JER/NHP SENIOR HOUSING, LLC", and is dated as of
August 28, 2001. Except as otherwise indicated herein, each capitalized term
used herein shall have the meaning set forth for the same in the LLC Agreement.

     B. Throughout the Exclusivity Period, NHP is not permitted to acquire a
Target Asset without first providing written notice to JER of the opportunity
for the Company to participate in such acquisition on the terms set forth in the
LLC Agreement.

     C. NHP has identified a portfolio of 49 Target Assets (collectively, the
"La Quinta Portfolio") owned by La Quinta Properties, Inc., a Delaware
corporation ("La Quinta") and certain of its subsidiaries (which, together with
La Quinta, are herein called "Sellers"), which are available for purchase.

     D. The Members recognize that JER will not approve the participation of the
Company with respect to six of the Target Assets, which are located in North
Carolina and South Carolina (the "Carolina Target Assets"), and desire to
expedite the approval process with respect to the Target Assets in the La Quinta
Portfolio by allowing NHP to present only the remaining 43 Target Assets
(collectively, the "Modified Portfolio") in the La Quinta Portfolio.

     E. The Members desire to amend the LLC Agreement on the terms and
conditions hereinafter set forth.

     IN LIGHT OF THE FOREGOING, and in consideration of the mutual undertakings
of the parties hereto, it is hereby agreed as follows:

     1. Acquisition Procedure. NHP will not be required to provide a separate
        ---------------------
Target Asset Offer Notice under Article VI of the LLC Agreement for each Target
Asset in the La Quinta Portfolio so long as NHP provides a Target Asset Offer
Notice under Article VI of the LLC Agreement with respect to the Modified
Portfolio (with a corresponding $17,000,000 reduction in the price and a
proportionate reduction in any required deposit). Without limitation

                                       1



on the foregoing, NHP shall deliver a single proposed preliminary Operating
Budget with respect to any due diligence, market, financial and other
evaluation, documentation and other anticipated costs to be incurred by or on
behalf of the Company in its evaluation of and pursuit of the possible
acquisition of the Modified Portfolio. The Acquisition Memorandum which NHP is
required to deliver under Section 6.2 of the LLC Agreement shall relate to the
Modified Portfolio in its entirety instead of having a separate Acquisition
Memorandum for each of the 43 individual Target Assets in the Modified
Portfolio. The foregoing shall not limit JER's right to require additional
information reasonably requested by JER with respect to any particular Target
Asset in the Modified Portfolio.

     2. NHP Acquisition of Carolina Properties. NHP has informed JER of its
        --------------------------------------
intention to enter into a contract (pursuant to Section 6.3(f) of the LLC
Agreement) to purchase the entire La Quinta Portfolio and to acquire the
Carolina Properties on its own. NHP shall not take any action with respect to
the Carolina Properties that prejudices the rights of the Company with respect
to the Modified Portfolio. Without limitation on the foregoing: (a) such
contract shall permit NHP to assign to the Company NHP's rights to acquire the
Modified Portfolio; and (b) if NHP's failure to acquire the Carolina Properties
results in the loss of the opportunity for the Company to acquire the Modified
Portfolio, then NHP shall promptly pay all of the out-of-pocket costs incurred
by the Company or JER in connection with the La Quinta Portfolio.

     3. Exclusivity Period. To the extent more than 50% of the capital required
        ------------------
to acquire the Modified Portfolio is contributed by the Members because third
party financing is not available at closing, then the excess will not count
towards the $65,000,000 threshold that is part of the definition of the
Exclusivity Period on Exhibit "A" to the LLC Agreement.

     4. Designated Representatives. The parties acknowledge that Luann S.
        --------------------------
Sinclair has been replaced by Gerald R. Best as a Designated Representative of
JER under Section 4.1(e) of the LLC Agreement.

     5. Notices. Subject to the right to make changes under Section 14.1 of the
        -------
LLC Agreement, notices that were previously to be sent to the attention of Luann
S. Sinclair, Esq. shall instead be sent to the attention of "Legal Department
(GRB/DTW)".

     6. No Other Changes. Except as expressly modified hereby, the LLC Agreement
        ----------------
remains unchanged and in full force and effect and is hereby reaffirmed by the
Members.

     7. Counterparts; Facsimile. This Amendment may be executed by counterpart
        -----------------------
and delivered by facsimile.

                                       2



     IN ORDER TO EVIDENCE THEIR AGREEMENT TO THE FOREGOING, the parties hereto
have executed this Amendment in the respective places provided below.

                                  NHP:

                                  NATIONWIDE HEALTH PROPERTIES, INC.,
                                  a Maryland corporation


                                  By:          /s/ Donald D. Bradley
                                         --------------------------------------
                                  Name:            Donald D. Bradley
                                         --------------------------------------
                                  Title:       Senior Vice President &
                                               General Counsel
                                         --------------------------------------


                                  JER:

                                  JER SENIOR HOUSING, LLC,
                                  a Delaware limited liability company


                                  By:          /s/ Daniel T. Ward
                                         --------------------------------------
                                  Name:            Daniel T. Ward
                                         --------------------------------------
                                  Title:           Vice President
                                         --------------------------------------


                                       3

EX-10.13

                                                                   EXHIBIT 10.13

                               SECOND AMENDMENT TO
                       LIMITED LIABILITY COMPANY AGREEMENT
                         OF JER/NHP SENIOR HOUSING, LLC

         THIS AMENDMENT (this "Amendment") is made and entered into as of the
28th day of October, 2002, by and among NATIONWIDE HEALTH PROPERTIES, INC., a
Maryland corporation ("NHP"), and JER SENIOR HOUSING, LLC, a Delaware limited
liability company ("JER"), as members.

                              B A C K G R O U N D:

         A. NHP and JER are parties to that certain limited liability company
agreement of JER/NHP Senior Housing, LLC, a Delaware limited liability company
("Company"), which agreement is captioned "LIMITED LIABILITY COMPANY AGREEMENT
OF JER/NHP SENIOR HOUSING, LLC", is dated as of August 28, 2001, and amended by
that certain amendment captioned "FIRST AMENDMENT TO LIMITED LIABILITY COMPANY
AGREEMENT OF JER/NHP SENIOR HOUSING, LLC", dated as of February __, 2002 (such
agreement, as so amended, being herein called the "LLC Agreement"). Except as
otherwise indicated herein, each capitalized term used herein shall have the
meaning set forth for the same in the LLC Agreement.

         B. The Members desire to amend the LLC Agreement on the terms and
conditions hereinafter set forth.

         IN LIGHT OF THE FOREGOING, and in consideration of the mutual
undertakings of the parties hereto, it is hereby agreed as follows:

         1. Transfers of Indirect Interest. Section 10.2 of the LLC Agreement is
            ------------------------------
hereby deleted and the following is hereby substituted therefor:

                  "Section 10.2 Transfers of Indirect Interests; JER Pledge.
                                -------------------------------------------
Section 10.1(a) shall not restrict, and each Member hereby consents in advance
to, (1) any Transfer of an interest in a Member and (2) any granting by a Member
(after prior written notice to the other Member) of a security interest in its
Member Economic Interest in the Company to an institutional lender and the
exercise by such lender of any of its remedies with respect thereto (including
foreclosure)."

         2. Termination of Managing Member. Section 4.3(a)(iii) is hereby
            ------------------------------
deleted and the following is hereby substituted therefor:

         "(iii) Either (A) a Bankruptcy/Dissolution Event with respect to
Managing Member or (B) if Managing Member grants a security interest in its
Member Economic Interest in the Company to a lender, the exercise by such lender
of any of its remedies with respect thereto (including foreclosure) (x) after
the giving of any required notice, if any, from the lender to the

                                       1




borrower and the expiration of any applicable cure periods, if any, under the
loan documents or (y) in the nature of foreclosure, mortgagee in possession,
receivership or otherwise whereby the lender or other third party has taken over
management or control of the Managing Member or substantial portion of its
assets, or (z) in the nature of collecting, directing or otherwise controlling
any distributions or other payments to Managing Member under this Agreement; or"

         3. No Other Changes. Except as expressly modified hereby, the LLC
            ----------------
Agreement remains unchanged and in full force and effect and is hereby
reaffirmed by the Members.

         4. Counterparts; Facsimile. This Amendment may be executed by
            -----------------------
counterpart and delivered by facsimile.

         IN ORDER TO EVIDENCE THEIR AGREEMENT TO THE FOREGOING, the parties
hereto have executed this Amendment in the respective places provided below.



                     [THE REMAINDER OF THIS PAGE LEFT BLANK\
                           SIGNATURE PAGES TO FOLLOW.]

                                       2




                                 SIGNATURE PAGE
                                 --------------

                               SECOND AMENDMENT TO
                       LIMITED LIABILITY COMPANY AGREEMENT
                         OF JER/NHP SENIOR HOUSING, LLC


                                            NHP:

                                            NATIONWIDE HEALTH PROPERTIES, INC.,
                                            a Maryland corporation

                                            By:      /s/ Donald D. Bradley
                                                   ---------------------------
                                            Name:        Donald D. Bradley
                                                   ---------------------------
                                            Title:   Senior Vice President &
                                                     General Counsel
                                                   ---------------------------

                                       3




                                 SIGNATURE PAGE
                                 --------------

                               SECOND AMENDMENT TO
                       LIMITED LIABILITY COMPANY AGREEMENT
                         OF JER/NHP SENIOR HOUSING, LLC


                                            JER:

                                            JER SENIOR HOUSING, LLC,
                                            a Delaware limited liability company


                                            By:       /s/ Gerald R. Best
                                                   ---------------------------
                                            Name:         Gerald R. Best
                                                   ---------------------------
                                            Title:   Vice President & Counsel
                                                   ---------------------------




                                       4

EX-21

EXHIBIT 21

Subsidiaries of the Company

As of December 31, 2002

Name	State of Incorporation or Organization
Nationwide Health Properties Finance Corporation	Delaware
MLD Financial Capital Corporation	Delaware
MLD Wisconsin SNF, Inc.	Wisconsin
MLD Delaware Trust	Delaware
MLD Properties, Inc.	Delaware
MLD Properties, LLC	Delaware
NH Texas Properties Limited Partnership	Texas
MLD Properties Limited Partnership	Delaware
NHP Finance Corporation	Delaware
HN Texas Properties, L.P.	Texas

EX-23.1

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-94845), the Registration Statement (Form S-3 No. 333-70707), the Registration Statement (Form S-3 No. 333-32135), the Registration Statement (Form S-8 No. 333-20589), the Registration Statement (Form S-3 No. 333-17061), the Registration Statement (Form S-3 No. 33-64798) and the Registration Statement (Form S-8 No. 33-35276) of Nationwide Health Properties, Inc. of our report dated January 24, 2003, with respect to the consolidated financial statements and schedule of Nationwide Health Properties, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2002.

/s/    ERNST & YOUNG LLP

Irvine, California

March 10, 2003