MANUFACTURED HOME COMMUNITIES INC
S-3, 1999-11-12
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>   1

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1999

                                                 REGISTRATION NO. 333-
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                      MANUFACTURED HOME COMMUNITIES, INC.
      (Exact name of registrant as specified in its governing instrument)

<TABLE>
<S>                                            <C>
                   MARYLAND                                      36-3857664
           (State of Organization)                (I.R.S. Employer Identification Number)
</TABLE>

                      TWO NORTH RIVERSIDE PLAZA, SUITE 800
                            CHICAGO, ILLINOIS 60606
                    (Address of principal executive offices)

                                 HOWARD WALKER
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                      MANUFACTURED HOME COMMUNITIES, INC.
                      TWO NORTH RIVERSIDE PLAZA, SUITE 800
                            CHICAGO, ILLINOIS 60606
                                 (312) 279-1400
           (Name, address and telephone number of agent for service)

                                   Copies to:

<TABLE>
<S>                                            <C>
                                                            ELLEN KELLEHER, ESQ.
             BLAKE D. RUBIN, ESQ.               EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
            STEPTOE & JOHNSON LLP                   MANUFACTURED HOME COMMUNITIES, INC.
        1330 CONNECTICUT AVENUE, N.W.               TWO NORTH RIVERSIDE PLAZA, SUITE 800
         WASHINGTON, D.C. 20036-1795                      CHICAGO, ILLINOIS 60606
                (202) 429-3000                                 (312) 279-1656
</TABLE>

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective.

     If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.  [ ]

     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.  [X]

     If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]

     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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                                                       PROPOSED MAXIMUM       PROPOSED MAXIMUM       AMOUNT OF
          TITLE OF CLASS             AMOUNT TO BE       OFFERING PRICE       AGGREGATE OFFERING     REGISTRATION
  OF SECURITIES BEING REGISTERED      REGISTERED         PER SHARE(1)             PRICE(1)             FEE(1)
- ------------------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>                    <C>                    <C>
Common Stock, $.01 par value per
share.............................    2,000,000            $24.0625             $48,125,000           $13,379
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of computing the registration fee in
    accordance with Rule 457(c) based on the average of the high and low
    reported sales prices on the New York Stock Exchange on November 9, 1999.

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>   2

      THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
      MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT RELATING TO
      THESE SECURITIES HAS BEEN DECLARED EFFECTIVE BY THE SECURITIES AND
      EXCHANGE COMMISSION. THIS PROSPECTUS IS NEITHER AN OFFER TO SELL NOR A
      SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
      SUCH OFFER OR SALE IS UNLAWFUL.

                 SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1999

PROSPECTUS
                      MANUFACTURED HOME COMMUNITIES, INC.
                 DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN

                                   2,000,000
                             SHARES OF COMMON STOCK

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

     Manufactured Home Communities, Inc., a Maryland corporation, is a REIT
(real estate investment trust) for U.S. federal income tax purposes.

     MHC is self-administered and self-managed. We are primarily in the business
of owning, operating, leasing, developing, redeveloping and acquiring
manufactured home communities.

     We are the general partner of MHC Operating Limited Partnership, an
Illinois partnership. We own all of our assets and conduct substantially all of
our business through MHC Operating Partnership and our subsidiaries.

     With this prospectus, we are offering participation in our Dividend
Reinvestment and Share Purchase Plan to record holders of our common shares and
to holders of operating partnership units in MHC Operating Partnership, as well
as to other interested investors. The Dividend Reinvestment and Share Purchase
Plan is a simple, convenient and low-cost means of investing in our common
shares.
                             ---------------------

                                PLAN HIGHLIGHTS

     - You may participate in the Plan if you own our common shares or OP Units
       in MHC Operating Partnership. If you do not own any common shares or OP
       Units, you can participate in the Plan by making your initial investment
       in our common shares through the Plan with a minimum initial investment
       of $1,000.

     - Once you are enrolled in the Plan, you may buy additional common shares
       by automatically reinvesting all or a portion of the cash dividends paid
       on your common shares or cash distributions paid on your OP Units. To
       participate in the dividend reinvestment feature of the Plan, you must
       hold and elect to reinvest the dividends on a minimum of 10 common shares
       or the cash distributions on a minimum of 10 OP Units.

     - Once you are enrolled in the Plan, you may buy additional common shares
       by making optional cash investments of $250 to $5,000 per month. In some
       instances, however, we may permit greater optional cash investments.

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

     Your participation in the Plan is entirely voluntary, and you may terminate
your participation at any time. If you do not elect to participate in the Plan,
you will continue to receive cash dividends, if and when declared by our board
of directors, in the usual manner.

     Our common shares are traded on the New York Stock Exchange under the
ticker symbol "MHC." The closing price of our common shares on
            , 1999 was $     per share.

     Investing in our common shares involves risks. Potential investors should
consider the information presented under our discussion of "Risk Factors"
beginning on page 7 .

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

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or has determined if
this prospectus is adequate or accurate. Any representation to the contrary is a
criminal offense.

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

                THE DATE OF THIS PROSPECTUS IS          , 1999.
<PAGE>   3

                              SUMMARY OF THE PLAN

     The following summary of our Dividend Reinvestment and Share Purchase Plan
may omit information that may be important to you. You should carefully read the
entire text of the Plan contained in this prospectus beginning on page 15 before
you decide to participate in the Plan. References to Questions in this summary
are those found under "Terms and Conditions of the Plan."

ENROLLMENT.................  You can participate in the Plan if you own our
                             common shares or OP Units in MHC Operating
                             Partnership by submitting a completed authorization
                             form. You may obtain an authorization form from the
                             Plan's Administrator, The Chase Manhattan Bank.
                             Please see Question 6 for more detailed
                             information.

INITIAL INVESTMENT.........  If you do not own any of our common shares or OP
                             Units in MHC Operating Partnership, you can
                             participate in the Plan by making an initial
                             investment in our common shares through the Plan
                             with a minimum initial investment of $1,000. Please
                             see Question 5 for more detailed information.

REINVESTMENT OF
DIVIDENDS..................  You can reinvest your cash dividends on all or a
                             portion of your common shares or your cash
                             distributions on all or a portion of your OP Units
                             to purchase additional common shares. To
                             participate in the dividend and distribution
                             reinvestment feature of the Plan, you must hold and
                             elect to reinvest the dividends on a minimum of 10
                             common shares or the cash distributions on a
                             minimum of 10 OP Units. Please see Question 6 for
                             more detailed information.

OPTIONAL CASH
INVESTMENTS................  After you are enrolled in the Plan, you can buy
                             additional common shares. You can invest a minimum
                             of $250 to a maximum of $5,000 in any one month.
                             Under some circumstances, we may approve a written
                             request to waive the $5,000 per month maximum
                             amount. Please see Question 6 for more detailed
                             information.

ADMINISTRATION.............  The Chase Manhattan Bank initially will serve as
                             the Administrator of the Plan. ChaseMellon
                             Shareholder Services L.L.C., a registered transfer
                             agent, will provide administrative support to the
                             Administrator. You should send all correspondence
                             with the Administrator to: Manufactured Home
                             Communities, Inc., c/o ChaseMellon Shareholder
                             Services, P.O. Box 3338, South Hackensack, NJ
                             07606-1938. You may call the Administrator at (888)
                             847-1159. Please see Question 4 for more detailed
                             information.

SOURCE OF SHARES...........  The Administrator of the Plan will purchase our
                             common shares directly from us as newly issued
                             common shares, in the open market or in privately
                             negotiated transactions with third parties. Please
                             see Question 8 for more detailed information.

PURCHASE PRICE.............  Under the Plan, with respect to reinvested
                             dividends and distributions and optional cash
                             investments of $5,000 or less, the purchase price
                             for our common shares that the Administrator
                             purchases directly from us initially will equal
                             100% of the average of the daily high and low sales
                             prices for a common share reported by the New York
                             Stock Exchange on the applicable Investment Date
                             or, if no trading occurs in our common shares on
                             the applicable Investment Date, the average of the
                             daily high and low sales prices for the first
                             trading day immediately

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<PAGE>   4

                             preceding the Investment Date for which trades are
                             reported. Please see Question 8 for more detailed
                             information.

                             With respect to optional cash investments of
                             greater than $5,000, the purchase price for newly
                             issued common shares that the Administrator
                             purchases directly from us initially will equal
                             100% of the average of the daily high and low sales
                             prices of our common shares reported by the New
                             York Stock Exchange for the trading day relating to
                             each Investment Date, less any discount that we may
                             elect to offer in connection with a waiver of the
                             $5,000 limit. Please see Questions 8 and 10 for
                             more detailed information.

                             The purchase price for common shares purchased in
                             the open market or in privately negotiated
                             transactions with third parties will equal the
                             price paid for the shares on the relevant
                             Investment Date. Please see Question 8 for more
                             detailed information.

                             The reinvestment of cash dividends and
                             distributions in additional common shares is not
                             subject to a maximum limit.

                             The Waiver Discount, if any, described in the
                             response to Question 10 will not be available for
                             optional cash investments that do not exceed
                             $5,000. Similarly, these investments will not be
                             subject to the Minimum Waiver Price. However, MHC
                             reserves the right to grant a discount and set a
                             minimum price in the future for these investments.
                             MHC also reserves the right to offer a discount or
                             change any discount offered on common shares
                             purchased with reinvested dividends or
                             distributions. In no event will the discount be
                             greater than 5% of the average of the high and low
                             trading prices of MHC's common shares on the
                             Investment Date.

                             Optional cash investments of less than $250 and
                             that portion of any optional cash investment that
                             exceeds $5,000, unless the limit has been waived,
                             will be returned to the participant without
                             interest.

TRACKING YOUR
INVESTMENTS................  You will receive periodic statements of the
                             transactions made in your Plan account. These
                             statements will provide you with details of the
                             transactions and will indicate the share balance in
                             your Plan account. Please see Question 14 for more
                             detailed information.

                                        4
<PAGE>   5

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission a registration
statement on Form S-3. This prospectus, which is part of the registration
statement, does not contain all the information included in the registration
statement. Some information is omitted and you should refer to the registration
statement and its exhibits. With respect to references made in this prospectus
to any contract, agreement or other document of ours, our descriptions are
summaries and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document.

     We also file annual, quarterly and current reports, proxy statements and
other information with the Commission. You may read and copy any materials we
file with the Commission at the Public Reference Room of the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. You may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. In addition, we file many of our
documents electronically with the Commission, and you may access those documents
over the internet. The Commission maintains a "web site" that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address is "http://www.sec.gov."

     You may inspect any reports, proxy statements and other information we file
with the NYSE at the offices of the NYSE, 20 Broad Street, New York, New York
10005.

     The Commission allows us to "incorporate by reference" the information we
file with them in this prospectus. This helps us disclose information to you by
referring you to the documents we file. The information we incorporate by
reference is an important part of this prospectus. We incorporate by reference
each of the documents listed below.

     - Our Annual Report on Form 10-K for the year ended December 31, 1998.

     - Our Quarterly Reports on Form 10-Q for the quarters ended March 31 and
       June 30, 1999.

     - Our Current Report on Form 8-K dated January 22, 1999, filed with the
       Commission on February 4, 1999.

     - The description of our common stock contained in our Registration
       Statement on Form 8-A/A, filed with the Commission on February 22, 1993.

     We also incorporate by reference any future filings we make under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
until all of the common shares to which this prospectus relates have been issued
or the offering is terminated. You should note that any of our future filings
which are incorporated by reference will automatically update and supersede the
information in this prospectus.

     Copies of all documents which are incorporated by reference (not including
the exhibits to this information, unless these exhibits are specifically
incorporated by reference in this information) will be provided without charge
to each person, including any beneficial owner, to whom this prospectus is
delivered upon written or oral request. Requests should be directed to
Manufactured Home Communities, Inc., Two North Riverside Plaza, Chicago,
Illinois 60606, Attention: Investor Relations Department (telephone number:
(800) 247-5279).

                                        5
<PAGE>   6

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Information contained in or incorporated by reference into this prospectus
and any accompanying prospectus supplement contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act. We intend the
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in Section 27A of the Securities Act. These
forward-looking statements relate to, without limitation, future economic
performance, our plans and objectives for future operations and projections of
revenue and other financial items, and can be identified by the use of
forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "estimate," or "continue" or the negative or other variations of
these terms or comparable terminology. The cautionary statements under the
caption "Risk Factors" and other similar statements contained in this prospectus
or any accompanying prospectus supplement identify important factors with
respect to the forward-looking statements, including risks and uncertainties,
that could cause actual results to differ materially from those in the
forward-looking statements.

                                        6
<PAGE>   7

                                  RISK FACTORS

     Before you invest in our common shares, you should be aware that your
investment is subject to various risks, including those described below. You
should consider carefully these risks together with all of the other information
included in this prospectus and incorporated by reference before you decide to
purchase any of our common shares.

     OP Units in MHC Operating Partnership are exchangeable on a one-for-one
basis for shares of MHC common stock or their cash equivalent. In the following
discussion of risk factors, we refer to our common shares and the OP Units
together as our securities, and the investors who own shares of our common stock
and/or OP Units as our securityholders.

OUR PERFORMANCE AND SHARE VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE REAL
ESTATE INDUSTRY.

  Adverse Economic And Real Estate Conditions Could Adversely Affect Our
  Properties.

     Our ability to make payments to our securityholders depends on our ability
to generate income sufficient to pay our expenses, service our debt and maintain
our portfolio of manufactured home community properties. The economic
performance and value of our properties may be adversely affected by factors
that are beyond our control, including:

     - changes in the national, regional and local economic climate;

     - local conditions such as an oversupply of manufactured home sites or a
       reduction in demand for manufactured home sites in the area;

     - the attractiveness of our properties to tenants;

     - competition from other available manufactured home communities and
       alternative forms of housing (such as apartment buildings and site-built
       single family homes);

     - high vacancy rates; and

     - changes in market rental rates.

     Our performance also depends on our ability to collect rent from tenants
and pay maintenance, insurance and other operating costs (including real estate
taxes), which could increase over time.

     The expenses of owning and operating a property are not necessarily reduced
when circumstances such as market factors and competition cause a reduction in
income from the property. If a property is mortgaged and we are unable to meet
the mortgage payments, the lender could foreclose on the mortgage and take the
property. In addition, other factors, such as

     - interest rate levels;

     - the availability of financing;

     - changes in laws and governmental regulations (including those governing
       usage, zoning and taxes);

     - potential environmental or other legal liabilities; and

     - acts of God, such as floods, hurricanes and earthquakes,

may adversely affect our financial condition.

                                        7
<PAGE>   8

  Risks Associated With Our Expansion Activities Could Adversely Affect Us.

     Our expansion and redevelopment of properties subjects us to a variety of
risks. In the case of an unsuccessful expansion or redevelopment project, we may
fail to recoup our investment in the project. These risks include:

     - abandonment of expansion or redevelopment opportunities after the payment
       of funds;

     - failure to obtain required permits, licenses or approvals for a project;

     - temporary disruption of income from a property;

     - loss of tenants due to inconvenience caused by construction; and

     - failure to maintain occupancy rates and rents at a level sufficient to
       make a project profitable.

  Risks Associated With Our Acquisition Activities Could Adversely Affect Us.

     We intend to continue to acquire manufactured home community properties to
the extent they can be acquired on advantageous terms and meet our investment
criteria. However, we may not be able to complete transactions in the future.
When we acquire, develop or expand properties, we are subject to the risks that:

     - competition for new acquisitions may result in increased prices for
       properties;

     - we may underestimate the costs necessary to bring an acquired property up
       to standards established for its intended market position;

     - projected occupancy and rental rates at the property may not be realized;

     - we may fail to recoup our investment in the properties; and

     - we may experience difficulty or delays in obtaining necessary zoning,
       land-use and other governmental permits and authorizations.

     We expect that other real estate investors with significant capital will
compete with us for attractive investment opportunities. These competitors
include publicly traded REITs, private REITs and other types of investors.
Competition often drives up the price of attractive manufactured home community
properties.

     We expect to acquire properties with cash from secured or unsecured
financings and proceeds from offerings of equity or debt. We may not be in a
position or have the opportunity in the future to make suitable property
acquisitions on favorable terms.

  Because Real Estate Investments Are Illiquid, We May Not Be Able To Sell
  Properties When Appropriate.

     Limitations on our ability to sell our investments could adversely affect
our ability to service debt and make distributions to our securityholders. Real
estate investments generally cannot be sold quickly. We may not be able to vary
our portfolio promptly in response to economic or other conditions. This
inability to respond promptly to changes in the performance of our investments
could adversely affect our financial condition.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH DEBT FINANCING.

  Scheduled Debt Payments Could Adversely Affect Our Financial Condition.

     We have a substantial amount of debt. As of June 30, 1999, the total
principal amount of our outstanding indebtedness was $756 million. As a result,
we are subject to the following risks:

     - the risk that our cash flow from operations could be insufficient to meet
       required payments of principal and interest and pay distributions at
       expected levels;

                                        8
<PAGE>   9

     - the risk that we will not be able to refinance our existing indebtedness
       on favorable terms, or at all; and

     - the risk that we will be unable to obtain financing for necessary capital
       expenditures on favorable terms, or at all.

     If we are unable to meet mortgage payments for a mortgage that is secured
by one of our properties, that property could be transferred to the lender, or
other third parties, resulting in a loss of income and asset value.

     Virtually all of our debt requires the payment of substantial principal at
maturity. If principal payments due at maturity cannot be refinanced, extended
or paid with proceeds of other capital transactions, such as new equity capital,
our cash flow will not be sufficient in all years to repay all maturing debt. If
prevailing interest rates or other factors at the time of refinancing (such as
the possible reluctance of lenders to make commercial real estate loans) result
in higher interest rates, increased interest expense would adversely affect cash
flow and our ability to service debt and make distributions to securityholders.

  The Obligation To Comply With Financial Covenants In Our Debt Instruments
  Could Adversely Affect Our Financial Condition.

     The mortgages on our properties contain customary negative covenants which,
among other things, limit our ability, without the prior consent of the lender,
to further mortgage the property or to discontinue insurance coverage.

     In addition, our credit facilities contain certain customary restrictions,
requirements and other limitations on our ability to incur indebtedness,
including:

     - total debt to assets ratios,

     - secured debt to total assets ratios,

     - debt service coverage ratios, and

     - minimum ratios of unencumbered assets to unsecured debt.

     Foreclosure on our mortgaged properties or our inability to refinance
existing indebtedness would likely have a negative impact on our financial
condition and results of operations.

  Our Degree Of Leverage Could Limit Our Ability To Obtain Additional Financing.

     As of September 30, 1999, our "debt to market capitalization ratio" ( which
we calculate as total debt as a percentage of total debt plus the market value
of the outstanding common stock and OP Units) was approximately 41%. This degree
of leverage could have important consequences to our business and
securityholders, including affecting our ability to obtain additional 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 of the economy generally.

STOCKHOLDERS ARE LIMITED IN THEIR ABILITY TO CHANGE CONTROL OF US.

  Provisions Of Our Charter And Bylaws Could Inhibit Changes In Control.

     There are significant limitations on the ability of stockholders to change
control of us. Certain provisions of our charter and bylaws may delay or prevent
a change in control, tender offers for our common stock, attempts to assemble a
block of common stock through purchases of common stock from stockholders at a
premium to the prevailing market price or which might otherwise be in the best
interest of our stockholders. These include a board of directors that is elected
for three year terms, with approximately one-third of its directors elected each
year, and the Ownership Limitation that we describe

                                        9
<PAGE>   10

below. Also, any future series of preferred stock may have voting provisions
that could delay or prevent a change of control or other transaction that might
involve a premium price or otherwise be good for our stockholders.

  We Could Adopt Maryland Law Limitations On Changes In Control.

     Certain provisions of Maryland law prohibit "business combinations"
(including certain issuances of equity securities) with any person who
beneficially owns ten percent or more of the voting power of outstanding stock,
or with an affiliate of the company who, at any time within the two-year period
prior to the date in question, was the owner of ten percent or more of the
voting power of the outstanding voting stock (defined under Maryland law as an
"Interested Stockholder"), or with an affiliate of an Interested Stockholder.
These prohibitions last for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder. After the five-year
period, a business combination with an Interested Stockholder must be approved
by two super-majority stockholder votes unless, among other conditions, common
stockholders receive a minimum price for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Stockholder for its shares of common stock.

     Our board of directors has exempted from these provisions of Maryland law
any business combination with any of the following or their affiliates:

     - Mr. Samuel Zell (Chairman of our board of directors);

     - certain holders of OP Units who received them at the time of our initial
       public offering;

     - the General Motors Hourly Rate Employes Pension Trust and the General
       Motors Salaried Employes Pension Trust (which we sometimes refer to as
       the GM Trusts); and

     - our officers who acquired shares of our common stock at the time we were
       formed.

  We Have A Stock Ownership Limit For REIT Tax Purposes.

     To remain qualified as a REIT for federal income tax purposes, not more
than 50% in value of our outstanding stock may be owned, directly or indirectly,
by five or fewer individuals (as defined in the federal income tax laws
applicable to REITs) at any time during the last half of any year. To facilitate
maintenance of our REIT qualification, our charter, subject to certain
exceptions, prohibits ownership by any single stockholder of more than 5% (in
value or number of shares, whichever is more restrictive) of our stock. We refer
to this as the Ownership Limitation. Our charter permits the board of directors
to increase the Ownership Limitation with respect to any class or series of
stock. Further, the board of directors is required to waive or modify the
Ownership Limitation with respect to a stockholder who would not be treated as
an "individual" for purposes of the Internal Revenue Code of 1986, as amended,
if this stockholder's ownership in excess of the Ownership Limitation will not
cause a stockholder who is an individual to be treated as owning stock in excess
of the Ownership Limitation or otherwise jeopardize our REIT status. In the
absence of an exemption or waiver, stock acquired or held in violation of the
Ownership Limitation will be transferred to us by operation of law as trustee
for the benefit of the person to whom the stock is ultimately transferred, and
the stockholder's rights to distributions and to vote would terminate. The
stockholder would be entitled to receive, from the proceeds of any subsequent
sale of the stock transferred to us as trustee, the lesser of (i) the price paid
for the stock or, if the owner did not pay for the stock (for example, in the
case of a gift, devise or other such transaction), the market price of the stock
on the date of the event causing the stock to be transferred to us as trustee or
(ii) the amount realized from such sale. A transfer of stock may be void if it
causes a person to violate the Ownership Limitation. The Ownership Limitation
could delay or prevent a change in control of us and, therefore, could adversely
affect our stockholders' ability to realize a premium over the then-prevailing
market price for their stock.

                                       10
<PAGE>   11

CONFLICTS OF INTEREST COULD RESULT IN DECISIONS CONTRARY TO OUR BEST INTEREST.

  Mr. Zell's Affiliates Control Our Management Corporations.

     Controlling ownership interests of affiliates allows affiliates to exercise
significant influence on us.

     LP Management Corp. and DeAnza Group, Inc., which we call the Management
Corporations, are limited partners of MHC Management Limited Partnership and
MHC-DAG Management Limited Partnership, respectively. We sometimes refer to
these partnerships as the Management Partnerships. The Management Partnerships
provide property management services and asset management services to most of
our properties. The management contracts for these services were not negotiated
on an arms length basis. While we believe that the management fees the
Management Partnerships receive from these properties are at current market
rates, there is no assurance that these management fees will equal at all times
those fees that would be charged by an unaffiliated third party. While we
generally own 95% of the economic interest in the Management Corporations, Mr.
Zell controls and has a substantial interest in the private company which has
voting control of the Management Corporations. Due to his position at MHC, Mr.
Zell may have a conflict with respect to enforcing the terms of these management
contracts, which could adversely affect our financial condition and results of
operations.

  Certain Directors, Officers And Stockholders Have Conflicts Of Interest And
  Could Exercise Influence In A Manner Inconsistent With Stockholders' Best
  Interest.

     As of March 17, 1999, Mr. Zell and Ms. Sheli Z. Rosenberg (one of our
directors) owned (as determined in accordance with the rules of the Securities
and Exchange Commission) approximately 9.8%, and all other directors and
executive officers as a group owned approximately 15.2%, of our outstanding
stock (in each case including common stock issuable upon exchange of OP Units
and options to purchase an aggregate of 792,658 shares of common stock).
Finally, the GM Trusts own approximately 8.6% of our common stock. Accordingly,
these persons have significant influence on our management and operation. This
influence might be exercised in a manner that is inconsistent with the interests
of other securityholders.

  Mr. Zell And His Affiliates Continue To Be Involved In Other Investment
  Activities.

     Although Mr. Zell entered into a noncompetition agreement at the time of
our initial public offering, he and his affiliates have a broad and varied range
of investment interests, including interests in other real estate investment
companies involved in other forms of housing, including multifamily housing. Mr.
Zell and his affiliates may acquire interests in other companies. He may not be
able to control whether any of these companies competes with us. Consequently,
Mr. Zell's continued involvement in other investment activities could result in
competition with us as well as management decisions that might not reflect the
interests of our securityholders.

  We Lease Our Corporate Offices From An Affiliate Of Mr. Zell.

     Our corporate offices are at Two North Riverside Plaza in Chicago,
Illinois. We lease our office space there from one of Mr. Zell's affiliates. We
believe that the lease terms, including the rental rates, reflect current market
terms.

WE DO NOT CONTROL REALTY SYSTEMS, INC.

     Realty Systems, Inc. provides sales, leasing, brokerage and construction
services to our properties and we provide RSI with an unsecured credit line to
purchase inventory. Certain persons with significant business relationships with
Mr. Zell control the voting stock and management of RSI, although we own 95% of
the economic interests in RSI. We therefore do not control the timing or amount
of distributions or the management and operations of RSI. As a result, decisions
relating to the declaration and payment of distributions, the credit line and
the business policies and operations of RSI could be adverse to our interests or
could lead to adverse financial results, which could adversely affect our
financial condition and results of operations.

                                       11
<PAGE>   12

SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE.

     We carry comprehensive liability, fire, extended coverage and rental loss
insurance on all of our properties. We believe the policy specifications and
insured limits of these policies are adequate and appropriate. There are,
however, certain types of losses, such as lease and other contract claims, that
generally are not insured. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose all or a portion of the capital we have
invested in a property, as well as the anticipated future revenue from the
property. In such an event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the property.

ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND CAN BE COSTLY.

     Federal, state and local laws and regulations relating to the protection of
the environment may require a current or previous owner or operator of real
estate to investigate and clean up hazardous or toxic substances or petroleum
product releases at the property. If unidentified environmental problems arise,
we may have to make substantial payments which could adversely affect our cash
flow and our ability to make distributions to our securityholders because:

     - the owner or operator may have to pay a governmental entity or third
       parties for property damage and for investigation and clean-up costs
       incurred by those parties in connection with the contamination;

     - these laws typically impose clean-up responsibility and liability without
       regard to whether the owner or operator knew of or caused the
       contamination;

     - even if more than one person may have been responsible for the
       contamination, each person covered by the environmental laws may be held
       responsible for all of the clean-up costs incurred; and

     - third parties may sue the owner or operator of a site for damages and
       costs resulting from environmental contamination emanating from that
       site.

     Environmental laws also govern the presence, maintenance and removal of
asbestos. These laws require that owners or operators of property containing
asbestos properly manage and maintain the asbestos, that they notify and train
those who may come into contact with asbestos and that they undertake special
precautions, including removal or other abatement, if asbestos would be
disturbed during renovation or demolition of a building. These laws may impose
fines and penalties on real property owners or operators who fail to comply with
these requirements and may allow third parties to seek recovery from owners or
operators for personal injury associated with exposure to asbestos fibers.

     Independent environmental consultants have conducted Phase I environmental
site assessments at all of our properties. These assessments included, at a
minimum, a visual inspection of the properties and the surrounding areas, an
examination of current and historical uses of the properties and the surrounding
areas and a review of relevant federal, state, and historical documents. Where
appropriate, on a property by property basis, these consultants have conducted
additional testing, including sampling for asbestos, for lead in drinking water,
for soil contamination where underground storage tanks are or were located or
where other past site usages create a potential environmental problem, and for
contamination in groundwater.

     These environmental assessments have not revealed any environmental
liabilities at the properties that we believe would have a material adverse
effect on our business, assets, financial condition or results of operations,
nor are we aware of any material environmental liability. There can be no
assurances, however:

     - that circumstances have not changed since any assessments were completed;

     - that they reveal all potential environmental liabilities;

     - that they are accurate; or

     - that prior owners or operators of the properties have not created a
       potential environmental liability unknown to us.
                                       12
<PAGE>   13

     We cannot be sure that environmental laws will not become more stringent in
the future or that the environmental conditions on or near our properties will
not have a material adverse effect on individual properties or on us as a whole
in the future.

THE MARKET VALUE OF OUR STOCK CAN BE ADVERSELY AFFECTED BY A NUMBER OF FACTORS.

  Changes In Market Conditions Could Adversely Affect The Market Price Of Our
  Stock.

     As with other publicly traded equity securities, the value of our common
stock depends on various market conditions, which may change from time to time.
Among the market conditions that may affect the value of our publicly traded
securities are the following:

     - the extent of institutional investor interest in us;

     - the reputation of REITs and manufactured home community REITs generally,
       and the attractiveness of their equity securities in comparison to other
       equity securities (including securities issued by other real estate
       companies);

     - our financial condition and performance; and

     - general financial market conditions.

  Our Earnings And Cash Distributions Will Affect The Market Price Of Our Stock.

     We believe that the market value of a REIT's equity securities is based
primarily upon the market's perception of the REIT's growth potential and its
current and potential future cash distributions, and is secondarily based upon
the real estate market value of the underlying assets. For that reason, our
common stock may trade at prices that are higher or lower than the net asset
value per share. To the extent we retain operating cash flow for investment
purposes, working capital reserves or other purposes, these retained funds,
while increasing the value of our underlying assets, may not correspondingly
increase the market price of our common stock. Our failure to meet the market's
expectations with regard to future earnings and cash distributions would likely
adversely affect the market price of our publicly traded securities.

  Market Interest Rates May Have An Effect On The Value Of Our Stock.

     One of the factors that investors consider important in deciding whether to
buy or sell shares of a REIT is the distribution rate with respect to its shares
(as a percentage of the price of its shares) relative to market interest rates.
If market interest rates go up, prospective purchasers of REIT shares may expect
a higher distribution rate. Higher interest rates would not, however, result in
more funds for us to distribute and, in fact, would likely increase our
borrowing costs and potentially decrease funds available for distribution. Thus,
higher market interest rates could cause the market price of our publicly traded
securities to go down.

  Our Earnings are Affected by Changes in Interest Rates.

     Because a portion of our outstanding indebtedness is at variable rates
based on the London Inter-Bank Offer Rate, our earnings are affected by changes
in interest rates. We have a $175 million line of credit (of which $40 million
dollars was outstanding as of September 30, 1999) that bears interest at LIBOR
plus 1.125% as well as a $100 million Term Loan that bears interest at LIBOR
plus 1.0%. In addition, we are party to an interest rate swap agreement that
fixes LIBOR at 6.4% on $100 million of our floating rate debt for the period
1998 through 2003. By way of illustration, if LIBOR had increased or decreased
by 1.0% during 1998, our interest expenses would have increased or decreased,
respectively, by approximately $1.0 million based on the average balance
outstanding under our line of credit for the year ended December 31, 1998.

                                       13
<PAGE>   14

WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL FOR FUTURE GROWTH.

     To qualify as a REIT, we must distribute to our stockholders each year at
least 95% of our net taxable income (excluding any net capital gain). Because of
these distribution requirements, it is not likely that we will be able to fund
all future capital needs, including for acquisitions, from income from
operations. We will have to rely on third-party sources of capital, which may or
may not be available on favorable terms or at all. Our access to third-party
sources of capital depends on a number of things, including the market's
perception of our growth potential and our current and potential future
earnings. Moreover, additional equity offerings may result in substantial
dilution of securityholders' interests, and additional debt financing may
substantially increase our leverage.

IF WE FAIL TO QUALIFY AS A REIT OUR SECURITYHOLDERS WOULD BE ADVERSELY AFFECTED.

     We believe that, since our initial public offering in March 1993, we have
qualified for taxation as a REIT for federal income tax purposes. We plan to
continue to meet the requirements for taxation as a REIT. Many of these
requirements, however, are highly technical and complex. The determination that
we are a REIT requires an analysis of various factual matters and circumstances
that may not be totally within our control. For example, to qualify as a REIT,
at least 95% of our gross income must come from certain sources that are
itemized in the REIT tax laws. We are also required to distribute to
stockholders at least 95% of our REIT taxable income (excluding capital gains).
The fact that we hold our assets through MHC Operating Partnership and its
subsidiaries further complicates the application of the REIT requirements. Even
a technical or inadvertent mistake could jeopardize our REIT status.
Furthermore, Congress and the Internal Revenue Service might make changes to the
tax laws and regulations, and the courts might issue new rulings that make it
more difficult, or impossible, for us to remain qualified as a REIT. We do not
believe, however, that any pending or proposed tax law changes would jeopardize
our REIT status.

     In addition, although REITs are prohibited from holding more than 10% of
the voting securities of any corporation, a REIT is not currently prohibited
from holding more than 10% of the value of the stock of a corporation, subject
to the general REIT asset requirements. Several proposals affecting REITs are
included in both the conference language of the Taxpayer Refund and Relief Act
of 1999 that was vetoed by President Clinton and the federal budget for 2000.
One such proposal, if enacted, would prohibit a REIT from holding securities
representing more than 10% of the vote or value of all classes of stock of a
corporation, other than stock of a qualified REIT subsidiary or another REIT.
Although stock currently owned in existing subsidiaries, such as RSI, would be
grandfathered under this type of proposal, those subsidiaries would be
prohibited from acquiring substantial new assets or engaging in a new trade or
business. If enacted in its present form, the proposal may limit our future
activities and growth, absent restructuring those subsidiaries into taxable REIT
subsidiaries. There can be no assurance that these or similar proposals will not
be enacted.

     If we fail to qualify for taxation as a REIT and the relief provisions of
the Internal Revenue Code do not apply, we would be subject to federal income
tax at regular corporate rates. Also, unless the Internal Revenue Service
granted us relief under certain statutory provisions, we would be ineligible for
qualification as a REIT for four years following the year we first failed to
qualify. If we failed to qualify as a REIT, we would have to pay significant
income taxes and would therefore have less money available for investments or
for distributions to stockholders. This would likely have a significant adverse
affect on the value of our securities. In addition, we would no longer be
required to make any distributions to stockholders.

WE PAY SOME TAXES.

     Even if we qualify as a REIT, we are required to pay certain federal, state
and local taxes on our income and property. In addition, any net taxable income
earned directly by certain noncontrolled subsidiaries is subject to federal and
state income tax.

                                       14
<PAGE>   15

OUR BUSINESS MAY BE DISRUPTED AS A RESULT OF THE YEAR 2000 ISSUE.

     The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of our
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, collect rents or
engage in similar normal business activities.

     We have conducted an assessment of our exposure to Year 2000 related
business disruptions. The assessment examined our internal systems, including
computer hardware and software such as Accounts Receivable, Accounts Payable,
General Ledger and Payroll systems. We have substantially completed vendor and
manufacturer recommended procedures to remedy Year 2000 issues identified during
our assessment, and have upgraded, replaced, or retired non-year 2000 compliant
hardware and software.

     We have retained consultants to conduct on-site inspections of our utility
operations, such as drinking water systems, waste water treatment plants and
lift stations. Our inspections lead us to believe there will be no material
issue. In addition, we have contacted our significant suppliers in order to
assess and, to the extent possible, minimize potential exposure to Year 2000
Issue related disruptions.

     We have commenced contingency planning for critical operational areas that
might be affected by the Year 2000 Issue if compliance is delayed. Aside from
catastrophic failures of banks, governmental agencies, utilities or similar
entities, we believe that we could continue routine operations. For example,
rent on properties can be collected and recorded by manual methods using
hardcopy reports from previous months; payroll can be processed by issuing
manual checks relying on existing payroll registers; bills can be paid as long
as banks can process checks; and basic financial statements can be prepared
manually. The pervasiveness of Year 2000 Issues, however, makes it likely that
previously unidentified issues will require remediation during the normal course
of business.

     Although we believe that our efforts to minimize business disruptions
resulting from the Year 2000 Issue are adequate, we can give no assurance that
such efforts, and those of our tenants and suppliers, will be adequate to
prevent a material adverse effect on us.

                        TERMS AND CONDITIONS OF THE PLAN

     The following constitutes our Dividend Reinvestment and Share Purchase
Plan, as in effect beginning             , 1999. All references in this
prospectus to common shares refer to our shares of common stock, par value $.01
per share.

PURPOSE

1. WHAT IS THE PURPOSE OF THE PLAN?

     The primary purpose of the Plan is to give holders of record of our common
shares and holders of OP Units in MHC Operating Partnership, as well as other
interested investors, a convenient and economical way to purchase and to
reinvest all or a portion of their cash dividends or cash distributions in
common shares. A secondary purpose of the Plan is to provide us another way to
raise additional capital for general corporate purposes through sales of common
shares.

PARTICIPATION OPTIONS

2. WHAT ARE MY INVESTMENT OPTIONS UNDER THE PLAN?

     Once enrolled in the Plan, you may buy common shares through any of the
following investment options:

     - Full Distribution Reinvestment. You may reinvest cash dividends paid on
       all of your common shares to purchase additional common shares if you
       have at least 10 common shares in your Plan account. Similarly, you may
       invest cash distributions paid on all of your OP Units if you have at

                                       15
<PAGE>   16

       least 10 OP Units in your Plan account. This option also permits you to
       make optional cash investments from $250 to $5,000 per month to buy
       additional common shares.

     - Partial Distribution Reinvestment. You may reinvest cash dividends paid
       on some of your common shares to purchase additional common shares if you
       have at least 10 common shares in your Plan account. Similarly, you may
       invest cash distributions paid on some of your OP Units if you have at
       least 10 OP Units in your Plan account. In either case, you must elect to
       reinvest the dividends on a minimum of 10 common shares or the cash
       distributions on a minimum of 10 OP Units. We will continue to pay you
       cash dividends on the remaining common shares and cash distributions on
       the remaining OP Units, when and if declared by our board of directors.
       This option also permits you to make optional cash investments from $250
       to $5,000 per month to buy additional common shares.

     - Optional Cash Investments. You may make optional cash investments from
       $250 to $5,000 per month to buy additional common shares. If you
       currently do not own any of our common shares or OP Units, you can
       participate in the Plan by making a minimum initial investment of $1,000.
       You may request, and in some instances we may approve, a waiver from us
       permitting you to make optional cash investments in an amount greater
       than $5,000 per month. See Question 10 to learn how to request a waiver.

BENEFITS AND DISADVANTAGES

3. WHAT ARE THE BENEFITS AND DISADVANTAGES OF THE PLAN?

  Benefits

     Before deciding whether to participate in the Plan, you should consider the
following benefits of the Plan:

     - There are minimal costs associated with the Plan that you must pay,
       including costs related to your voluntary selling of common shares.
       Therefore, you will not pay trading fees or service fees to purchase
       common shares through the Plan, unless we authorize the Administrator to
       purchase common shares in the open market. Please see the "Plan Service
       Fees Schedule" attached as Exhibit A for a detailed description of the
       costs for which you will be responsible.

     - You will get the convenience of having all or a portion of your cash
       dividends automatically reinvested in additional common shares. You can
       also invest distributions paid on all or a portion of your OP Units.
       Since the Administrator will credit fractional common shares to your Plan
       account, you will receive full investment of your dividends or
       distributions and optional cash investments.

     - You will have the option of having your share certificates held for
       safekeeping by the Administrator, protecting against loss, theft or
       destruction of the certificates representing your common shares.

     - You will simplify your record keeping by receiving periodic statements
       which will reflect all current activity in your Plan account, including
       purchases, sales and latest balances.

     - You will have the flexibility of making optional cash investments of $250
       to $5,000 in any one month to buy additional common shares. You may make
       these optional cash investments on a regular or occasional basis.

     - At any time, you may direct the Administrator to sell or transfer all or
       a portion of the common shares held in your Plan account. You will be
       responsible for any trading fees associated with the sale.

                                       16
<PAGE>   17

  Disadvantages

     Before deciding whether to participate in the Plan, you should consider the
following disadvantages of the Plan:

     - We are not now offering a discount on purchases of common shares made
       through dividend or distribution reinvestments or optional cash
       investments, although we reserve the right to offer discounts in the
       future.

     - In no event will the discount be greater than 5% of the average of the
       high and low trading prices of MHC's common shares on the Investment
       Date.

     - Without giving you prior notice, we may direct the Administrator to buy
       common shares under the Plan either directly from us or in the open
       market or in privately negotiated transactions with third parties.

     - Your reinvestment of cash dividends on common shares will result in your
       being treated for federal income tax purposes as having received a
       dividend on the dividend payment date, to the extent of our earnings and
       profits. The dividend may give rise to a liability for the payment of
       income tax without providing you with immediate cash to pay the tax when
       it becomes due.

     - You may not know the actual number of common shares that the
       Administrator of the Plan buys for your account until after the
       applicable "Investment Date", as we define that term in Question 8.

     - Because the Administrator of the Plan will buy common shares for your
       account at an average price per share, the price paid for the shares on
       any date may be greater than the price at which common shares are then
       trading.

     - Sales of common shares held in your Plan account may be delayed up to
       three (3) business days.

     - As described in Exhibit A, you will pay trading fees or transaction fees
       on the sale of common shares held in your Plan account. You will also be
       charged for your pro rata share of trading fees on the purchase of common
       shares which are acquired in the open market for your Plan account should
       we elect not to issue such shares directly.

     - The administrator will not pay interest on funds that it holds pending
       reinvestment or investment.

     - You may not pledge common shares deposited in your Plan account unless
       you withdraw the shares from the Plan.

ADMINISTRATION

4. WHO WILL ADMINISTER THE PLAN?

     Administrator. The Chase Manhattan Bank or another entity as we may
designate, will serve as the Administrator of the Plan. ChaseMellon Shareholder
Services, L.L.C., a registered transfer agent, will provide administrative
support to the Administrator. The Administrator:

     - acts as your agent,

     - keeps records of all Plan accounts,

     - sends your account statements to you,

     - buys and sells, on your behalf, all common shares under the Plan, and

     - performs other duties relating to the Plan. You should send all
       correspondence with the Administrator to:

                  Manufactured Home Communities, Inc.
                    c/o ChaseMellon Shareholder Services
                  P.O. Box 3338
                  South Hackensack, NJ 07606-1938
                  Telephone (888) 847-1159

                                       17
<PAGE>   18

     Successor to Administrator. We may replace the Administrator at any time.
The Administrator may resign as Administrator of the Plan at any time. In either
case, we will appoint a successor Administrator, and will notify you of the
change.

PARTICIPATION

     For purposes of this section, we have based our responses upon the method
by which you hold your common shares. Generally, you either are a record owner
or a beneficial owner. You are a record owner if you own common shares in your
own name. You are a beneficial owner if you own common shares that are
registered in a name other than your own; for example, if the shares are held in
the name of a broker, bank or other nominee. If you are a record owner, you may
participate directly in the Plan. If you are a beneficial owner, you will have
to become either a record owner by having ten or more shares transferred into
your own name or coordinate your participation in the Plan through the broker,
bank or other nominee in whose name your shares are held.

     Holders of OP Units in MHC Operating Partnership can also automatically
invest some or all of their quarterly distributions from the operating
partnership in shares of MHC common stock as well as participate in the optional
cash investment portion of the Plan. Except as otherwise noted, the discussion
on the following questions in this prospectus relating to reinvestment of
dividends on our common shares also applies to the investment choices available
to holders of OP Units and to the mechanics and timing of the investment of
quarterly distributions from MHC Operating Partnership.

5. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?

     You may participate in the Plan if you meet the following requirements:

     Minimum Ownership Interest. You may directly join the Plan if you are a
registered holder of common shares. For instructions on enrolling, see Question
6.

     There is no minimum requirement as to the number of common shares that you
must hold in your Plan account in order to participate in the optional cash
investment portion of the Plan. However, if you wish to reinvest all or a
portion of your dividends, you must hold at least 10 common shares in your Plan
account and reinvest the dividends on at least 10 shares.

     If you are an interested investor but not yet a shareholder, you initially
can purchase from us at least $1,000 of common shares in order to participate in
the Plan. This initial purchase will enable you to participate in both the
optional cash investment and dividend reinvestment portions of the Plan, subject
to eligibility requirements. You may purchase common shares pursuant to this
paragraph in the manner set forth in the response to Question 8.

     Non-transferability of right to participate. You may not transfer your
right to participate in the Plan to another person.

     Foreign Law Restrictions. You may not participate in the Plan if it would
be unlawful for you to do so in the jurisdiction where you are a citizen or
reside. If you are a citizen or resident of a country other than the United
States, you should confirm that by participating in the Plan you will not
violate local laws governing, among other things, taxes, currency and exchange
controls, stock registration and foreign investments.

     Exclusion From Plan For Short-Term Trading Or Other Practices. You should
not use the Plan to engage in short-term trading activities that could change
the normal trading volume of the common shares. If you do engage in short-term
trading activities, we may prevent you from participating in the Plan. We
reserve the right to modify, suspend or terminate participation in the Plan, by
otherwise eligible holders of common shares, in order to eliminate practices
which are, in our sole discretion, not consistent with the purposes or operation
of the Plan or which adversely affect the price of the common shares. In
addition to short-term trading activities, we reserve the right to prevent you
from participating in the Plan for any other reason. It is in our sole
discretion to exclude you from, or terminate your participation in, the Plan.

                                       18
<PAGE>   19

ENROLLMENT

6. HOW DO I ENROLL IN THE PLAN?

     If you are eligible to participate in the Plan, you may join the Plan at
any time. Once you enroll in the Plan, you will remain enrolled until you
withdraw from the Plan or we terminate the Plan or your participation in the
Plan.

     The Authorization Form. To enroll and participate in the Plan, you must
complete the enclosed Authorization Form and mail it to the Administrator of the
Plan at the address set forth in Question 4. If your common shares are
registered in more than one name (such as joint tenants or trustees), all
registered holders must sign the Authorization Form. If you are eligible to
participate in the Plan, you may sign and return the Authorization Form to join
the Plan at any time.

     However, if you are a beneficial owner of common shares and wish to enroll
and participate in the Plan, you must do one of the following: (1) contact your
broker to have your brokerage account coded for full or partial dividend
reinvestment through the Depository Trust Company; or (2) instruct your broker
to have your shares transferred to ChaseMellon Shareholder Services to be held
for your benefit and then request Plan materials by calling (888) 847-1159; or
(3) if you desire to participate in optional cash purchase transactions, fill
out the Broker and Nominee Form, which you can obtain by calling the Plan
Administrator.

     If you are an interested investor but not presently a shareholder, and you
desire to participate in the Plan by making an initial purchase from us of at
least $1,000 of common shares, you may join the Plan by signing an Authorization
Form and forwarding it, together with the funds, to the Administrator. You may
obtain an Authorization Form at any time by contacting the Administrator as set
forth in Question 4.

     Choosing Your Investment Option. When completing the Authorization Form,
you should choose one of the investment options discussed in Question 2 and
repeated below:

     - "Full Distribution Reinvestment" -- This option directs the Administrator
       to reinvest the cash dividends paid on all of the common shares owned by
       you then or in the future in common shares. To participate in the full
       distribution reinvestment feature of the Plan, you must hold a minimum of
       10 common shares in your Plan account. This option also permits you to
       make optional cash investments from $250 to $5,000 per month to buy
       additional common shares.

     - "Partial Distribution Reinvestment" -- This option directs the
       Administrator to reinvest cash dividends paid on a specified number of 10
       or more common shares then owned by you in common shares. We will
       continue to pay you cash dividends on the remaining common shares, when
       and if declared by our board of directors. To participate in the partial
       distribution reinvestment feature of the Plan, you must hold a minimum of
       10 common shares in your Plan account, and you must elect to reinvest the
       dividends on at least 10 common shares. This option also permits you to
       make optional cash investments from $250 to $5,000 per month to buy
       additional common shares.

     - "Optional Cash Investments" -- This option permits you to make optional
       cash investments from $250 to $5,000 per month to buy additional common
       shares. We will continue to pay you cash dividends, when and if declared
       by our board of directors, on the common shares owned by you then or in
       the future, unless you designate the shares for reinvestment pursuant to
       the Plan.

     You should choose your investment option by checking the appropriate box on
the Authorization Form. If you sign and return an Authorization Form without
checking an option, the Administrator will choose the "Full Distribution
Reinvestment" option and will reinvest all cash dividends on all common shares
registered in your name, provided that you are the registered holder of at least
10 common shares. If you are not the registered holder of at least 10 common
shares, the Administrator will choose the "Optional Cash Investments" option.

     The Administrator automatically will reinvest all cash dividends paid on
all common shares that you have designated for participation in the Plan until
you indicate otherwise or withdraw from the Plan, or

                                       19
<PAGE>   20

until we terminate the Plan. If you have elected to have your dividends
reinvested, we will pay to the Administrator dividends on all common shares held
in your Plan account. The Administrator will credit the common shares purchased
with your reinvested dividends to your Plan account.

     Changing Your Investment Option. You may change your investment option by
completing and signing a new Authorization Form and returning it to the
Administrator of the Plan. The Administrator must receive any change at least
one business day before the record date for a dividend payment in order for the
change to become effective for that dividend payment. The Administrator also
must receive any change in the number of common shares that you have designated
for partial dividend reinvestment at least one business day before the record
date for a dividend payment in order to reinvest for the new number of shares on
the next Investment Date.

     The Broker And Nominee Form. If you are a beneficial owner of common shares
and wish for your broker, bank or other nominee in whose name your shares are
held to participate in the Plan on your behalf, the broker, bank or other
nominee in whose name your shares are held must complete a Broker and Nominee
Form. The Broker and Nominee Form provides the only means by which a broker,
bank or other nominee in whose name your shares are held, may make optional cash
investments on your behalf. Your broker, bank or other nominee in whose name
your shares are held must submit a Broker and Nominee Form to the Administrator
each time the broker, bank or other nominee in whose name your shares are held
transmits optional cash investments on your behalf. You, your broker, bank or
other nominee in whose name your shares are held may request a Broker and
Nominee Form at any time by contacting the Administrator as set forth in
Question 4. Prior to submitting a Broker and Nominee Form, your broker, bank or
other nominee must have submitted a completed Authorization Form on your behalf.

     The Administrator must receive the Broker and Nominee Form and appropriate
instructions at least three business days before the applicable Investment Date
or the optional cash investment will not be invested until the following
Investment Date.

7. WHEN WILL MY PARTICIPATION IN THE PLAN BEGIN?

     The date on which the Administrator receives your properly completed
Authorization Form will determine the date on which the Administrator will buy
common shares for your account. If you choose either the full or partial
dividend reinvestment option, the Administrator will begin to reinvest dividends
and distributions on the Investment Date after receipt of your Authorization
Form, provided it receives the Authorization Form at least one business day
before the record date set for the related dividend or distribution payment.

     If you choose the optional cash investments option and wish to invest
$5,000 or less in any one month, the Administrator will purchase common shares
for you on the Investment Date after receipt of both your Authorization Form and
the funds to be invested, provided it receives the Authorization Form and funds
on or before the close of business on the third business day immediately
preceding the Investment Date. If the Administrator receives your Authorization
Form and funds for optional cash investment after the third business day
indicated above but before the subsequent Investment Date, then the
Administrator will hold your funds, without interest, for investment on the next
following Investment Date. Please see the provisions of Question 10 if you wish
to invest more than $5,000.

     Once you enroll in the Plan, you will remain enrolled in the Plan until you
withdraw from the Plan or we terminate the Plan or your participation in the
Plan.

PURCHASES

8. HOW ARE SHARES PURCHASED UNDER THE PLAN?

     Initial Purchase Of Common Shares. If you are an interested investor but
not yet our shareholder, then you initially may direct the Administrator to
purchase for your account at least $1,000 worth of common shares, making you
eligible to participate in the Plan. You should send, together with your
Authorization Form, a check or money order or wire transfer, payable to The
Chase Manhattan Bank, in

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<PAGE>   21

an amount from $1,000 to $5,000 made out in U.S. funds drawn on a U.S. bank to
the Administrator at the address set forth in Question 4. The other provisions
of this Question 8 will apply to your purchase of common shares in this manner.

     Source of The Common Shares. The Administrator will use all dividends and
distributions reinvested through the Plan and all optional cash investments to
buy either common shares directly from us, on the open market or in privately
negotiated transactions with third parties, or a combination of them, at our
discretion. Common shares purchased directly from us will consist of newly
issued common shares. We cannot revise our determination that shares purchased
through the Plan will be purchased either (1) from us, or (2) on the open market
or in privately negotiated transactions, more than once every three months.

     Investment Dates. When the Administrator purchases common shares from us,
the purchases shall be made on the "Investment Date" in each month. If the
Administrator is buying common shares directly from us through dividend
reinvestment or optional cash investments of $5,000 or less, then the Investment
Date will occur on either (1) the dividend payment date during any month in
which we pay a cash dividend or (2) on or around the second Friday of any month
in which we do not pay a cash dividend. See "Calendar of Expected
Events -- Optional Cash Investments of $5,000 or Less" attached as Exhibit B to
this prospectus for a list of the expected Investment Dates.

     If the Administrator is buying common shares directly from us through an
optional cash investment of greater than $5,000 pursuant to a request for waiver
(see Question 10 for how to obtain a waiver), then there will be ten Investment
Dates, each of which will occur on a separate "trading day", or a day on which
trades in our common shares are reported on the New York Stock Exchange, in a
Pricing Period, as defined in the next paragraph, with one-tenth of your
optional cash investment being invested on each trading day, subject to the
qualifications under "Minimum Waiver Price" in Question 10 below.

     The "Pricing Period" is the period encompassing the ten consecutive trading
days ending on either (1) the dividend payment date during any month in which we
pay a cash dividend or (2) on or around the second Friday of any month in which
we do not pay a cash dividend. See "Calendar of Expected Events -- Optional Cash
Investments of Greater than $5,000" attached as Exhibit B to this prospectus for
a list of the expected Pricing Period commencement and conclusion dates.

     If the Administrator is buying common shares for the Plan through open
market or privately negotiated transactions, then the Administrator will
reinvest dividends or make optional cash investments as soon as is practical on
or after the applicable Investment Date.

     In the past, record dates for dividends have preceded the dividend payment
dates by approximately two weeks. We historically have paid dividends on the
second Friday of each April, July and October and the last business day of
December. We cannot assure you that we will pay dividends according to this
schedule in the future, and nothing contained in the Plan obligates us to do so.
In fact, we now plan to pay the fourth quarter dividend on the second Friday of
January, with the record date for such payment being the last Friday of
December. Neither we nor the Administrator will be liable when conditions,
including compliance with the rules and regulations of the Commission, prevent
the Administrator from buying common shares or interfere with the timing of
purchases.

     We pay dividends as and when declared by our board of directors. We cannot
assure you that we will declare or pay a dividend in the future, and nothing
contained in the Plan obligates us to do so. The Plan does not represent a
guarantee of future dividends.

     Price of Common Shares. If the Administrator purchases common shares
directly from us, then with respect to reinvested dividends and distributions
and optional cash investments of $5,000 or less, the Administrator will pay a
price equal to 100% of the average of the daily high and low sales price for a
common share reported by the New York Stock Exchange on the applicable
Investment Date, or, if no trading occurs in common shares on the applicable
Investment Date, the first trading day immediately preceding the Investment Date
for which trades are accepted.

                                       21
<PAGE>   22

     If the Administrator purchases common shares directly from us, then with
respect to optional cash investments of greater than $5,000, the Administrator
will pay a price equal to 100% of the average of the daily high and low sales
prices of our common shares reported by the New York Stock Exchange for each
Investment Date in the Pricing Period. If we have granted a Waiver Discount, as
described in the response to Question 10, with respect to a purchase under the
Plan, the Administrator will receive the same discount when purchasing the
shares from us.

     If the Administrator purchases common shares in the open market or in
privately negotiated transactions, then the Administrator will pay a price equal
to the weighted average purchase price paid by the Administrator for the shares.
Each participant will be charged a pro rata portion of any trading fees or other
fees or charges paid by the Administrator in connection with such open market
purchases. The Administrator will purchase the shares as soon as is practical on
or after an Investment Date.

     Number of Shares to Be Purchased. If you elect to participate in the Plan
by reinvesting your dividends or distributions, the Administrator will invest
for you the total dollar amount equal to the sum of (1) the dividend on all
common shares, including fractional shares, and distributions on OP Units held
in your Plan account for which you have requested dividend or distribution
reinvestment and (2) any optional cash investments to be made as of that
Investment Date. There is no limit on the number of shares you may purchase
through dividend reinvestment. We reserve the right to offer a discount or
change any discount on common shares purchased with reinvested dividends.

     If you elect to make only optional cash investments, the Administrator will
invest for you the total dollar amount equal to any optional cash investments to
be made as of that Investment Date.

     As of any Investment Date, the Administrator will purchase for your account
the number of common shares equal to the total dollar amount to be invested for
you, as described above, divided by the applicable purchase price. The
Administrator will deduct from the amount to be invested for you any amount that
we are required to deduct for withholding tax purposes.

     Administrator's Control of Purchase Terms. With respect to purchases of
common shares in the open market or in privately negotiated transactions that
the Administrator makes under the Plan, the Administrator, or a broker that the
Administrator selects, will determine the following:

     - the exact timing of open market purchases;

     - the number of common shares, if any, that the Administrator purchases on
       any one day or at any time of that day;

     - the prices for the common shares that the Administrator pays;

     - the markets on which the Administrator makes the purchases; and

     - the persons, including brokers and dealers, from or through which the
       Administrator makes the purchases.

     Commingling of Funds. When making purchases for an account under the Plan,
we or the Administrator may commingle your funds with those of other investors
participating in the Plan.

                                       22
<PAGE>   23

9. HOW DO I MAKE OPTIONAL CASH INVESTMENTS?

     You may make optional cash investments at any time if you have submitted a
signed Authorization Form or your broker, bank or other nominee has submitted a
Broker and Nominee Form, and if you are (1) a registered holder of common
shares, (2) a holder of OP Units, (3) an interested investor who has purchased
from us at least $1,000 of common shares or (4) a beneficial owner of common
shares and either have directed your broker, bank or other nominee in whose name
your shares are held to transfer at least 10 common shares to your name or you
have arranged with your broker, bank or other nominee in whose name your shares
are held to participate in the Plan on your behalf.

     Initial Optional Cash Investments. You may make an initial optional cash
investment when enrolling in the Plan by sending your properly completed
Authorization Form and a check or money order, payable to The Chase Manhattan
Bank, in an amount from $1,000 to $5,000 made out in U.S. funds drawn on a U.S.
bank to the Administrator at the address set forth in Question 4 by the close of
the third business day preceding an Investment Date. Please see Question 10 if
you wish to make an optional cash investment of more than $5,000 in any month.

     Subsequent Optional Cash Investments. Once you enroll in the Plan and make
an initial investment, whether by dividend or distribution reinvestment or
optional cash investment, the Administrator will attach an Optional Cash
Investment Form to each statement of account it sends to you. To make an
optional cash investment once enrolled in the Plan, you should send a properly
completed Optional Cash Investment Form and a check, money order or wire
transfer, payable to The Chase Manhattan Bank, in an amount from $250 to $5,000
made out in U.S. funds drawn on a U.S. bank to the Administrator at the address
set forth in Question 4 so that it is received by the close of the third
business day preceding an Investment Date.

     If you are a beneficial owner of common shares you, through your broker,
bank or other nominee, must make all optional cash investments through the use
of a Broker and Nominee Form. See Question 6.

     The Administrator will hold, without interest, all optional cash
investments that it receives after the close of business on the third business
day before an Investment Date through the next subsequent Investment Date. The
Administrator will invest the held-over funds on the next subsequent Investment
Date, provided that the next subsequent Investment Date falls within 35 or fewer
days. If the next subsequent Investment Date will occur in more than 35 days,
then the Administrator will return the funds to you, without interest.

     Minimum and Maximum Limits. For any Investment Date that you choose to make
an optional cash investment, you must invest at least $250 but not more than
$5,000. You may invest an amount greater than $5,000 in any month if you obtain
a prior written waiver from us to do so. See Question 10 to learn how to request
a waiver.

     Items to Remember When Making Optional Cash Investments. When making your
optional cash investment, you should consider the following:

     - All optional cash investments must equal at least $250 but not more than
       $5,000 per month;

     - You do not have to make an optional cash investment in any month;

     - You do not have to send the same amount of cash payment each month;

     - You must make all optional cash investments in United States dollars; and

     - You must send optional cash investments in the form of a check, money
       order or wire transfer payable to The Chase Manhattan Bank. Do not send
       cash.

     Refunds of Uninvested Optional Cash Investments. To obtain a refund of
optional cash investments which the Administrator has not yet invested, you must
contact the Administrator as set forth in Question 4. The Administrator must
receive your request no later than two business days prior to the Investment
Date in order to refund your money for the Investment Date.
                                       23
<PAGE>   24

     No Interest On Optional Cash Investments. You will not earn interest on
optional cash investments held pending investment. We therefore suggest that you
send any optional cash investment that you wish to make so as to reach the
Administrator as close as possible to the third business day preceding the next
Investment Date. You should contact the Administrator if you have any questions
regarding these dates.

     Returned Checks. In the event that any check is returned unpaid for any
reason, the Administrator will consider the request for investment of the money
null and void and will immediately remove from the participant's account any
common shares purchased upon the prior credit of the money. The Administrator
will be entitled to sell these common shares to satisfy any uncollected amounts.
If the net proceeds of the sale of the common shares are insufficient to satisfy
the balance of the uncollected amounts, the Administrator will be entitled to
sell additional common shares from the participant's account to satisfy the
uncollected balance. A $25.00 fee will be charged for any deposit returned
unpaid.

10. HOW DO I MAKE AN OPTIONAL CASH INVESTMENT OVER THE MAXIMUM MONTHLY AMOUNT?

     If you wish to make an optional cash investment in excess of $5,000 for any
Investment Date, you must obtain our prior written approval by submitting a
request for waiver. To obtain a Request For Waiver Form, please call our
Investor Relations Department at (312) 279-1528. Once completed, you should
return the Request For Waiver Form to our Investor Relations Department via
facsimile at (312) 279-1529 no later than three (3) business days preceding the
start of the Pricing Period for the applicable Investment Date. If we have
approved your request for waiver, then we will send to you and the Administrator
a copy of our written waiver approval. After you receive our approval form, you
should send your optional cash investment of greater than $5,000 by wire
transfer pursuant to the instructions in the approval form. The Administrator
must receive your optional cash investment by wire transfer in good funds
pursuant to a Request For Waiver by the close of business on the last business
day immediately preceding the first day of the Pricing Period. Subject to our
right to establish a Minimum Waiver Price or to suspend or terminate the plan,
the investment decision is irrevocable. Please see Question 9 for other
provisions relating to optional cash investments.

     We have the sole discretion to approve any request to make an optional cash
investment in excess of the $5,000 maximum allowable amount. We may grant the
requests for waiver in order of receipt or by any other method that we determine
to be appropriate. We also may determine the amount that you may invest pursuant
to a waiver. In deciding whether to approve your request for waiver, we may
consider, among other things, the following factors:

     - whether, at the time of the request, the Administrator is acquiring
       common shares for the Plan directly from us or in the open market or in
       privately negotiated transactions with third parties;

     - our need for additional funds;

     - our desire to obtain the additional funds through the sale of common
       shares as compared to other sources of funds;

     - the purchase price likely to apply to any sale of common shares;

     - the extent and nature of your prior participation in the Plan;

     - the number of common shares you hold of record or beneficially; and

     - the total amount of optional cash investments in excess of $5,000 for
       which requests for waiver have been submitted.

     Minimum Waiver Price. We may set a minimum purchase price per share (the
"Minimum Waiver Price") for optional cash investments made pursuant to requests
for waiver for any Pricing Period. We will determine whether to set a Minimum
Waiver Price, and, if so, its amount, not later than four business days before
the first day of a Pricing Period. We will notify the Administrator of the
Minimum Waiver Price, if any. In deciding whether to set a Minimum Waiver Price,
we will consider current market conditions, the level of participation in the
Plan and our current and projected capital needs.
                                       24
<PAGE>   25

     We will fix the Minimum Waiver Price for a Pricing Period as a dollar
amount that the average of the high and low sale prices reported by the New York
Stock Exchange for each trading day of the Pricing Period must equal or exceed.
We will exclude from the Pricing Period and from the determination of the
purchase price any trading day within the Pricing Period that does not meet the
Minimum Waiver Price. Also, any day in which no trades of common shares are made
on the New York Stock Exchange will not be considered a "trading day" or an
Investment Date and will be excluded from the Pricing Period. For example, if
the Minimum Waiver Price is not met for two of the ten trading days in a Pricing
Period, then we will base the purchase price upon, and sell shares to the
Administrator only for, the remaining eight trading days in which the Minimum
Waiver Price was met.

     At the end of each Pricing Period we will return a portion of each optional
cash investment for each trading day of a Pricing Period for which the Minimum
Waiver Price is not met or for each day in which no trades of common shares are
reported on the New York Stock Exchange. The returned amount will equal
one-tenth of the total amount of the optional cash investment, not just the
amount exceeding $5,000, for each trading day that the Minimum Waiver Price is
not met or for each day in which no trades are reported. Thus, for example, if
the Minimum Waiver Price is not met or no sales of our common shares are
reported for two of the ten trading days in a Pricing Period, then the
Administrator will return two-tenths (or 20%) of the optional cash investment to
you without interest.

     The establishment of the Minimum Waiver Price and the possible return of a
portion of the investment applies only to optional cash investments made
pursuant to a request for waiver. Setting a Minimum Waiver Price for a Pricing
Period will not affect the setting of a Minimum Waiver Price for any other
Pricing Period. We may waive our right to set a Minimum Waiver Price for any
particular month. Neither we nor the Administrator is required to give you
notice of the Minimum Waiver Price for any Pricing Period. However, you may
contact our Investor Relations Department on the Minimum Waiver Price/Waiver
Discount set date (indicated on "Calendar of Expected Events -- Optional Cash
Investments of Greater than $5,000" attached as Exhibit B to this prospectus) at
(312) 279-1528 to learn whether we have set a Minimum Waiver Price for that
Pricing Period.

     Waiver Discount. We may, at our sole discretion, grant a discount on the
purchase of common shares under the Plan to any person who purchases in excess
of $5,000 of common shares in one month pursuant to an approved request for
waiver. The discount may be between 0% and 5%, inclusive, of the market price of
the common shares on the Investment Date. We will determine whether to set a
Waiver Discount not later than four business days before the first day of a
Pricing Period. We do not presently intend to offer a discount, and we may not
do so. The Waiver Discount, if any, will not be available for optional cash
investments that do not exceed $5,000. However, we reserve the right to grant a
discount and set a minimum price in the future for these investments. However,
in no event will any discount offered hereunder be greater than 5% of the
average of the high and low trading prices of MHC's common shares on the
Investment Date.

     Neither we nor the Administrator is required to give you notice of any
Waiver Discount or Minimum Waiver Price for any Pricing Period. However, you may
contact our Investor Relations Department on the Minimum Waiver Price/Waiver
Discount set date indicated on "Calendar of Expected Events -- Optional Cash
Investments of Greater than $5,000" attached as Exhibit B to this prospectus at
(312) 279-1528 to learn whether we have set a Waiver Discount for that Pricing
Period.

11. WHAT IF I HAVE MORE THAN ONE ACCOUNT?

     For purposes of the limitations discussed in Question 10, we may aggregate
all optional cash investments for Plan participants with more than one account
using the same social security or taxpayer identification number. If you are
unable to supply a social security or taxpayer identification number, we may
limit your participation to only one Plan account.

     For purposes of the Plan, we may aggregate all Plan accounts that we
believe, in our sole discretion, to be under common control or management or to
have common ultimate beneficial ownership. Unless we have determined that
reinvestment of dividends and distributions and optional cash investments for
each
                                       25
<PAGE>   26

account would be consistent with the purposes of the Plan, we will have the
right to aggregate all the accounts and to return, without interest, within 30
(for dividend reinvestment) or 35 (for optional cash investment) days of
receipt, any amounts in excess of the investment limitations applicable to a
single account received in respect of all the accounts.

CERTIFICATES

12. WILL I RECEIVE CERTIFICATES FOR SHARES PURCHASED?

     Safekeeping of Certificates. Unless your shares are held by a broker, bank
or other nominee, we will register common shares that the Administrator
purchases for your account under the Plan in your name. The Administrator will
credit the shares to your Plan account in "book-entry" form. This service
protects against the loss, theft or destruction of certificates evidencing
common shares.

     You also may send to the Administrator for safekeeping all certificates for
common shares which you hold. The Administrator will credit the common shares
represented by the certificates to your account in "book-entry" form and will
combine the shares with any whole and fractional shares then held in your Plan
account. In addition to protecting against the loss, theft or destruction of
your certificates, this service also is convenient if and when you sell common
shares through the Plan. See Question 13 to learn how to sell your common shares
under the Plan.

     You may deposit certificates for common shares into your account regardless
of whether you have previously authorized reinvestment of dividends. The
Administrator automatically will reinvest all dividends on any shares deposited
in accordance with the Plan, unless you have instructed the Administrator
otherwise.

     To deposit certificates for safekeeping under the Plan, you should send
your share certificates, in non-negotiable form, to the Administrator by insured
mail at the address specified in Question 4. You may withdraw any shares
deposited for safekeeping by contacting the Administrator.

     Issuance of Certificates. Upon your contacting the Administrator or upon
our termination of the Plan, the Administrator will issue and deliver to you
certificates for all whole common shares credited to your Plan account. The
Administrator will not issue certificates for fractional common shares but will
issue a check representing the value of any fractional common shares valued at
the then current market price. The Administrator will handle the request at no
cost to you. The Administrator will continue to credit any remaining whole or
fractional common shares to your account.

     Effect of Requesting Certificates in Your Name. If you request a
certificate for whole common shares held in your account, either of the
following may occur:

     - If you maintain an account for reinvestment of dividends, then the
       Administrator will continue to reinvest all dividends on the common
       shares for which you requested a certificate so long as the shares remain
       registered in your name; and

     - If you maintain an account only for optional cash investments, then the
       Administrator will not reinvest dividends on common shares for which you
       requested a certificate unless and until you submit an Authorization Form
       to authorize reinvestment of dividends on the shares registered in your
       name.

     Transfer Restrictions. You may not pledge, sell or otherwise transfer
common shares credited to your Plan account. If you wish to pledge, sell or
transfer the shares, you must first request that we issue a certificate for the
shares in your name.

                                       26
<PAGE>   27

SALE OF SHARES

13. HOW DO I SELL SHARES?

     Sale of Shares Held in Your Account. You may contact the Administrator to
sell all or any part of the common shares held in your Plan account. After
receipt of your request, the Administrator will sell the shares through a
designated broker or dealer. The Administrator will mail to you a check for the
proceeds of the sale, less applicable trading fees, service charges and any
taxes. The Administrator will sell shares within three (3) business days of
receipt of the sale request, at then current market prices through one or more
brokerage firms.

     If you sell or transfer only a portion of the common shares in your Plan
account, you will remain a participant in the Plan and may continue to make
optional cash investments and reinvest dividends, provided that you maintain the
10 share minimum dividend reinvestment eligibility threshold in your Plan
account. The Administrator will continue to reinvest the dividends on the common
shares credited to your account unless you notify the Administrator that you
wish to withdraw from the Plan.

     Costs of Selling Shares. The Plan requires you to pay all costs associated
with the sale of your common shares under the Plan. Please see the "Plan Service
Fees Schedule" attached as Exhibit A hereto for a detailed description of the
costs.

     Termination of Your Account Upon Sale of All Shares. If the Administrator
sells all common shares held in your Plan account, the Administrator will
automatically terminate your account. In this case, you will have to complete
and file a new Authorization Form to rejoin the Plan.

REPORTS

14. HOW WILL I KEEP TRACK OF MY INVESTMENTS?

     Each time the Administrator makes an investment for your account, whether
by reinvestment of dividends or distributions or by optional cash investment,
the Administrator will send you a detailed statement that will provide the
following information with respect to your Plan account:

     - total cash dividends or distributions received;

     - total optional cash investments received;

     - total number of common shares purchased, including fractional shares;

     - price paid per common share;

     - date of share purchases; and

     - total number of common shares in your Plan account.

     You should retain these statements to determine the tax cost basis of the
shares purchased for your account under the Plan.

WITHDRAWAL

15. HOW WOULD I WITHDRAW FROM PARTICIPATION IN THE PLAN?

     How to Withdraw From the Plan. You may withdraw from the Plan at any time.
In order to withdraw from the Plan, you must provide notice instructing the
Administrator to terminate your account. The Administrator must receive notice
three business days before the record date for any dividend or distribution
payment in order to terminate your account prior to the dividend or distribution
payment date.

     Issuance of Share Certificates Upon Withdrawal From Plan. Upon termination
of your Plan account, the Administrator will issue to you share certificates for
any whole common shares in your account. The Administrator will convert to cash
any fractional shares held in your account at the time of termination at

                                       27
<PAGE>   28

the then current market price of the common shares. After the Administrator
terminates your account, we will pay to you all cash dividends on common shares
owned by you unless you rejoin the Plan.

     Selling Shares Upon Withdrawal From Plan. As an alternative to receiving
share certificates, upon termination of your Plan account you may request that
the Administrator sell all or a portion of the common shares (both whole and
fractional) in your account. If you instruct the Administrator only to sell a
portion of your common shares, then the Administrator will issue to you
certificates for the remaining shares. The Administrator will mail to you a
check for the proceeds of the sale, less applicable trading fees, service
charges and any taxes.

     Rejoining the Plan After Withdrawal. After you withdraw from the Plan, you
may rejoin the Plan at any time by filing a new Authorization Form with the
Administrator. However, the Administrator has the right to reject the
Authorization Form if you repeatedly join and withdraw from the Plan, or for any
other reason. The Administrator's exercise of this right is intended to minimize
unnecessary administrative expenses and to encourage use of the Plan as a
long-term shareholder investment service.

TAXES

16. WHAT ARE SOME OF THE TAX CONSEQUENCES OF MY PARTICIPATION IN THE PLAN?

     The following is a summary of all material federal income tax consequences
of participation in the Plan. This summary is for general information only and
does not constitute tax advice. This summary does not reflect every possible tax
outcome or consequence that could result from participation in the Plan. Also,
this summary does not discuss your tax consequences if you are not a United
States citizen or a resident alien. We advise you to consult your own tax
advisors to determine the tax consequences particular to your situation,
including any applicable state, local or foreign income and other tax
consequences that may result from your participation in the Plan and your
subsequent sale of shares acquired pursuant to the Plan. Any state tax
consequences will vary from state to state, and any tax consequences to you if
you reside outside of the United States will vary from jurisdiction to
jurisdiction.

     Reinvestment of Dividends Paid on Common Shares. With respect to common
shares that the Administrator purchases from us with cash dividends that you
elect to have reinvested under the Plan, you will be treated for federal income
tax purposes as having received a distribution, with respect to common shares,
equal to the fair market value on the Investment Date of the common shares
credited to your Plan account, which should equal the amount of cash dividends
that you would have otherwise received, assuming that we have not granted a
discount on your purchase of common shares under the Plan. With respect to
common shares that the Administrator purchases on the open market with cash
dividends that you elect to have reinvested under the Plan, you will be treated
for federal income tax purposes as having received a distribution equal to the
price paid by the Administrator for the common shares. In either case, you will
be treated as receiving a distribution even though you will not receive the
distribution in cash. For federal income tax purposes, distributions made by us
will first be taxable as dividends to the extent of our current and accumulated
earnings and profits. To the extent that the amount distributed by us exceeds
our current and accumulated earnings and profits, the distribution will next be
treated as a return of capital to you to the extent of your basis in your common
shares, with any excess being taxable to you as gain from the sale of common
shares. If you are a corporation, then the distributions that you receive from
us which are taxable as dividends will not be eligible for the dividends
received deduction.

     All costs of administering the Plan, except for trading fees when shares
are purchased on the open market and costs related to your voluntary selling of
common shares and/or withdrawal from the Plan, will be paid by us. Consistent
with the conclusion reached by the Internal Revenue Service in a recent private
letter ruling issued to another real estate investment trust, we intend to take
the position that these costs do not constitute a distribution which is either
taxable to you or which would reduce your basis in your common shares. Since the
other private letter ruling was not issued to us, we have no legal right to rely
on its conclusions. We intend to request a letter ruling from the Internal
Revenue Service confirming this position. However, it is possible that the
Internal Revenue Service might view your share of the costs as

                                       28
<PAGE>   29

constituting a taxable distribution to you and/or a distribution which reduces
the basis in your common shares. For this or other reasons, we may in the future
take a different position with respect to the costs.

     Your tax basis in the common shares acquired for your Plan account
generally will equal your cash distribution, including cash used to purchase the
shares and any cash used to pay trading fees. If we elect to offer a discount on
the purchase price of shares you purchase with reinvested cash distributions,
your tax basis in the shares would include any amount of the discount. Your
holding period for the shares generally will begin on the day following the
Investment Date for the shares.

     Optional Cash Investments. We intend to follow three recent private letter
rulings (the "IRS Rulings") issued to other real estate investment trusts. Since
the other private letter rulings were not issued to us, we have no legal right
to rely on their conclusions. Thus, we also intend to request a letter ruling
from the Internal Revenue Service confirming this position.

     Under the IRS Rulings, the tax treatment of the purchase of common shares
under an optional cash investment will differ depending on whether you are
participating in the dividend reinvestment feature of the Plan. If you
participate in the dividend reinvestment feature of the Plan, you will be
treated as having received a distribution equal to the excess, if any, of the
fair market value of the common shares acquired on the Investment Date over the
actual purchase price of the common shares. Your tax basis in the common shares
received will equal the fair market value of such common shares on the
Investment Date.

     If you do not participate in the dividend reinvestment feature of the Plan,
the IRS Rulings states that you will not realize any taxable income as a result
of the acquisition of common shares. Thus, your tax basis in the common shares
received will equal the amounts paid for such common shares. You are encouraged
to consult with your own tax advisor with regard to the tax treatment of
optional cash purchases.

     Your holding period for the common shares generally will begin on the day
following the Investment Date for the common shares.

     Reinvestment of Distributions Paid on OP Units. The income tax treatment of
holders of OP Units who participate in the Plan is unclear because there is no
clear legal authority regarding the income tax treatment of a limited partner in
a partnership who invests cash distributions from the partnership in shares of
another entity that is a partner in the partnership. The following, however,
sets forth our view of the likely tax treatment of holders of OP Units who
participate in the Plan, and absent the promulgation of authority to the
contrary, we and MHC Operating Partnership intend to report the tax consequences
of a holder's participation in a manner consistent with the following.

     With respect to common shares that the Administrator purchases from us or
in the open market with cash distributions from MHC Operating Partnership that
you elect to have reinvested under the Plan, you will be treated for federal
income tax purposes as having received, on the distribution payment date, a
distribution in an amount equal to the cash distribution that was invested. If
we grant a discount on your purchase of common shares under the Plan, the
Internal Revenue Service might contend that you should be treated for federal
income tax purposes as having received an additional distribution from MHC
Operating Partnership or us in an amount equal to the excess, if any, of the
fair market value (determined as the average of the high and low trading prices)
of the common shares credited to your account on the Investment Date less the
amount paid by you for such common shares.

     A cash distribution from MHC Operating Partnership will reduce your basis
in your OP Units by the amount distributed. To the extent that the cash
distributed exceeds your basis in the OP Units generally will be taxable as
capital gain. However, under Section 751(b) of the Code, to the extent that a
distribution is considered to be in exchange for your interest in substantially
appreciated inventory items or unrealized receivables of MHC Operating
Partnership, you may recognize ordinary income rather than a capital gain.

     With respect to common shares that the Administrator purchases from us or
in the open market pursuant to the optional cash purchase feature of the Plan,
the tax treatment is not entirely clear. We

                                       29
<PAGE>   30

currently intend to take the position for tax reporting purposes that unless you
also participate as a shareholder in the dividend reinvestment feature of the
Plan you will not realize any taxable income as a result of the acquisition of
common shares by optional cash purchases. If you participate as a shareholder in
the dividend reinvestment feature of the Plan and acquire common shares by
optional cash purchases, you will be treated as having received a distribution
equal to the excess, if any, of the fair market value of the common shares
acquired on the Investment Date over the actual purchase price of the common
shares. Your tax basis in the common shares received will equal the fair market
value of such common shares on the Investment Date.

     Income Tax Withholding and Administrative Expenses. We or the Administrator
may be required to deduct as "backup withholding" thirty-one percent (31%) of
the dividends that we pay to any shareholder, regardless of whether the
dividends are reinvested pursuant to the Plan. Similarly, the Administrator may
be required to deduct backup withholding from the proceeds of sales of common
shares held in your Plan account. You will be subject to backup withholding if:

     - you fail to properly furnish us and the Administrator with your correct
       tax identification number, or "TIN;"

     - the Internal Revenue Service or any other governmental body or agency
       notifies us or the Administrator that you have provided an incorrect TIN;

     - the Internal Revenue Service notifies us or the Administrator that backup
       withholding should be commenced because you failed to properly report
       dividends paid to you; or

     - when required to do so, you fail to certify, under penalties of perjury,
       that you are not subject to backup withholding.

     If you are a foreign shareholder whose distributions are subject to federal
income tax withholding at the 30% rate (or a lower treaty rate), the appropriate
amount will be withheld and the balance in common shares will be credited to
your account. As a result of the Small Business Job Protection Act of 1996, we
intend to withhold an additional 10% of any distribution to a foreign
shareholder to the extent it exceeds our current and accumulated earnings and
profits.

     All withholding amounts will be withheld from dividends before the
dividends are reinvested under the Plan. Therefore, if you are subject to
withholding, dividends which would otherwise be available for reinvestment under
the Plan will be reduced by the withholding amount. Any amount paid as
withholding will be creditable against your income tax liability.

     Disposition. When you withdraw shares from the Plan and receive whole
shares, you will not realize any taxable income. However, if you receive cash
for a fraction of a share, you will be required to recognize gain or loss with
respect to the fraction. You also will be required to recognize a gain or loss
whenever your shares are sold, whether the shares are sold by the Administrator
pursuant to your request or by you after the shares are withdrawn from the Plan.
Generally, the amount of the gain or loss that you will be required to recognize
will be the difference between the amount that you receive for the shares and
your tax basis in those shares.

     Exceeding the Ownership Limitation Set Forth in Our Articles of
Incorporation. For us to qualify as a real estate investment trust for federal
income tax purposes, no more than 50% in value of our outstanding shares may be
actually and/or constructively owned by five or fewer individuals, as defined in
the Internal Revenue Code to include entities, during the last half of a taxable
year or during a proportionate part of a shorter taxable year (the "Closely-Held
Requirement"), and our common shares must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year or during a proportionate
part of a shorter taxable year (the "100 shareholder Requirement"). Because we
expect to continue to qualify as a REIT, our Articles of Incorporation contains
an ownership restriction (the "Ownership Limitation"), which is intended to help
ensure compliance with these requirements, that no holder of our shares may own,
or be deemed to own by virtue of any of the attribution rules of the

                                       30
<PAGE>   31

Internal Revenue Code, more than 5% percent, in value or number of shares,
whichever is more restrictive, of our common shares or any series of our
preferred shares.

     If a shareholder violates the Ownership Limitation or any other
restrictions in the Articles of Incorporation, the shares held in violation will
be automatically transferred to MHC as Trustee of a Trust for the benefit of a
beneficiary, and the shareholder would not be entitled to dividends or the right
to vote those shares. In the case of transfers of shares causing a violation of
the Ownership Limitation or any other restriction in the Articles of
Incorporation, the transfer may be treated as void AB INITIO and the purported
transferee would not be entitled to dividends or the right to vote those shares.

     Under certain circumstances, our board of directors may grant to
individuals an exemption from the Ownership Limitation, provided that certain
conditions are met and the board is satisfied that the exemption would not
jeopardize our status as a REIT.

OTHER PROVISIONS

17. HOW CAN I VOTE MY SHARES?

     We will send you proxy materials for any meeting of shareholders in order
to vote all whole common shares credited to your account. You may vote your
common shares either by designating the vote of the shares by proxy or by voting
the shares in person at the meeting of shareholders.

18. WHAT ARE THE COSTS OF THE PLAN?

     We will pay service charges in connection with the reinvestment of
dividends and optional cash investments to purchase common shares which we issue
under the Plan. In the event, however, that we authorize the Administrator to
purchase common shares in the open market, you will be responsible for your pro
rata share of any trading fees incurred by the Administrator. You will be
responsible for any fees payable in connection with your sale of shares from the
Plan. Please see the "Plan Service Fees Schedule" attached as Exhibit A hereto
for a detailed description of the costs.

19. WHAT ARE YOUR AND THE ADMINISTRATOR'S RESPONSIBILITIES?

     We, any of our agents and the Administrator, in administering the Plan, are
not liable for any act done in good faith or for any good faith failure to act,
including, without limitation, any claim of liability (i) arising from the
failure to terminate your account upon your death or judgment of incompetence
prior to the Administrator's receipt of notice in writing of the death; (ii)
relating to the prices and times at which the Administrator buys or sells common
shares for your account; or (iii) relating to any fluctuation in the market
value of the common shares.

     We, any of our agents and the Administrator will not have any duties,
responsibilities or liabilities other than those expressly set forth in the Plan
or as imposed by applicable laws, including federal securities laws. Since the
Administrator has assumed all responsibility for administering the Plan, we
specifically disclaim any responsibility for any of the Administrator's actions
or inactions in connection with the administration of the Plan. None of our
directors, officers or shareholders shall have any personal liability under the
Plan.

20. CAN I PLEDGE MY SHARES UNDER THE PLAN?

     You may not pledge any common shares credited to your Plan account. Any
attempted pledge will be void. If you wish to pledge your common shares, you
first must withdraw the shares from the Plan. See Question 15 to learn how to
withdraw your shares under the Plan.

                                       31
<PAGE>   32

21. HOW CAN I TRANSFER MY SHARES?

     You may transfer ownership of all or part of the common shares held in your
Plan account through gift, private sale or otherwise by contacting the
Administrator, as set forth in Question 4. The Administrator will provide the
information necessary to complete the transfer of your shares.

     You also may transfer ownership of all or part of the common shares held in
your Plan account into the account of another person within the Plan. To
complete a transfer, you must mail to the Administrator a letter with specific
instructions regarding the transfer and an Authorization Form completed by the
person to whom you are transferring your shares.

22. CAN THE PLAN BE AMENDED, MODIFIED, SUSPENDED OR TERMINATED?

     Although we expect to continue the Plan indefinitely, we reserve the right
to amend, modify, suspend or terminate the Plan in any manner at any time. We
will notify you in writing of any modifications made to the Plan.

23. WHAT HAPPENS IF YOU TERMINATE THE PLAN?

     If we terminate the Plan, you will receive a certificate for all whole
common shares held in your Plan account and a check representing the value of
any fractional common shares valued at the then current market price and any
uninvested dividends or optional cash investments held in your account.

24. ARE THERE ANY RISKS ASSOCIATED WITH THE PLAN?

     Your investment in shares purchased under the Plan is no different from any
investment in shares that you hold directly. Neither we nor the Administrator
can assure you a profit or protect you against a loss on shares that you
purchase. You bear the risk of loss and enjoy the benefits of any gain from
changes in the market price with respect to common shares purchased under the
Plan.

25. HOW WILL YOU INTERPRET AND REGULATE THE PLAN?

     We may interpret, regulate and take any other action in connection with the
Plan that we deem reasonably necessary to carry out the Plan. As a participant
in the Plan, you will be bound by any actions taken by us or the Administrator.

26. WHAT LAW GOVERNS THE PLAN?

     The laws of the State of Maryland will govern the terms, conditions and
operation of the Plan.

27. WHERE WILL NOTICES BE SENT?

     The Administrator will address all of its notices to you at your last known
address. You should notify the Administrator promptly of any change of address.

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<PAGE>   33

                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

     The following is a description of the material federal income tax
consequences to MHC and holders of our common shares of the treatment of MHC as
a REIT. This prospectus addresses the taxation of MHC and the impact on MHC of
its election to be taxed as a REIT. The following discussion assumes that MHC
continues to qualify as a REIT during all relevant periods. Since these
provisions are highly technical and complex, and because the following
discussion is not exhaustive of all possible tax considerations, each
prospective purchaser of common shares is urged to consult his or its own tax
advisor with respect to the federal, state, local, foreign and other tax
consequences of the purchase, ownership and disposition of the common shares.
This discussion does not purport to deal with the federal income or other tax
consequences applicable to all investors in light of their particular investment
circumstances or to all categories of investors, some of whom may be subject to
special rules (including, for example, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States).

     THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING,
AND EACH PROSPECTIVE SHAREHOLDER IS ENCOURAGED TO CONSULT WITH HIS OR ITS TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
SALE OF COMMON SHARES IN AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

     If certain detailed conditions imposed by the REIT provisions of the
Internal Revenue Code of 1986, as amended (the "Code") are met, entities, such
as MHC, that invest primarily in real estate and that otherwise would be treated
for federal income tax purposes as corporations generally are not taxed at the
corporate level on their "REIT taxable income" that is currently distributed to
shareholders. This treatment substantially eliminates the "double taxation" (at
the corporate and shareholder levels) that generally results from the use of
corporate investment vehicles.

     If MHC fails to qualify as a REIT in any year, however, it will be subject
to federal income tax as if it were a domestic corporation, and its shareholders
will be taxed in the same manner as shareholders of ordinary corporations. In
this event, MHC could be subject to potentially significant tax liabilities, and
therefore the amount of cash available for distribution to its shareholders
would be reduced.

     MHC elected REIT status commencing with its taxable year ended December 31,
1993. In the opinion of Steptoe & Johnson LLP, which has acted as its special
tax counsel, MHC was organized and has operated in conformity with the
requirements for qualification and taxation as a REIT under the Code for its
taxable years ended December 31, 1993, 1994, 1995, 1996, 1997 and 1998, and
MHC's current organization and method of operation should enable it to continue
to meet the requirements for qualification and taxation as a REIT. It must be
emphasized that this opinion is based on various assumptions relating to the
organization and operation of MHC, MHC Operating Partnership, the Management
Partnerships, sub-partnerships of MHC Operating Partnership created to (i)
facilitate mortgage financing (the "Financing Partnerships") and (ii) facilitate
MHC's ability to provide financing to the owners of manufactured home
communities (the "Lending Partnership"), RSI, LP Management Corp. and De Anza
Group, Inc. (collectively, the "Management Corporations") and the various
qualified REIT subsidiaries wholly-owned by MHC (each a "QRS Corporation")
(collectively, the Management Partnerships, the Financing Partnerships, the
Lending Partnership, RSI, the Management Corporations and the QRS Corporations
may be referred to herein as the "Subsidiary Entities") and is conditioned upon
the accuracy of certain representations made by MHC and MHC Operating
Partnership to Steptoe & Johnson LLP as to certain relevant factual matters,
including matters related to (i) the organization, past operation, expected
future operation, and assets of MHC, MHC Operating Partnership and the
Subsidiary Entities, and (ii) that certain services rendered are those usually
or customarily rendered in connection with the rental of space for occupancy
only at particular manufactured home communities. MHC's qualification and
taxation as a REIT depend upon (i) MHC's having met for each of its taxable
years, through actual annual operating and other results, the various
requirements under the Code and described in this prospectus with regard to,
among other things, the sources of its gross income,

                                       33
<PAGE>   34

the composition of its assets, the level of its distributions to shareholders,
and the diversity of its share ownership, and (ii) MHC's ability to meet such
requirements on a continuing basis. Steptoe & Johnson LLP will not review MHC's
compliance with these requirements on a continuing basis. No assurance can be
given that the actual results of the operations of MHC, MHC Operating
Partnership and the Subsidiary Entities, the sources of their income, the nature
of their assets, the level of MHC's distributions to shareholders and the
diversity of its share ownership for any given taxable year will satisfy the
requirements under the Code for qualification and taxation as a REIT.

TAXATION OF MHC

     General. In any year in which MHC qualifies as a REIT, it will not
generally be subject to federal income tax on that portion of its REIT taxable
income or capital gain which is distributed to shareholders. MHC may, however,
be subject to tax at normal corporate rates upon any taxable income or capital
gain not distributed.

     If MHC should fail to satisfy either the 75% or the 95% gross income test
(as discussed below), and nonetheless maintains its qualification as a REIT
because certain other requirements are met, it would be subject to a 100% tax on
the greater of the amount by which it fails the 75% or the 95% test, multiplied
by a fraction intended to reflect its profitability. MHC would also be subject
to a tax of 100% on net income from any "prohibited transaction," as described
below. In addition, if MHC should fail to distribute during each calendar year
at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT capital gain net income for such year, and (iii) any undistributed
taxable income from prior years, MHC would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed. MHC
would also be subject to the corporate "alternative minimum tax," as well as tax
in certain situations and on certain transactions not presently contemplated.
MHC uses the calendar year both for federal income tax purposes and for
financial reporting purposes.

     In order to qualify as a REIT, MHC must meet, among others, the following
requirements:

     Stock Ownership Test. -- The capital stock of MHC must be held by a minimum
of 100 persons for at least 335 of the days in each taxable year subsequent to
1993. In addition, at all times during the second half of each taxable year
subsequent to 1993, no more than 50% in value of the capital stock of MHC may be
owned, directly or indirectly and by applying certain constructive ownership
rules, by five or fewer individuals. MHC believes that it has satisfied both of
these tests, and it believes it will continue to do so. In order to ensure
compliance with this test, MHC has placed certain restrictions on the transfer
of its capital stock to prevent further concentration of stock ownership.
Moreover, to evidence compliance with these requirements, MHC must maintain
records which disclose the actual ownership of its outstanding capital stock. In
fulfilling its obligations to maintain records, MHC must demand written
statements each year from the record holders of designated percentages of its
capital stock disclosing the actual owners of such capital stock. A list of
those persons failing or refusing to comply with such demand must be maintained
as a part of MHC's records. A shareholder failing or refusing to comply with
MHC's written demand must submit with his tax returns a similar statement
disclosing the actual ownership of capital stock and certain other information.
MHC's charter provides restrictions regarding the transfer of its capital stock
that are intended to assist MHC in continuing to satisfy the stock ownership
requirements. See "Risk Factors -- We Have a Stock Ownership Limit for REIT Tax
Purposes". For MHC's taxable years commencing on or after January 1, 1998, if
MHC complies with regulatory rules pursuant to which it is required to send
annual letters to holders of capital stock requesting information regarding the
actual ownership of capital stock, but does not know, or exercising reasonable
diligence would not have known, whether it failed to meet the requirement that
it not be closely held, MHC will be treated as having met the requirement.

     Asset Tests -- At the close of each quarter of MHC's taxable year, MHC must
satisfy two tests relating to the nature of its assets. First, at least 75% of
the value of MHC's total assets must be represented by "real estate assets"
(including any combination of interests in real property, interests in

                                       34
<PAGE>   35

mortgages on real property, and stock in other REITs), cash, cash items and
certain government securities. Second, although the remaining 25% of MHC's
assets generally may be invested without restriction, securities in this class
may not exceed either (i) 5% of the value of MHC's total assets as to any one
issuer (other than an interest in a partnership) or (ii) 10% of the outstanding
voting securities of any one issuer (other than an interest in a partnership or
stock of a qualified REIT subsidiary or another REIT). Where MHC invests in a
partnership, it will be deemed to own a proportionate share of the partnership's
assets in accordance with its capital interest. MHC's investment in the
properties through its interest in MHC Operating Partnership will constitute
qualified assets for purposes of the 75% asset test.

     MHC Operating Partnership owns none of the voting stock, but owns 100% of
the non-voting stock, of the Management Corporations and RSI. By virtue of its
partnership interest in MHC Operating Partnership, MHC is deemed to own its pro
rata share of the assets of MHC Operating Partnership, including the stock of
the Management Corporations and RSI as described above.

     MHC Operating Partnership has not owned and will not own more than 10% of
the voting securities of the Management Corporations and RSI. In addition, based
upon its analysis of the estimated value of the stock of the Management
Corporations and RSI owned by MHC Operating Partnership relative to the
estimated value of the other assets owned by MHC Operating Partnership, MHC
believes that its pro rata share of the stock of the Management Corporations and
RSI held by MHC Operating Partnership together has not and will not exceed 5% of
the total value of MHC's assets. No independent appraisals have been obtained,
however, to support this conclusion. This 5% limitation must be satisfied not
only on the date that MHC first acquired stock of the Management Corporations
and RSI, but also at the end of each quarter in which MHC increases its interest
in the Management Corporations and RSI (including as a result of increasing its
interest in MHC Operating Partnership as a result of the offering, and as the
holders of OP Units exercise their exchange rights). Although MHC plans to take
steps to ensure that it satisfies the 5% value test for any quarter with respect
to which retesting is to occur, there can be no assurance that such steps always
will be successful or will not require a reduction in MHC Operating
Partnership's overall interest in the Management Corporations or RSI.

     MHC's indirect interests as a general partner in the Financing Partnerships
and the Lending Partnership are held through the QRS Corporations, each of which
is organized and operated as a "qualified REIT subsidiary" within the meaning of
the Code. Qualified REIT subsidiaries are not treated as separate entities from
their parent REIT for federal income tax purposes. Instead, all assets,
liabilities and items of income, deduction and credit of the QRS Corporations
will be treated as assets, liabilities and items of MHC. The QRS Corporations
therefore will not be subject to federal corporate income taxation, although
they may be subject to state or local taxation. In addition, MHC's ownership of
the voting stock of each QRS Corporation will not violate the general
restriction against ownership of more than 10% of the voting securities of any
issuer. MHC may in the future form one or more additional qualified REIT
subsidiaries. MHC must own all of the stock of each such subsidiary, although it
will not be required to own such stock of such subsidiary from the commencement
of such subsidiary's existence.

     Gross Income Tests -- There are currently two separate percentage tests
relating to the sources of MHC's gross income which must be satisfied for each
taxable year. For purposes of these tests, where MHC invests in a partnership,
MHC will be treated as receiving its proportionate share of the income and loss
of the partnership, and the gross income of the partnership will retain the same
character in the hands of MHC as it has in the hands of the partnership. See
"-- Tax Aspects of MHC's Investments in Partnerships -- General" below.

     1. The 75% Test. -- At least 75% of MHC's gross income for each taxable
year must be "qualifying income." Qualifying income generally includes (i) rents
from real property (except as modified below); (ii) interest on obligations
collateralized by mortgages on, or interests in, real property; (iii) gains from
the sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of MHC's trade or business ("dealer property"); (iv)
dividends or other distributions on stock in other REITs, as well as gain from
the sale of such stock; (v) abatements and refunds of real property taxes; (vi)
income from the operation, and gain

                                       35
<PAGE>   36

from the sale, of real property acquired at or in lieu of a foreclosure of the
mortgage collateralized by such real property ("foreclosure property"); (vii)
commitment fees received for agreeing to make loans collateralized by mortgages
on real property or to purchase or lease real property; and (viii) certain
qualified temporary investment income attributable to the investment of new
capital received by MHC in exchange for its stock (including common shares
issued pursuant to the offering) during the one-year period following the
receipt of such new capital.

     Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% gross income test (or the 95% gross income test
described below) if MHC, or a direct or indirect owner of 10% or more of the
stock of MHC, directly or constructively owns 10% or more of such tenant (a
"Related Party Tenant"). For MHC's taxable year which began on January 1, 1998
and for all taxable years thereafter, only partners who own 25% or more of the
capital or profits interest in a partnership are included in the determination
of whether a tenant is a "Related Party Tenant." In addition, if rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
rents from real property. Moreover, an amount received or accrued will not
qualify as rents from real property (or as interest income) for purposes of the
75% and 95% gross income tests if it is based in whole or in part on the income
or profits of any person. However, an amount received or accrued generally will
not fail to qualify as rents from real property solely by reason of being based
on a fixed percentage or percentages of receipts or sales. Finally, for rents
received to qualify as rents from real property, MHC generally must not operate
or manage the real property or furnish or render services to tenants, other than
through an "independent contractor" from whom MHC derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent that
the services provided by MHC are "usually or customarily rendered" in connection
with the rental of space for occupancy only, and are not otherwise considered
"rendered for the convenience of the occupant". For MHC's taxable years
commencing on or after January 1, 1998, rents received generally will qualify as
rents from real property notwithstanding the fact that MHC provides
non-customary services so long as the amount received for such services is de
minimis. If the value of the non-customary service income received with respect
to a property (valued at no less than 150% of MHC's direct costs of performing
such services) is 1% or less of the total income derived from the property, then
all rental income with respect to the property, except the non-customary service
income, will qualify as "rents from real property."

     MHC, through the Management Partnerships and RSI (none of which are
independent contractors), undertakes certain activities and provides certain
services with respect to the properties and will do the same for any newly
acquired manufactured home community properties. MHC believes that such
activities and services (i) primarily benefit MHC by maintaining and enhancing
occupancy and/or (ii) are activities and services usually or customarily
rendered in connection with the rental of space in manufactured home communities
in the geographic market in which the particular communities are located and are
not services rendered primarily for the convenience of the occupant.
Accordingly, MHC believes that the activities of the Management Partnerships and
RSI have not caused and will not cause the rents received with respect to the
properties to fail to qualify as rents from real property for purposes of the
75% gross income test or for purposes of the 95% gross income test as described
below.

     2. The 95% Test. -- In addition to the requirement that MHC derive at least
75% of its gross income from the sources listed above, at least 95% of MHC's
gross income for the taxable year must be derived from the above-described
qualifying income, or from dividends, interest or gains from the sale or
disposition of stock or other securities that are not dealer property. Dividends
(including MHC's share of dividends paid by the Management Corporations or RSI)
and interest on any obligations not collateralized by an interest in real
property (including interest received on a note receivable from RSI (the "RSI
Note") if the RSI Note is not collateralized by RSI's inventory and interests in
notes secured by real property) are included for purposes of the 95% gross
income test, but not for purposes of the 75% gross income test. Similarly, for
tax years beginning prior to January 1, 1998, any payments made to MHC under an
interest rate swap or cap agreement entered into by MHC to hedge certain of its
variable rate indebtedness is included as qualifying income for purposes of the
95% gross income test, but not for

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<PAGE>   37

purposes of the 75% gross income test. For MHC's tax years commencing on or
after January 1, 1998, such payments made to MHC will so qualify even though
MHC's indebtedness does not bear interest at a variable rate, and payments
pursuant to certain similar financial instruments entered into to reduce
interest rate risks will be treated in a similar manner.

     For purposes of determining whether MHC complies with the 75% and 95% gross
income tests, gross income does not include income from prohibited transactions.
A "prohibited transaction" is a sale of dealer property, excluding certain
dealer property held by MHC for at least four years and excluding foreclosure
property and dispositions of property that occur due to involuntary conversion.
See "-- Taxation of MHC -- General" and "-- Tax Aspects of MHC's Investments in
Partnerships -- Sale of the Properties."

     MHC's investment in the properties, through MHC Operating Partnership and
the Financing Partnerships, in major part gives rise to rental income qualifying
under the 75% and 95% gross income tests. Gains on sales of the properties or of
MHC's interest in MHC Operating Partnership or the Financing Partnerships
generally qualify under the 75% and 95% gross income tests. MHC believes that
income on its other investments, including its indirect investment in the
Management Corporations and in RSI, has not resulted in MHC failing the 75% or
95% gross income test for any year, and MHC anticipates that this will continue
to be the case. MHC has received a ruling from the Internal Revenue Service (the
"IRS") that interest income received by MHC Operating Partnership with respect
to the RSI Note qualifies for purposes of the 75% gross income test provided
that the obligation is collateralized by RSI's inventory and interests in notes
secured by real property on the condition that the RSI Note constitutes the
indebtedness of RSI.

     Even if MHC fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may still qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) MHC's failure to comply was due
to reasonable cause and not to willful neglect; (ii) MHC reports the nature and
amount of each item of its income included in the tests on a schedule attached
to its tax return; and (iii) any incorrect information on this schedule is not
due to fraud with intent to evade tax. It is not possible to state whether in
all circumstances MHC would be entitled to the benefit of these relief
provisions. If these relief provisions apply, MHC will, however, still be
subject to a special tax based upon the greater of the amount by which it fails
either the 75% or 95% gross income test for that year, less associated expenses.
See "-- Taxation of MHC -- General."

     3. The 30% Test. -- In addition to the 75% and 95% gross income tests, MHC
had to meet a 30% gross income test for each of its taxable years ended on or
before December 31, 1997. The 30% gross income test required that short-term
gain from the sale or other disposition of stock or securities, gain from
prohibited transactions and gain on the sale or other disposition of real
property held for less than four years, apart from involuntary conversions and
sales of foreclosure property, represent less than 30% of MHC's gross income,
including gross income from prohibited transactions. The 30% gross income test
is not applicable for taxable years starting on or after January 1, 1998.

     Annual Distribution Requirements. -- MHC, in order to qualify as a REIT,
generally is required to make distributions (other than capital gain
distributions) to its shareholders each year in an amount at least equal to (A)
the sum of (i) 95% of MHC's REIT taxable income (computed without regard to the
dividends paid deduction and MHC's net capital gain) and (ii) 95% of the net
income (after tax), if any, from foreclosure property, minus (B) the sum of
certain items of non-cash income (including cancellation of indebtedness and
original issue discount income). Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
MHC timely files its tax return for such year and if paid on or before the first
regular dividend payment after such declaration. See "Taxation of Taxable
Domestic Shareholders -- General." To the extent that MHC does not distribute
all of its net capital gain or distributes at least 95%, but less than 100%, of
its REIT taxable income, as adjusted, it will be subject to tax on the
undistributed amount at regular corporate tax rates. Furthermore, if MHC should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain income for
such year, and (iii) any undistributed taxable

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<PAGE>   38

income from prior periods, MHC would be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed.

     MHC has made and intends to make timely distributions sufficient to satisfy
the annual distribution requirements. In this regard, the Partnership Agreement
of MHC Operating Partnership authorizes MHC, as general partner, to take such
steps as may be necessary to cause MHC Operating Partnership to distribute to
its partners an amount sufficient to permit MHC to meet these distribution
requirements. It is possible that MHC may not have sufficient cash or other
liquid assets to meet the 95% distribution requirement, due to timing
differences between the actual receipt of income and actual payment of expenses
on one hand, and the inclusion of such income and deduction of such expenses in
computing MHC's REIT taxable income on the other hand, or if the amount of
nondeductible expenses such as principal amortization or capital expenditures
exceed the amount of non-cash deductions such as depreciation. In order to
satisfy the 95% distribution requirement, MHC will closely monitor the
relationship between its REIT taxable income and cash flow and, if necessary,
will borrow funds (or cause MHC Operating Partnership or other affiliates to
borrow funds) in order to satisfy the distribution requirement.

     If MHC fails to meet the 95% distribution requirement as a result of an
adjustment to MHC's tax return by the IRS, MHC may retroactively cure the
failure by paying a "deficiency dividend" (plus applicable penalties and
interest) within a specified period.

     Failure to Qualify. -- If MHC fails to qualify for taxation as a REIT in
any taxable year and the relief provisions of the Code do not apply, MHC will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to shareholders in any year in
which MHC fails to so qualify will not be required and, if made, will not be
deductible by MHC. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income, and, subject to certain limitations in the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, MHC also will be
ineligible for qualification as a REIT for the four taxable years following the
year during which qualification was lost.

TAX ASPECTS OF MHC'S INVESTMENTS IN PARTNERSHIPS

     General. MHC holds direct or indirect interests in MHC Operating
Partnership, the Management Partnerships, the Financing Partnerships and the
Lending Partnership and certain other partnerships (each individually a
"Partnership", and collectively the "Partnerships").

     Tax Allocations with Respect to the Properties. -- Pursuant to Section
704(c) of the Code, income, gain, loss and deduction attributable to appreciated
or depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as certain of the properties contributed at
the time of MHC's initial public offering) must be allocated in a manner such
that the contributing partner is charged with, or benefits from, respectively,
the unrealized gain or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the book-tax difference between the fair market value of
contributed property at the time of contribution and the adjusted tax basis of
such property at the time of contribution. Such allocations are solely for
federal income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. MHC Operating Partnership and
certain of the Financing Partnerships were formed by way of contributions of
appreciated property. Consequently, the partnership agreements for such
Partnerships require such allocations to be made in a manner consistent with
Section 704(c) of the Code.

     In general, the contributing partners will be allocated lower amounts of
depreciation deductions for tax purposes, and increased taxable income and gain
on sale by the Partnerships of the contributed assets, than would have been
allocated to them if the assets had a tax basis equal to their fair market value
at the time of contribution. The allocations will tend to eliminate the book-tax
difference over the life of the Partnerships. However, the special allocation
rules of Section 704(c) of the Code as applied by MHC do
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<PAGE>   39

not always entirely rectify the book-tax difference on an annual basis or with
respect to a specific taxable transaction such as a sale. Thus, the carryover
basis of the contributed assets in the hands of the Partnerships will cause MHC
to be allocated lower depreciation and other deductions, and possibly greater
amounts of taxable income in the event of a sale of such contributed assets in
excess of the economic or book income allocated to it as a result of such sale.
This may cause MHC to recognize taxable income in excess of cash proceeds, which
might adversely affect MHC's ability to comply with the REIT distribution
requirements. See "-- Taxation of MHC -- Annual Distribution Requirements." In
addition, to the extent that the carryover basis of the contributed assets will
cause MHC to have greater current and accumulated earnings and profits, the
amount, if any, of distributions to shareholders that may be treated as a
tax-free return of capital will be reduced. See "-- Taxation of Taxable Domestic
Shareholders -- General."

     With respect to any property purchased or to be purchased by any of the
Partnerships subsequent to the formation of MHC, such property will initially
have a tax basis equal to its fair market value and Section 704(c) of the Code
will not apply.

     Sale of the properties. -- MHC's share of any gain realized by a
Partnership on the sale of any dealer property generally will be treated as
income from a prohibited transaction that is subject to a 100% penalty tax, and
will have an adverse effect upon MHC's ability to satisfy the income tests for
qualification as a REIT. See "-- Taxation of MHC -- General" and "-- Gross
Income Tests -- The 95% Test." Under existing law, whether property is dealer
property is a question of fact that depends on all the facts and circumstances
with respect to the particular transaction. The Partnerships have held and
intend to hold the properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing, owning and
operating the properties and other manufactured home communities. In addition,
the Partnerships may make such occasional sales of the properties as are
consistent with MHC's investment objectives. Based upon such investment
objectives, MHC believes that in general the properties should not be considered
dealer property and that the amount of income from prohibited transactions, if
any, will not be material.

TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS

     General. -- As long as MHC qualifies as a REIT, distributions made to MHC's
taxable domestic shareholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
them as ordinary income and will not be eligible for the dividends received
deduction for shareholders that are corporations. Distributions that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent that they do not exceed MHC's actual net capital gain for the
taxable year) without regard to the period for which the shareholder has held
its common shares.

     On November 10, 1997, the IRS issued IRS Notice 97-64, which provides
generally that MHC may classify portions of its designated capital gains
dividend as (i) a 20% rate gain distribution (which would be taxable to taxable
domestic shareholders who are individuals, estates or trusts at a maximum rate
of 20%), (ii) an unrecaptured Section 1250 gain distribution (which would be
taxable to taxable domestic shareholders who are individuals, estates or trusts
at a maximum rate of 25%), or (iii) a 28% rate gain distribution (which would be
taxable to taxable domestic shareholders who are individuals, estates or trusts
at a maximum rate of 28%). If no designation is made, the entire designated
capital gain dividend will be treated as a 28% rate gain distribution. Notice
97-64 provides that a REIT must determine the maximum amounts that it may
designate as 20% and 25% rate capital gain dividends by performing the
computation required by the Code as if the REIT were an individual whose
ordinary income were subject to a marginal tax rate of at least 28%. Notice
97-64 further provides that designations made by the REIT only will be effective
to the extent that they comply with Revenue Ruling 89-81, which requires that
distributions made to different classes of shares be composed proportionately of
dividends of a particular type. Distributions that are properly designated by
MHC as capital gain dividends will be taxable to taxable corporate domestic
shareholders as long-term capital gain (to the extent that capital gains
dividends do not exceed MHC's actual net capital gain for the taxable year)
without regard to the period for which such corporate domestic shareholder has
held its common shares. Corporate domestic shareholders may,
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<PAGE>   40

however, be required to treat up to 20% of certain capital gain dividends as
ordinary income. In 1998, the required holding period for the application of the
20% and 25% capital gain tax rates was reduced from more than 18 months to more
than one year for capital gain properly taken into account on or after January
1, 1998. It is expected that the IRS will issue clarifying guidance (most likely
applying the same principles set forth in IRS Notice 97-64) regarding the
application of the new holding period requirement to capital gain dividend
designations by REITs.

     If, for any taxable year, MHC elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital
Gains Amount") of the dividends (within the meaning of the Code) paid or made
available for the year to holders of all classes of shares of beneficial
interest (the "Total Dividends"), then the portion of the Capital Gains Amount
that will be allocable to the holders of common shares will be the Capital Gains
Amount multiplied by a fraction, the numerator of which will be the total
dividends (within the meaning of the Code) paid or made available to the holders
of the common shares for the year and the denominator of which will be the Total
Dividends.

     To the extent that MHC makes distributions in excess of current and
accumulated earnings and profits, these distributions are treated first as a
tax-free return of capital to the shareholder, reducing the tax basis of a
shareholder's common shares by the amount of such distribution (but not below
zero), with distributions in excess of the shareholder's tax basis taxable as
capital gains (if the common shares is held as a capital asset). In addition,
any dividend declared by MHC in October, November or December of any year and
payable to a shareholder of record on a specific date in any such month shall be
treated as both paid by MHC and received by the shareholder on December 31 of
such year, provided that the dividend is actually paid by MHC during January of
the following calendar year. Shareholders may not include in their individual
income tax returns any net operating losses or capital losses of MHC.

     In general, upon any sale or other disposition of common shares, a
shareholder will recognize gain or loss for federal income tax purposes in an
amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition and (ii)
the holder's adjusted basis in such common shares for tax purposes. Such gain or
loss will be capital gain or loss if the common shares has been held as a
capital asset. In the case of a shareholder that is a corporation, such capital
gain or loss will be long-term capital gain or loss if such common shares has
been held for more than one year. Generally, in the case of a taxable domestic
shareholder who is an individual or an estate or trust, such capital gain (i)
taken into account on or after January 1, 1998, will be taxed at a maximum rate
of 20% if such common shares has been held for more than one year; and (ii)
taken into account on or after December 31, 2000, will be taxed at a maximum
rate of 18% if the common shares has been held for more than five years. The IRS
is authorized to issue regulations relating to the manner in which the capital
gain rates will apply to sales of capital assets by "pass-through entities,"
which include REITs such as MHC, and to sales of interests in "pass-through
entities." On August 9, 1999, the IRS issued a notice of proposed rulemaking
regarding the manner in which the capital gain rates will apply to sales of
interests in partnerships, S corporations and trusts, but did not issue guidance
regarding REITs (but see discussion of Notice 97-64 above). When issued, such
regulations could affect the taxation of gain and loss realized on the
disposition of common shares.

     In general, any loss upon a sale or exchange of common shares by a
shareholder who has held such common shares for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions from MHC required to be treated by such
shareholder as long-term capital gains. For shareholders who are individuals,
trusts and estates, the long-term capital loss will be apportioned among the 20%
and 25% long-term capital gain rate groups to the extent that distributions
received by such shareholder were previously included in such rate groups.

     MHC may elect to require holders of common shares to include MHC's
undistributed net capital gains in their income for MHC's taxable year beginning
January 1, 1998 and thereafter. If MHC makes such an election, holders of common
shares will (i) include in their income as long-term capital gains their
proportionate share of such undistributed capital gains and (ii) be deemed to
have paid their proportionate share of the tax paid by MHC on such undistributed
capital gains and thereby receive a

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<PAGE>   41

credit or refund for such amount. A holder of common shares will increase its
basis in the common shares by the difference between the amount of capital gain
included in its income and the amount of the tax it is deemed to have paid. The
earnings and profits of MHC will be adjusted appropriately.

     In addition, distributions from MHC and gain from the disposition of common
shares will not be treated as "passive activity" income and therefore
shareholders will not be able to apply losses from "passive activities" to
offset such income.

TAXATION OF TAX-EXEMPT SHAREHOLDERS

     Most tax-exempt employees' pension trusts are not subject to federal income
tax except to the extent of their receipt of "unrelated business taxable income"
as defined in Section 512(a) of the Code ("UBTI"). Distributions by MHC to a
shareholder that is a tax-exempt entity should not constitute UBTI, provided
that the tax-exempt entity has not financed the acquisition of its stock with
"acquisition indebtedness" within the meaning of the Code and the shares of
common shares held by such shareholder are not otherwise used in an unrelated
trade or business of the tax-exempt entity. However, certain pension trusts that
own more than 10% of a "pension-held REIT" must report a portion of the
dividends that they receive from such a REIT as UBTI. MHC, though, has not been
and does not expect to be treated as a pension-held REIT for purposes of this
rule.

TAXATION OF FOREIGN SHAREHOLDERS

     The following is a discussion of certain anticipated United States federal
income tax consequences of the ownership and disposition of common shares
applicable to Non-United States Holders of such stock. A "Non-United States
Holder" is any person other than (i) a citizen or resident of the United States,
(ii) a domestic partnership or corporation, (iii) any estate (other than a
foreign estate the income of which, from sources without the United States,
which is not effectively connected with the conduct of a trade or business
within the United States, is not includable in gross income under subtitle A of
the Code), or (iv) any trust, if a court within the United States is able to
exercise primary supervision over the administration of the trust, and one or
more United States persons have the authority to control all substantial
decisions of the trust. The discussion is based on current law and is for
general information only. The discussion addresses only certain and not all
aspects of United States federal income taxation. Final regulations dealing with
withholding tax on income paid to foreign persons and related matters (the "New
Withholding Regulations") were promulgated on October 6, 1997. Final regulations
dealing with withholding tax on certain amounts paid to foreign persons and
related matters (the "New Withholding Regulations") were promulgated in October
1997. The New Withholding Regulations were amended in December 1998 to delay
generally the effective dates until January 1, 2000. In April 1999, the Service
announced that it intends to amend the regulations again to delay generally the
effective dates of the New Withholding Regulations until January 1, 2001. The
New Withholding Regulations alter the information reporting and back-up
withholding rules that apply to a Non-United States Holder and provide
presumptions under which such a Holder is subject to withholding unless the
Non-United States Holder properly certifies its status. Accordingly, prospective
Non-United States Holders are urged to consult their tax advisors concerning the
application of the New Withholding Regulations.

  Distributions From MHC.

     1. Ordinary Dividends. The portion of dividends received by Non-United
States Holders payable out of MHC's earnings and profits which are not
attributable to capital gains of MHC or of MHC Operating Partnership and which
are not effectively connected with a United States trade or business of the Non-
United States Holder will be subject to United States withholding tax on a gross
basis at the rate of 30% (unless reduced by treaty). Any amounts withheld should
be creditable against the Non-United States Holder's United States federal
income tax liability. In general, Non-United States Holders will not be
considered engaged in a United States trade or business solely as a result of
their ownership of common shares. In cases where the dividend income from a
Non-United States Holder's investment in common shares is (or is treated as)
effectively connected with the Non-United States Holder's conduct of a United
                                       41
<PAGE>   42

States trade or business, the Non-United States Holder generally will be subject
to United States tax at graduated rates, in the same manner as United States
shareholders are taxed with respect to such dividends, and a Non-United States
Holder that is a foreign corporation may also be subject to a 30% branch profits
tax (unless reduced by treaty).

     2. Non-Dividend Distributions. Distributions by MHC which are not dividends
out of the earnings and profits of MHC, and which do not exceed the adjusted
basis of the Non-United States Holder's common shares, will not be subject to
United States income tax but rather will reduce the adjusted basis of such
common shares. Nevertheless, MHC anticipates that tax at the rate applicable to
dividends will be withheld for all distributions to Non United States Holders.
However, the Non-United States Holder may seek a refund of such amounts from the
IRS if it is determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of MHC. To the extent such a
distribution exceeds the adjusted basis of a Non-United States Holder's common
shares, it will give rise to tax liability if the Non-United States Shareholder
otherwise would be subject to tax on any gain from the sale or disposition of
his common shares as described below.

     3. Capital Gain Dividends. Under the Foreign Investment in Real property
Tax Act of 1980 ("FIRPTA"), a distribution made by MHC to a Non-United States
Holder, to the extent attributable to gains from dispositions of United States
Real property Interests ("USRPIs") such as the properties ("USRPI Capital
Gains"), will be considered effectively connected with a United States trade or
business of the Non-United States Holder and subject to United States federal
income tax at the rate applicable to United States individuals or corporations
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) without regard to
whether such distribution is designated as a capital gain dividend. In addition,
MHC will be required to withhold tax equal to 35% (unless reduced by treaty) of
the amount of dividends to the extent such dividends constitute USRPI Capital
Gains. Any amounts withheld should be creditable against the Non-United States
Holder's United States federal income tax liability. Distributions subject to
FIRPTA may also be subject to a 30% branch profits tax (unless reduced by
treaty) in the hands of a foreign corporate shareholder.

     Although the law is not entirely clear, it appears that amounts designated
by MHC as undistributed capital gains in respect of shares would be treated with
respect to Non-United States Holders in the manner outlined in the preceding
paragraph for actual distributions by MHC of capital gain dividends. Under that
approach, the Non-United States Holders would be able to offset as a credit
against their United States federal income tax liability resulting therefrom
their proportionate share of the tax paid by MHC on such undistributed capital
gains (and to receive from the IRS a refund to the extent their proportionate
share of such tax paid by MHC were to exceed their actual United States federal
income tax liability).

     Dispositions of Common Shares. Unless the common shares constitutes a
USRPI, a sale of common shares by a Non-United States Holder generally will not
be subject to United States taxation under FIRPTA. The common shares will not
constitute a USRPI if MHC is a "domestically controlled REIT." A domestically
controlled REIT is a REIT in which, at all times during a specified testing
period, less than 50% in value of its stock is held directly or indirectly by
Non-United States Holders. MHC believes that it has been and anticipates that it
will continue to be a domestically controlled REIT, and therefore that the sale
of common shares by a Non-United States Holder will not be subject to taxation
under FIRPTA. Because the common shares will be publicly traded, however, no
assurance can be given that MHC will continue to be a domestically controlled
REIT. If MHC does not constitute a domestically controlled REIT, a Non-United
States Holder's sale of common shares generally still will not be subject to tax
under FIRPTA as a sale of a USRPI provided that (i) the common shares is
"regularly traded" (as defined by applicable United States Treasury Department
regulations) on an established securities market (e.g., the NYSE, on which the
common shares is listed) and (ii) the selling Non-United States Holder held 5%
or less of the outstanding common shares at all times during a specified testing
period.

     If gain on the sale of common shares were subject to taxation under FIRPTA,
the Non-United States Holder would be subject to the same treatment as a United
States shareholder with respect to such gain

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<PAGE>   43

(subject to applicable alternative minimum tax and a special alternative minimum
tax in the case of nonresident alien individuals) and the purchaser of common
shares could be required to withhold 10% of the purchase price and remit such
amount to the IRS. Capital gains not subject to FIRPTA will nonetheless be
taxable in the United States to a Non-United States Holder in two cases: (i) if
the Non-United States Holder's investment in common shares is effectively
connected with a United States trade or business conducted by such Non-United
States Holder, the Non-United States Holder will be subject to the same
treatment as a United States shareholder with respect to such gain, or (ii) if
the Non-United States Holder is a nonresident alien individual who was present
in the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, the nonresident alien individual will be subject to
a 30% tax on the individual's capital gain.

LEGISLATIVE PROPOSALS

     Taxpayer Refund and Relief Act of 1999. On August 5, 1999, the United
States House of Representatives and Senate passed the "Taxpayer Refund and
Relief Act of 1999" (the "1999 Act"). President Clinton vetoed the 1999 Act on
September 23, 1999. The 1999 Act contained several proposed changes to the REIT
provisions of the Code. Some of the important REIT related provisions are set
forth below.

     The 1999 Act would have amended the tax rules relating to the composition
of a REIT's assets. Under current law, a REIT is precluded from owning more than
10% of the outstanding voting securities of any one issuer, other than a wholly
owned subsidiary or another REIT. Under the 1999 Act, a REIT would have remained
subject to the current restriction and would have been precluded from owning
more than 10% of the value of all classes of securities of any one issuer. This
change would not have applied to certain debt instruments held by a REIT and
included certain grandfathering provisions.

     The 1999 Act also contained an exception to both the 10% asset test
described above and a second REIT asset test which would have precluded any one
issuer's securities owned by a REIT to exceed 5% of the value of a REIT's total
assets. This exception would have allowed a REIT to form and own up to 100% of
the outstanding securities of a taxable REIT subsidiary which could provide a
limited amount of services to a REIT's tenants and others. The 1999 Act would
have changed the current law by allowing a REIT (1) to have voting control of
subsidiaries that provide services to third parties, and (2) to provide
"non-customary" services to a REIT's tenants through a taxable REIT subsidiary
without disqualifying the rents the REIT receives from those tenants. The 1999
Act would have permitted a REIT to combine and convert existing corporate
subsidiaries into taxable REIT subsidiaries tax-free for a limited period of
time. Pursuant to the 1999 Act, a taxable REIT subsidiary could have deducted
interest on debt funded directly or indirectly by the REIT, subject only to
rules regarding the subsidiary's debt to equity ratio and the amount of this
interest expense.

     The 1999 Act also would have included a reduction of the REIT distribution
requirements from 95% to 90% of a REIT's taxable income. The 1999 Act would have
applied the limitations on deductibility of interest provided under the
"earnings stripping" rules of Section 163(j) of the Code to interest paid or
accrued by a taxable REIT subsidiary with respect to debt owed to its parent
REIT. Furthermore, under the 1999 Act, amounts paid by a taxable REIT subsidiary
to its parent REIT for the rental of real property would have been considered
"rents from real property" under the Internal Revenue Code.

     In addition to the above described provisions regarding REITs, the 1999 Act
would have lowered the maximum capital gain rates applicable to individuals from
20% to 18% with respect to gains derived from sales of capital assets occurring
on or after January 1, 1999. The tax rate for Section 1250 depreciation
recapture would have been lowered from 25% to 20% for assets sold on or after
January 1, 1999.

     Clinton Administration Proposal. On February 1, 1999 the Clinton
Administration announced its budget proposal for fiscal year 2000 which
contained provisions relating to REITs similar to those contained in the 1999
Act. The Clinton Administration proposals regarding taxable REIT subsidiaries
differs from that contained in the 1999 Act in that it would permit REITs to
form two kinds of taxable REIT subsidiaries: (1) "qualified independent
contractor subsidiaries" which could perform services for
                                       43
<PAGE>   44

tenants and other customers that a REIT currently cannot perform and (2)
"qualified business subsidiaries" which could undertake third-party management
and development activities as well as other non-real estate related activities.
Under the Clinton Administration proposal, no more than 15% of the value of a
REIT's total assets could consist of these taxable REIT subsidiaries and no more
than 5% of the value of a REIT's total assets could consist of qualified
independent contractor subsidiaries. In addition, a taxable REIT subsidiary
would not be entitled to deduct any interest on debt funded directly or
indirectly by the REIT.

     Impact of 1999 Act and Clinton Administration proposals. The 1999 Act
included, and the Clinton Administration's budget proposal includes, a proposal
to amend the REIT asset tests with respect to non-qualified REIT subsidiaries,
such as the Management Corporations and RSI. The proposal would prohibit a REIT
from owning more than 10% of the vote or value of the outstanding securities of
any non-qualified REIT subsidiary. Existing non-qualified REIT subsidiaries
would be grandfathered, and therefore subject only to the 5% asset test and 10%
voting securities test of current law (see "-- Taxation of MHC -- Asset Tests"),
except that such grandfathering would terminate under certain circumstances,
including if the subsidiary engaged in a new trade or business or acquired
substantial new assets. As a result, if the proposal were to be enacted, the
Management Corporations and RSI would become subject to the new
10%-vote-and-value limitation if they commenced new trade or business activities
or acquired substantial new assets after the specified effective date. MHC could
not satisfy the new test because it would be considered to own more than 10% of
the value of the stock of the Management Corporations and RSI. Accordingly, the
proposal, if enacted, would materially impede the ability of MHC to engage in
other activities without jeopardizing its REIT status. However, if the proposal
regarding taxable REIT subsidiaries were to be enacted, Management Corporations
and RSI could avoid the new 10%-vote-and-value limitation by making an election
to become taxable REIT subsidiaries and such election would qualify as a
reorganization.

     It is presently unknown whether the Clinton Administration proposal or any
other legislation regarding REITs or federal taxation will be enacted.

OTHER TAX CONSIDERATIONS

     The Management Corporations and RSI. A portion of the cash to be used by
MHC Operating Partnership to fund distributions to its partners, including MHC,
comes from the Management Corporations and RSI through payments of interest on
the RSI Note and dividends on the non-voting stock of these entities which is
held by MHC Operating Partnership. The Management Corporations and RSI pay
federal and state income tax at the full applicable corporate rates. To the
extent that the Management Corporations and RSI are required to pay federal,
state or local taxes, the cash available for distribution by MHC to shareholders
will be reduced accordingly.

     State and Local Taxes. MHC and its shareholders may be subject to state or
local taxation in various jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of MHC and its
shareholders may not conform to the federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax law.

                                       44
<PAGE>   45

                INFORMATION ABOUT MANUFACTURED HOME COMMUNITIES

     MHC was formed to continue and expand the business of an entity that owned
and operated manufactured home communities since 1969. MHC is the general
partner of MHC Operating Limited Partnership. We conduct substantially all of
our business and own substantially all of our assets through MHC Operating
Limited Partnership and our subsidiaries.

     Our principal executive offices are located at Two North Riverside Plaza,
Chicago, Illinois 60606, and our telephone number is (312) 279-1400.

                                USE OF PROCEEDS

     We will receive proceeds from the sale of common shares that the
Administrator purchases directly from us. We will not receive proceeds from the
sale of common shares that the Administrator purchases in the open market or in
privately negotiated transactions. We will use the proceeds from the sale of
common shares that the Administrator purchases directly from us for general
corporate purposes. We cannot estimate either the number of common shares or the
prices of the shares that we will sell in connection with the Plan.

                              PLAN OF DISTRIBUTION

     Except to the extent the Administrator purchases common shares in the open
market or in privately negotiated transactions with third parties, we will sell
directly to the Administrator the common shares acquired under the Plan. The
shares, including shares acquired pursuant to requests for waivers, may be
resold in market transactions on any national securities exchange on which
common shares trade or in privately negotiated transactions. The common shares
currently are listed on the New York Stock Exchange.

     Pursuant to the Plan, we may be requested to approve optional cash
investments in excess of the allowable maximum amounts pursuant to requests for
waiver on behalf of participants in the Plan that may be engaged in the
securities business. In deciding whether to approve a request for waiver, we may
consider relevant factors including, among other things,

     - whether, at the time of the request, the Administrator is acquiring
       common shares for the Plan directly from us or in the open market or in
       privately negotiated transactions with third parties;

     - our need for additional funds;

     - our desire to obtain the additional funds through the sale of common
       shares as compared to other sources of funds;

     - the purchase price likely to apply to any sale of common shares;

     - the extent and nature of your prior participation in the Plan;

     - the number of common shares you hold of record; and

     - the total amount of optional cash investments in excess of $5,000 for
       which requests for waiver have been submitted.

     We may sell common shares through the Plan to persons who, in connection
with the resale of the shares, may be considered underwriters. In connection
with these types of transactions, compliance with Regulation M under the
Exchange Act would be required. We will not give any person any rights or
privileges other than those that the person would be entitled to as a
participant under the Plan. We will not enter into any agreement with any person
regarding the person's purchase, resale or distribution of shares. Under some
circumstances, we may, however, approve requests for optional cash investments
in excess of the allowable maximum limitations pursuant to requests for waivers.

                                       45
<PAGE>   46

     Subject to the availability of common shares registered for issuance under
the Plan, there is no total maximum number of shares that can be issued pursuant
to the reinvestment of dividends and optional cash investments. Except to the
extent that we authorize the Administrator to purchase common shares on the open
market, we will pay all trading fees and service charges in connection with the
reinvestment of dividends and optional cash investments to purchase common
shares under the Plan. You will have to pay any fees payable in connection with
your voluntary sale of shares from your Plan account and/or withdrawal from the
Plan.

                                 LEGAL MATTERS

     Our counsel, Steptoe & Johnson LLP, Washington, D.C., will issue an opinion
as to the validity of the issuance of the common shares offered pursuant to the
Plan, and will pass upon tax matters.

                                    EXPERTS

     Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules at December 31, 1998 and 1997, and for each
of the three years in the period ended December 31, 1998, included in our Annual
Report on Form 10-K for the year ended December 31, 1998, as set forth in their
report which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Our consolidated financial statements and schedules
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.

                                       46
<PAGE>   47

                                                                       EXHIBIT A

                           PLAN SERVICE FEES SCHEDULE

<TABLE>
<S>                                                            <C>
Enrollment Fee for New Investors............................                     No Charge
Initial Purchase of Shares*.................................                     No Charge
Sale of Shares (partial or full)**
  Transaction Fee...........................................   $15.00 per sale transaction
  Trading Fee...............................................               $0.12 per share
Reinvestment of Dividends*..................................                     No Charge
Optional Cash Purchases*....................................                     No Charge
Gift or Transfer of Shares..................................                     No Charge
Safekeeping of Share Certificates...........................                     No Charge
Certificate Issuance........................................                     No Charge
Deposits Returned Unpaid....................................               $25.00 per item
Duplicate Statements
  Current Year..............................................                     No Charge
  Prior Year(s).............................................     $20.00 per year requested
</TABLE>

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

 * To the extent the Administrator purchases common shares in the open market,
   you will be charged your pro rata share of any trading fees incurred for such
   purchase.

** The Administrator will deduct the applicable fees from the proceeds of a
   sale. Note that upon sale of shares in connection with a withdrawal,
   participant pays the transaction and trading fee described above rather than
   brokerage fees. See item 15.

   We reserve the right to amend or modify this Plan Service Fees Schedule at
any time.

                                       A-1
<PAGE>   48

                                                                       EXHIBIT B

                          CALENDAR OF EXPECTED EVENTS

     Optional Cash Investments of $5,000 or Less

<TABLE>
<CAPTION>
                             OPTIONAL CASH
                         INVESTMENT DUE DATE(1)   INVESTMENT DATE
                         ----------------------   ---------------
                              <S>                    <C>
                              01/11/00               01/14/00
                              02/08/00               02/11/00
                              03/07/00               03/10/00
                              04/11/00               04/14/00
                              05/09/00               05/12/00
                              06/06/00               06/09/00
                              07/11/00               07/14/00
                              08/08/00               08/11/00
                              09/05/00               09/08/00
                              10/10/00               10/13/00
                              11/07/00               11/10/00
                              12/05/00               12/08/00
                              01/09/01               01/12/01
                              02/06/01               02/09/01
                              03/06/01               03/09/01
                              04/10/01               04/13/01
                              05/08/01               05/11/01
                              06/05/01               06/08/01
                              07/10/01               07/13/01
                              08/07/01               08/10/01
                              09/11/01               09/14/01
                              10/09/01               10/12/01
                              11/06/01               11/09/01
                              12/11/01               12/14/01
</TABLE>

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

(1) Optional cash investments of $5,000 or less are due three business days
    before the Investment Date.

                                       B-1
<PAGE>   49

     Optional Cash Investments of Greater than $5,000

<TABLE>
<CAPTION>
       MINIMUM WAIVER                                                                             DIVIDEND
        PRICE/WAIVER           OPTIONAL CASH         PRICING PERIOD       PRICING PERIOD     PAYMENT/INVESTMENT
    DISCOUNT SET DATE(1)   INVESTMENT DUE DATE(2)   COMMENCEMENT DATE   CONCLUSION DATE(3)          DATE
    --------------------   ----------------------   -----------------   ------------------   ------------------
          <S>                     <C>                   <C>                  <C>                  <C>
          12/28/99                12/31/99              01/03/00             01/14/00             01/14/00
          01/25/00                01/28/00              01/31/00             02/11/00             02/11/00
          02/22/00                02/25/00              02/28/00             03/10/00             03/10/00
          03/28/00                03/31/00              04/03/00             04/14/00             04/14/00
          04/25/00                04/28/00              05/01/00             05/12/00             05/12/00
          05/22/00                05/25/00              05/26/00             06/09/00             06/09/00
          06/26/00                06/29/00              06/30/00             07/14/00             07/14/00
          07/25/00                07/28/00              07/31/00             08/11/00             08/11/00
          08/21/00                08/24/00              08/25/00             09/08/00             09/08/00
          09/26/00                09/29/00              10/02/00             10/13/00             10/13/00
          10/24/00                10/27/00              10/30/00             11/10/00             11/10/00
          11/28/00                12/01/00              12/04/00             12/08/00             12/08/00
          12/22/00                12/28/00              12/29/00             01/12/01             01/12/01
          01/23/01                01/26/01              01/29/01             02/09/01             02/09/01
          02/20/01                02/23/01              02/26/01             03/09/01             03/09/01
          03/27/01                03/30/01              04/02/01             04/16/01             04/16/01
          04/24/01                04/27/01              04/30/01             05/11/01             05/11/01
          05/21/01                05/24/01              05/25/01             06/08/01             06/08/01
          06/25/01                06/28/01              06/29/01             07/13/01             07/13/01
          07/24/01                07/27/01              07/30/01             08/10/01             08/10/01
          08/27/01                08/30/01              08/31/01             09/14/01             09/14/01
          09/25/01                09/28/01              10/01/01             10/12/01             10/12/01
          10/23/01                10/26/01              10/29/01             11/09/01             11/09/01
          11/27/01                11/30/01              12/03/01             12/14/01             12/14/01
</TABLE>

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

(1) The Minimum Waiver Price and the Waiver Discount, if any, will be
    established four business days prior to the first day of the Pricing Period.
    The Minimum Waiver Price and Waiver Discount only apply to purchases made
    pursuant to an approved Request or Waiver.

(2) Optional cash investments of greater than $5,000 made pursuant to an
    approved Request for Waiver are due by the close of business on the last
    business day immediately preceding the first day of the Pricing Period.

(3) The Pricing Period relating to optional cash investments of greater than
    $5,000 made pursuant to an approved Request for Waiver will be the ten
    consecutive trading days ending on either (a) the dividend payment date
    during any month in which we pay a cash dividend or (b) on or around the
    second Friday of any month in which we do not pay a cash dividend.

                                       B-2
<PAGE>   50

                                  U.S. EQUITY
                             MARKETS CLOSED IN 1999

<TABLE>
<S>                                                           <C>
New Years Day...............................................  January 1
Martin Luther King Jr. Day..................................  January 18
Presidents Day..............................................  February 15
Good Friday.................................................  April 2
Memorial Day................................................  May 31
Independence Day............................................  July 5*
Labor Day...................................................  September 6
Thanksgiving Day............................................  November 25
Christmas Day...............................................  December 24*
</TABLE>

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

* Observed

                                  U.S. EQUITY
                             MARKETS CLOSED IN 2000

<TABLE>
<S>                                                           <C>
New Years Day...............................................  January 1*
Martin Luther King Jr. Day..................................  January 17
Presidents Day..............................................  February 21
Good Friday.................................................  April 21
Memorial Day................................................  May 29
Independence Day............................................  July 4
Labor Day...................................................  September 4
Thanksgiving Day............................................  November 23
Christmas Day...............................................  December 25
</TABLE>

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

* New Years Day 2000 falls on a Saturday. The Exchange will be open for regular
  trading hours on Friday, December 31, 1999 and Monday, January 3, 2000.

                                  U.S. EQUITY
                             MARKETS CLOSED IN 2001

<TABLE>
<S>                                                           <C>
New Years Day...............................................  January 1
Martin Luther King Jr. Day..................................  January 15
Presidents Day..............................................  February 19
Good Friday.................................................  April 13
Memorial Day................................................  May 28
Independence Day............................................  July 4
Labor Day...................................................  September 3
Thanksgiving Day............................................  November 22
Christmas Day...............................................  December 25
</TABLE>

                                       B-3
<PAGE>   51

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

     NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY MANUFACTURED HOME COMMUNITIES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE SECURITIES, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF MANUFACTURED HOME COMMUNITIES SINCE THE
DATE HEREOF.

                               TABLE OF CONTENTS

<TABLE>
<S>                                     <C>
Plan Highlights.......................     2
Summary of the Plan...................     3
Where You Can Find More Information...     5
Special Note Regarding Forward-Looking
  Statements..........................     6
Risk Factors..........................     7
Terms and Conditions of the Plan......    15
Certain Federal Income Tax
  Considerations......................    33
Information About Manufactured Home
  Communities.........................    45
Use of Proceeds.......................    45
Plan of Distribution..................    45
Legal Matters.........................    46
Experts...............................    46
Plan Service Fees Schedule............   A-1
Calendar of Expected Events...........   B-1
</TABLE>

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

                                2,000,000 SHARES
                               MANUFACTURED HOME
                               COMMUNITIES, INC.
                             SHARES OF COMMON STOCK
                                 OFFERED SOLELY
                             IN CONNECTION WITH OUR

                             DIVIDEND REINVESTMENT
                                      AND
                              SHARE PURCHASE PLAN
                                   PROSPECTUS
                                           , 1999

             ------------------------------------------------------
             ------------------------------------------------------
<PAGE>   52

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the estimated fees and expenses payable by
the Registrant in connection with the issuance and distribution of the
securities being registered:

<TABLE>
<S>                                                          <C>
Registration Fee..........................................   $13,379
Printing and Duplicating Expenses.........................      *
Legal Fees and Expenses...................................      *
Accounting Fees and Expenses..............................      *
Miscellaneous.............................................      *
                                                             -------
          Total...........................................   $
                                                             =======
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The Maryland General Corporation Law (the "MGCL") permits a Maryland
corporation to include in its bylaws a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money damages
except for liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Company's Bylaws, as amended from time to time, (the "Bylaws"), contain such a
provision which eliminates such liability to the maximum extent permitted by the
MGCL.

     The Bylaws of the Company authorize it to obligate itself to indemnify its
present and former officers and directors and to pay or reimburse expenses for
such individuals in advance of the final disposition of a proceeding to the
maximum extent permitted from time to time by the laws of Maryland. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services, or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a corporation may not indemnify for an
adverse judgment in a suit by or in the right of the corporation. In addition,
the MGCL requires the Company, as conditions to advancing expenses, to obtain
(i) a written affirmation by the director or officer of his good faith belief
that he has met the standard of conduct necessary for indemnification by the
Company as authorized by the applicable Bylaws and (ii) a written agreement by
him or on his behalf to repay the amount paid or reimbursed by the Company if it
shall ultimately be determined that the standard of conduct was not met. The
Bylaws of the Company and each of its corporate subsidiaries and the partnership
agreements for each of the partnership subsidiaries also permit the Company to
provide indemnification and advance of expenses to a present or former director
or officer who served a predecessor of the Company in such capacity, and to any
employee or agent of the Company or a predecessor of the Company. Finally, the
MGCL requires a corporation (unless its charter provides otherwise, which the
Company's charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity.

     The partnership agreements of the Operating Partnership, the Management
Partnerships and the Financing Partnerships also provide for indemnification of
the Company and its officers and directors to

                                      II-1
<PAGE>   53

the same extent indemnification is provided to officers and directors of the
Company in its Charter, and limits the liability of the Company and its officers
and directors to the Operating Partnership, the Management Partnerships and the
Financing Partnerships and their respective partners to the same extent the
liability of the officers and directors of the Company to the Company and its
stockholders is limited under the Company's Charter.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.

ITEM 16. EXHIBITS

<TABLE>
<S>                      <C>
           3.1           -- Amended and Restated Articles of Incorporation of
                            Manufactured Home Communities, Inc.
           3.2           -- Articles Supplementary
           3.3           -- Amended Bylaws of Manufactured Home Communities, Inc.
           5.1           -- Opinion of Steptoe & Johnson LLP regarding the legality
                            of the securities being registered
           8.1           -- Opinion of Steptoe & Johnson LLP regarding certain tax
                            matters
          10.1           -- $265,000,000 Mortgage Note dated December 12, 1997
          10.2           -- Second Amended and Restated Credit Agreement (Revolving
                            Facility) between the Company, MHC Operating Limited
                            Partnership, and certain lenders and agents, dated April
                            28, 1998
          10.3           -- First Amendment to Second Amended and Restated Credit
                            Agreement between the Company, MHC Operating Limited
                            Partnership, and certain lenders and agents, dated
                            December 18, 1998
          10.4           -- Amended and Restated Credit Agreement (Term Loan) between
                            the Company, MHC Operating Limited Partnership, and
                            certain lenders and agent, dated April 28, 1998
          10.5           -- Letter Agreement between the Company and Bank of America
                            National Trust and Savings Association confirming the
                            $100 million swap transaction, dated July 11, 1995
          23.1           -- Consent of Steptoe & Johnson LLP (included as part of
                            Exhibit 5.1)
          23.2           -- Consent of Steptoe & Johnson LLP (included as part of
                            Exhibit 8.1)
          23.3           -- Consent of Ernst & Young LLP
          24.1           -- Power of Attorney (included in signature page)
</TABLE>

ITEM 17. UNDERTAKINGS

     (a) The undersigned Registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being
     made, a post-effective amendment to this registration statement:

             (i) To include any prospectus required by Section 10(a)(3) of the
        Securities Act of 1933;

             (ii) To reflect in the prospectus any facts or events arising after
        the effective date of the registration statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in this registration statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than a 20 percent change


                                      II-2
<PAGE>   54

        in the maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement; and

             (iii) To include any material information with respect to the plan
        of distribution not previously disclosed in the registration statement
        or any material change to such information in this registration
        statement;

provided, however, that subparagraphs (i) and (ii) above shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.

         (2) That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the Securities offered
     herein, and the offering of such Securities at that time shall be deemed to
     be the initial bona fide offering thereof.

         (3) To remove from registration by means of a post-effective amendment
     any of the Securities being registered which remain unsold at the
     termination of the offering.

     (b) The undersigned Registrant hereby further undertakes that, for the
         purposes of determining any liability under the Securities Act of 1933,
         each filing of the Registrant's annual report pursuant to Section 13(a)
         or Section 15(d) of the Securities Exchange Act of 1934 that is
         incorporated by reference in this registration statement shall be
         deemed to be a new registration statement relating to the Securities
         offered herein, and the offering of such Securities at that time shall
         be deemed to be the initial bona fide offering thereof.

     (c) Insofar as indemnification for liabilities arising under the Securities
         Act of 1933 may be permitted to directors, officers and controlling
         persons of the Registrant pursuant to existing provisions or
         arrangements whereby the Registrant may indemnify a director, officer
         or controlling person of the Registrant against liabilities arising
         under the Securities Act of 1933, or otherwise, the Registrant has been
         advised that in the opinion of the Securities and Exchange Commission
         such indemnification is against public policy as expressed in the
         Securities Act of 1933 and is, therefore, unenforceable. In the event
         that a claim for indemnification against such liabilities (other than
         the payment by the Registrant of expenses incurred or paid by a
         director, officer or controlling person of the Registrant in the
         successful defense of any action, suit or proceeding) is asserted by
         such director, officer or controlling person in connection with the
         securities being registered, the Registrant will, unless in the opinion
         of its counsel the matter has been settled by controlling precedent,
         submit to a court of appropriate jurisdiction the question whether such
         indemnification by it is against public policy as expressed in the
         Securities Act of 1933 and will be governed by the final adjudication
         of such issue.

                                      II-3
<PAGE>   55

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Chicago, Illinois, on this twelfth day of November, 1999.

                                          MANUFACTURED HOME
                                          COMMUNITIES, INC.

                                          By:       /s/ HOWARD WALKER
                                            ------------------------------------
                                                       Howard Walker
                                               President and Chief Executive
                                                           Officer

                               POWER OF ATTORNEY

     We, the undersigned directors and officers of Manufactured Home
Communities, Inc., do hereby constitute and appoint Thomas P. Heneghan and
Howard Walker and each and either of them, our true and lawful attorneys-in-fact
and agents, to do any and all acts and things in our names and our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
Company to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
registration statement, or any registration statement for this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, including specifically, but without limitation, any and all amendments
(including post-effective amendments) hereto; and we hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                    NAME                                      TITLE                       DATE
                    ----                                      -----                       ----
<C>                                            <S>                                  <C>
               /s/ SAMUEL ZELL                 Chairman of the Board                November 12, 1999
- ---------------------------------------------
                 Samuel Zell

              /s/ HOWARD WALKER                Chief Executive Officer and          November 12, 1999
- ---------------------------------------------    President and Director
                Howard Walker

           /s/ THOMAS P. HENEGHAN              Executive Vice President and Chief   November 12, 1999
- ---------------------------------------------    Financial Officer
             Thomas P. Heneghan

               /s/ MARK HOWELL                 Principal Accounting Officer         November 12, 1999
- ---------------------------------------------
                 Mark Howell

           /s/ SHELI Z. ROSENBERG                           Director                November 12, 1999
- ---------------------------------------------
             Sheli Z. Rosenberg

            /s/ DAVID A. HELFAND                            Director                November 12, 1999
- ---------------------------------------------
              David A. Helfand

           /s/ DONALD S. CHISHOLM                           Director                November 12, 1999
- ---------------------------------------------
             Donald S. Chisholm
</TABLE>

                                      II-4
<PAGE>   56

<TABLE>
<CAPTION>
                    NAME                                      TITLE                       DATE
                    ----                                      -----                       ----
<C>                                            <S>                                  <C>
            /s/ MICHAEL A. TORRES                           Director                November 12, 1999
- ---------------------------------------------
              Michael A. Torres

           /s/ THOMAS E. DOBROWSKI                          Director                November 12, 1999
- ---------------------------------------------
             Thomas E. Dobrowski

            /s/ LOUIS H. MASOTTI                            Director                November 12, 1999
- ---------------------------------------------
              Louis H. Masotti

            /s/ GARY L. WATERMAN                            Director                November 12, 1999
- ---------------------------------------------
              Gary L. Waterman

          /s/ JOHN F. PODJASEK, JR.                         Director                November 12, 1999
- ---------------------------------------------
            John F. Podjasek, Jr.
</TABLE>

                                      II-5
<PAGE>   57

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
           3.1           -- Amended and Restated Articles of Incorporation of
                            Manufactured Home Communities, Inc.
           3.2           -- Articles Supplementary
           3.3           -- Amended Bylaws of Manufactured Home Communities, Inc.
           5.1           -- Opinion of Steptoe & Johnson LLP regarding the legality
                            of the securities being registered
           8.1           -- Opinion of Steptoe & Johnson LLP regarding certain tax
                            matters
          10.1           -- $265,000,000 Mortgage Note dated December 12, 1997
          10.2           -- Second Amended and Restated Credit Agreement (Revolving
                            Facility) between the Company, MHC Operating Limited
                            Partnership, and certain lenders and agents, dated April
                            28, 1998
          10.3           -- First Amendment to Second Amended and Restated Credit
                            Agreement between the Company, MHC Operating Limited
                            Partnership, and certain lenders and agents, dated
                            December 18, 1998
          10.4           -- Amended and Restated Credit Agreement (Term Loan) between
                            the Company, MHC Operating Limited Partnership, and
                            certain lenders and agent, dated April 28, 1998
          10.5           -- Letter Agreement between the Company and Bank of America
                            National Trust and Savings Association confirming the
                            $100 million swap transaction, dated July 11, 1995
          23.1           -- Consent of Steptoe & Johnson LLP (included as part of
                            Exhibit 5.1)
          23.2           -- Consent of Steptoe & Johnson LLP (included as part of
                            Exhibit 8.1)
          23.3           -- Consent of Ernst & Young LLP
          24.1           -- Power of Attorney (included in signature page)
</TABLE>

                                      II-6

<PAGE>   1


                                                                     EXHIBIT 3.1

                       MANUFACTURED HOME COMMUNITIES, INC.

                      ARTICLES OF AMENDMENT AND RESTATEMENT

THIS IS TO CERTIFY THAT:

         FIRST: Manufactured Home Communities, Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its charter as currently in effect
and as hereinafter amended.

         SECOND: The charter of the Corporation is hereby amended by striking
out Article VI, Section 5, "Indemnification".

         THIRD: The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:

                                    ARTICLE I

                                  INCORPORATOR

         The undersigned, James J. Hanks, Jr., whose address is 100 South
Charles Street, Baltimore, Maryland 21201, being at least 18 years of age, does
hereby form a corporation under the general laws of the State of Maryland.

                                   ARTICLE II

                                      NAME

         The name of the corporation (the "Corporation") is: Manufactured Home
Communities, Inc.

                                   ARTICLE III

                                     PURPOSE

         The purposes for which the Corporation is formed are to engage in any
lawful act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which corporations
may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of these Articles, "REIT" means a real estate
investment trust under Sections 856 through 860 of the Code.

                                   ARTICLE IV

                  PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

         The post office address of the principal office of the Corporation in
the State of Maryland is c/o Prentice-Hall Corporation System, Maryland, 11 East
Chase Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in the State of Maryland is The


<PAGE>   2




Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202. The resident agent is a corporation located in the State of
Maryland.

                                    ARTICLE V

                                      STOCK

              SECTION 1. AUTHORIZED SHARES. The total number of shares of stock
which the Corporation has authority to issue is 60,000,000 shares, of which
50,000,000 shares are shares of Common Stock, $.01 par value per share ("Common
Stock"), and 10,000,000 shares are shares of Series Preferred Stock ("Preferred
Stock"), $.01 par value per share. The aggregate par value of all authorized
shares of stock having par value is $600,000.00.

              SECTION 2. VOTING RIGHTS. Subject to the provisions of Article VII
regarding Excess Stock (as such term is defined therein), each share of Common
Stock shall entitle the holder thereof to one vote.

              SECTION 3. ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be
issued, from time to time, in one or more series as authorized by the Board of
Directors. Prior to issuance of shares of each series, the Board of Directors by
resolution shall designate that series to distinguish it from all other series
and classes of stock of the Corporation, shall specify the number of shares to
be included in the series and, subject to the provisions of Article VII
regarding Excess Stock, shall set the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption. Subject to
the express terms of any other series of Preferred Stock outstanding at the time
and notwithstanding any other provision of the charter, the Board of Directors
may increase or decrease the number of shares of, or alter the designation or
classify or reclassify, any unissued shares of any series of Preferred Stock by
setting or changing, in any one or more respects, from time to time before
issuing the shares, and, subject to the provisions of Article VII regarding
Excess Stock, the terms, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of redemption of the shares of any series of Preferred
Stock.

              SECTION 4. CHARTER AND BYLAWS. All persons who shall acquire stock
in the Corporation shall acquire the same subject to the provisions of the
charter and the Bylaws of the Corporation.

                                   ARTICLE VI

                        PROVISIONS FOR DEFINING, LIMITING
                      AND REGULATING CERTAIN POWERS OF THE
                CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

              SECTION 1. NUMBER AND CLASSIFICATION. The number of directors of
the Corporation initially shall be four, which number may be increased or
decreased pursuant to the Bylaws of the Corporation; provided, however, that (a)
if there is stock outstanding and so long as there are three or more
stockholders, the number of directors shall never be less than three and (b) if
there is stock outstanding and so long as there are less than three
stockholders, the number of directors may be less than three but not less than
the number of stockholders. The


                                      -2-


<PAGE>   3




names of the directors who shall serve effective immediately and until the first
annual meeting of stockholders and until their successors are duly elected and
qualify are:

                                   Samuel Zell
                                 Randall K. Rowe
                                 Gary W. Powell
                                Gerald A. Spector

              At the first annual meeting of stockholders, the directors shall
be divided into three classes, as nearly equal in number as possible, with a
term of three years each, and the term of office of one class shall expire each
year. One class shall hold office initially for a term expiring at the annual
meeting of stockholders in 1994, another class shall hold office initially for a
term expiring at the annual meeting of stockholders in 1995 and another class
shall hold office initially for a term expiring at the annual meeting of
stockholders in 1996. Beginning with the annual meeting of stockholders in 1994
and at each succeeding annual meeting of stockholders, the directors of the
class of directors whose term expires at such meeting will be elected to hold
office for a term expiring at the third succeeding annual meeting. Each director
will hold office for the term for which he or she is elected and until his or
her successor is duly elected and qualifies.

              SECTION 2. REMOVAL. A director may be removed only for cause and
only by the affirmative vote of two-thirds of all the votes entitled to be cast
for the election of directors. A special meeting of the stockholders may be
called, in accordance with the Bylaws of the Corporation, for the purpose of
removing a director.

              SECTION 3. AUTHORIZATION BY BOARD OF STOCK ISSUANCE. The Board of
Directors of the Corporation may authorize the issuance from time to time of
shares of its stock of any class, whether now or hereafter authorized, or
securities convertible into shares of its stock of any class, whether now or
hereafter authorized, for such consideration as the Board of Directors may deem
advisable, subject to such restrictions or limitations, if any, as may be set
forth in the charter or the Bylaws of the Corporation or in the general laws of
the State of Maryland.

              SECTION 4. PREEMPTIVE RIGHTS. Except as may be provided by the
Board of Directors in authorizing the issuance of shares of Preferred Stock
pursuant to Article V, Section 3, no holder of shares of stock of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any additional shares of the stock of the Corporation or any other
security of the Corporation which it may issue or sell.

              SECTION 5. ADVISOR AGREEMENTS. Subject to such approval of
stockholders and other conditions, if any, as may be required by any applicable
statute, rule or regulation, the Board of Directors may authorize the execution
and performance by the Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or general) or
other organization whereby, subject to the supervision and control of the Board
of Directors, any such other person, corporation, association, company, trust
partnership (limited or general) or other organization (the "Advisor") shall
render or make available to the Corporation managerial, investment, advisory
and/or related services, office space and other services and facilities
(including, if deemed advisable by the Board of Directors, the management or
supervision of the investments of the Corporation) upon such terms and


                                      -3-

<PAGE>   4




conditions as may be provided in such agreement or agreements (including, if
deemed fair and equitable by the Board of Directors, the compensation payable
thereunder by the Corporation).

              SECTION 6. RELATED PARTY TRANSACTIONS. Without limiting any other
procedures available by law or otherwise to the Corporation, the Board of
Directors may authorize any agreement of the character described in Section 5 of
this Article VI or other transaction with any person, corporation, association,
company, trust, partnership (limited or general) or other organization, although
one or more of the directors or officers of the Corporation may be a party to
any such agreement or an officer, director, stockholder or member of such other
party, and no such agreement or transaction shall be invalidated or rendered
void or voidable solely by reason of the existence of any such relationship if
the existence is disclosed or known to the Board of Directors, and the contract
or transaction is approved by the affirmative vote of a majority of the
disinterested directors, even if they constitute less than a quorum of the Board
of Directors. Any director of the Corporation who is also a director, officer,
stockholder or member of such other entity may be counted in determining the
existence of a quorum at any meeting of the Board of Directors considering such
matter.

              SECTION 7. DETERMINATIONS BY BOARD. The determination as to any of
the following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with the charter of the Corporation and in the
absence of actual receipt of an improper benefit in money, property or services
or active and deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Corporation and every holder of shares
of its stock: the amount of the net income of the Corporation for any period and
the amount of assets at any time legally available for the payment of dividends,
redemption of its stock or the payment of other distributions on its stock; the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over losses on sales of assets; the amount, purpose, time of creation, increase
or decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
the fair value, or any sale, bid or asked price to be applied in determining the
fair value, of any asset owned or held by the Corporation; and any matters
relating to the acquisition, holding and disposition of any assets by the
Corporation.

              SECTION 8. RESERVED POWERS OF BOARD. The enumeration and
definition of particular powers of the Board of Directors included in this
Article VI shall in no way be limited or restricted by reference to or inference
from the terms of any other clause of this or any other provision of the charter
of the Corporation, or construed or deemed by inference or otherwise in any
manner to exclude or limit the powers conferred upon the Board of Directors
under the general laws of the State of Maryland as now or hereafter in force.

              SECTION 9. REIT QUALIFICATION. The Board of Directors shall use
its reasonable best efforts to cause the Corporation and its stockholders to
qualify for U.S. Federal income tax treatment in accordance with the provisions
of the Code applicable to a REIT. In furtherance of the foregoing, the Board of
Directors shall use its reasonable best efforts to take such actions as are
necessary, and may take such actions as in its sole judgment and discretion are
desirable, to preserve the status of the Corporation as a REIT; provided,
however, that if the Board of Directors determines that it is no longer in the
best interests of the Corporation to continue to have the Corporation qualify as
a REIT, the Board of Directors may revoke or otherwise terminate the
Corporation's REIT election pursuant to Section 856(g) of the Code.


                                      -4-

<PAGE>   5


                                  ARTICLE VII

                            RESTRICTION ON TRANSFER,
                      ACQUISITION AND REDEMPTION OF SHARES

              SECTION 1. DEFINITIONS. For the purposes of this Article VII, the
following terms shall have the following meanings:

              "Beneficial Ownership" shall mean ownership of Equity Stock by a
Person who would be treated as an owner of such Equity Stock under Section
542(a)(2) of the Code either directly or constructively through the application
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns," "Beneficially Own" and
"Beneficially Owned" shall have the correlative meanings.

              "Beneficiary" shall mean the beneficiary of the Trust as
determined pursuant to Section 19 of this Article VII.

              "Debt" shall mean indebtedness of (i) the Corporation or (ii) MHC
Operating Limited Partnership, an Illinois limited partnership to be formed, or
any predecessor thereof.

              "Equity Stock" shall mean stock that is either Common Stock or
Preferred Stock.

              "Existing Holder" shall mean (i) any Person who is, or would be
upon the exchange of OP Units or Debt, the Beneficial Owner of Common Stock
and/or Preferred Stock in excess of the Ownership Limit both upon and
immediately after the closing of the Initial Public Offering, so long as, but
only so long as, such Person Beneficially Owns or would, upon exchange of OP
Units or Debt, Beneficially Own Common Stock and/or Preferred Stock in excess of
the Ownership Limit and (ii) any Person to whom an Existing Holder Transfers,
subject to the limitations provided in this Article VII, Beneficial Ownership of
Common Stock and/or Preferred Stock causing such transferee to Beneficially Own
Common Stock and/or Preferred Stock in excess of the Ownership Limit.

              "Existing Holder Limit" (i) for any Existing Holder who is an
Existing Holder by virtue of clause (i) of the definition thereof, shall mean,
initially, the percentage of the outstanding Equity Stock Beneficially Owned, or
which would be Beneficially Owned upon the exchange of OP Units or Debt, by such
Existing Holder upon and immediately after the date of the closing of the
Initial Public Offering, and, after any adjustment pursuant to Section 9 of this
Article VII, shall mean such percentage of the outstanding Equity Stock as so
adjusted; and (ii) for any Existing Holder who becomes an Existing Holder by
virtue of clause (ii) of the definition thereof, shall mean, initially, the
percentage of the outstanding Equity Stock Beneficially Owned by such Existing
Holder at the time that such Existing Holder becomes an Existing Holder, but in
no event shall such percentage be greater than the Existing Holder Limit for the
Existing Holder who Transfers Beneficial Ownership of the Common Stock and/or
Preferred Stock or, in the case of more than one transferor, in no event shall
such percentage be greater than the smallest Existing Holder Limit of any
transferring Existing Holder, and, after any adjustment pursuant to Section 9 of
this Article VII, shall mean such percentage of the outstanding Equity Stock as
so adjusted. From the date of the Initial Public Offering and prior to the
Restriction Termination Date, the Secretary of the Corporation shall maintain
and, upon


                                      -5-


<PAGE>   6

request, make available to each Existing Holder a schedule which sets forth the
then current Existing Holder Limit for each Existing Holder.

              "Initial Public Offering" means the sale of shares of Common Stock
pursuant to the Corporation's first effective registration statement for such
Common Stock filed under the Securities Act of 1933, as amended.

              "Market Price" shall mean the last reported sales price reported
on the New York Stock Exchange of Common Stock or Preferred Stock, as the case
may be, on the trading day immediately preceding the relevant date, or if not
then traded on the New York Stock Exchange, the last reported sales price of the
Common Stock or Preferred Stock, as the case may be, on the trading day
immediately preceding the relevant date as reported on any exchange or quotation
system over which the Common Stock or Preferred Stock, as the case may be, may
be traded, or if not then traded over any exchange or quotation system, then the
market price of the Common Stock or Preferred Stock, as the case may be, on the
relevant date as determined in good faith by the Board of Directors.

              "OP Units" shall mean units of limited partnership of MHC
Operating Limited Partnership, an Illinois limited partnership to be formed.

              "Ownership Limit" shall initially mean 5.0%, in number of shares
or value, of the outstanding Equity Stock of the Corporation, and after any
adjustment as set forth in Section 10 of this Article VII, shall mean such
greater percentage of the outstanding Equity Stock as so adjusted. The number
and value of shares of the outstanding Equity Stock shall be determined by the
Board of Directors in good faith, which determination shall be conclusive for
all purposes hereof.

              "Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401 (a) of the Code or
Section 501(c)(17) of the Code), a portion of a trust permanently set aside for
or to be used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity; but such term does not include an
underwriter which participated in a public offering of the Common Stock and/or
Preferred Stock for a period of 25 days following the purchase by such
underwriter of the Common Stock and/or Preferred Stock.

              "Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock as defined below in Section 3
of this Article VII, the purported beneficial transferee for whom the Purported
Record Transferee would have acquired shares of Equity Stock, if such Transfer
had been valid under Section 2 of this Article VII.

              "Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the record holder of the
Equity Stock if such Transfer had been valid under Section 2 of this Article
VII.

              "Restriction Termination Date" shall mean the first day after the
date of the Initial Public Offering on which the Board of Directors determines
that it is no longer in the best interests of the Corporation to attempt to, or
continue to, qualify as a REIT.


                                      -6-




<PAGE>   7


              "Transfer" shall mean any sale, transfer, gift, assignment, devise
or other disposition of Equity Stock, (including (i) the granting of any option
or entering into any agreement for the sale, transfer or other disposition of
Equity Stock or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Equity Stock, but
excluding the exchange of OP Units or Debt for Equity Stock), whether voluntary
or involuntary, whether of record or beneficially and whether by operation of
law or otherwise. The terms "Transfers" and "Transferred" shall have the
correlative meanings.

              "Trust" shall mean the trust created pursuant to Section 15 of
this Article VII.

              "Trustee" shall mean the Corporation as trustee for the Trust, and
any successor trustee appointed by the Corporation.

              SECTION 2. OWNERSHIP LIMITATION. (i) Except as provided in Section
12 of this Article VII, from the date of the Initial Public Offering and prior
to the Restriction Termination Date, no Person (other than an Existing Holder)
shall Beneficially Own shares of Common Stock and/or Preferred Stock in excess
of the Ownership Limit and no Existing Holder shall Beneficially Own shares of
Common Stock and/or Preferred Stock in excess of the Existing Holder Limit for
such Existing Holder.

              (ii)  Except as provided in Section 9 and Section 12 of this
Article VII, from the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer that, if effective, would result in
any Person (other than an Existing Holder) Beneficially Owning Common Stock
and/or Preferred Stock in excess of the Ownership Limit shall be void ab initio
as to the Transfer of such shares of Common Stock and/or Preferred Stock which
would be otherwise Beneficially Owned by such Person in excess of the Ownership
Limit; and the intended transferee shall acquire no rights in such shares of
Common Stock and/or Preferred Stock.

              (iii) Except as provided in Section 9 and Section 12 of this
Article VII, from the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer that, if effective, would result in
any Existing Holder Beneficially Owning Common Stock and/or Preferred Stock in
excess of the applicable Existing Holder Limit shall be void ab initio as to the
Transfer of such shares of Common Stock and/or Preferred Stock which would be
otherwise Beneficially Owned by such Existing Holder in excess of the applicable
Existing Holder Limit; and such Existing Holder shall acquire no rights in such
shares of Common Stock and/or Preferred Stock.

              (iv)  Except as provided in Section 12 of this Article VII, from
the date of the Initial Public Offering and prior to the Restriction Termination
Date, any Transfer that, if effective, would result in the Common Stock and/or
Preferred Stock being Beneficially Owned by less than 100 Persons (determined
without reference to any rules of attribution) shall be void ab initio as to the
Transfer of such shares of Common Stock and/or Preferred Stock which would be
otherwise Beneficially Owned by the transferee; and the intended transferee
shall acquire no rights in such shares of Common Stock and/or Preferred Stock.

              (v)   From the date of the Initial Public Offering and prior to
the Restriction Termination Date, any Transfer that, if effective, would result
in the Corporation being "closely held" within the meaning of Section 856(h) of
the Code shall be void ab initio as to the Transfer of the shares of Common
Stock and/or Preferred Stock which would cause the Corporation to


                                      -7-



<PAGE>   8

be "closely held" within the meaning of Section 856(h) of the Code; and the
intended transferee shall acquire no rights in such shares of Common Stock
and/or Preferred Stock.

              SECTION 3. EXCESS STOCK. (i) If, notwithstanding the other
provisions contained in this Article VII, at any time after the date of the
Initial Public Offering and prior to the Restriction Termination Date, there is
a purported Transfer or other change in the capital structure of the Corporation
(except for a change resulting from the exchange of OP Units or Debt for Equity
Stock) such that any Person would Beneficially Own Common Stock and/or Preferred
Stock in excess of the applicable Ownership Limit or Existing Holder Limit,
then, except as otherwise provided in Section 9 and Section 12 of this Article
VII, such shares of Common Stock and/or Preferred Stock in excess of such
Ownership Limit or Existing Holder Limit (rounded up to the nearest whole share)
shall constitute "Excess Stock" and be a treated as provided in this Article
VII. Such designation and treatment shall be effective as of the close of
business on the business day prior to the date of the purported Transfer or
change in capital structure (except for a change resulting from the exchange of
OP Units or Debt for Equity Stock).

              (ii)  If, notwithstanding the other provisions contained in this
Article VII, at any time after the date of the Initial Public Offering and prior
to the Restriction Termination Date, there is a purported Transfer or other
change in the capital structure of the Corporation (except for a change
resulting from the exchange of OP Units or Debt for Equity Stock) which, if
effective, would cause the Corporation to become "closely held" within the
meaning of Section 856(h) of the Code, then the shares of Common Stock and/or
Preferred Stock being Transferred which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code (rounded up to
the nearest whole share) shall constitute Excess Stock and be treated as
provided in this Article VII. Such designation and treatment shall be effective
as of the close of business on the business day prior to the date of the
purported Transfer or change in capital structure (except for a change resulting
from the exchange of OP Units or Debt for Equity Stock).

              SECTION 4. PREVENTION OF TRANSFER. If the Board of Directors or
its designee shall at any time determine in good faith that a Transfer has taken
place in violation of Section 2 of this Article VII or that a Person intends to
acquire or has attempted to acquire beneficial ownership (determined without
reference to any rules of attribution) or Beneficial Ownership of any shares of
stock of the Corporation in violation of Section 2 of this Article VII, the
Board of Directors or its designee shall take such action as it deems advisable
to refuse to give effect to or to prevent such Transfer, including, but not
limited to, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer; provided,
however, that any Transfers or attempted Transfers in violation of subparagraphs
(ii), (iii) and (v) of Section 2 of this Article VII shall automatically result
in the designation and treatment described in Section 3 of this Article VII,
irrespective of any action (or non-action) by the Board of Directors.

              SECTION 5. NOTICE TO CORPORATION. Any Person who acquires or
attempts to acquire shares in violation of Section 2 of this Article VII, or any
Person who is a transferee such that Excess Stock results under Section 3 of
this Article VII, shall immediately give written notice or, in the event of a
proposed or attempted Transfer, give at least 15 days prior written notice to
the Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or attempted Transfer on the Corporation's status as a
REIT.


                                      -8-


<PAGE>   9




              SECTION 6. INFORMATION FOR CORPORATION. From the date of the
Initial Public Offering and prior to the Restriction Termination Date:

              (i)   every Beneficial Owner of more than 5.0% (or such other
percentage, between 1/2 of 1.0% and 5.0%, as provided in the income tax
regulations promulgated under the Code) of the number or value of outstanding
shares of Equity Stock shall, within 30 days after January 1 of each year, give
written notice to the Corporation stating the name and address of such
Beneficial Owner, the number of shares Beneficially Owned, and a description of
how such shares are held. Each such Beneficial Owner shall provide to the
Corporation such additional information as the Corporation may reasonably
request in order to determine the effect, if any, of such Beneficial Ownership
on the Corporation's status as a REIT; and

              (ii)  each Person who is a Beneficial Owner of Common Stock and/or
Preferred Stock and each Person (including the stockholder of record) who is
holding Common Stock and/or Preferred Stock for a Beneficial Owner shall provide
to the Corporation such information that the Corporation may reasonably request
in order to determine the Corporation's status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.

              SECTION 7. OTHER ACTION BY BOARD. Nothing contained in this
Article VII shall limit the authority of the Board of Directors to take such
other action as it deems necessary or advisable to protect the Corporation and
the interests of its stockholders by preservation of the Corporation's status as
a REIT.

              SECTION 8. AMBIGUITIES. In the case of an ambiguity in the
application of any of the provisions of this Article VII, including any
definition contained in Section 1 of this Article VII, the Board of Directors
shall have the power to determine the application of the provisions of this
Article VII with respect to any situation based on the facts known to it.

              SECTION 9. MODIFICATION OF EXISTING HOLDER LIMITS. The Existing
Holder Limits may be modified as follows:

              (i)   Subject to the limitations provided in Section 11 of this
Article VII, the Board of Directors may grant stock options which result in
Beneficial Ownership of Common Stock and/or Preferred Stock by an Existing
Holder pursuant to a stock option plan approved by the Board of Directors and/or
the stockholders of the Corporation. Any such grant shall increase the Existing
Holder Limit for the affected Existing Holder to the maximum extent possible
under Section 11 of this Article VII to permit the Beneficial Ownership of the
shares of Common Stock and/or Preferred Stock issuable upon the exercise of such
stock options.

              (ii)  Subject to the limitations provided in Section 11 of this
Article VII, an Existing Holder may elect to participate in a dividend
reinvestment plan approved by the Board of Directors which results in Beneficial
Ownership of Common Stock and/or Preferred Stock by such participating Existing
Holder and any comparable reinvestment plan of MHC Operating Limited
Partnership, an Illinois limited partnership to be formed, wherein those
Existing Holders holding OP Units are entitled to purchase additional OP Units.
Any such participation shall increase the Existing Holder Limit for the affected
Existing Holder to the maximum extent possible under Section 11 of this Article
VII to permit Beneficial Ownership of the shares of Common Stock and/or
Preferred Stock acquired as a result of such participation.


                                      -9-


<PAGE>   10


              (iii) The Board of Directors will reduce the Existing Holder Limit
for any Existing Holder after any Transfer permitted in this Article VII by such
Existing Holder by the percentage of the outstanding Equity Stock so Transferred
or after the lapse (without exercise) of a stock option described in
subparagraph (i) of Section 9 of this Article VII by the percentage of the
Equity Stock that the stock option, if exercised, would have represented, but in
either case no Existing Holder Limit shall be reduced to a percentage which is
less than the Ownership Limit.

              SECTION 10. INCREASE IN OWNERSHIP LIMIT. Subject to the
limitations provided in Section 11 of this Article VII. the Board of Directors
may from time to time increase the Ownership Limit.

              SECTION 11. LIMITATIONS ON CHANGES IN EXISTING HOLDER LIMITS AND
OWNERSHIP LIMITS. (i) Neither the Ownership Limit nor any Existing Holder Limit
may be increased (nor may any additional Existing Holder Limit be created) if,
after giving effect to such increase (or creation), five Beneficial Owners of
Common Stock (including all of the then Existing Holders) could Beneficially
Own, in the aggregate, more than 50.0% in number or value of the outstanding
shares of Equity Stock.

              (ii)  Prior to the modification of any Existing Holder Limit or
Ownership Limit pursuant to Section 9 or Section 10 of this Article VII, the
Board of Directors may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary or advisable in order to
determine or ensure the Corporation's status as a REIT.

              (iii) No Existing Holder Limit shall be reduced to a percentage
which is less than the Ownership Limit.

              SECTION 12. EXEMPTIONS BY BOARD. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of counsel
or other evidence satisfactory to the Board of Directors and upon at least 15
days written notice from a Transferee prior to the proposed Transfer which, if
consummated, would result in the intended Transferee owning shares in excess of
the Ownership Limit or the Existing Holder Limit, as the case may be, and upon
such other conditions as the Board of Directors may direct, may exempt a Person
from the Ownership Limit or the Existing Holder Limit, as the case may be.

              SECTION 13. LEGEND. Each certificate for shares of Common Stock
and for shares of Preferred Stock shall bear substantially the following legend:

              The securities represented by this certificate are
              subject to restrictions on transfer for the purpose
              of the Corporation's maintenance of its status as a
              real estate investment trust under the Internal
              Revenue Code of 1986, as amended. Except as
              otherwise provided pursuant to the charter of the
              Corporation, no Person may Beneficially Own shares
              of Common Stock and/or Preferred Stock in excess of
              5.0% (or such greater percentage as may be
              determined by the Board of Directors of the
              Corporation) of the number or value of the
              outstanding Equity Stock of the Corporation (unless
              such Person is an Existing Holder). Any Person who
              attempts or proposes to Beneficially Own shares of


                                      -10-


<PAGE>   11


              Common Stock and/or Preferred Stock in excess of
              the above limitations must notify the Corporation
              in writing at least 15 days prior to such proposed
              or attempted Transfer. All capitalized terms in
              this legend have the meanings defined in the
              charter of the Corporation, a copy of which,
              including the restrictions on transfer, will be
              sent without charge to each stockholder who so
              requests. If the restrictions on transfer are
              violated, the securities represented hereby will be
              designated and treated as shares of Excess Stock
              which will be held in trust by the Corporation

              SECTION 14. SEVERABILITY. If any provision of this Article VII or
any application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity and
enforceability of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent necessary to
comply with the determination of such court.

              SECTION 15. TRUST FOR EXCESS STOCK. Upon any purported Transfer
that results in Excess Stock pursuant to Section 3 of this Article VII, such
Excess Stock shall be deemed to have been transferred to the Corporation, as
Trustee of a Trust for the benefit of such Beneficiary or Beneficiaries to whom
an interest in such Excess Stock may later be transferred pursuant to Section 19
of this Article VII. Shares of Excess Stock so held in trust shall be issued and
outstanding stock of the Corporation. The Purported Record Transferee shall have
no rights in such Excess Stock except the right to designate a transferee of
such Excess Stock upon the terms specified in Section 19 of this Article VII.
The Purported Beneficial Transferee shall have no rights in such Excess Stock
except as provided in Section 19 of this Article VII.

              SECTION 16. NO DIVIDENDS FOR EXCESS STOCK. Excess Stock shall not
be entitled to any dividends. Any dividend or distribution paid prior to the
discovery by the Corporation that the shares of Common Stock and/or Preferred
Stock have been Transferred so as to be deemed Excess Stock shall be repaid to
the Corporation upon demand.

              SECTION 17. LIQUIDATION DISTRIBUTIONS FOR EXCESS STOCK. Subject to
the preferential rights of the Preferred Stock, if any, as may be determined by
the Board of Directors, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any other distribution of all or
substantially all of the assets of, the Corporation, each holder of shares of
Excess Stock shall be entitled to receive, in the case of Excess Stock
constituting Preferred Stock, ratably with each other holder of Preferred Stock
and Excess Stock constituting Preferred Stock and, in the case of Excess Stock
constituting Common Stock, ratably with each other holder of Common Stock and
Excess Stock constituting Common Stock, that portion of the assets of the
Corporation available for distribution to its stockholders as the number of
shares of the Excess Stock held by such holder bears to the total number of
shares of (i) Preferred Stock and Excess Stock then outstanding in the case of
Excess Stock constituting Preferred Stock and (ii) Common Stock and Excess Stock
then outstanding in the case of Excess Stock constituting Common Stock. The
Corporation, as holder of the Excess Stock in trust, or if the Corporation shall
have been dissolved, any trustee appointed by the Corporation prior to its
dissolution, shall distribute ratably to the Beneficiaries of the Trust, when
determined, any such assets received in respect of the Excess Stock in any
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation.



                                      -11-


<PAGE>   12




              SECTION 18. NO VOTING RIGHTS FOR EXCESS STOCK. The holders of
shares of Excess Stock shall not be entitled to vote on any matter.

              SECTION 19. NON-TRANSFERABILITY OF EXCESS STOCK. Excess Stock
shall not be transferable. The Purported Record Transferee may freely designated
a Beneficiary of an interest in the Trust (representing the number of shares of
Excess Stock held by the Trust attributable to a purported Transfer that
resulted in the Excess Stock), if (i) the shares of Excess Stock held in the
Trust would not be Excess Stock in the hands of such Beneficiary and (ii) the
Purported Beneficial Transferee does not receive a price for designating such
Beneficiary that reflects a price per share for such Excess Stock that exceeds
(x) the price per share such Purported Beneficial Transferee paid for the Common
Stock and/or Preferred Stock, as the case may be, in the purported Transfer that
resulted in the Excess Stock, or (y) if the Purported Beneficial Transferee did
not give value for such Excess Stock (through a gift, devise or other
transaction), a price per share equal to the Market Price for the shares of the
Excess Stock on the date of the purported Transfer that resulted in the Excess
Stock. Upon such transfer of an interest in the Trust, the corresponding shares
of Excess Stock in the Trust shall be automatically exchanged for an equal
number of shares of Common Stock and/or Preferred Stock, as applicable, and such
shares of Common Stock and/or Preferred Stock, as applicable, shall be
transferred of record to the transferee of the interest in the Trust if such
shares of Common Stock and/or Preferred Stock, as applicable, would not be
Excess Stock in the hands of such transferee. Prior to any transfer of any
interest in the Trust, the Purported Record Transferee must give advance notice
to the Corporation of the intended transfer and the Corporation must have waived
in writing its purchase rights under Section 20 of this Article VII.

              Notwithstanding the foregoing, if a Purported Beneficial
Transferee receives a price for designating a Beneficiary of an interest in the
Trust that exceeds the amounts allowable under this Section 19 of this Article
VII, such Purported Beneficial Transferee shall pay, or cause such Beneficiary
to pay, such excess to the Corporation.

              If any of the foregoing restrictions on transfer of Excess Stock
are determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Corporation, to have acted as an agent of the Corporation in acquiring
such Excess Stock and to hold such Excess Stock on behalf of the Corporation.

              SECTION 20. CALL BY CORPORATION ON EXCESS STOCK. Shares of Excess
Stock shall be deemed to have been offered for sale to the Corporation, or its
designee, at a price per share equal to the lesser of (i) the price per share in
the transaction that created such Excess Stock (or, in the case of a devise or
gift, the Market Price at the time of such devise or gift) and (ii) the Market
Price of the Common Stock or Preferred Stock to which such Excess Stock relates
on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of 90 days
after the later of (i) the date of the Transfer which resulted in such Excess
Stock and (ii) the date the Board of Directors determines in good faith that a
Transfer resulting In Excess Stock has occurred, if the Corporation does not
receive a notice of such Transfer pursuant to Section 5 of this Article VII but
in no event later than a permitted Transfer pursuant to and in compliance with
the terms of Section 19 of this Article VII.


                                      -12-


<PAGE>   13




                                  ARTICLE VIII

                                   AMENDMENTS

         The Corporation reserves the right from time to time to make any
amendment to its charter, now or hereafter authorized by law, including any
amendment altering the terms or contract rights, as expressly set forth in this
charter, of any shares of outstanding stock. Any amendment to the charter of the
Corporation shall be valid only if such amendment shall have been approved by
the affirmative vote of two-thirds of all the votes entitled to be cast on the
matter. All rights and powers conferred by the charter of the Corporation on
stockholders, directors and officers are granted subject to this reservation.

                                   ARTICLE IX

                             LIMITATION OF LIABILITY

         To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers, no director or
officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this Article
IX, nor the adoption or amendment of any other provision of the charter or
Bylaws of the Corporation inconsistent with this Article IX, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.

         FOURTH: The amendment to and restatement of the charter of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders of the Corporation as required by
law.

         FIFTH: The current address of the principal office of the Corporation
is as set forth in Article IV of the foregoing amendment and restatement of the
charter.

         SIXTH: The name and address of the Corporation's current resident agent
is as set forth in Article IV of the foregoing amendment and restatement of the
charter.

         SEVENTH: The number of directors of the Corporation is 10, and the
names of the directors currently in office are:

                             Samuel Zell
                             Howard Walker
                             Donald S. Chisholm
                             Thomas E. Dobrowski
                             David A. Helfand
                             Louis H. Masotti
                             John F. Podjasek Jr.
                             Sheli Z. Rosenberg
                             Michael A. Torres
                             Gary L. Waterman


                                      -13-


<PAGE>   14




         IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this 11th day of May, 1999.

ATTEST:                            MANUFACTURED HOME COMMUNITIES, INC.

/s/ Susan Obuchowski               By: /s/ Howard Walker                  (SEAL)
- ----------------------------          --------------------------
Susan Obuchowski, Secretary           Howard Walker, President


         THE UNDERSIGNED, President of Manufactured Home Communities, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment and
Restatement, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles of Amendment
and Restatement to be the corporate act of said corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.




                                             By: /s/ Howard Walker
                                                --------------------------------
                                                Howard Walker, President



                                      -14-


<PAGE>   1
                                                                     EXHIBIT 3.2

                      MANUFACTURED HOME COMMUNITIES, INC.

                             ARTICLES SUPPLEMENTARY

                                5,000,000 SHARES

        9.000% SERIES D CUMULATIVE REDEEMABLE PERPETUAL PREFERRED STOCK


         MANUFACTURED HOME COMMUNITIES, INC., a Maryland corporation (the
"COMPANY"), hereby certifies to the State Department of Assessments and
Taxation of Maryland (the "DEPARTMENT") that:

         FIRST:  Pursuant to the authority expressly vested in the Board of
Directors of the Company by Article V of the Articles of Amendment and
Restatement of the Company filed with the Department on May 21, 1999 (the
"CHARTER") and Section 2-105 of the Maryland General Corporation Law (the
"MGCL"), the Board of Directors of the Company (the "BOARD OF DIRECTORS") at a
teleconference meeting held on September 23, 1999, by resolutions duly adopted
on September 23, 1999 has classified 5,000,000 shares of the authorized but
unissued Preferred Stock par value $.01 per share ("PREFERRED STOCK") as a
separate class of Preferred Stock, authorized the issuance of a maximum of
5,000,000 shares of such class of Preferred Stock, set certain of the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, terms and
conditions of redemption and other terms and conditions of such class of
Preferred Stock, and determined the number of shares of such class of Preferred
Stock (not in excess of the aforesaid maximum number) to be issued and the
consideration and other terms and conditions upon which such shares of such
class of Preferred Stock are to be issued.

         SECOND:  The Board of Directors has unanimously adopted resolutions
designating the aforesaid class of Preferred Stock as the "9.000% Series D
Cumulative Redeemable Perpetual Preferred Stock," setting the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other terms
and conditions of such 9.000% Series D Cumulative Redeemable Perpetual
Preferred Stock (to the extent not set by the Board of Directors in the
resolutions referred to in Article FIRST of these Articles Supplementary) and
authorizing the issuance of up to 5,000,000 shares of 9.000% Series D
Cumulative Redeemable Perpetual Preferred Stock.

         THIRD:  The class of Preferred Stock of the Company created by the
resolutions duly adopted by the Board of Directors and referred to in Articles
FIRST and SECOND of these Articles Supplementary shall have the following
designation, number of shares, preferences, conversion and other rights, voting
powers, restrictions and limitation as to dividends and other distributions,
qualifications, terms and conditions of redemption and other terms and
conditions:
<PAGE>   2
         SECTION 1.  DESIGNATION AND NUMBER.  A series of Preferred Stock,
designated the "9.000% Series D Cumulative Redeemable Perpetual Preferred
Stock" (the "SERIES D PREFERRED STOCK") is hereby established.  The number of
shares of Series D Preferred Stock shall be 5,000,000.

         SECTION 2. RANK.  The Series D Preferred Stock will, with respect to
distributions and rights upon voluntary or involuntary liquidation, winding-up
or dissolution of the Company, rank senior to all classes or series of Common
Stock (as defined in the Charter) and to all classes or series of equity
securities of the Company now or hereafter authorized, issued or outstanding,
other than any class or series of equity securities of the Company expressly
designated as ranking on a parity with or senior to the Series D Preferred
Stock as to distributions and rights upon voluntary or involuntary liquidation,
winding-up or dissolution of the Company.  For purposes of these Articles
Supplementary, the term "PARITY PREFERRED STOCK" shall be used to refer to any
class or series of equity securities of the Company now or hereafter
authorized, issued or outstanding expressly designated by the Company to rank
on a parity with Series D Preferred Stock with respect to distributions and
rights upon voluntary or involuntary liquidation, winding-up or dissolution of
the Company.  The term "equity securities" does not include debt securities,
which will rank senior to the Series D preferred stock prior to conversion.

         SECTION 3.  DISTRIBUTIONS.  (a) Payment of Distributions.  Subject to
the rights of holders of Parity Preferred Stock as to the payment of
distributions and holders of equity securities ranking senior to the Series D
Preferred Stock as to payment of distributions, holders of Series D Preferred
Stock will be entitled to receive, when, as and if declared by the Company, out
of funds legally available for the payment of distributions, cumulative
preferential cash distributions at the rate per annum of 9.000% of the $25
liquidation preference per share of Series D Preferred Stock.  All
distributions shall be cumulative, shall accrue from the original date of
issuance and shall be payable (i) quarterly (such quarterly periods for
purposes of payment and accrual will be the quarterly periods ending on the
dates specified in this sentence and not calendar quarters) in arrears, on March
31, June 30, September 30 and December 31 of each year, commencing on the first
of such dates to occur after the original date of issuance and, (ii) in the
event of a redemption, on the redemption date (each such payment or redemption
date, a "PREFERRED SHARES DISTRIBUTION PAYMENT DATE").  The amount of the
distribution payable for any period will be computed based on the ratio of a
360-day year of twelve 30-day months and for any period shorter than a full
quarterly period for which distributions are computed, the amount of the
distribution payable will be computed on the basis of the actual number of days
elapsed in such a period to ninety (90) days.  If any date on which
distributions are to be made on the Series D Preferred Stock is not a Business
Day (as defined herein), then payment of the distribution to be made on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except that,
if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on
<PAGE>   3
                                       3

such date.  Distributions on the Series D Preferred Stock will be made to the
holders of record of the Series D Preferred Stock on the relevant record dates,
which, unless otherwise provided by the Company with respect to any
distribution, will be fifteen (15) Business Days prior to the relevant
Preferred Stock Distribution Payment Date (each a "DISTRIBUTION RECORD DATE").
Notwithstanding anything to the contrary set forth herein, each share of Series
D Preferred Stock shall also continue to accrue all accrued and unpaid
distributions up to the exchange date on any Series D Preference Unit (as
defined in the Second Amended and Restated MHC Operating Limited Partnership
Agreement of Limited Partnership, dated as of March 15, 1996 (the "PARTNERSHIP
AGREEMENT"), as amended and supplemented through the date hereof) validly
exchanged into such share of Series D Preferred Stock in accordance with the
provisions of such Partnership Agreement.

         The term "BUSINESS DAY" shall mean each day, other than a Saturday or
a Sunday, which is not a day on which banking institutions in New York, New
York are authorized or required by law, regulation or executive order to close.

         (b)  Limitations on Distributions.  No distributions on the Series D
Preferred Stock shall be declared or paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration, payment or setting
apart for payment shall be restricted or prohibited by law.

         (c)  Distributions Cumulative.  Notwithstanding the foregoing,
distributions on the Series D Preferred Stock will accrue whether or not
declared, whether or not the terms and provisions set forth in SECTION 3(b)
hereof at any time prohibit the current payment of distributions, whether or
not the Company has earnings, whether or not there are funds legally available
for the payment of such distributions and whether or not such distributions are
authorized or declared.  Accrued but unpaid distributions on the Series D
Preferred Stock will accumulate as of the Preferred Stock Distribution Payment
Date on which they first become payable.  Accumulated and unpaid distributions
will not bear interest.

         (d)  Priority as to Distributions.  (i) So long as any Series D
Preferred Stock is outstanding, no distribution of cash or other property shall
be authorized, declared, paid or set apart for payment on or with respect to
any class or series of Common Stock or any class or series of other stock of
the Company ranking junior to the Series D Preferred Stock as to the payment of
distributions or rights upon voluntary or involuntary dissolution, liquidation
or winding-up (such Common Stock or other junior stock, collectively, "JUNIOR
STOCK"), nor shall any cash or other property be set aside for or applied to
the purchase, redemption or other acquisition for consideration of any Series D
Preferred Stock, any Parity Preferred Stock or any
<PAGE>   4
                                       4

Junior Stock, unless, in each case, all distributions accumulated on all Series
D Preferred Stock and all classes and series of outstanding Parity Preferred
Stock have been paid in full.  The foregoing sentence will not prohibit (i)
distributions payable solely in Junior Stock, (ii) the conversion of Junior
Stock or Parity Preferred Stock into stock of the Company ranking junior to the
Series D Preferred Stock as to distributions and upon liquidation, winding-up
or dissolution, (iii) purchase by the Company of such Series D Preferred Stock,
Parity Preferred Stock or Junior Stock pursuant to Article VII of the Charter
to the extent required to preserve the Company's status as a real estate
investment trust, (iv) any distributions to the Company necessary for it to
maintain its status as a "real estate investment trust" under the Code, or (v)
the redemption, purchase or other acquisition of Junior Stock made for purposes
of and in compliance with requirements of an employee incentive or benefit plan
of the Company or any subsidiary of the Partnership or the Company.

              (ii)  So long as distributions have not been paid in full (or a
sum sufficient for such full payment is not irrevocably deposited in trust for
immediate payment) upon the Series D Preferred Stock, all distributions
authorized and declared on the Series D Preferred Stock and all classes or
series of outstanding Parity Preferred Stock shall be authorized and declared
so that the amount of distributions authorized and declared per share of Series
D Preferred Stock and such other classes or series of Parity Preferred Stock
shall in all cases bear to each other the same ratio that accrued distributions
per share on the Series D Preferred Stock and such other classes or series of
Parity Preferred Stock (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if such class or series of
Parity Preferred Stock does not have cumulative distribution rights) bear to
each other.

         (e)  No Further Rights.  Holders of Series D Preferred Stock shall not
be entitled to any distributions, whether payable in cash, other property or
otherwise, in excess of the full cumulative distributions described herein.

         SECTION 4.  LIQUIDATION PREFERENCE.  (a) Payment of Liquidating
Distributions.  Subject to the rights of holders of Parity Preferred Stock with
respect to rights upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company and subject to equity securities ranking senior to
the Series D Preferred Stock with respect to rights upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the holders
of Series D Preferred Stock shall be entitled to receive out of the assets of
the Company legally available for distribution or the proceeds thereof, after
payment or provision for debts and other liabilities of the Company, but before
any payment or distributions of the assets shall be made to holders of Common
Stock or any other class or series of shares of the Company that ranks junior
to the Series D Preferred Stock as to rights upon liquidation, dissolution or
winding-up of the Company, an amount equal to the sum of (i) a liquidation
preference of $25 per share of Series D Preferred Stock, and (ii) an amount
equal to any accumulated and unpaid distributions thereon, whether or not
declared, to the date of payment.  In the event that, upon such voluntary or
<PAGE>   5
                                       5

involuntary liquidation, dissolution or winding-up, there are insufficient
assets to permit full payment of liquidating distributions to the holders of
Series D Preferred Stock and any Parity Preferred Stock as to rights upon
liquidation, dissolution or winding-up of the Company, all payments of
liquidating distributions on the Series D Preferred Stock and such Parity
Preferred Stock shall be made so that the payments on the Series D Preferred
Stock and such Parity Preferred Stock shall in all cases bear to each other the
same ratio that the respective rights of the Series D Preferred Stock and such
other Parity Preferred Stock (which shall not include any accumulation in
respect of unpaid distributions for prior distribution periods if such Parity
Preferred Stock does not have cumulative distribution rights) upon liquidation,
dissolution or winding-up of the Company bear to each other.

         (b)  Notice.  Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Company, stating the payment date
or dates when, and the place or places where, the amounts distributable in such
circumstances shall be payable, shall be given by (i) fax and (ii) by first
class mail, postage pre-paid, not less than thirty (30) and not more than sixty
(60) days prior to the payment date stated therein, to each record holder of
the Series D Preferred Stock at the respective addresses of such holders as the
same shall appear on the share transfer records of the Company.

         (c)  No Further Rights.  After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Series D
Preferred Stock will have no right or claim to any of the remaining assets
of the Company.

         (d)  Consolidation, Merger or Certain Other Transactions.  The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Company to, or the consolidation or merger or other
business combination of the Company with or into any corporation, trust or
other entity (or of any corporation, trust or other entity with or into the
Company) shall not be deemed to constitute a liquidation, dissolution or
winding-up of the Company.

         SECTION 5.  OPTIONAL REDEMPTION.  (a) Right of Optional Redemption.
Except in connection with a request for demand registration pursuant to a
registration rights agreement then in effect between the Company and holders of
Series D Preferred Stock, the Series D Preferred Stock may not be redeemed
prior to September 29, 2004. On or after such date, the Company shall have the
right to redeem the Series D Preferred Stock, in whole or in part, at any time
or from time to time, upon not less than thirty (30) nor more than sixty (60)
days' written notice, at a redemption price, payable in cash, equal to $25 per
share of Series D Preferred Stock plus accumulated and unpaid distributions,
whether or not declared, to the date of redemption.  If fewer than all of the
outstanding shares of Series D Preferred Stock are to be redeemed, the shares
of Series D Preferred Stock to be redeemed shall be selected pro rata (as
nearly as
<PAGE>   6
                                       6

practicable without creating fractional units).  Further, in order to ensure
that the Company remains a qualified real estate investment trust for federal
income tax purposes, the Series D Preferred Stock will also be subject to the
provisions of Article VII of the Charter.

         (b)  Limitation on Redemption.  The Company may not redeem fewer than
all of the outstanding shares of Series D Preferred Stock unless all
accumulated and unpaid distributions have been paid on all outstanding Series D
Preferred Stock for all quarterly distribution periods terminating on or prior
to the date of redemption; provided, however, that the foregoing shall not
prevent the purchase or acquisition of Series D Preferred Stock or Parity
Preferred Stock pursuant to a purchase or exchange offer made on the same terms
to holders of all Series D Preferred Stock or Parity Preferred Stock, as the
case may be, which offer may be accepted by such holders in such holders' sole
discretion.

         (c)  Procedures for Redemption.  (i) Notice of redemption will be (i)
faxed, and (ii) mailed by the Company, postage prepaid, not less than thirty
(30) nor more than sixty (60) days prior to the redemption date, addressed to
the respective holders of record of the Series D Preferred Stock to be redeemed
at their respective addresses as they appear on the transfer records of the
Company.  No failure to give or defect in such notice shall affect the validity
of the proceedings for the redemption of any Series D Preferred Stock except as
to the holder to whom such notice was defective or not given.  In addition to
any information required by law or by the applicable rules of any exchange upon
which the Series D Preferred Stock may be listed or admitted to trading, each
such notice shall state:  (i) the redemption date, (ii) the redemption price,
(iii) the number of shares of Series D Preferred Stock to be redeemed, (iv) the
place or places where such shares of Series D Preferred Stock are to be
surrendered for payment of the redemption price, (v) that distributions on the
Series D Preferred Stock to be redeemed will cease to accumulate on such
redemption date and (vi) that payment of the redemption price and any
accumulated and unpaid distributions will be made upon presentation and
surrender of such Series D Preferred Stock.  If fewer than all of the shares of
Series D Preferred Stock held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of shares of Series D
Preferred Stock held by such holder to be redeemed.

              (ii)  If the Company gives a notice of redemption in respect of
Series D Preferred Stock (which notice will be irrevocable) then, by 12:00
noon, New York City time, on the redemption date, the Company will deposit
irrevocably in trust for the benefit of the Series D Preferred Stock being
redeemed funds sufficient to pay the applicable redemption price, plus any
accumulated and unpaid distributions, if any, on such shares to the date fixed
for redemption, without interest, and will give irrevocable instructions and
authority to pay such redemption price and any accumulated and unpaid
distributions, whether or not declared, if any, on such shares to the holders
of the Series D Preferred Stock upon surrender of the Series D Preferred Stock
by such holders at the place designated in the notice of redemption.  If fewer
than all Series D Preferred Stock evidenced by any certificate is being
redeemed, a new certificate shall
<PAGE>   7
                                       7

be issued upon surrender of the certificate evidencing all Series D Preferred
Stock, evidencing the unredeemed Series D Preferred Stock without cost to the
holder thereof.  On and after the date of redemption, distributions will cease
to accumulate on the Series D Preferred Stock or portions thereof called for
redemption, unless the Company defaults in the payment thereof.  If any date
fixed for redemption of Series D Preferred Stock is not a Business Day, then
payment of the redemption price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption.  If payment of the redemption price or any
accumulated or unpaid distributions in respect of the Series D Preferred Stock
is improperly withheld or otherwise not paid by the Company, distributions on
such Series D Preferred Stock will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating
the applicable redemption price and any accumulated and unpaid distributions.

         (d)  Status of Redeemed Stock.  Any Series D Preferred Stock that
shall at any time have been redeemed shall after such redemption, have the
status of authorized but unissued Preferred Stock, without designation as to
class or series until such shares are once more designated as part of a
particular class or series by the Board of Directors.

         SECTION 6.  VOTING RIGHTS. (a)  General.  Holders of the Series D
Preferred Stock will not have any voting rights, except as set forth below.

         (b)  Right to Elect Directors.  (i) If at any time full distributions
shall not have been timely made on any Series D Preferred Stock with respect to
any six (6) prior quarterly distribution periods, whether or not consecutive,
(a "PREFERRED DISTRIBUTION DEFAULT"), the holders such Series D Preferred
Stock, voting together as a single class with the holders of each class or
series of Parity Preferred Stock upon which like voting rights have been
conferred and are exercisable, will have the right to elect two additional
directors to serve on the Company's Board (the "PREFERRED STOCK DIRECTORS") at
a special meeting called by holders of record of at least 10% of the
outstanding shares of Series D Preferred Stock or any such class or series of
Parity Preferred Stock or at the next annual meeting of stockholders, and at
each subsequent annual meeting of stockholders or special meeting held in place
thereof, until all such distributions in arrears and distributions for the
current quarterly period on the Series D Preferred Stock and each such class or
series of Parity Preferred Stock have been paid in full.

              (ii) At any time when such voting rights shall have vested, a
proper officer of the Company shall call or cause to be called, upon written
request of holders of record of at least 10% of the outstanding Shares of
Series D Preferred Stock, a special meeting of the holders of Series D
Preferred Stock and all the series of Parity Preferred Stock upon which like
voting
<PAGE>   8
                                       8

rights have been conferred and are exercisable (collectively, the "PARITY
SECURITIES") by mailing or causing to be mailed to such holders a notice of
such special meeting to be held not less than ten and not more than forty-five
(45) days after the date such notice is given.  The record date for determining
holders of the Parity Securities entitled to notice of and to vote at such
special meeting will be the close of business on the third Business Day
preceding the day on which such notice is mailed.  At any such special
meeting, all of the holders of the Parity Securities, by plurality vote, voting
together as a single class without regard to series will be entitled to elect
two directors on the basis of one vote per $25 of liquidation preference to
which such Parity Securities are entitled by their terms (excluding amounts
in respect of accumulated and unpaid dividends) and not cumulatively.  The
holder or holders of one-third of the Parity Securities then outstanding,
present in person or by proxy, will constitute a quorum for the election of the
Preferred Stock Directors except as otherwise provided by law.  Notice of all
meetings at which holders of the Series D Preferred Shares shall be entitled to
vote will be given to such holders at their addresses as they appear in the
transfer records.  At any such meeting or adjournment thereof in the absence of
a quorum, subject to the provisions of any applicable law, the holders of a
majority in interest of the Parity Securities present in person or by proxy
shall have the power to adjourn the meeting for the election of the Preferred
Stock Directors, without notice other than an announcement at the meeting,
until a quorum is present.  If a Preferred Distribution Default shall terminate
after the notice of a special meeting has been given but before such special
meeting has been held, the Company shall, as soon as practicable after such
termination, mail or cause to be mailed notice of such termination to holders
of the Series D Preferred Shares that would have been entitled to vote at such
special meeting.

              (iii)  If and when all accumulated distributions and the
distribution for the current distribution period on the Series D Preferred
Stock shall have been paid in full or a sum sufficient for such payment is
irrevocably deposited in trust for payment, the holders of the Series D
Preferred Stock shall be divested of the voting rights set forth in SECTION 6(b)
herein (subject to revesting in the event of each and every Preferred
Distribution Default) and, if all distributions in arrears and the
distributions for the current distribution period have been paid in full or set
aside for payment in full on all other classes or series of Parity Preferred
Stock upon which like voting rights have been conferred and are exercisable,
the term and office of each Preferred Stock Director so elected shall
terminate.  Any Preferred Stock Director may be removed at any time with or
without cause by the vote of, and shall not be removed otherwise than by the
vote of, the holders of record of a majority of the outstanding Series D
Preferred Stock when they have the voting rights set forth in SECTION 6(b)
(voting separately as a single class with all other classes or series of Parity
Preferred Stock upon which like voting rights have been conferred and are
exercisable).  So long as a Preferred Distribution Default shall continue, any
vacancy in the office of a Preferred Stock Director may be filled by written
consent of the Preferred Stock Director remaining in office, or if none remains
in office, by a vote of the holders of record of a majority of the outstanding
Series D Preferred Stock when they have the voting rights set forth in SECTION
6(b) (voting separately as a single class with all other classes or series
<PAGE>   9
                                       9

of Parity Preferred Stock upon which like voting rights have been conferred and
are exercisable).  The Preferred Stock Director shall each be entitled to one
vote per director on any matter.

         (c)  Certain Voting Rights.  So long as any Series D Preferred Stock
remains outstanding, the Company shall not, without the affirmative vote of the
holders of at least two-thirds of the Series D Preferred Stock outstanding at
the time (i) designate or create, or increase the authorized or issued amount
of, any class or series of shares ranking senior to the Series D Preferred
Stock with respect to payment of distributions or rights upon liquidation,
dissolution or winding-up or reclassify any authorized shares of the Company
into any such shares, or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any such shares, (ii)
designate or create, or increase the authorized or issued amount of, any
Parity Preferred Stock or any stock which purport to be on parity with the
Series D Preferred Stock as to either (but not both) distributions or rights
upon dissolution, liquidation or winding up, or reclassify any authorized
shares of the Company into any such shares, or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase
any such shares, but only to the extent such Parity Preferred Stock or any
stock which purport to be on parity with the Series D Preferred Stock as to
either (but not both) distributions or rights upon dissolution, liquidation or
winding up is issued to an affiliate of the Company (as such term is defined in
Rule 144 of the General Rules and Regulations under the Securities Act of
1933), or (iii) either (A) consolidate, merge into or with, or convey, transfer
or lease its assets substantially as an entirety, to any corporation or other
entity, or (B) amend, alter or repeal the provisions of the Company's Charter
(including these Articles Supplementary) or By-laws, whether by merger,
consolidation or otherwise, in each case in such a way that would materially
and adversely affect the powers, special rights, preferences, privileges or
voting power of the Series D Preferred Stock or the holders thereof; provided,
however, that with respect to the occurrence of a merger, consolidation or a
sale or lease of all of the Company's assets as an entirety, so long as (a) the
Company is the surviving entity and the Series D Preferred Stock remains
outstanding with the terms thereof unchanged, or (b) the resulting, surviving
or transferee entity is a corporation organized under the laws of any state and
substitutes for the Series D Preferred Stock other preferred stock having
substantially the same terms and same rights as the Series D Preferred Stock,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect the rights, privileges
or voting powers of the holders of the Series D Preferred Stock.
Notwithstanding anything to the contrary contained in clause (ii) above, the
Company may (x) create additional classes and series of Parity Preferred Stock
and stock junior to the Series D Preferred Stock with respect to payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding-up, or both, (y) increase the authorized number of Parity Preferred
Stock and stock junior to the Series D Preferred Stock with respect to payment
of distributions or the distribution of assets upon liquidation, dissolution or
winding-up, or both, and (z) issue additional classes and series of Parity
Preferred Stock and stock junior to the Series D Preferred Stock with respect
to payment of distributions or the
<PAGE>   10
                                       10

distribution or assets upon liquidation, dissolution or winding-up, or both,
without the consent of any holders of Series D Preferred Stock, to any
"affiliate" of the Company (as such term is defined in Rule 144 of the General
Rules and Regulations under the Securities Act of 1933), provided that any such
Parity Preferred Stock or any stock which purport to be on parity with the
Series D Preferred Stock as to either (but not both) distributions or rights
upon dissolution, liquidation or winding up is issued with the consent of the
majority of the independent directors of the Company's Board of Directors.

         SECTION 7.  TRANSFER RESTRICTIONS.  The Series D Preferred Stock shall
be subject to the provisions of Article VII of the Charter.

         SECTION 8.  NO CONVERSION RIGHTS.  The holders of the Series D
Preferred Stock shall not have any rights to convert such shares into shares of
any other class or series of stock or into any other securities of, or interest
in, the Company.

         SECTION 9.  NO SINKING FUND.  No sinking fund shall be established for
the retirement or redemption of Series D Preferred Stock.

         SECTION 10.  NO PREEMPTIVE RIGHTS.  No holder of the Series D
Preferred Stock of the Company shall, as such holder, have any preemptive
rights to purchase or subscribe for additional shares of stock of the Company
or any other security of the Company which it may issue or sell.

         FOURTH:  The Series D Preferred Stock have been classified and
designated by the Board under the authority contained in the Charter.

         FIFTH:  These Articles Supplementary have been approved by the Board
in the manner and by the vote required by law.

         SIXTH:  The undersigned President of the Company acknowledges these
Articles Supplementary to be the corporate act of the Company and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
<PAGE>   11
         IN WITNESS WHEREOF, the Company has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Asst. Secretary on this 28th day of
September, 1999.

                                                 MANUFACTURED HOME
                                                 COMMUNITIES, INC.


                                                 By:  /s/ Howard Walker
                                                     ---------------------------
                                                     Name:  Howard Walker
                                                     Title: President/CEO


    [SEAL]

    ATTEST:


    /s/ Ellen Kelleher
    ------------------------------



The undersigned president of Manufactured Home Communities, Inc., who executed
on behalf of the corporation the Articles Supplementary of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
said corporation the foregoing Articles Supplementary to be the corporate act
of said corporation and hereby certifies that the matter and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.


                                                 By:  /s/ Howard Walker
                                                     ---------------------------
                                                     Name:  Howard Walker
                                                     Title: President/CEO




<PAGE>   1
                                                                     EXHIBIT 3.3



                       MANUFACTURED HOME COMMUNITIES, INC.

                                     BYLAWS

                  (Including Amendments through March 18, 1999)

                                    ARTICLE I

                                     OFFICES


         Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.

         Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.


                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

         Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.

         Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of February in 1993 and during the month of May in
each year thereafter.

         Section 3. SPECIAL MEETINGS. The president, chief, executive officer or
Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary upon the written
request of the holders of shares entitled to cast not less than ten percent of
all the votes entitled to be cast at such meeting. Such request shall state the
purpose of such meeting and the matters proposed to be acted on at such meeting.
The secretary shall inform such stockholders of the reasonably estimated cost of
preparing and mailing notice of the meeting and, upon payment to the Corporation
of such costs, the

<PAGE>   2


secretary shall give notice to each stockholder entitled to notice of the
meeting. Unless requested by the stockholders entitled to cast a majority of all
the votes entitled to be cast at such meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the stockholders held during the preceding twelve
months.

         Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by statute, the purpose for which the meeting is called, either by
mail or by presenting it to such stockholder personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail addressed to the stockholder
at his post office address as it appears on the records of the Corporation, with
postage thereon prepaid.

         Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by statute to be
stated in such notice. No business shall be transacted at a special meeting of
stockholders except as specifically designated in the notice.

         Section 6. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the Charter of Corporation
for the vote necessary for the adoption of any measure. If, however, such quorum
shall not be present at any meeting of the stockholders, the stockholders
entitled to vote at such meeting, present in person or by proxy, shall have
power to adjourn the meeting from time to time to a date not more than 120 days
after the original record date without notice other than announcement at the
meeting. At such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.

         Section 7. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called and
at which a


                                       2
<PAGE>   3



quorum is present shall be sufficient to approve any other matter which may
properly come before the meeting, unless more than a majority of the votes cast
is required by statute or by the Charter of Corporation. Unless otherwise
provided in the Charter, each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.

         Section 8. PROXIES. A stockholder may vote the stock owned of record by
him, either in person or by proxy executed, in writing by the stockholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.

         Section 9. VOTING OF STOCK BY CERTAIN HOLDERS. Stock registered in the
name of a corporation, partnership, trust or other entity, if entitled to be
voted, may be voted by the president or a vice president, a general partner or
trustee thereof, as the case may be, or a proxy appointed by any of the
foregoing individuals, unless some other person who has been appointed to vote
such stock pursuant to a bylaw or a resolution of the board of directors of such
corporation or other entity presents a certified copy of such bylaw or
resolution, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.

                  Shares of stock of the Corporation directly or indirectly
owned by it shall not be voted at any meeting and shall not be counted in
determining the total number of outstanding shares entitled to be voted at any
given time, unless they are held by it in a fiduciary capacity, in which case
they may be voted and shall be counted in determining the total number of
outstanding shares at any given time.

                  The Board of Directors may adopt by resolution a procedure by
which a stockholder may certify in writing to the Corporation that any shares of
stock registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of


                                       3
<PAGE>   4


such certification, the person specified in the certification shall be regarded
as, for the purposes set forth in the certification, the stockholder of record
of the specified stock in place of the stockholder who makes the certification.

                  Notwithstanding any other provision of the Charter of the
Corporation or these Bylaws, Title 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of stock of the
Corporation.

         Section 10. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may, or upon the request of any stockholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the stockholders.

                  Each report of an inspector shall be in writing and signed by
him or by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.

         Section 11. NOMINATIONS AND STOCKHOLDER BUSINESS

                  (a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of
persons for election to the Board of Directors and the proposal of business to
be considered by the stockholders may be made at an annual meeting of
stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at
the direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this Section 11(a), who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 11(a).

                  (2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 11, the stockholder must have given timely notice thereof
in writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual


                                        4
<PAGE>   5


meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall set
forth (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y) the class and number
of shares of stock of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner.

                  (3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 11 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Corporation
at least 70 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 11(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.

                  (b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected (i) pursuant to the
Corporation's


                                        5
<PAGE>   6


notice of meeting, (ii) by or at the direction of the Board of Directors or
(iii) provided that the Board of Directors has determined that directors shall
be elected at such special meeting, by any stockholder of the Corporation who is
a stockholder of record at the time of giving of notice provided for in this
Section 11(b), who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 11(b). In the event the Corporation
calls a special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder may nominate a person
or persons (as the case may be) for election to such position as specified in
the Corporation's notice of meeting, if the stockholder's notice required by
paragraph (a)(2) of this Section 11(b) shall be delivered to the secretary at
the principal executive offices of the Corporation not earlier than the 90th day
prior to such special meeting and not later than the close of business on the
later of the 60th day prior to such special meeting or the tenth day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting.

                  (c) GENERAL. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 11 shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 11. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination or, any
business proposed to be brought before the meeting was made in accordance with
the procedures set forth in this Section 11 and, if any proposed nomination or
business is not in compliance with this Section 11, to declare that such
defective nomination or proposal be disregarded.

                  (2) For purposes of this Section 11, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones New Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Sections
13, 14 or 15(d) of the Exchange Act.

                  (3) Notwithstanding the foregoing provisions of this Section
11, a stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 11. Nothing in this Section 11
shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the

                                        6
<PAGE>   7

Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.

         Section 12. INFORMAL ACTION BY STOCKHOLDERS. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by each
stockholder entitled, to vote on the matter and any other stockholder entitled
to notice of a meeting of stockholders (but not to vote thereat) has waived in
writing any right to dissent from such action, and such consent and waiver are
filed with the minutes of proceedings of the stockholders.

         Section 13. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.


                                   ARTICLE III

                                    DIRECTORS

         Section 1. GENERAL POWERS; QUALIFICATIONS. The business and affairs of
the Corporation shall be managed under the direction of its Board of Directors.

         Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or
at any special meeting called for that purpose, a majority of the entire Board
of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors. Pursuant to the charter of the Corporation,
the directors have been divided into classes with terms of three years, with the
term of office of one class expiring at the annual meeting of stockholders in
each year. Each director shall hold office for the term for which he is elected
and until his successor is elected and qualified.

         Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.

         Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the


                                       7

<PAGE>   8



board (or any co-chairman of the board if more than one), president or by a
majority of the directors then in office. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Directors called by them.

         Section 5. NOTICE. Notice of any special meeting shall be given by
written notice delivered personally, transmitted by facsimile, telegraphed or
mailed to each director at his business or residence address. Personally
delivered, facsimile transmitted or telegraphed notices shall be given at least
two days prior to the meeting. Notice by mail shall be given at least five days
prior to the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail properly addressed, with postage thereon
prepaid. If given by telegram, such notice shall be deemed to be given when the
telegram is delivered to the telegraph company. Neither the business to be
transacted at, nor the purpose of, any annual, regular or special meeting of the
Board of Directors need be stated in the notice, unless specifically required by
statute or these Bylaws.

         Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to the
Charter of the Corporation or these Bylaws, the vote of a majority of a
particular group of directors is required for action, a quorum must also include
a majority of such group.

                  The Board of Directors present at a meeting which has been
duly called and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.

         Section 7. VOTING. The action of the majority of the directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.

         Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.



                                        8
<PAGE>   9



         Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.

         Section 10. VACANCIES. If for any reason any or all the directors cease
to be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, although such majority is less than a quorum. Any
vacancy in the number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors. Any
individual so elected as director shall hold office for the unexpired term of
the director he is replacing.

         Section 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors but, by resolution of the Board of Directors,
fixed sums per year and/or per meeting. Expenses of attendance, if any, may be
allowed to directors for attendance at each annual, regular or special meeting
of the Board of Directors or of any committee thereof; but nothing herein
contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.

         Section 12. REMOVAL OF DIRECTORS. The stockholders may remove any
director for cause, in the manner provided in the Charter of Corporation.

         Section 13. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.

         Section 14. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.

         Section 15. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,


                                       9
<PAGE>   10


appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.

         Section 16. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to those
of or relating to the Corporation.


                                   ARTICLE IV

                                   COMMITTEES

         Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit Committee
and other committees, composed of two or more directors, to serve at the
pleasure of the Board of Directors.

         Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.

         Section 3. MEETINGS. In the absence of any member of any such
committee, the members thereof present at any meeting,, whether or not they
constitute a quorum, may appoint another director to act in the place of such
absent member.

         Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.

         Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.


                                       10
<PAGE>   11

                                    ARTICLE V

                                    OFFICERS

         Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board (or one or more co-chairmen of the board), a
vice chairman of the board, one or more vice presidents, a chief operating
officer, a chief financial officer, a treasurer, one or more assistant
secretaries and one or more assistant treasurers. In addition, the Board of
Directors may from time to time appoint such other officers with such powers and
duties as they shall deem necessary or desirable. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
stockholders, except that the chief executive officer may appoint one or more
vice presidents, assistant secretaries and assistant treasurers. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except president and
vice president may be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except that of president, treasurer and
secretary. Election of an officer or agent shall not of itself create contract
rights between the Corporation and such officer or agent.

         Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board (or any
co-chairman of the board if more than one), the president or the secretary. Any
resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation shall not be
necessary to make it effective unless otherwise stated in the resignation.

         Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.

         Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors shall
designate a chief executive officer. In the absence of such


                                       11
<PAGE>   12


designation, the chairman of the board (or, if more than one, the co-chairmen of
the board in the order designated at the time of their election or, in the
absence of any designation, then in the order of their election) shall be the
chief executive officer of the Corporation. The chief executive officer shall
have general responsibility for implementation of the policies of the
Corporation, as determined by the Board of Directors, and for the management of
the business and affairs of the Corporation.

         Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

         Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

         Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board (or one or more co-chairmen of the board). The
chairman of the board shall preside over the meetings of the Board of Directors
and of the stockholders at which he shall be present. If there be more than one,
the co-chairmen designated by the Board of Directors will perform such duties.
The chairman of the board shall perform such other duties as may be assigned to
him or them by the Board of Directors.

         Section 8. PRESIDENT. The president or chief executive officer, as the
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief operating
officer by the Board of Directors, the president shall be the chief operating
officer. He may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.

         Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to


                                       12
<PAGE>   13


time may be assigned to him by the president or by the Board of Directors. The
Board of Directors may designate one or more vice presidents as executive vice
president or as vice president for particular areas of responsibility.

         Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the trust records and of the seal of the
Corporation; (d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder; (e) have general
charge of the share transfer books of the Corporation; and (f) in general
perform such other duties as from time to time may be assigned to him by the
chief executive officer, the president or by the Board of Directors.

         Section 11. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.

                  The treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account 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 in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.

         Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board


                                       13
<PAGE>   14


of Directors, give bonds for the faithful performance of their duties in such
sums and with such surety or sureties as shall be satisfactory to the Board of
Directors.

         Section 13. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director.


                                   ARTICLE VI

                      CONTRACTS, LOANS, CHECKS AND DEPOSITS

         Section 1. CONTRACTS. The Board of Directors may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the directors or by an authorized person
shall be valid and binding upon the Board of Directors and upon the Corporation
when authorized or ratified by action of the Board of Directors.

         Section 2. CHECKS AND DRAFTS. 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 shall from time to time be
determined by the Board of Directors.

         Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.


                                   ARTICLE VII

                                      STOCK

         Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile.


                                       14
<PAGE>   15


Certificates shall be consecutively numbered; and if the Corporation shall, from
time to time, issue several classes of stock, each class may have its own number
series. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. In lieu of such statement or summary, the Corporation may set forth
upon the face or back of the certificate a statement that the Corporation will
furnish to any stockholder, upon request and without charge, a full statement of
such information.

         Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.

                  The Corporation shall be entitled to treat the holder of
record of any share of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Maryland.

                  Notwithstanding the foregoing, transfers of shares of any
class of stock will be subject in all respects to the Charter of the Corporation
and all of the terms and conditions contained therein.

         Section 3. LOST CERTIFICATE. The Board of Directors(or any officer
designated by it) may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or his legal representative to advertise
the same in such manner as they shall require and/or to give bond, with
sufficient surety, to the Corporation to indemnify it against any loss or claim
which may arise as a result of the issuance of a new certificate.


                                       15
<PAGE>   16


         Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of stockholders, not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders is to be held or taken.

                  In lieu of fixing a record date, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period but
not longer than 20 days. If the stock transfer books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.

                  If no record date is fixed and the stock transfer books are
not closed for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the directors, declaring the dividend or allotment of rights, is adopted.

                  When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the transfer books and the
stated period of closing has expired.

         Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.

         Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the Charter or


                                       16
<PAGE>   17


these Bylaws, the Board of Directors may issue units consisting of different
securities of the Corporation. Any security issued in a unit shall have the same
characteristics as any identical securities issued by the Corporation, except
that the Board of Directors may provide that for a specified period securities
of the Corporation issued in such unit may be transferred on the books of the
Corporation only in such unit.


                                  ARTICLE VIII

                                 ACCOUNTING YEAR

                  The Board of Directors shall have the power, from time to
time, to fix the fiscal year of the Corporation by a duly adopted resolution.



                                   ARTICLE IX

                                    DIVIDENDS

         Section 1. DECLARATION. Dividends upon the stock of the Corporation may
be declared by the Board of Directors, subject to the provisions of law and the
Charter of the Corporation. Dividends may be paid in cash, property or stock of
the Corporation, subject to the provisions of law and the Charter.

         Section 2. CONTINGENCIES. Before payment of any dividends, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may from time to time, in its absolute
discretion, think proper as a reserve fund for contingencies, for equalizing
dividends, for repairing or maintaining any property of the Corporation or for
such other purpose as the Board of Directors shall determine to be in the best
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.


                                    ARTICLE X

                                INVESTMENT POLICY

         Subject to the provisions of the Charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any policy
or policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.


                                       17
<PAGE>   18


                                   ARTICLE XI

                                      SEAL

         Section 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall have inscribed thereon the name of the
Corporation and the year of its organization. The Board of Directors may
authorize one or more duplicate seals and provide for the custody thereof.

         Section 2. AFFIXING SEAL. Whenever the Corporation is required to place
its seal to a document, it shall be sufficient to meet the requirements of any
law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent
to the signature of the person authorized to execute the document on behalf of
the Corporation.


                                   ARTICLE XII

                    INDEMNIFICATION OF OFFICERS AND DIRECTORS

         Section 1. RIGHT TO INDEMNIFICATION. (a) Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter, a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter, an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, partner, trustee, employee or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the General
Corporation Law of the State of Maryland, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all liability, loss and reasonable expenses
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) actually incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, partner, trustee, employee
or agent and shall inure to the benefit of the


                                       18
<PAGE>   19


indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 3 of this Article with respect to proceedings to
enforce rights to indemnification, the Corporation shall be required to
indemnify a person in connection with a proceeding (or part thereof) initiated
by such person only if the proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.

                  (b) The Corporation's obligation, if any, to indemnify any
person who was or is serving at its request as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit entity.

         Section 2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section 1 of this Article shall include the right
to be paid by the Corporation the reasonable expenses (including attorneys' fees
(which may be of counsel selected by the indemnitee)) incurred by the indemnitee
in connection with any proceeding for which such right to indemnification is
applicable in advance of its final disposition, without requiring a preliminary
determination of the ultimate entitlement to indemnification; provided, however,
that the Corporation shall have first received a written affirmation by such
indemnitee of the indemnitee's good faith belief that the standard of conduct
necessary for indemnification by the Corporation as authorized by the General
Corporation Law of the State of Maryland has been met, and a written undertaking
by or on behalf of such indemnitee to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee did not meet the applicable
standard of conduct.

         Section 3. RIGHT OF INDEMNITEE TO BRING SUIT. The rights to
indemnification and to the advancement of expenses conferred in Sections 1 and 2
of this Article shall be contract rights. If a claim under Sections 1 and 2 of
this Article is not paid in full by the Corporation within sixty days after a
written claim therefor has been received by the Corporation, except in case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the


                                       19
<PAGE>   20


indemnitee to enforce a right to an advancement of expenses) it shall be a
defense of the Corporation that, and (ii) any suit by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the General Corporation Law of the State of Maryland. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper under
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Maryland, nor
an actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section or otherwise, shall be on he
Corporation.

         Section 4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
to the advancement of expenses conferred in this Article shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Corporation's Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.

         Section 5. INSURANCE. The Corporation may maintain insurance (including
self-insurance), at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the General Corporation Law of the
State of Maryland.

         Section 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article with respect to indemnification and advancement of
expenses of directors and officers of the Corporation.


                                       20
<PAGE>   21

         Section 7. REPEALS AND MODIFICATIONS. Any repeal or modification of the
foregoing provisions of this Article shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.

                                  ARTICLE XIII

                                WAIVER OF NOTICE

                  Whenever any notice is required to be given pursuant to the
Charter of the Corporation or these Bylaws or pursuant to applicable law, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at nor the purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where such
person attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened.


                                   ARTICLE XIV

                               AMENDMENT OF BYLAWS

                  The Board of Directors shall have the exclusive power to
adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.


                                       21


<PAGE>   1
                                                                     EXHIBIT 5.1

                        STEPTOE & JOHNSON LLP LETTERHEAD

                                November 12, 1999


Manufactured Home Communities, Inc.
Two North Riverside Plaza
Chicago, Illinois  60606

  Re:    Registration Statement on Form S-3

Ladies and Gentlemen:

         We have acted as counsel to Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), in connection with the registration of
2,000,000 shares (the "Shares") of common stock, $.01 par value per share, of
the Company ("Common Stock") to be issued pursuant to the Company's Dividend
Reinvestment and Share Purchase Plan (the "Plan") pursuant to the above
referenced Registration Statement (the "Registration Statement"), filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act").

         In connection with our representation of the Company and as a basis for
the opinion hereinafter set forth, we have examined the Registration Statement,
corporate records, certificates of public officials and Company officers, and
such other documents as we deemed appropriate or necessary for the purpose of
rendering this opinion.

         Based on the foregoing, it is our opinion that the Shares of the
Company covered by the Registration Statement have been duly authorized and, if
and when issued and delivered against payment therefor in the manner described
in the Plan (assuming that the sum of (a) all shares of Common Stock issued and
outstanding as of the date hereof, (b) any shares of Common Stock issued between
the date hereof and the dates on which the Shares are actually issued (not
including any of the Shares), and (c) the Shares will not exceed the total
number of shares of Common Stock that the Company is authorized to issue), the
Shares will be validly issued, fully paid and nonassessable.

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement.

                                  Very truly yours,



                                  /s/ STEPTOE & JOHNSON LLP
                                  STEPTOE & JOHNSON LLP

<PAGE>   1
                                                                     EXHIBIT 8.1

                          STEPTOE & JOHNSON LLP LETTERHEAD

                               November 12, 1999


Manufactured Home Communities, Inc.
MHC Operating Limited Partnership
Two North Riverside Plaza
Chicago, Illinois  60606

Dear Sirs/Madams:

         We have acted as counsel to Manufactured Home Communities, Inc. a
Maryland corporation (the "Company"), in connection with its registration
statement on Form S-3 (the "Registration Statement", which includes the
Prospectus) filed with the Securities and Exchange Commission on November 11,
1999, relating to the proposed public offering of up to 2,000,000 common shares
of beneficial interest, par value $.01 per share, of the Company (the "Common
Shares"), issuable in connection with the Company's Dividend Reinvestment and
Share Purchase Plan (the "Plan"). This opinion letter is furnished to you at
your request to enable the Company to fulfill the requirements of Item 601(b)(5)
of Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in connection with the
Registration Statement. In connection with the registration of the Stock, we
have been asked to provide an opinion regarding certain federal income tax
matters related to the Company.

         The opinion set forth in this letter is based on relevant provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
thereunder (including proposed and temporary Treasury Regulations), and
interpretations of the foregoing as expressed in court decisions, administrative
determinations, and the legislative history, all as of the date hereof. These
provisions and interpretations are subject to change, which may or may not be
retroactive in effect, that might result in modifications of our opinion.

         In rendering our opinion, we have examined such statutes, regulations,
records, certificates and other documents as we have considered necessary or
appropriate as a basis for such opinion, including the following: (1) the
Registration Statement (including the exhibits thereto and all amendments
thereto made through the date hereof); (2) the Articles of Amendment and
Restatement of the Company as in effect on the date hereof; (3) the Second
Amended and Restated Partnership Agreement for MHC Operating Limited
Partnership, dated as of March 15, 1996, together with amendments and joinders
thereto; (4) the MHC Management Limited



<PAGE>   2

Manufactured Home Communities, Inc.
November 12, 1999
Page 2


Partnership Agreement of Limited Partnership, dated as of March 3, 1993, and the
MHC-DAG Management Limited Partnership Agreement of Limited Partnership, dated
as of August 18, 1994 (collectively, these two partnerships will be referred to
herein as the "Management Partnerships"); (5) the articles of incorporation,
by-laws and stock ownership information for the Management Corporations and RSI;
(6) the partnership agreements of the Financing Partnerships and all other
partnerships in which the Operating Partnership has an interest (collectively,
the "Subsidiary Partnerships") and the operating agreements of the limited
liability companies in which the Operating Partnership has an interest
(collectively, the "Subsidiary LLCs") (for a list of the wholly-owned Subsidiary
Partnerships and Subsidiary LLCs, see Exhibit A attached hereto); and (7) the
articles of incorporation, by-laws and stock ownership information of the QRS
Corporations (for a list of the QRS Corporations, see Exhibit B attached
hereto). The Management Partnerships, the Management Corporations, the QRS
Corporations, RSI, the Subsidiary Partnerships and the Subsidiary LLCs, may be
collectively referred to herein as the "Subsidiary Entities." The opinion set
forth in this letter also is premised on certain representations made to us by
you.

         In our review, we have assumed, with your consent, that all of the
representations and statements set forth in the documents we reviewed are true
and correct in all material respects, and all of the obligations imposed by any
such documents on the parties thereto have been and will be performed or
satisfied substantially in accordance with their terms. Moreover, we have
assumed that the Company, the Operating Partnership, and the Subsidiary Entities
each have operated and will continue to operate substantially in the manner
described in the relevant partnership agreement, articles of incorporation or
other organizational documents and in the Prospectus. We also have assumed the
genuineness of all signatures, the proper execution of all documents, the
authenticity of all documents submitted to us as copies, and the authenticity of
the originals from which any copies were made.

         For the purposes of our opinion, we have not made an independent
investigation of the facts set forth in documents we reviewed or of
representations made to us by you. We consequently have assumed that the
information presented in such documents or otherwise furnished to us accurately
and completely describes all material facts relevant to our opinion. In
particular, but without limiting the foregoing, we have assumed that, based on
representations made to us by you, all amenities and services provided to
tenants of the Properties by the Operating Partnership, the Management
Partnerships, RSI or any other Subsidiary Entity are usually or customarily
rendered in connection with the rental of space for occupancy only of the same
asset type as the Properties in the respective geographic markets in which the
Properties are located, and are not services rendered primarily for the
convenience of the tenant. We also have assumed for the purposes of this opinion
that the Company is a validly organized and duly incorporated corporation under
the laws of the State of Maryland, that the Management Corporations, RSI and the
QRS Corporations are validly organized and duly incorporated corporations under
the laws of the states in which they are incorporated, and that the Operating



<PAGE>   3

Manufactured Home Communities, Inc.
November 12, 1999
Page 3



Partnership, the Management Partnerships, and the Subsidiary Partnerships are
duly organized and validly existing partnerships under the laws of the states in
which they are organized.

         Based upon, and subject to, the foregoing and the next paragraph below,
we are of the opinion that:


         1.  The Company was organized and has operated in conformity with the
         requirements for qualification and taxation as a REIT under the Code
         for its taxable years ended December 31, 1993, December 31, 1994,
         December 31, 1995, December 31, 1996, December 31, 1997, and December
         31, 1998 and the Company's current organization and method of operation
         should enable it to continue to meet the requirements for qualification
         and taxation as a REIT under the Code;


         2.  The discussion in the Registration Statement under the heading
         "Taxes," to the extent that it constitutes matters of law or legal
         conclusions, is correct in all material respects as of the date hereof;
         and


         3.  The discussion in the Registration Statement under the heading
         "Certain Federal Income Tax Considerations," to the extent that it
         constitutes matters of law or legal conclusions, is correct in all
         material respects as of the date hereof.

         The Company's qualification and taxation as a REIT under the Code
depend upon the Company's ability to meet on a continuing basis, through actual
annual operating and other results, the various requirements under the Code and
described in the Prospectus with regard to, among other things, the sources of
its gross income, the composition of its assets, the level of its distributions
to stockholders, and the diversity of its share ownership. Steptoe & Johnson LLP
will not review the Company's compliance with these requirements on a continuing
basis. No assurance can be given that the actual results of the operations of
the Company, the Operating Partnership, and the Subsidiary Entities, the sources
of their gross income, the composition of their assets, the level of the
Company's distributions to stockholders and the diversity of its share ownership
for any given taxable year will satisfy the requirements under the Code for
qualification and taxation as a REIT.

         For a discussion relating the law to the facts and the legal analysis
underlying the opinion set forth in this letter, we incorporate by reference the
discussion of federal income tax issues, which we assisted in preparing, in the
section of the Prospectus under the heading "Taxes" and "Certain Federal Income
Tax Considerations."

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein.



<PAGE>   4
Manufactured Home Communities, Inc.
November 12, 1999
Page 4







                                          Very truly yours,


                                          /s/ Steptoe & Johnson LLP
                                          Steptoe & Johnson LLP



<PAGE>   5
Manufactured Home Communities, Inc.
November 12, 1999
Page 5



                                                                       EXHIBIT A
                      WHOLLY-OWNED SUBSIDIARY PARTNERSHIPS

MHC Lending Limited Partnership;

MHC-DeAnza Financing Limited Partnership;

MHC-Bay Indies Financing Limited Partnership;

MHC Financing Limited Partnership;

MHC Financing Limited Partnership Two;

Blue Ribbon Communities Limited Partnership;

Gold Medal Communities Limited Partnership; and

MHC-Naples Estates LP.

                          WHOLLY-OWNED SUBSIDIARY LLCS

MHC Coquina Crossing, L.L.C.

MHC Naples Estates, L.L.C.

MHC Kloshe Illahee, L.L.C.

MHC Royal Holiday, L.L.C.

MHC Sedona Shadows, L.L.C.

MHC Spanish Oaks, L.L.C.

MHC Villa Borega, L.L.C.

MHC Acquistion One, L.L.C.

MHC Laguna Lake, L.L.C.

MHC Carriage Cove, L.L.C.



<PAGE>   6
                                                                EXHIBIT B
Manufactured Home Communities, Inc.
November 12, 1999
Page 6





                                QRS CORPORATIONS


1.   MHC Lending QRS, Inc.;

2.   MHC-QRS DeAnza, Inc.;

3.   MHC-QRS Bay Indies, Inc.;

4.   MHC-QRS, Inc.;

5.   MHC-QRS Two, Inc.;

6.   MHC-QRS Blue Ribbon Communities, Inc.;

7.   QRS Gold Medal Communities, Inc.;

8.   MHC-QRS Western, Inc.; and

9.   MHC Acquisition QRS, Inc.



<PAGE>   1


                                                                    EXHIBIT 10.1


                                 MORTGAGE NOTE


                                                              New York, New York
$265,000,000                                                  December 12, 1997

FOR VALUE RECEIVED, MHC FINANCING LIMITED PARTNERSHIP, an Illinois limited
partnership ("MHC"), SAMUEL ZELL, not personally, but solely as surviving
trustee under Trust Agreement and Declaration of Trust dated April 15, 1986 and
known as Trust No. 41586 (the "Trust"), ORANGELAND VISTAS, INC., an Illinois
corporation ("Orangeland"), PENNLAND VISTAS, INC., an Illinois corporation
("Pennland"), and SANDLAND VISTAS, INC., an Illinois corporation ("Sandland"),
each having its principal office at c/o Manufactured Home Communities, Inc., 2
North Riverside Plaza, Suite 800, Chicago, Illinois 60606 (MHC, the Trust,
Orangeland, Pennland and Sandland are collectively referred to herein as,
"Maker"), jointly and severally promise to pay to the order of MIDLAND LOAN
SERVICES, L.P., a Missouri limited partnership, or its assigns ("Payee"), having
its principal office at 210 West 10th Street, Kansas City, Missouri 64105, the
Principal Amount (as defined below), together with interest on the outstanding
principal balance hereunder from the date hereof at the Applicable Interest Rate
(as defined below). Interest accruing hereunder shall be calculated on the basis
of a 360-day year composed of twelve (12) months of thirty (30) days each.

          WHEN USED HEREIN, the following capitalized terms shall have
the following meanings:

"Applicable Interest Rate" shall mean (a) from the date of this Note through but
not including the Reset Date (as hereinafter defined), a rate of seven and
978/10,000 percent (7.0978%) per annum (the "Initial Interest Rate") and (b)
from and after the Reset Date through and including the date this Note is paid
in full, a rate per annum equal to the greater of (i) the Initial Interest Rate
plus two percent (2.0%) or (ii) the Treasury Rate (as hereinafter defined) plus
two percent (2.0%) (the "Revised Interest Rate"). For purposes of this Note, (A)
the term "Reset Date" shall mean the date that is the tenth (10th) year
anniversary of the last day of the month in which the Closing Date occurs and
(B) the term Treasury Rate" shall mean, as of the Reset Date, the yield,
calculated by linear interpolation (rounded to the nearest one-thousandth of one
percent) of noncallable United States Treasury obligations with terms (one
longer and one shorter) most nearly approximating the period from the Reset Date
to the date which is ten (10) years after the Reset Date, as determined by Payee
on the basis of Federal Reserve Statistical Release H.15 Selected Interest Rates
under the heading U.S.
<PAGE>   2




Governmental Security/Treasury Constant Maturities or other recognized source of
financial market information selected by Payee during the week prior to the
Reset Date.

         "Commencement Date" shall be February 1, 1998.

         "Closing Date" shall be December 12, 1997.

         "Default Rate" shall be the Applicable Interest Rate plus three percent
(3.0%) per annum.

         "Initial Monthly Amount" shall be $1,567,430.83.

         "Maturity Date" shall be January 2, 2028 or, if such day is not a
Business Day, then on the next preceding Business Day

         "Payment Date" shall be the first Business Day of each month commencing
on February 1, 1998 and continuing thereafter through and including the Maturity
Date.

         "Principal Amount" shall be $265,000,000.

         Capitalized terms not defined herein shall have the meaning ascribed to
them in the Mortgage (as hereinafter defined).

         1.   The Principal Amount and interest thereon shall be due and payable
in lawful money of the United States as follows

                   (a)  Prior to the Reset Date, interest shall accrue on the
         unpaid principal balance from time to time outstanding on this Note at
         the Initial Interest Rate. On the Closing Date, all interest on the
         unpaid balance through the end of the month in which the Closing Date
         occurs shall be due and payable. Thereafter, commencing on the
         Commencement Date and continuing until the Payment Date next following
         the Reset Date, 120 equal monthly installments of interest only at the
         Initial Monthly Amount each shall be due and payable. Each such monthly
         installment shall be due on each Payment Date and shall bear interest
         from and after the applicable Payment Date (if and to the extent not
         then paid to Lender).

                   (b)  In the event that the Maker does not prepay the entire
         Principal Amount of this Note and any other amounts outstanding on or
         before the Reset Date, then interest shall thereafter accrue on the
         unpaid principal balance from time to time outstanding on this Note at
         the Revised Interest Rate and Maker shall pay on February 1, 2008 and
         on each Payment Date thereafter up to and including the Maturity Date
         the payments provided for in Section 4 of the Cash Collateral Agreement
         (as defined below) in the order of priority set forth therein. Interest
         accrued at the Revised Interest


                                       2


<PAGE>   3


         Rate and not paid pursuant to the preceding sentence shall be deferred
         and added to the Debt and shall accrue interest at the Revised Interest
         Rate (to the extent permitted by applicable law) (such accrued interest
         is hereinafter referred to as "Accrued Interest"). All of the Debt,
         including Accrued Interest, shall be due and payable on the Maturity
         Date.

                   (c)  In addition, all amounts advanced by Payee pursuant to
         applicable provisions of the Loan Documents (as hereinafter defined),
         together with any interest at the Default Rate or other charges as
         therein provided, shall be due and payable hereunder two days after
         written demand therefor by Payee to Maker or as otherwise provided by
         the Loan Documents. In the event any such advance is not so repaid by
         Maker, Payee may, at its option, first apply any payments received
         hereunder to repay said advances together with any interest thereon or
         other charges as provided in the Loan Documents, and the balance, if
         any, shall be applied in payment of any installment then due. The
         entire remaining unpaid balance of principal of this Note, all interest
         accrued thereon and all other sums payable hereunder or under the Loan
         Documents (collectively, the "Debt") shall be due and payable in full
         on the Maturity Date.

                   (d)  Amounts due on this Note shall be payable, without any
         counterclaim, setoff or deduction whatsoever, in accordance with the
         Cash Collateral Agreement or as Payee or its agent or designee may
         otherwise from time to time designate in writing.

         2.   This Note is secured by an Amended, Restated and Consolidated
Renewal Indenture of Mortgage, Deed of Trust, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
of even date herewith (the "Mortgage") from Maker for the benefit of Payee, by
an Assignment of Rents and Leases of even date herewith (the "Assignment")
from Maker to Payee and by a Cash Collateral Account Security, Pledge,
Assignment and Control Agreement of even date herewith (the "Cash Collateral
Agreement") between Maker and Payee. The Mortgage, the Assignment, the Cash
Collateral Agreement and any other instrument given at any time to secure this
Note are hereinafter collectively called the "Loan Documents."

         3.   (a) Maker shall have no right to prepay the principal of this Note
in full or in part at any time prior to the Reset Date, except as hereinafter
set forth in this paragraph 3.

              (b) Maker shall have the right to prepay the principal of this
Note from the proceeds of insurance or condemnation awards in accordance with
Section 6 of the Mortgage.

              (c) Maker shall have the right to effect a Defeasance of this Note
in whole or in part at the times and otherwise in accordance with the terms and
conditions set forth in the Mortgage.


                                       3

<PAGE>   4



              (d) Notwithstanding the foregoing, this Note may be prepaid in
whole or in part without regard to the Defeasance requirements of the Mortgage
at any time after the date which is three (3) months prior to the Reset Date.
Any partial prepayments of principal shall not change the Payment Dates or
amounts of subsequent monthly installments, unless Payee shall otherwise agree
in writing.

              (e) Upon acceleration of this Note in accordance with its terms
and the terms of the Loan Documents, Maker agrees that Payee shall be entitled
to add to the then outstanding principal amount due hereunder the positive
difference between (i) the amount of the Defeasance Collateral that would be
required to effect a Defeasance of this Note as of the date of such tender and
(ii) the then outstanding principal amount due hereunder. A tender of payment of
the amount necessary to pay and satisfy the entire unpaid principal balance of
this Note or any portion thereof at any time after an Event of Default or an
acceleration by Payee of the indebtedness evidenced hereby, whether such payment
is tendered voluntarily, during or after foreclosure of the Mortgage, or
pursuant to realization upon other security, shall constitute a purposeful
evasion of the prepayment terms of this Note, shall be deemed to be a voluntary
prepayment hereof, and Maker shall be required to pay the amount described
above.

         4.   If Maker defaults in the payment of any installment of principal
and interest on the date on which it shall fall due or in the performance of any
of the agreements, conditions, covenants, provisions or stipulations contained
in this Note or in the Loan Documents, and if such default shall continue beyond
any grace period provided for in the Mortgage so as to constitute an Event of
Default thereunder, then Payee, at its option and without further notice to
Maker, may declare immediately due and payable the entire unpaid principal
balance of this Note, together with interest thereon at an annual rate after the
date of such default equal to the Default Rate, together with all sums due by
Maker under the Loan Documents, anything herein or in the Loan Documents to the
contrary notwithstanding. The foregoing provision shall not be construed as a
waiver by Payee of its right to pursue any other remedies available to it under
the Mortgage, this Note or any other Loan Document, nor shall it be construed to
limit in any way the application of the Default Rate. Any payment hereunder may
be enforced and recovered in whole or in part at such time by one or more of the
remedies provided to Payee in this Note or in the Loan Documents. In the event
that: (i) this Note or any Loan Document is placed in the hands of an attorney
for collection or enforcement or is collected or enforced through any legal
proceeding; (ii) an attorney is retained to represent Payee in any bankruptcy,
reorganization, receivership, or other proceedings affecting creditors' rights
and involving a claim under this Note or any Loan Document; (iii) an attorney is
retained to protect or enforce the lien of the Mortgage or any Loan Document; or
(iv) an attorney is retained to represent Payee in any other proceedings
whatsoever in connection with this Note, the Mortgage, any of the Loan
Documents or any portion of the Trust Estate subject thereto, then Maker shall
pay to Payee all reasonable out-of-pocket attorney's fees, costs and expenses
incurred in connection therewith, including costs of appeal, together with
interest on any judgment obtained by Payee at the Default Rate.



                                       4

<PAGE>   5




         5.   If Maker defaults in the payment of any monthly installment of
principal (other than the final installment due upon acceleration or on the
Maturity Date), interest or required escrows for more than ten (10) days after
any Payment Date therefor, then Maker shall pay to Payee a late payment charge
in an amount equal to three percent (3%) of the amount of the installment not
paid as aforesaid. An additional late charge equal to three percent (3%) of the
monthly payment due will be charged for each successive month the payment
remains outstanding. Said late charge payments if payable, shall be secured by
the Mortgage and the other Loan Documents, shall be payable without notice or
demand by Payee, and are independent of and have no effect upon the rights of
Payee under paragraph 4 above.

         6.   Maker and all endorsers, sureties and guarantors hereby jointly
and severally waive all applicable exemption rights, valuation and appraisement,
presentment for payment, demand, notice of demand, notice of nonpayment or
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Note. Maker and all endorsers, sureties and guarantors
consent to any and all extensions of time, renewals, waivers or modifications
that may be granted by Payee with respect to the payment or other provisions of
this Note and to the release of the collateral or any part thereof, with or
without substitution, and agree that additional makers, endorsers, guarantors or
sureties may become parties hereto without notice to them or affecting their
liability hereunder.

         7.   Payee shall not be deemed, by any act of omission or commission,
to have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the extent specifically set forth
in writing. A waiver of one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent event,

         8.   This Note shall be governed by and construed in accordance with
the laws of the State of New York (the "State").

         9.   The parties hereto intend and believe that each provision in this
Note comports with all applicable law. However, if any provision in this Note is
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
provision shall be given full force and effect to the fullest possible extent
that is legal, valid and enforceable, that the remainder of this Note shall be
construed as if such unlawful, void or unenforceable provision were not
contained therein, and that the rights, obligations and interest of Maker and
the holder hereof under the remainder of this Note shall continue in full force
and effect; provided however, that if any provision of this Note which is found
to be in violation of any applicable law concerns the imposition of interest
hereunder, the rights, obligations and interests of Maker and Payee with respect
to the imposition of interest hereunder shall be governed and controlled by the
provisions of the following paragraph.


                                       5
<PAGE>   6

         10.  It being the intention of Payee and Maker to comply with the laws
of the State with regard to the rate of interest charged hereunder, it is agreed
that, notwithstanding any provision to the contrary in this Note, the Mortgage,
or any of the other Loan Documents, no such provision, including without
limitation any provision of this Note providing for the payment of interest or
other charges, shall require the payment or permit the collection of any amount
("Excess Interest") in excess of the maximum amount of interest permitted by
law to be charged for the use or detention, or the forbearance in the
collection, of all or any portion of the indebtedness evidenced by this Note. If
any Excess Interest is provided for, or is adjudicated to be provided for, in
this Note, the Mortgage, or any of the other Loan Documents, then in such event:

                   (i)   the provisions of this paragraph shall govern;

                   (ii)  Maker shall not be obligated to pay any Excess
              Interest;

                   (iii) any Excess Interest that Payee may have received
              hereunder shall, at the option of Payee, be (x) applied as a
              credit against the unpaid principal balance then due under this
              Note, accrued and unpaid interest thereon not to exceed the
              maximum amount permitted by law, or both, (y) refunded to the
              payor thereof or (z) any combination of the foregoing;

                   (iv)  the applicable interest rate or rates provided for
              herein shall be automatically subject to reduction to the maximum
              lawful rate allowed to be contracted for in writing under the
              applicable usury laws of the aforesaid State, and this Note, the
              Mortgage and the other Loan Documents shall be deemed to have
              been, and shall be, reformed and modified to reflect such
              reduction in such interest rate or rates; and

                   (v)  Maker shall not have any action or remedy against Payee
              for any damages whatsoever or any defense to enforcement of this
              Note, the Mortgage or any other Loan Document arising out of the
              payment or collection of any Excess Interest.

         11.  Upon any endorsement, assignment, or other transfer of this Note
by Payee or by operation of law, the term "Payee," as used herein, shall mean
such endorsee, assignee, or other transferee or successor to Payee then becoming
the holder of this Note. This Note shall inure to the benefit of Payee and its
successors and assigns and shall be binding upon the undersigned and its
successors and assigns. The term "Maker" as used herein shall include the
respective successors and assigns, legal and personal representatives,
executors, administrators, devisees legatees and heirs of maker.



                                       6
<PAGE>   7



         12.  Any notice, demand or other communication which any party may
desire or may be required to give to any other party shall be in writing and
shall be given as provided in the Mortgage.

         13.  To the extent that Maker makes a payment or Payee receives any
payment or proceeds for Maker's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
obligations of Maker hereunder intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Payee.

         14.  Maker shall execute and acknowledge (or cause to be executed and
acknowledged) and deliver to Payee all documents, and take all actions,
reasonably required by Payee from time to time to confirm the rights created or
now or hereafter intended to be created under this Note and the Loan Documents,
to protect and further the validity, priority and enforceability of this Note
and the Loan Documents, to subject to the Loan Documents any property of Maker
intended by the terms of any one or more of the Loan Documents to be encumbered
by the Loan Documents, or otherwise carry out the purposes of the Loan Documents
and the transactions contemplated thereunder; provided, however, that no such
further actions, assurances and confirmations shall increase Maker's obligations
under this Note or the Loan Documents.

         15.  No modification, amendment, extension, discharge, termination or
waiver (a "Modification ") of any provision of this Note, or any one or more of
the other Loan Documents, nor consent to any departure by Maker therefrom, shall
in any event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein, no notice to, or demand
on, Maker shall entitle Maker to any other or future notice or demand in the
same, similar or other circumstances. Payee does not hereby agree to, nor does
Payee hereby commit itself to, enter into any Modification.

         16.  Maker hereby expressly and unconditionally waives, in connection
with any suit, action or proceeding brought by Payee on this Note, any and every
right it may have to (a) a trial by jury, (b) interpose any counterclaim therein
(other than a counterclaim which can only be asserted in the suit, action or
proceeding brought by Payee on this Note and cannot be maintained in a separate
action) and (c) have the same consolidated with any other or separate suit,
action or proceeding.

         17.  Notwithstanding any provision to the contrary in the Mortgage,
this Note or the Loan Documents, recourse to the EXculpated Parties (as defined
in the Mortgage) with respect to any claims arising under or in connection with
this Note shall be limited to the extent provided in Section 33 of the Mortgage.



                                       7

<PAGE>   8


         18.  [Reserved]

         19.  Any legal action or proceeding with respect to this Note and any
action for enforcement of any judgment in respect thereof may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this Note,
Maker hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. Maker irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to Maker at the address for notices set forth in the Mortgage. Maker
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Maker brought in the courts referred to above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of Payee
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Maker in any other jurisdiction.



                                       8
<PAGE>   9


         IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the day and year first above written.


Signed in the presence of:              MHC FINANCING LIMITED
                                        PARTNERSHIP, an Illinois limited
                                        partnership

                                        By:  MHC-QRS, Inc., a Delaware
                                             corporation, its sold
                                             general partner

 /s/ Laura Miller                            By: /s/ Ellen Kelleher
- -------------------------                       ----------------------
Print Name: Laura Miller                        Name:  Ellen Kelleher
                                                Title: Executive Vice President


<PAGE>   10


/s/ Laura Miller                             /s/ Samuel Zell
- --------------------------                   -----------------------------------
Print Name:  Laura Miller                    SAMUEL ZELL, NOT PERSONALLY
                                             OR INDIVIDUALLY, BUT SOLELY
                                             IN HIS CAPACITY AS TRUSTEE
                                             UNDER AN AGREEMENT AND
                                             DECLARATION OF TRUST NUM-
                                             BER 41586 DATED AS OF APRIL 15,
                                             1986




                             Signature Page - Note
<PAGE>   11

                                    ORANGELAND VISTAS, INC.,
                                    an Illinois corporation


/s/ Laura Miller                    By: /s/ Mark J. Parrell
- -------------------------               ----------------------------------------
Print Name: Laura Miller              Name:  Mark J. Parrell
                                      Title: Vice President
<PAGE>   12

                                         PENNLAND VISTAS, INC.,
                                         an Illinois corporation


/s/ Laura Miller                         By: /s/ Mark J. Parrell
- ---------------------------                  -----------------------------------
Print Name:  Laura Miller                    Name:  Mark J. Parrell
                                             Title: Vice President
<PAGE>   13
                                    SANDLAND VISTAS, INC.,
                                    an Illinois corporation


/s/ Laura Miller                    By: /s/ Mark J. Parrell
- -------------------------               ----------------------------------------
Print Name: Laura Miller                Name:  Mark J. Parrell
                                        Title: Vice President

<PAGE>   1
                                                                    EXHIBIT 10.2


                          SECOND AMENDED AND RESTATED
                                CREDIT AGREEMENT
                              (REVOLVING FACILITY)

                                     AMONG

                       MHC OPERATING LIMITED PARTNERSHIP,
                        AN ILLINOIS LIMITED PARTNERSHIP,
                                  AS BORROWER,

                      MANUFACTURED HOME COMMUNITIES, INC.,
                            A MARYLAND CORPORATION,
                                    THE REIT

                             WELLS FARGO BANK, N.A.


                         BANK OF AMERICA NATIONAL TRUST
                            AND SAVINGS ASSOCIATION,


                        COMMERZBANK AKTIENGESELLSCHAFT,
                                 CHICAGO BRANCH

                                      AND

                         MORGAN GUARANTY TRUST COMPANY
                                  OF NEW YORK,

                         TOGETHER WITH THOSE ASSIGNEES
                        BECOMING PARTIES HERETO PURSUANT
                         TO SECTION 11.13, AS LENDERS,

                             WELLS FARGO BANK, N.A.
                 AS AGENT, SWINGLINE LENDER AND ISSUING LENDER,

                         BANK OF AMERICA NATIONAL TRUST
                 AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT,

                                      AND

                         MORGAN GUARANTY TRUST COMPANY
                                  OF NEW YORK,
                             AS DOCUMENTATION AGENT

                           DATED AS OF APRIL 28, 1998
<PAGE>   2
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                            PAGE
<S>                                                                         <C>
ARTICLE I.    DEFINITIONS...................................................  2

1.01.    Certain Defined Terms..............................................  2
1.02.    Computation of Time Periods........................................ 24
1.03.    Terms.............................................................. 24
1.04.    Interrelationship With the Existing Credit Agreement............... 25

ARTICLE II.   LOANS......................................................... 25

2.01.    Loan Advances and Repayment........................................ 25
2.02.    Authorization to Obtain Loans and Letters of Credit................ 27
2.03.    Interest on the Loans.............................................. 28
2.04.    Fees............................................................... 32
2.05.    Payments........................................................... 34
2.07.    Notice of Increased Costs.......................................... 35
2.08.    Option to Replace Lenders.......................................... 35
2.09.    Letters of Credit.................................................. 36
2.10.    Swingline Loans.................................................... 40
2.11.    Conversion to Pre-Extension Term Loan.............................. 43

ARTICLE III.  SECURED FACILITY CONVERSION................................... 43

3.01.    Term-Out and Conversion............................................ 43
3.02.    Documents.......................................................... 44

ARTICLE IV.   CONDITIONS TO LOANS........................................... 45

4.01.    Conditions to Initial Disbursement of Loans and Issuance of
           Letters of Credit................................................ 45
4.02.    Conditions Precedent to All Loans and Issuance of Letters of
           Credit........................................................... 47

ARTICLE V.    REPRESENTATIONS AND WARRANTIES................................ 48

5.01.    Representations and Warranties as to Borrower...................... 48
5.02.    Representations and Warranties as to the REIT...................... 54

ARTICLE VI.   REPORTING COVENANTS........................................... 58

6.01.    Financial Statements and Other Financial and Operating
           Information...................................................... 58
6.02.    Press Releases; SEC Filings and Financial Statements............... 60
6.03.    Environmental Notices.............................................. 60
6.04.    Qualifying Unencumbered Properties................................. 61

ARTICLE VII.  AFFIRMATIVE COVENANTS......................................... 61

7.01.    With respect to Borrower:.......................................... 61
7.02.    With respect to the REIT:.......................................... 64

ARTICLE VIII. NEGATIVE COVENANTS............................................ 65

8.01.    With respect to Borrower:.......................................... 65
8.02.    With respect to the REIT:.......................................... 69

ARTICLE IX.   FINANCIAL COVENANTS........................................... 71

9.01.    Total Liabilities to Gross Asset Value............................. 71
9.02.    Secured Debt to Gross Asset Value.................................. 71
9.03.    EBITDA to Interest Expense Ratio................................... 71
9.04.    EBITDA to Fixed Charges Ratio...................................... 72
</TABLE>

                                       i
<PAGE>   3
<TABLE>

<S>                                                                         <C>
9.05.    Unencumbered Net Operating Income to Unsecured Interest
           Expense.........................................................  72
9.06.    Unencumbered Pool.................................................  72
9.07.    Minimum Net Worth.................................................  72
9.08.    Permitted Holdings................................................  72
9.09.    Calculation.......................................................  73

ARTICLE X.    EVENTS OF DEFAULT; RIGHTS AND REMEDIES.......................  73

10.01.   Events of Default.................................................  73
10.02.   Rights and Remedies...............................................  78
10.03.   Rescission........................................................  79
10.04.   Suspension of Lending.............................................  79

ARTICLE XI.   AGENCY PROVISIONS............................................  80

11.01.   Appointment.......................................................  80
11.02.   Nature of Duties..................................................  80
11.03.   Loan Disbursements................................................  80
11.04.   Distribution and Apportionment of Payments........................  81
11.05.   Rights, Exculpation, Etc..........................................  83
11.06.   Reliance..........................................................  83
11.07.   Indemnification...................................................  84
11.08.   Agent Individually................................................  84
11.09.   Successor Agent; Resignation of Agent; Removal of Agent...........  84
11.10.   Consents and Approvals............................................  85
11.11.   Consents and Approvals as to Collateral...........................  87
11.12.   Lender Actions Against Collateral.................................  89
11.13.   Assignments and Participations....................................  89
11.14.   Ratable Sharing...................................................  92
11.15.   Delivery of Documents.............................................  93
11.16.   Notice of Events of Default.......................................  93

ARTICLE XII.  MISCELLANEOUS................................................  94

12.01.   Expenses..........................................................  94
12.02.   Indemnity.........................................................  94
12.03.   Change in Accounting Principles...................................  96
12.04.   Setoff............................................................  96
12.05.   Amendments and Waivers............................................  97
12.06.   Independence of Covenants.........................................  98
12.07.   Notices and Delivery..............................................  98
12.08.   Survival of Warranties, Indemnities and Agreements................  99
12.09.   Failure or Indulgence Not Waiver; Remedies Cumulative.............  99
12.10.   Marshalling; Recourse to Security; Payments Set Aside.............  99
12.11.   Severability...................................................... 100
12.12.   Headings.......................................................... 100
12.13.   Governing Law..................................................... 100
12.14.   Limitation of Liability........................................... 100
12.15.   Successors and Assigns............................................ 100
12.16.   Usury Limitation.................................................. 100
12.17.   Confidentiality................................................... 101
12.18.   Consent to Jurisdiction and Service of Process; Waiver of
           Jury Trial; Waiver Of Permissive Counterclaims.................. 101
12.19.   Counterparts; Effectiveness; Inconsistencies...................... 102
12.20.   Construction...................................................... 103
12.21.   Entire Agreement.................................................. 103
12.22.   Agent's Action for Its Own Protection Only........................ 103
</TABLE>

                                       ii

<PAGE>   4
<TABLE>

<S>                                                                         <C>
12.23.   Lenders' ERISA Covenant........................................... 103


EXHIBITS

A   -    Assignment and Assumption
B   -    Closing Checklist
C   -    Compliance Certificate
D   -    Revolving Loan Note
E   -    Swingline Note
F   -    Qualified Unencumbered Properties
G   -    Letter of Credit Note
H   -    Letter of Credit Application
I   -    Notice of Borrowing
J   -    Notice of Continuation/Conversion


SCHEDULES

5.01(c)  -    Ownership of Borrower
5.01(r)  -    Environmental Matters
5.01(w)  -    Subsidiaries and Investment Affiliates
</TABLE>

                                      iii
<PAGE>   5
                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

         THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of April
28, 1998 (as amended, supplemented or modified from time to time, the
"Agreement") and is among MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), Manufactured Home Communities, Inc., a
Maryland corporation (the "REIT"), each of the Lenders, as hereinafter defined,
Wells Fargo Bank, N.A ("Wells Fargo") in its capacity as Agent, as Swingline
Lender, as Issuing Lender and as a Lender, Bank of America National Trust and
Savings Association, as Syndication Agent and as a Lender, Morgan Guaranty
Trust Company of New York, as Documentation Agent and as a Lender, and
Commerzbank Aktiengesellschaft, Chicago Branch, as a Lender.

                                    RECITALS

         A.   Borrower, the REIT and Wells Fargo Realty Advisors Funding
Incorporated ("WFRAF"), in its capacity as Agent and as the sole Lender, have
previously entered into that certain Credit Agreement dated as of August 16,
1994 (the "Original Credit Agreement").

         B.   The Original Credit Agreement was amended and restated in its
entirety by that certain First Amended and Restated Credit Agreement dated as
of September 26, 1994 (the "Existing Credit Agreement") by and among Borrower,
the REIT, WFRAF, as Agent and as a Lender, and Bank of America Illinois, as
Co-Agent and a Lender.

         C.   The Existing Credit Agreement has been amended by that certain
First Amendment and Waiver to First Amended and Restated Credit Agreement dated
as of June 29, 1995 (the "First Amendment"), that certain Second Amendment to
First Amendment and Restated Credit Agreement dated as of May 7, 1996 (the
"Second Amendment"), that certain Third Amendment to First Amended and Restated
Credit Agreement dated February 28, 1997 (the "Third Amendment"), and that
certain Fourth Amendment to First Amended and Restated Credit Agreement dated as
of March 1, 1997 (the "Fourth Amendment").

         D.   After giving effect to that certain Assignment and Assumption
Agreement of even date herewith by and between The First National Bank of
Chicago and Wells Fargo, the "Lenders" under the Existing Credit Agreement (as
so amended) are Wells Fargo, Bank of America National Trust and Savings
Association (as successor in interest to Bank of America Illinois), and Morgan
Guaranty Trust Company of New York (the "Existing Lenders").

         E.   Borrower, the REIT, Wells Fargo (as successor in interest to
WFRAF), as Agent and an Existing Lender, and the other Existing Lenders desire
to further amend and restate the Existing Credit Agreement (as so amended) in
its entirety to add additional entities as lenders, increase the loan facility
provided thereby from One Hundred Million Dollars ($100,000,000) to One Hundred
Fifty Million Dollars ($150,000,000), and make certain other modifications as
hereinafter set forth.
<PAGE>   6
                                   AGREEMENT

                                   ARTICLE I.
                                  DEFINITIONS

         1.01 Certain Defined Terms.  The following terms used in this
Agreement shall have the following meanings (such meanings to be applicable,
except to the extent otherwise indicated in a definition of a particular term,
both to the singular and the plural forms of the terms defined):

         "Accommodation Obligations" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of which that
person is liable for any Indebtedness or other obligation or liability of
another Person, including without limitation and without duplication (i) any
such Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or to make payment other than for
value received and (ii) any obligation of such Person arising through such
Person's status as a general partner of a general or limited partnership with
respect to any Indebtedness, obligation or liability of such general or limited
partnership.

         "Accountants" means any nationally recognized independent accounting
firm.

         "Adjusted Asset Value" means, as of any date of determination, (i) for
any Property for which an acquisition or disposition by Borrower or any
Subsidiary has not occurred in the Fiscal Quarter most recently ended as of
such date, the product of four (4) and a fraction, the numerator of which is
EBITDA for such Fiscal Quarter attributable to such Property in a manner
reasonably acceptable to Agent, and the denominator of which is eight hundred
seventy-five ten-thousandths (0.0875), and (ii) for any Property which has been
acquired by Borrower or any Subsidiary in the Fiscal Quarter most recently
ended as of such date, the Net Price of the Property paid by Borrower or its
Subsidiaries for such Property.

         "Affiliates" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, (b) the ownership of a general

                                       2
<PAGE>   7
partnership interest in such Person or (c) the ownership of twenty-five percent
(25%) or more of the limited partnership interests (or other ownership
interests with similarly limited voting rights) in such Person; provided,
however, that in no event shall the Affiliates of Borrower or any Subsidiary or
any Investment Affiliate include Persons holding direct or indirect ownership
interests in the REIT or any other real estate investment trust which holds a
general partnership interest in Borrower if such Person does not otherwise
constitute an "Affiliate" hereunder; provided, further, that the REIT and
Borrower shall at all times be deemed Affiliates of each other.

         "Agent" means Wells Fargo in its capacity as administrative agent for
the Lenders under this Agreement, and shall include any successor Agent
appointed pursuant hereto and shall be deemed to refer to Wells Fargo in its
individual capacity as a Lender where the context so requires.

         "Agreement" has the meaning ascribed to such term in the Preamble
hereto.

         "Agreement Party" means any Person, other than the REIT and Borrower,
which concurrently with this Agreement or hereafter executes and delivers a
guaranty in connection with this Agreement, which as of the date of
determination, is in force and effect.

         "Applicable Margin" means, for any day, the rate per annum set forth
below opposite the applicable Level Period then in effect:

<TABLE>
<CAPTION>

         Level Period               Applicable Margin
         ------------               -----------------

         <S>                        <C>
         Level I Period                   1.0%

         Level II Period                  1.125%
</TABLE>

The Applicable Margin shall be adjusted for all purposes quarterly as soon as
reasonably practicable, but not later than five (5) days, after the date of
receipt by Agent of the quarterly financial information in accordance with the
provisions of Section 6.01(a) hereof, together with a calculation by Borrower
of the ratio of Total Liabilities to the sum of Gross Asset Values for Borrower
and each of its Subsidiaries as of the end of the applicable Fiscal Quarter.
Notwithstanding the foregoing, the Applicable Margin for the Pre-Extension Term
Loan, if any, shall be 1.0% for the duration thereof ending on August 17, 2000,
regardless of the applicable Level Period.

         "Appraisal" means a written appraisal prepared by an independent
appraiser reasonably acceptable to Agent and subject to Agent's customary
independent appraisal requirements and prepared in compliance with all
applicable regulatory requirements, including FIRREA.

         "Appraised Value" means, with respect to any Property, the "as is"
market value of such Property as reflected in the then most recent Appraisal of
such Property, as the same may

                                       3
<PAGE>   8
have been adjusted by Agent based upon its internal review of such Appraisal,
which review shall be conducted prior to acceptance of such Appraisal by Agent.

         "Assignment and Assumption" means an Assignment and Assumption in the
form of Exhibit A hereto (with blanks appropriately filled in) delivered to
Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to Section 11.13.

         "Balloon Payment" means, with respect to any loan constituting
Indebtedness, any required principal payment of such loan which is either (i)
payable at the maturity of such Indebtedness or (ii) in an amount which exceeds
twenty-five percent (25%) of the original principal amount of such loan;
provided, however, that the final payment of a fully amortizing loan shall not
constitute a Balloon Payment.

         "Base Rate" means, on any day, a fluctuating interest rate per annum
as shall be in effect from time to time, which rate shall at all times be equal
to the higher of (a) the base rate of interest per annum established from time
to time by Wells Fargo, and designated as its prime rate and in effect on such
day, and (b) the Federal Funds Rate as announced by the Federal Reserve Bank of
New York, in effect on such day plus one half percent (0.5%) per annum.  Each
change in the Base Rate shall become effective automatically as of the opening
of business on the date of such change in the Base Rate, without prior written
notice to Borrower or Lenders.  The Base Rate may not be the lowest rate of
interest charged by any bank, Agent or Lender on similar loans.

         "Base Rate Loans" means those Loans bearing interest at the Base Rate.

         "Base Rent" means the aggregate rent received by Borrower from tenants
which lease manufactured community home sites owned by Borrower minus any
amounts specifically identified as and representing payments from trash
removal, cable television, water, electricity, taxes, other utilities, and
other rent which reimburses expenses related to tenant's occupancy.

         "Benefit Plan" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which a Person or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the immediately preceding five (5) years, was
maintained, administered, contributed to or was required to contribute to, or
under which a Person or any ERISA Affiliate may have any liability.

         "Borrower" has the meaning ascribed to such term in the preamble
hereto.

         "Borrower Plan" shall mean any Plan (A) which Borrower, any of its
Subsidiaries or any of its ERISA Affiliates maintains, administers, contributes
to or is required to contribute to, or, within the five years prior to the
Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which Borrower, any of its Subsidiaries or any of its
ERISA Affiliates may incur any liability and (B) which covers any employee or
former employee of Borrower, any of its Subsidiaries or any of its ERISA
Affiliates (with respect to their relationship with such entities).

                                       4
<PAGE>   9
         "Borrower's Share" means Borrower's or the REIT's direct or indirect
share of the assets, liabilities, income, expenses or expenditures, as
applicable, of an Investment Affiliate based upon Borrower's or the REIT's
percentage ownership (whether direct or indirect) of such Investment Affiliate,
as the case may be.

         "Borrowing" means a borrowing under the Facility.

         "Business Day" means (a) with respect to any Borrowing, payment or
rate determination of LIBOR Loans, a day, other than a Saturday or Sunday, on
which Agent is open for business in Chicago and San Francisco and on which
dealings in Dollars are carried in the London inter bank market, and (b) for
all other purposes any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of States of California and Illinois, or is a day
on which banking institutions located in California and Illinois are required
or authorized by law or other governmental action to close.

         "Capital Expenditures" means, as applied to any Person for any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities during that period and including that portion of Capital Leases
which is capitalized on the balance sheet of a Person) by such Person during
such period that, in conformity with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
reflected in the balance sheet of such Person, excluding any expenditures
reasonably determined by such Person as having been incurred for expansion of
the number of manufactured home sites at a manufactured home community owned by
such Person.

          "Capital Leases," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person, excluding ground leases.

          "Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof;
(b) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two nationally recognized rating services
reasonably acceptable to Agent; (c) domestic corporate bonds, other than
domestic corporate bonds issued by Borrower or any of its Affiliates, maturing
no more than 2 years after the date of acquisition thereof and, at the time of
acquisition, having a rating of at least A or the equivalent from two
nationally recognized rating services reasonably acceptable to Agent; (d)
variable-rate domestic corporate notes or medium term corporate notes, other
than notes issued by Borrower or any of its Affiliates, maturing or resetting
no more than 1 year after the date of acquisition thereof and having a rating
of at least AA or the equivalent from two nationally recognized rating services
reasonably acceptable to Agent; (e) commercial paper (foreign and domestic) or
master notes, other than commercial paper or master notes issued by



                                       5
<PAGE>   10
Borrower or any of its Affiliates, and, at the time of acquisition, having a
long-term rating of at least A or the equivalent from a nationally recognized
rating service reasonably acceptable to Agent and having a short-term rating of
a least A-1 and P-1 from S&P and Moody's, respectively (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then the highest
rating from such other nationally recognized rating services reasonably
acceptable to Agent); (f) domestic and Eurodollar certificates of deposit or
domestic time deposits or Eurotime deposits or bankers' acceptances (foreign or
domestic) that are issued by a bank (I) which has, at the time of acquisition,
a long-term rating of at least A or the equivalent from a nationally recognized
rating service reasonably acceptable to Agent and (II) if a domestic bank,
which is a member of the Federal Deposit Insurance Corporation; and (g)
overnight securities repurchase agreements, or reverse repurchase agreements
secured by any of the foregoing types of securities or debt instruments,
provided that the collateral supporting such repurchase agreements shall have a
value not less than 101% of the principal amount of the repurchase agreement
plus accrued interest.

         "Closing Checklist" means the Closing Checklist attached hereto as
Exhibit B, as the same may be amended by the parties.

         "Closing Date" means the date on which this Agreement shall become
effective in accordance with Section 12.19, which date shall be April 28, 1998
or such later date as to which Agent and Borrower agree in writing.

         "Commission" means the Securities and Exchange Commission.

         "Commitment" means, with respect to any Lender, such Lender's Pro Rata
Share of the Facility which amount shall not exceed the principal amount set
out under such Lender's name under the heading "Loan Commitment" on the
counterpart signature pages attached to this Agreement or as set forth on an
Assignment and Assumption executed by such Lender, as assignee, as such amount
may be adjusted pursuant to the terms of this Agreement.

         "Compliance Certificate" means a certificate in the form of Exhibit C
hereto delivered to Agent by Borrower pursuant to Section 6.01(d) and covering
Borrower's compliance with the financial covenants contained in Articles VIII
and IX hereof.

         "Contaminant" means any pollutant (as that term is defined in 42
U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 C.F.R. Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C.
6903(5)), radioactive material, special waste, petroleum (including crude oil
or any petroleum-derived substance, waste, or breakdown or decomposition
product thereof), or any constituent of any such substance or
waste, including, but not limited to hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives, urea
formaldehyde insulation, radioactive materials, biological substances, PCBs,
pesticides, herbicides, asbestos, sewage sludge, industrial slag, acids,
metals, or solvents.

                                       6
<PAGE>   11
          "Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including without limitation any
restrictive covenant affecting such Person or any of its properties).

          "Controlled Partnership Interests" means ownership interests held by
the REIT and/or Borrower in a partnership or joint venture where the REIT or
Borrower (independently or collectively) has control over the management and
operations of the partnership or joint venture.

          "Convertible Securities" means evidences of indebtedness, shares of
stock, limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible into or
exchangeable for, with or without payment of additional consideration, shares of
common stock of the REIT or partnership interests of Borrower, as the case may
be, either immediately or upon the arrival of a specified date or the happening
of a specified event.

          "Court Order" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon the Person in
question.

          "Debt Service" means, for any period, Interest Expense for such period
plus scheduled principal amortization (exclusive of Balloon Payments) for such
period on all Indebtedness of the REIT, on a consolidated basis, plus, the
REIT's and Borrower's actual or potential liability, on a consolidated basis,
for scheduled principal amortization (exclusive of Balloon Payments) for such
period on all Indebtedness of Investment Affiliates that is recourse to the
REIT, Borrower or any Material Subsidiary.

          "Defaulting Lender" means any Lender which fails or refuses to perform
its obligations under this Agreement within the time period specified for
performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of two (2) Business Days after written
notice from Agent.

          "Development Activity" means construction in process, that is being
performed by or at the direction of Borrower, of any manufactured home community
that will be owned and operated by Borrower upon completion of construction,
other than (i) construction in process of manufactured home communities not
owned by Borrower and for which Borrower has no contractual obligation to
purchase until completion of construction or (ii) construction in process for
the purpose of expanding manufactured home communities that have been operated
by Borrower or another owner for at least one (1) year prior to the commencement
of such expansion.

          "Documentation Agent" means Morgan Guaranty Trust Company of New York
in its capacity as documentation agent for the Lenders under this Agreement.

          "DOL" means the United States Department of Labor and any successor
department or agency.

                                        7


<PAGE>   12




          "Dollars" and "$" means the lawful money of the United States of
America.

          "EBITDA" means, for any period (i) Net Income for such period, plus
(ii) depreciation and amortization expense and other non-cash items deducted in
the calculation of Net Income for such period, plus (iii) Interest Expense
deducted in the calculation of Net Income for such period, plus, (iv) Taxes
deducted in the calculation of Net Income for such period, minus (v) the gains
(and plus the losses) from extraordinary or unusual items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of Net
Income, for such period, minus (vi) earnings of Subsidiaries for such period
distributed to third parties, all of the foregoing without duplication.

          "Environmental Laws" means all federal, state, district, local and
foreign laws, and all orders, consent orders, judgments, notices, permits or
demand letters issued, promulgated or entered thereunder, relating to pollution
or protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or industrial substances or Contaminants into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contamination, chemicals, industrial
substances or Contaminants. The term Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"); the Toxic Substances Control Act, as
amended; the Hazardous Materials Transportation Act, as amended; the Resource
Conservation and Recovery Act, as amended ("RCRA"); the Clean Water Act, as
amended; the Safe Drinking Water Act, as amended; the Clean Air Act, as amended;
all analogous state laws; the plans, rules, regulations or ordinances adopted,
or other criteria and guidelines promulgated pursuant to the preceding laws or
other similar laws, regulations, rules or ordinances now or hereafter in effect
regulating public health, welfare or the environment.

          "Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under federal or state environmental laws or
regulations, or (b) damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a Contaminant into
the environment.

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

          "ERISA Affiliate" means any (a) corporation which is, becomes, or is
deemed by any Governmental Authority to be a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the Internal Revenue
Code) as a Person or is so deemed by such Person, (b) partnership, trade or
business (whether or not incorporated) which is, becomes or is deemed by any
Governmental Authority to be under common control (within the meaning of Section
414(c) of the Internal Revenue Code) with such Person or is so deemed by such
Person, (c) any Person which is, becomes or is deemed by any Governmental
Authority to be a member of the same "affiliated service group" (as defined in
Section 414(m) of the Internal

                                       8


<PAGE>   13




Revenue Code) as such Person or is so deemed by such Person, or (d) any other
organization or arrangement described in Section 414(o) of the Internal Revenue
Code which is, becomes or is deemed by such Person or by any Governmental
Authority to be required to be aggregated pursuant to regulations issued under
Section 414(o) of the Internal Revenue Code with such Person pursuant to Section
414(o) of the Internal Revenue Code or is so deemed by such Person.

          "Event of Default" means any of the occurrences set forth in Article X
after the expiration of any applicable grace period expressly provided therein.

          "Existing Credit Agreement" has the meaning set forth in the Recitals
hereto.

          "Existing Lenders" has the meaning set forth in the Recitals hereto.

          "Existing Loans" means the "Loans" as defined in the Existing Credit
Agreement.

          "Facility" means the loan facility of up to One Hundred Fifty Million
Dollars ($150,000,000) described in Section 2.01(a).

          "FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.

          "Federal Funds Rate" means, for any period, a fluctuating interest
rate, rounded upwards to the nearest one hundredth of one percent (0.01%), per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.

          "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any governmental authority succeeding to its functions.

          "Financial Statements" has the meaning ascribed to such term in
Section 6.01 (a).

          "FIRREA" means the Financial Institutions Recovery, Reform and
Enforcement Act of 1989, as amended from time to time.

          "First Amendment" has the meaning set forth in the Recitals hereto.

          "Fiscal Quarter" means a fiscal quarter of a Fiscal Year.

          "Fiscal Year" means the fiscal year of Borrower and the REIT which
shall be the twelve (12) month period ending on the last day of December in each
year.


                                       9

<PAGE>   14


          "Fixed Charges" for any Fiscal Quarter period means the sum of (i)
Debt Service for such period, (ii) 3% of Base Rent for such period, and (iii)
Borrower's Share of Capital Expenditures from Investment Affiliates for such
period.

          "Fourth Amendment" has the meaning set forth in the Recitals hereto.

          "Funding Date" means, with respect to any Loan made after the Closing
Date, the date of the funding of such Loan.

          "Funds from Operations" means the definition of "Funds from
Operations" of the National Association of Real Estate Investment Trusts on the
date of determination (before allocation of minority interests).

          "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination and which are consistent with the past practices of the REIT and
Borrower.

          "Governmental Authority" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

          "Gross Asset Value" means (subject to the proviso in Section 9.08),
with respect to any Person as of any date of determination, the sum of the
Adjusted Asset Values for each Property then owned by such Person plus the value
of any cash or Cash Equivalent owned by such Person and not subject to any Lien.

          "Indebtedness," as applied to any Person (and without duplication),
means (a) all indebtedness, obligations or other liabilities (whether secured,
unsecured, recourse, non-recourse, direct, senior or subordinate) of such Person
for borrowed money, (b) all indebtedness, obligations or other liabilities of
such Person evidenced by Securities or other similar instruments, (c) all
reimbursement obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's account or
other similar instruments for which a contingent liability exists, (d) all
obligations of such Person to pay the deferred purchase price of Property or
services, (e) all obligations in respect of Capital Leases of such Person, (f)
all Accommodation Obligations of such Person, (g) all indebtedness, obligations
or other liabilities of such Person or others secured by a Lien on any asset of
such Person, whether or not such indebtedness, obligations or liabilities are
assumed by, or are a personal liability of, such Person, (h) all indebtedness,
obligations or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange agreements
excluding all indebtedness, obligations or other liabilities in respect of such
Interest Rate Contracts to the extent that the aggregate notional amount thereof
does not exceed the aggregate principal amount of any outstanding fixed or
floating rate Indebtedness, obligations or other


                                       10

<PAGE>   15


liabilities permitted under this Agreement that exist as of the date that such
Interest Rate Contracts are entered into or that are incurred no more than
thirty (30) days after such Interest Rate Contracts are entered into and (i)
ERISA obligations currently due and payable.

          "Interest Expense" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized (including the
interest component of Capital Leases but excluding interest expense covered by
an interest reserve established under a loan facility) of the REIT, on a
consolidated basis and determined in accordance with GAAP, plus the REIT's and
Borrower's actual or potential liability, on a consolidated basis, for accrued,
paid or capitalized interest with respect to Indebtedness of Investment
Affiliates that is recourse to the REIT, Borrower or any Material Subsidiary.

          "Interest Period" means, relative to any LIBOR Loans comprising part
of the same Borrowing, the period beginning on (and including) the date on which
such LIBOR Loans are made as, or converted into, LIBOR Loans, and shall end on
(but exclude) the day which numerically corresponds to such date one (1), two
(2), three (3), six (6) or twelve (12) months thereafter (or, if such month has
no numerically corresponding day, on the last Business Day of such month), in
either case as Borrower may select in its relevant Notice of Borrowing pursuant
to Section 2.01(b); provided, however, that:

          (a) if such Interest Period would otherwise end on a day which is not
     a Business Day, such Interest Period shall end on the next following
     Business Day (unless such next following Business Day is the first Business
     Day of a calendar month, in which case such Interest Period shall end on
     the Business Day next preceding such numerically corresponding day);

          (b) no Interest Period may end later than the Termination Date; and

          (c) with the reasonable approval of Agent (unless any Lender has
     previously advised Agent and Borrower that it is unable to enter into LIBOR
     contracts for an Interest Period of such duration), an Interest Period may
     have a duration of less than one (1) month.

          "Interest Rate Contracts" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.

          "Interim Period" has the meaning ascribed to such term in Section
4.01(g).

          "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.

          "Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of Securities, or of a beneficial
interest in Securities, of any other Person, and any direct or indirect loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, advances to employees and similar items
made or incurred in the ordinary course of business), or capital contribution by
such Person to

                                       11
<PAGE>   16

any other Person, including all Indebtedness and accounts owed by that other
Person which are not current assets or did not arise from sales of goods or
services to that Person in the ordinary course of business. The amount of any
Investment shall be determined in conformity with GAAP.

          "Investment Affiliate" means any Person in whom the REIT, Borrower or
any Subsidiary holds an equity interest, directly or indirectly, whose financial
results are not consolidated under GAAP with the financial results of the REIT
or Borrower on the consolidated financial statements of the REIT and Borrower.

          "Investment Mortgages" means mortgages securing indebtedness directly
or indirectly owed to Borrower or any of its Subsidiaries, including
certificates of interest in real estate mortgage investment conduits.

          "Issuing Lender" means Wells Fargo in its capacity as issuer of
Letters of Credit under this Agreement, and shall include any successor Issuing
Lender appointed pursuant hereto.

          "IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.

          "Land" means unimproved real estate purchased or leased or to be
purchased or leased by Borrower or any of its Subsidiaries for the purpose of
future development of improvements.

          "Lender Affiliate" as applied to any Lender, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Lender. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote more than fifty percent (50%) of the Securities
having voting power for the election of directors of such Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting Securities or by contract or otherwise,
or (b) the ownership of a general partnership interest or a limited partnership
interest representing more than fifty (50%) of the outstanding limited
partnership interests of a Person.

          "Lender Reply Period" has the meaning ascribed to such term in Section
11.10(a).

          "Lender Taxes" has the meaning ascribed to such term in Section
2.03(g).

          "Lenders" means Wells Fargo and any other bank, finance company,
insurance or other financial institution which is or becomes a party to this
Agreement by execution of a counterpart signature page hereto or an Assignment
and Assumption, as assignee, provided that with respect to matters requiring the
consent to or approval of Requisite Lenders, the Supermajority Lenders, or all
Lenders at any given time, all then existing Defaulting Lenders will be
disregarded and excluded, and, for voting purposes only, "all Lenders" shall be
deemed to mean "all Lenders other than Defaulting Lenders."

                                       12


<PAGE>   17

          "Letter of Credit Application" shall have the meaning ascribed to such
term in Section 2.09(b).

          "Letter of Credit Documents" has the meaning set forth in Section
2.09(j) hereof.

          "Letter of Credit Mandatory Borrowing" has the meaning set forth in
Section 2.09(f) hereof.

          "Letter of Credit Note" means the promissory note evidencing the
Letter of Credit Obligations in the original principal amount of Thirty Million
Dollars ($30,000,000) executed by Borrower in favor of Issuing Lender, as it may
be amended, supplemented, replaced or modified from time to time. The initial
Letter of Credit Note and any replacements thereof shall be substantially in the
form of Exhibit G.

          "Letter of Credit Obligations" means, collectively and without
duplication, (a) all reimbursement and other obligations of Borrower in respect
of Letters of Credit, and (b) all amounts paid by Lenders to Issuing Lender in
respect of Letters of Credit.

          "Letters of Credit" means the letters of credit issued by Issuing
Lender pursuant to Section 2.09 hereof for the account of Borrower in an
aggregate face amount not to exceed $30,000,000.00 outstanding at any one time,
as they may be drawn on, replaced or modified from time to time.

          "Level I Period" means a period during which the ratio of Total
Liabilities to the sum of Gross Asset Values for the Borrower and each of its
Subsidiaries shall be equal to or less than 0.45:1.

          "Level II Period" mean a period during which the ratio of Total
Liabilities to the sum of Gross Asset Values for Borrower and each of its
Subsidiaries shall exceed 0.45:1 but shall not exceed 0.60:1.

          "Liabilities and Costs" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including punitive and treble
damages), costs, disbursements and expenses (including without limitation
reasonable attorneys', experts' and consulting fees and costs of investigation
and feasibility studies), fines, penalties and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future.

          "LIBOR" means, relative to any Interest Period for any LIBOR Loan
included in any Borrowing, the rate of interest obtained by dividing (i) the
rate of interest determined by Agent (whose determination shall be conclusive
absent manifest error, which shall not include any lower determination by any
other banks) equal to the rate (rounded upwards, if necessary, to the nearest
one one-hundredth of one percent (.01%)) per annum reported by Wells Fargo at
which Dollar deposits in immediately available funds are offered by Wells Fargo
to leading banks in the Eurodollar inter bank market at or about 11:00 A.M.
London time two (2) Business Days prior to the beginning of such Interest Period
for delivery on the first day of such Interest Period for a period approximately
equal to such Interest Period and in an amount equal or

                                       13


<PAGE>   18




comparable to the LIBOR Loan to which such Interest Period relates, by (ii) a
percentage expressed as a decimal equal to one (1) minus the LIBOR Reserve
Percentage.

          "LIBOR Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to LIBOR.

          "LIBOR Reserve Percentage" means, relative to any Interest Period, the
average daily maximum reserve requirement (including, without limitation, all
basic, emergency, supplemental, marginal and other reserves) which is imposed
under Regulation D, as Regulation D may be amended, modified or supplemented, on
"Eurocurrency liabilities" having a term equal to the applicable Interest Period
(or in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any bank to United States residents), which
requirement shall be expressed as a decimal. LIBOR shall be adjusted
automatically on, and as of the effective date of, any change in the LIBOR
Reserve Percentage.

          "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights-of-way, zoning restrictions and the like),
lien (statutory or other) preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including without
limitation any conditional sale or other title retention agreement, the interest
of a lessor under a Capital Lease, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement (other than a financing statement filed by a "true" lessor pursuant to
9-408 of the Uniform Commercial Code) naming the owner of the asset to which
such Lien relates as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.

          "Loans" means the loans made pursuant to the Facility, including,
without limitation, loans made pursuant to Section 2.01 hereof, Swingline Loans,
Loans made pursuant to Mandatory Borrowings and the Pre-Extension Term Loan.

          "Loan Availability" means the amount of the Facility from time to
time.

          "Loan Documents" means, this Agreement, the Loan Notes, the REIT
Guaranty, and all other agreements, instruments and documents (together with
amendments and supplements thereto and replacements thereof) now or hereafter
executed by the REIT, Borrower or any Agreement Party, which evidence, guaranty
or secure the Obligations.

          "Loan Notes" means the promissory notes evidencing the Loans (other
than Swingline Loans) in the aggregate original principal amount of One Hundred
Fifty Million Dollars ($150,000,000) executed by Borrower in favor of Lenders,
as they may be amended, supplemented, replaced or modified from time to time.
The initial Loan Notes and any replacements thereof shall be substantially in
the form of Exhibit D. The Loan Notes shall be issued in substitution for the
"Loan Notes" issued pursuant to the Existing Credit Facility.

                                       14


<PAGE>   19


          "Mandatory Borrowing" means any Letter of Credit Mandatory Borrowing
or Swingline Mandatory Borrowing.

          "Manufactured Home Community Mortgages" means Investment Mortgages
issued by any Person engaged primarily in the business of developing, owning,
and managing manufactured home communities.

          "Manufactured Home Community Partnership Interests" means partnership
or joint venture interests issued by any Person engaged primarily in the
business of developing, owning, and managing manufactured home communities.

          "Material Adverse Effect" means a material adverse effect upon (i) the
ability of Borrower or the REIT to perform its covenants and obligations under
this Agreement and the other Loan Documents or (ii) the ability of Agent or
Lenders to enforce the Loan Documents. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has or will result in a
Material Adverse Effect," and the phrase "has no (or does not have a) Material
Adverse Effect" or "will not result in a Material Adverse Effect" or words
substantially similar thereto shall in all cases be intended to mean "does not
or will not result in a Material Adverse Effect."

          "Material Subsidiary" means any Subsidiary having a Gross Asset Value
in excess of One Hundred Million Dollars ($100,000,000).

          "Maturity Date" means August 17, 2000, or such extended maturity date
as may be applicable pursuant to the provisions of Article III hereof.

          "Moody's" means Moody's Investors Service, a Delaware corporation, and
its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Agent.

          "Multiemployer Plan" means an employee benefit plan defined in Section
4001(a)(3) or Section 3(37) of ERISA which is, or within the immediately
preceding six (6) years was, maintained, administered, contributed to by or was
required to be contributed to by a Person or any ERISA Affiliate, or under which
a Person or any ERISA Affiliate may incur any liability.

          "Net Income" means, for any period, the net income (or loss) after
Taxes of the REIT, on a consolidated basis, for such period calculated in
conformity with GAAP.

          "Net Offering Proceeds" means all cash or other assets received by the
REIT or Borrower as a result of the sale of common stock, preferred stock,
partnership interests, limited liability company interests, Convertible
Securities or other ownership or equity interests in the REIT or Borrower less
customary costs and discounts of issuance paid by the REIT or Borrower,
as the case may be.

                                       15


<PAGE>   20


          "Net Operating Income" means, for any period, and with respect to any
Qualifying Unencumbered Property, the net operating income of such Qualifying
Unencumbered Property (attributed to such Property in a manner reasonably
acceptable to Agent) for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past practices of the
REIT and Borrower, and (iii) inclusive of an allocation of reasonable management
fees and administrative costs to such Qualifying Unencumbered Property
consistent with the past practices of the REIT and Borrower, except that, for
purposes of determining Net Operating Income, income shall not (a) include
security or other deposits, lease termination or other similar charges,
delinquent rent recoveries, unless previously reflected in reserves, or any
other items reasonably deemed by Agent to be of a non-recurring nature or (b) be
reduced by depreciation or amortization or any other non-cash item.

          "Net Price" means, with respect to the purchase of any Property by
Borrower or any Subsidiary, without duplication, (i) cash and Cash Equivalents
paid as consideration for such purchase, plus (ii) the principal amount of any
note or other deferred payment obligation delivered in connection with such
purchase (except as described in clause (iv) below), plus (iii) the value of any
other consideration delivered in connection with such purchase or sale
(including, without limitation, shares in the REIT and operating partnership
units or preferred operating partnership units in Borrower) (as reasonably
determined by Agent), minus (iv) the value of any consideration deposited into
escrow or subject to disbursement or claim upon the occurrence of any event,
minus (v) reasonable costs of sale and taxes paid or payable in connection with
such purchase.

          "Net Worth" means, at any time, the tangible net worth of the REIT
determined in accordance with GAAP, on a consolidated basis, not including
depreciation and amortization expense of the REIT since September 30, 1996 and
not including the REIT's share of depreciation and amortization expense of
Investment Affiliates since September 30, 1996. The parties hereto acknowledge
that the Net Worth as of December 31, 1997 was Three Hundred Sixty Nine Million
Nine Hundred Sixty One Thousand Dollars ($369,961,000).

          "New Lender" shall have the meaning set forth in Section 11.13(k)
hereof.

          "Non Pro Rata Loan" means a Loan (other than a Swingline Loan but
including a Mandatory Borrowing) or Letter of Credit draw with respect to which
less than all Lenders have funded their respective Pro Rata Shares of such Loans
or Letter of Credit draws (whether by making Loans or purchasing participation
interests in accordance with the terms hereof) and the failure of the non-
funding Lender or Lenders to fund its or their respective Pro Rata Shares of
such Loan or Letter of Credit draw constitutes a breach of this Agreement.

          "Non-Recourse Indebtedness" means any single loan with respect to
which recourse for payment is limited to (i) specific assets related to a
particular Property or group of Properties encumbered by a Lien securing such
Indebtedness, so long as the Adjusted Asset Value for such Property, or the
total of the Adjusted Asset Values for such group of Properties, does not exceed
One Hundred Million Dollars ($100,000,000) or (ii) any Subsidiary which is not a
Material Subsidiary; provided, however, that personal recourse to the REIT, on a
consolidated


                                       16
<PAGE>   21




basis, or to Borrower by a holder of any such loan for fraud, misrepresentation,
misapplication of cash, waste, environmental claims and liabilities and other
circumstances customarily excluded by institutional lenders from exculpation
provisions and/or included in separate indemnification agreements in non-
recourse financing of real estate shall not, by itself, prevent such loan from
being characterized as Non-Recourse Indebtedness.

          "Non-Manufactured Home Community Property" means Property which is not
(i) used for lease, operation or use of manufactured home communities, (ii)
Land, (iii) Securities consisting of stock issued by real estate investment
trusts engaged primarily in the development, ownership and management of
manufactured home communities, (iv) Manufactured Home Community Mortgages or (v)
Manufactured Home Community Partnership Interests.

          "Notice of Borrowing" means, with respect to a proposed Borrowing
pursuant to Section 2.01(b) or Section 2.10, a notice of borrowing duly
executed by an authorized officer of Borrower substantially in the form of
Exhibit I.

          "Notice of Continuation/Conversion" means a notice of continuation or
conversion of or to a LIBOR Loan duly executed by an authorized officer of
Borrower substantially in the form of Exhibit J.

          "Obligations" means, from time to time, all Indebtedness of Borrower
owing to Agent, Swingline Lender, Issuing Lender, any Lender, or any Person
entitled to indemnification pursuant to Section 12.02, or any of their
respective successors, transferees or assigns, of every type and description,
whether or not evidenced by any note, guaranty or other instrument, arising
under or in connection with this Agreement or any other Loan Document, whether
or not for the payment of money, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, reasonable attorneys' fees
and disbursements and any other sum now or hereafter chargeable to Borrower
under or in connection with this Agreement or any other Loan Document.
Notwithstanding anything to the contrary contained in this definition,
Obligations shall not be deemed to include any obligations or liabilities of
Borrower to Agent or any Lender under an Interest Rate Contract, foreign
currency exchange agreement or other Contractual Obligation unless the same is
among Borrower and all Lenders. Obligations shall also not include the
"Obligations" under the Term Loan Credit Agreement.

          "Officer's Certificate" means a certificate signed by a specified
officer of a Person certifying as to the matters set forth therein.

          "Other Indebtedness" means all Indebtedness other than the
Obligations.

          "Original Closing Date" means the "Closing Date" as defined in the
Existing Credit Agreement.

          "Original Credit Agreement" has the meaning set forth in the Recitals
hereto.


                                       17

<PAGE>   22




          "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.

          "Permit" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.

          "Permitted Holdings" means any of the holdings and activities
described in Section 9.08, but only to the extent permitted in Section 9.08.

          "Permitted Liens" means:

          (a) Liens for Taxes, assessments or other governmental charges not yet
     due and payable or which are being contested in good faith by appropriate
     proceedings promptly instituted and diligently conducted in accordance with
     Sections 7.01(d) or 7.02(g);

          (b) statutory liens of carriers, warehousemen, mechanics, materialmen
     and other similar liens imposed by law, which are incurred in the ordinary
     course of business for sums not more than sixty (60) days delinquent or
     which are being contested in good faith in accordance with Sections 7.01
     (d) or 7.02(g);

          (c) deposits made in the ordinary course of business to secure
     liabilities to insurance carriers;

          (d) Liens for purchase money obligations for equipment; provided that
     (i) the Indebtedness secured by any such Lien does not exceed the purchase
     price of such equipment, (ii) any such Lien encumbers only the asset so
     purchased and the proceeds upon sale, disposition, loss or destruction
     thereof, and (iii) such Lien, after giving effect to the Indebtedness
     secured thereby, does not give rise to an Event of Default or Unmatured
     Event of Default pursuant to Section 8.01(a)(iii);

          (e) easements, rights-of-way, zoning restrictions, other similar
     charges or encumbrances and all other items listed on Schedule B to
     Borrower's owner's title insurance policies for any of Borrower's real
     Properties, so long as the foregoing do not interfere in any material
     respect with the use or ordinary conduct of the business of Borrower and do
     not diminish in any material respect the value of the Property to which it
     is attached or for which it is listed; or

          (f) Liens and judgments which have been or will be bonded or released
     of record within thirty (30) days after the date such Lien or judgment is
     entered or filed against the REIT, Borrower, any Subsidiary or any
     Agreement Party.

          "Person" means any natural person, employee, corporation, limited
partnership, limited liability partnership, general partnership, joint stock
company, limited liability company, joint venture, association, company, trust,
bank, trust company, land trust, business trust, real

                                       18


<PAGE>   23


estate investment trust or other organization, whether or not a legal entity, or
any other nongovernmental entity, or any Governmental Authority.

          "Plan" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which a Person or an ERISA
Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA.

          "Post-Foreclosure Plan" has the meaning ascribed to such term in
Section 11.11(f).

          "Pre-Closing Financials" has the meaning ascribed to such term in
Section 5.01(g).

          "Pre-Extension Term Loan" has the meaning ascribed to such term in
Section 2.11 hereof.

          "Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the aggregate amount
of all of the Lenders' Commitments, as adjusted from time to time in accordance
with the provisions of this Agreement.

          "Property" means, with respect to any Person, any real or personal
property, building, facility, structure, equipment or unit, or other asset owned
by such Person.

          "Protective Advance" means all sums expended as determined by Agent to
be necessary to: (a) protect the priority, validity and enforceability of the
Liens on, and security interests in, any collateral and the instruments
evidencing or securing the Obligations, or (b) (i) prevent the value of any such
collateral from being materially diminished (assuming the lack of such a payment
within the necessary time frame could potentially cause such collateral to lose
value), or (ii) protect any of such collateral from being materially damaged,
impaired, mismanaged or taken, including, without limitation, any amounts
expended in accordance with Section 12.01 or post-foreclosure ownership,
maintenance, operation or marketing of any such collateral.

          "Qualifying Unencumbered Property" means (a) the Properties listed on
Exhibit F hereto and (b) any Property designated by Borrower from time to time
pursuant to Section 6.04 which (i) is an operating manufactured home community
property wholly-owned (directly or beneficially) by Borrower or any Subsidiary
wholly-owned, directly or indirectly by Borrower and/or the REIT, (ii) is not
subject (nor are any equity interests in such Property subject) to a Lien which
secures Indebtedness of any Person other than a Permitted Lien, (iii) is not
subject (nor are any equity interests in such Property subject) to any covenant,
condition, or other restriction which prohibits or limits the creation or
assumption of any Lien upon such Property (except as set forth in the Term Loan
Credit Agreement), and (iv) has not been designated by the Agent in a notice to
Borrower as not acceptable to the Requisite Lenders pursuant to Section 6.04;
provided, however, that the weighted average occupancy rate of the Properties
listed on Exhibit F together with those designated by Borrower to be Qualifying
Unencumbered Properties

                                       19


<PAGE>   24




pursuant to Section 6.04 (excluding expansion areas of such Properties which are
purchased and/or developed on or after the Closing Date) shall be at least
eighty-five percent (85%); provided, further, that the Borrower may, upon at
least fifteen (15) Business Days prior notice to the Agent, designate that any
Property listed on Exhibit F or otherwise designated as a Qualifying
Unencumbered Property is no longer a Qualifying Unencumbered Property (and upon
such designation, such Property shall no longer be a Qualifying Unencumbered
Property).

          "Regulation D" means Regulation D of the Federal Reserve Board as in
effect from time to time.

          "Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.

          "Regulation T" means Regulation I of the Federal Reserve Board as in
effect from time to time.

          "Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.

          "Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.

          "REIT" has the meaning ascribed to such term in the preamble hereto.

          "REIT Guaranty" means the Amended and Restated REIT Guaranty of even
date herewith executed by the REIT in favor of Agent and the Lenders.

          "Release" may be either a noun or a verb and means the release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escaping, dumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.

          "Remedial Action" means any action undertaken pursuant to
Environmental Laws to (a) clean up, remove, remedy, respond to, treat or in any
other way address Contaminants in the indoor or outdoor environment; (b) prevent
the Release or threat of Release or minimize the further Release of Contaminants
so they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; or (c) perform pre-remedial
studies and investigations and post remedial monitoring and care.

          "Reportable Event" means any of the events described in Section
4043(b) of ERISA, other than an event for which the thirty (30) day notice
requirement is waived by regulations, or any of the events described in Section
4062(f) or 4063(a) of ERISA.

          "Requirements of Law" means, as to any Person, the charter and
by-laws, partnership agreements or other organizational or governing documents
of such Person, and any

                                       20


<PAGE>   25


law, rule or regulation, permit, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject, including without limitation, the Securities Act, the Securities
Exchange Act, Regulations G, T, U and X, FIRREA and any certificate of
occupancy, zoning ordinance, building or land use requirement or Permit or
occupational safety or health law, rule or regulation.

          "Requisite Lenders" means, collectively, Lenders whose Pro Rata
Shares, in the aggregate, are at least sixty-six and two-thirds percent (66
2/3%), provided that, in determining such percentage at any given time, all then
existing Defaulting Lenders will be disregarded and excluded and the Pro Rata
Shares of Lenders shall be redetermined, for voting purposes only, to exclude
the Pro Rata Shares of such Defaulting Lenders.

          "S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
its successors and assigns, and, if Standard & Poor's Rating Group shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Agent.

          "Second Amendment "has the meaning set forth in the Recitals hereto.

          "Secretary's Certificate" has the meaning ascribed to such term in
Section 4.01(c)(i).

          "Secured Debt" means Indebtedness, the payment of which is secured by
a Lien on any real Property owned or leased by the REIT, Borrower, or any
Subsidiary.

          "Securities" means any stock, partnership interests, shares, shares of
beneficial interest, voting trust certificates, bonds, debentures, 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, but shall not include any evidence of
the Obligations.

          "Securities Act" means the Securities Act of 1933, as amended to the
date hereof and from time to time hereafter, and any successor statute.

          "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended to the date hereof and from time to time hereafter, and any successor
statute.

          "Senior Loans" has the meaning ascribed to such term in Section
11.04(h).

          "Solvent" means as to any Person at the time of determination, such
Person (a) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (b) is
able to pay all of its debts as such debts mature; and (c) has capital

                                       21


<PAGE>   26




sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.

          "Subsidiary" means any Person, whose financial results are
consolidated under GAAP with the financial results of the REIT or Borrower on
the consolidated financial statements of the REIT or Borrower.

          "Supermajority Lenders" means Lenders whose Pro Rata Shares, in the
aggregate, are at least eighty-five percent (85%), provided that in determining
such percentage at any given time, all then existing Defaulting Lenders will be
disregarded and excluded and the Pro Rata Shares of Lenders shall be
redetermined, for voting purposes only, to exclude the Pro Rata Shares of such
Defaulting Lenders.

          "Swingline Mandatory Borrowing" has the meaning set forth in Section
2.10(b)(iv) hereof.

          "Swingline Lender" means Wells Fargo in its capacity as Swingline
Lender hereunder, and shall include any successor Swingline Lender appointed
pursuant hereto.

          "Swingline Loan" means a Loan made by the Swingline Lender pursuant to
Section 2.10 hereof.

          "Swingline Note" means the promissory note evidencing the Swingline
Loans in the original principal amount of Thirty Million Dollars ($30,000,000)
executed by Borrower in favor of Swingline Lender, as it may be amended,
supplemented, replaced or modified from time to time. The initial Swingline Note
and any replacements thereof shall be substantially in the form of Exhibit E.

          "Syndication Agent" means Bank of America National Trust and Savings
Association in its capacity as syndication agent for the Lenders under this
Agreement.

          "Taxes" means all federal, state, local and foreign income and gross
receipts taxes.

          "Term Loan Credit Agreement" means that certain Amended and Restated
Credit Agreement of even date herewith by and among Borrower, the REIT, Wells
Fargo, as Agent, and the lenders named therein.

          "Termination Date" has the meaning ascribed to such term in Section
2.01(d).

          "Termination Event" means (a) any Reportable Event, (b) the withdrawal
of a Person, or an ERISA Affiliate from a Benefit Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
(c) the occurrence of an obligation arising under Section 4041 of ERISA of a
Person or an ERISA Affiliate to provide affected parties with a written notice
of an intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA, (d) the institution by the PBGC of

                                       22


<PAGE>   27

proceedings to terminate any Benefit Plan under Section 4042 of ERISA or to
appoint a trustee to administer any Benefit Plan, (e) any event or condition
which constitutes grounds under Section 4042 of ERISA for the appointment of a
trustee to administer a Benefit Plan, (f) the partial or complete withdrawal of
such Person or any ERISA Affiliate from a Multiemployer Plan which would have a
Material Adverse Effect, or (g) the adoption of an amendment by any Person or
any ERISA Affiliate to terminate any Benefit Plan which is subject to Title IV
of ERISA or Section 412 of the Internal Revenue Code or the treatment of an
amendment to a Benefit Plan as a termination under ERISA.

          "Third Amendment" has the meaning set forth in the Recitals hereto.

          "Total Liabilities" means, without duplication, all Indebtedness of
the REIT, on a consolidated basis, plus all other items which, in accordance
with GAAP, would be included as liabilities on the liability side of the balance
sheet of the REIT (including, without limitation, accounts payable incurred in
the ordinary course of business), on a consolidated basis, plus the actual or
potential liability of the REIT, Borrower or any Material Subsidiary for any
Indebtedness of Investment Affiliates that is recourse to the REIT, Borrower or
any Material Subsidiary; provided, however, that "Total Liabilities" shall not
include dividends declared by the REIT or Borrower which are permitted under
Section 8.01(d) but not yet paid.

          "Unencumbered Asset Value" means, as of any date of determination, (i)
a fraction, the numerator of which is the product of four (4) and the
Unencumbered Net Operating Income for the most recently ended Fiscal Quarter
which is attributable (in a manner reasonably acceptable to Agent) to Qualifying
Unencumbered Properties owned (directly or beneficially) by Borrower or any
Subsidiary wholly-owned, directly or indirectly, by Borrower and/or the REIT,
for the entire Fiscal Quarter and the denominator of which is eight hundred
seventy-five ten-thousandths (0.0875) plus (ii) the aggregate of the Net Prices
paid by Borrower or such Subsidiary, or their respective Affiliates for all
Qualifying Unencumbered Properties which have been acquired in the Fiscal
Quarter most recently ended.

          "Unencumbered Net Operating Income" means for any Fiscal Quarter, Net
Operating Income for such period from each Qualifying Unencumbered Property
owned (directly or beneficially) by Borrower.

          "Unfunded Pension Liabilities" means the excess of a Benefit Plan's
accrued benefits, as defined in Section 3(23) of ERISA, over the current value
of that Plan's assets, as defined in Section 3(26) of ERISA.

          "Uniform Commercial Code" means the Uniform Commercial Code as in
effect on the date hereof in the State of Illinois, provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of any security interest in any collateral or the availability of
any remedy hereunder is governed by the Uniform Commercial Code as in effect on
or after the date hereof in any other jurisdiction, "Uniform Commercial Code"
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes

                                       23


<PAGE>   28


of the provisions hereof relating to such perfection or effect of perfection or
non-perfection or availability of such remedy.

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

          "Unsecured Debt" means, as of any date of determination, the sum of
(i) Indebtedness of the REIT, Borrower or any Subsidiary, which is not Secured
Debt or accounts payable plus (ii) that portion of accounts payable of the REIT,
Borrower or any Subsidiary incurred in the ordinary course of business, the
payment of which is not secured by a Lien on any property owned or leased by the
REIT, Borrower or any Subsidiary, which at the date of determination exceeds two
percent (2%) of the sum of Gross Asset Values of Borrower and each of its
Subsidiaries.

          "Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.

          "Unused Amount" has the meaning ascribed to such term in Section
2.04(a).

          "Unused Facility Fee" has the meaning ascribed to such term in Section
2.04(b).

          "Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(l) of ERISA, which a Person or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or within the
immediately preceding five years maintained, administered, contributed to or was
required to contribute to, or under which a Person or any ERISA Affiliate may
incur any liability.

          "Wells Fargo" has the meaning ascribed to such term in the preamble
hereto.

          "WFRAF" has the meaning set forth in the Recitals hereto.

          1.02. Computation of Time Periods. In this Agreement, unless otherwise
specified, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to and including." Periods of days referred to in
this Agreement shall be counted in calendar days unless Business Days are
expressly prescribed.

          1.03. Terms.

          (a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP, provided that for purposes of references to the financial
results of the "REIT, on a consolidated basis," the REIT shall be deemed to own
one hundred percent (100%) of the partnership interests in Borrower.


                                       24

<PAGE>   29
         (b)   Any time the phrase "to the best of Borrower's knowledge" or a
phrase similar thereto is used herein, it means: "to the actual knowledge of the
executive officers of Borrower and the REIT, after reasonable inquiry of those
agents, employees or contractors of the REIT, Borrower, any Agreement Party or
any Subsidiary who could reasonably be anticipated to have knowledge with
respect to the subject matter or circumstances in question and review of those
documents or instruments which could reasonably be anticipated to be relevant to
the subject matter or circumstances in question."

         (c)   In each case where the consent or approval of Agent, Requisite
Lenders, Supermajority Lenders or all Lenders is required or their
non-obligatory action is requested by Borrower, such consent, approval or action
shall be in the sole and absolute discretion of Agent and, as applicable, each
Lender, unless otherwise specifically indicated.

         1.04. Interrelationship With the Existing Credit Agreement. Effective
on the Closing Date, this Agreement shall amend and restate the provisions of
the Existing Credit Agreement (as amended by the First Amendment, the Second
Amendment, the Third Amendment and the Fourth Amendment) in their entirety, and
all Existing Loans and all Loans made on or after the Closing Date shall be
governed exclusively by the terms of this Agreement. Borrower hereby
acknowledges that no Existing Lender is currently in default of its obligations
under the Existing Credit Agreement. Each Existing Lender hereby waives any
Event of Default or Unmatured Event of Default arising from the failure of
Borrower to comply with the provisions of Section 9.01 of the Existing Credit
Agreement prior to the Closing Date.

                                   ARTICLE II.
                                     LOANS

         2.01. Loan Advances and Repayment.

         (a)   Loan Availability

         (i)   Subject to the terms and conditions set forth in this Agreement,
     Lenders hereby agree to make Loans (other than Swingline Loans) to Borrower
     from time to time during the period from the Closing Date to the first
     Business Day preceding the Maturity Date; provided, that the sum of the
     aggregate principal amount of all outstanding Loans (including Swingline
     Loans) plus the aggregate face amount of all outstanding Letters of Credit
     shall not exceed Loan Availability; and provided, further, that if a Base
     Rate Loan is being made pursuant to Section 2.09(e) hereof to reimburse
     Issuing Lender for a drawn Letter of Credit, to avoid a duplicative
     reduction in the amount of Loan availability, the drawn Letter of Credit
     shall not be considered outstanding. All Loans (other than Swingline Loans)
     under this Agreement shall be made by Lenders simultaneously and
     proportionately to their respective Pro Rata Shares, it being understood
     that no Lender shall be responsible for any failure by any other Lender to
     perform its obligation to make a Loan hereunder and that the Commitment of
     any Lender shall not be increased or decreased as a result of the failure
     by any other Lender to perform its obligation to make a

                                       25


<PAGE>   30


     Loan. The Loans (other than Swingline Loans) will be evidenced by the Loan
     Notes. The Swingline Loans will be evidenced by the Swingline Note.

         (ii) Loans (including, without limitation, Swingline Loans) may be
     voluntarily prepaid pursuant to Section 2.05(a) and, subject to the
     provisions of this Agreement (including, without limitation, the provisions
     of Section 2.11 hereof), any amounts so prepaid may, be reborrowed, up to
     the amount available under Section 2.01(a)(i) at the time of such
     Borrowing, until the Business Day next preceding the Termination Date. The
     principal balance of the Loans shall be payable in full on the Termination
     Date. During the term of this Agreement and prior to the termination of the
     Commitments, Borrower shall pay to Agent, within one (1) Business Day after
     Borrower's receipt of a demand in writing from Agent for the benefit of
     Lenders, such principal amounts as are necessary so that the sum of the
     aggregate principal amounts of all outstanding Loans (including Swingline
     Loans) plus the aggregate face amount of all outstanding Letters of Credit
     at any time does not exceed Loan Availability at such time.

         (b)  Notice of Borrowing. Whenever Borrower desires to borrow under
this Section 2.01, Borrower shall give Agent, at Wells Fargo Real Estate Group
Disbursement Center, 2120 East Park Place, Suite 100, El Segundo, California
90245, with a copy to: Wells Fargo Bank, N.A., 225 West Wacker Drive, Suite
2550, Chicago, Illinois 60606, Attn: Account Officer, or such other address as
Agent shall designate, an original or facsimile Notice of Borrowing no later
than 10:00 A.M. (California time), not less than three (3) nor more than five
(5) Business Days prior to the proposed Funding Date of each Loan. Each Notice
of Borrowing shall specify (i) the Funding Date (which shall be a Business Day)
in respect of the Loan, (ii) the amount of the proposed Loan, provided that the
aggregate amount of such proposed Loan shall equal (A) in the case of Base Rate
Loans, One Million Dollars ($1,000,000) or integral multiples of One Hundred
Thousand Dollars ($100,000) in excess thereof, or (B) in the case of LIBOR
Loans, One Million Dollars ($1,000,000) or integral multiples of One Hundred
Thousand Dollars ($100,000) in excess thereof, and (iii) whether the Loan to be
made thereunder will be a Base Rate Loan or a LIBOR Loan and, if a LIBOR Loan,
the Interest Period. Any Notice of Borrowing pursuant to this Section 2.01 (b)
shall be irrevocable. Each such Notice of Borrowing shall be accompanied by all
reports or documents required to be delivered by Borrower to Agent or any
Lender under this Agreement. Borrower may elect (A) so long as no Event of
Default has occurred and is continuing, to convert Base Rate Loans or any
portion thereof into LIBOR Loans, (B) to convert LIBOR Loans or any portion
thereof into Base Rate Loans, or (C) so long as no Event of Default has occurred
and is continuing, to continue any LIBOR Loans or any portion thereof for an
additional Interest Period, provided, however, that the aggregate amount of
Loans being continued as or converted into LIBOR Loans shall, in the aggregate,
equal One Million Dollars ($1,000,000) or an integral multiple of One Hundred
Thousand Dollars ($100,000) in excess thereof. The applicable Interest Period
for the continuation of any LIBOR Loan shall commence on the day on which the
next preceding Interest Period expires. Each such election shall be made by
giving Agent, at 2120 E. Park Place, Suite 100, El Segundo, California 90245,
Attn: Kathleen Medireos, a Notice of Continuation/Conversion by 10:00 A.M.
(California time) on the date of a conversion to a Base Rate Loan, or by 10:00
A.M. (California time) not less than three (3) nor more than five (5) Business
Days prior to the date of a

                                       26


<PAGE>   31

conversion to or continuation of a LIBOR Loan, specifying, in each case (1)
whether a conversion or continuation is to occur, (2) the amount of the
conversion or continuation, (3) the Interest Period therefor, in the case of a
conversion to or continuation of a LIBOR Loan, and (4) the date of the
conversion or continuation (which date shall be a Business Day). Agent shall
promptly notify each Lender, but in any event within one (1) Business Day after
receipt of such notice, of its receipt of each such notice and the contents
thereof. Notwithstanding anything to the contrary contained herein and subject
to the default interest provisions contained in Section 2.03, if an Event of
Default occurs and as a result thereof the Commitments are terminated, all LIBOR
Loans will convert to Base Rate Loans upon the expiration of the applicable
Interest Periods therefor or the date all Loans become due, whichever occurs
first. Except as provided above, the conversion of a LIBOR Loan to a Base Rate
Loan shall only occur on the last Business Day of the Interest Period relating
to such LIBOR Loan. In the absence of an effective election by Borrower of a
LIBOR Loan and Interest Period in accordance with the above procedures prior to
the third (3rd) Business Day prior to the expiration of the then current
Interest Period with respect to any LIBOR Loan, interest on such LIBOR Loan
shall accrue at the interest rate then applicable to a LIBOR Loan for an
Interest Period of thirty (30) days, effective immediately upon the expiration
of the then-current Interest Period, without prejudice, however, to the right of
Borrower to elect a Base Rate Loan or a different Interest Period in accordance
with the terms and provisions of this Agreement; provided, however, that if such
continuation shall cause the number of LIBOR Loan tranches to exceed six (6),
such LIBOR Loan shall be converted to a Base Rate Loan.

         (c)   Making of Loans. Subject to Section 11.03, Agent shall make the
proceeds of Loans (other than Swingline Loans) available to Borrower in El
Segundo, California on such Funding Date and shall disburse such funds in
Dollars and in immediately available funds not later than 1:00 P.M. Chicago time
to Borrower's account, at Bank of America, Account Number 75-01943 in Chicago,
Illinois, or such other account specified in the Notice of Borrowing acceptable
to Agent, with a confirming telephone call to Roger Vollmer at (312) 466-3211 or
Judy Pultorak at (312) 466-3415.

         (d)   Term: Principal Payment. The outstanding balance of the Loans
(other than Swingline Loans, which by their terms shall mature earlier) shall be
payable in full on the earlier to occur of (A) the Maturity Date, and (B) the
acceleration of the Loans pursuant to Section 10.02(a) (the "Termination Date").

         2.02. Authorization to Obtain Loans and Letters of Credit. Borrower
shall provide Agent with documentation satisfactory to Agent indicating the
names of those employees or agents of Borrower authorized by Borrower to sign
Notices of Borrowing, to request Letters of Credit and to receive callback
confirmations, and Agent and Lenders shall be entitled to rely on such
documentation until notified in writing by Borrower of any change(s) of the
persons so authorized. Agent, Swingline Lender and Issuing Lender shall be
entitled to act in good faith on the instructions of anyone identifying himself
as one of the Persons authorized to request Loans or Letters of Credit, and
Borrower shall be bound thereby in the same manner as if such Person were
actually so authorized. Borrower agrees to indemnify, defend and hold Lenders,
Agent, Swingline Lender and Issuing Lender harmless from and against any and all

                                       27


<PAGE>   32

Liabilities and Costs which may arise or be created by the acceptance of
instructions for making Loans, and issuing Letters of Credit.

         2.03. Interest on the Loans

         (a)   Base Rate Loans. Subject to Section 2.03(d), all Base Rate Loans
shall bear interest on the average daily unpaid principal amount thereof from
the date made until paid in full at a fluctuating rate per annum equal to the
Base Rate. Base Rate Loans shall be made in minimum amounts of One Million
Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars
($100,000) in excess thereof.

         (b)   LIBOR Loans. Subject to Section 2.03(d), all LIBOR Loans shall
bear interest on the unpaid principal amount thereof during the Interest Period
applicable thereto at a rate per annum equal to the sum of LIBOR for such
Interest Period plus the Applicable Margin. Upon receipt of a Notice of
Borrowing requesting LIBOR Loans, Agent shall determine LIBOR applicable to the
Interest Period for such LIBOR Loans, and shall give notice thereof to Borrower
and Lenders; provided, however, that failure to give such notice shall not
affect the validity of such rate. Each determination by Agent of LIBOR shall be
conclusive and binding upon the parties hereto in the absence of demonstrable
error. LIBOR Loans shall be in tranches of One Million Dollars ($1,000,000) or
One Hundred Thousand Dollars ($100,000) increments in excess thereof. No more
than six (6) LIBOR Loan tranches shall be outstanding at any one time.

         (c)   Interest Payments. Subject to Section 2.03(d), interest accrued
on all Loans shall be payable by Borrower in arrears on the first Business Day
of the first calendar month following the Closing Date, and the first Business
Day of each succeeding calendar month thereafter, and on the Termination Date.

         (d)   Default Interest. Notwithstanding the rates of interest specified
in Sections 2.03(a) and 2.03(b) and the payment dates specified in Section
2.03(c), effective immediately upon demand by Agent after the occurrence of an
Event of Default and during the continuance of any Event of Default, the
principal balance of all Loans then outstanding and, to the extent permitted by
applicable law, any interest payments on the Loans not paid when due shall bear
interest payable upon demand at a rate which is five percent (5%) per annum in
excess of the rate or rates of interest otherwise payable under this Agreement.
All other amounts due Agent, Swingline Lender, Issuing Lender or Lenders
(whether directly or for reimbursement) under this Agreement or any of the other
Loan Documents if not paid when due, or if no time period is expressed, if not
paid within fifteen (15) days after written demand to Borrower, shall bear
interest from and after demand at the rate which is five percent (5%) per annum
in excess of the lowest rate or rates of interest otherwise payable under this
Agreement, or, if no Loans are then outstanding, at the rate which is five
percent (5%) per annum in excess of the rate of interest applicable to Base
Rate Loans.

         (e)   Late Fee. Borrower acknowledges that late payment hereunder will
cause Agent, Swingline Lender, Issuing Lender and Lenders to incur costs not
contemplated by this

                                       28


<PAGE>   33

Agreement. Such costs include without limitation processing and accounting
charges. Therefore, if Borrower fails timely to pay any sum due and payable
hereunder through the Termination Date (other than payments of principal),
unless waived by Agent pursuant to Section 12.05(e), a late charge of four cents
($.04) for each dollar of any interest payment due hereon and which is not paid
within fifteen (15) days after such payment is due or of any other amount due
hereon (other than payments of principal) and which is not paid within thirty
(30) days after such payment is due, shall be charged by Agent (for the benefit
of Swingline Lender, Issuing Lender and Lenders, as applicable) and paid by
Borrower for the purpose of defraying the expense incident to handling such
delinquent payment; provided, however, that no late charges shall be assessed
with respect to any amount for which Borrower is obligated to pay interest at
the rate specified in Section 2.03(d), provided, further, that in no event shall
Agent, Swingline Lender, Issuing Lender or Lenders be required to refund any
late fees paid by Borrower, notwithstanding the preceding proviso. Borrower,
Agent, Swingline Lender, Issuing Lender, and Lenders agree that this late charge
represents a reasonable sum considering all of the circumstances existing on the
date hereof and represents a fair and reasonable estimate of the costs that
Agent, Swingline Lender, Issuing Lender and Lenders will incur by reason of late
payment. Borrower, Agent, Swingline Lender, Issuing Lender and Lenders further
agree that proof of actual damages would be costly and inconvenient. Acceptance
of any late charge shall not constitute a waiver of the default with respect to
the overdue installment, and shall not prevent Agent from exercising any of the
other rights available hereunder or any other Loan Document. Such late charge
shall be paid without prejudice to any other rights of Agent.

         (f)   Computation of Interest. Interest and fees shall be computed on
the basis of the actual number of days elapsed in the period during which
interest or fees accrue and a year of three hundred sixty (360) days. In
computing interest on any Loan, the date of the making of the Loan shall be
included and the date of payment shall be excluded; provided, however, that if a
Loan is repaid on the same day on which it is made, one (1) day's interest shall
be paid on that Loan. Notwithstanding subsections (a), (b), (d) and (e) above,
interest in respect of any Loan shall not exceed the maximum rate permitted by
applicable law.

         (g)   Changes, Legal Restrictions. In the event that after the Closing
Date (A) the adoption of or any change in any law, treaty, rule, regulation,
guideline or determination of a court or Governmental Authority or any change
in the interpretation or application thereof by a court or Governmental
Authority, or (B) compliance by Agent, Swingline Lender, Issuing Lender or any
Lender with any request or directive made or issued after the Closing Date
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) from any central bank or other Governmental
Authority or quasi-governmental authority:

         (i)   subjects Agent, Swingline Lender, Issuing Lender or any Lender to
     any tax, duty or other charge of any kind with respect to the Facility,
     this Agreement or any of the other Loan Documents or the Loans or the
     Letters of Credit or changes the basis of taxation of payments to Agent,
     Swingline Lender, Issuing Lender or such Lender of principal, fees,
     interest or any other amount payable hereunder, except for net income,
     gross receipts, gross profits or franchise taxes imposed by any
     jurisdiction and not

                                       29


<PAGE>   34


     specifically based upon loan transaction (all such non-excepted taxes,
     duties and other charges being hereinafter referred to as "Lender Taxes");

         (ii)  imposes, modifies or holds applicable, in the determination of
     Agent, Swingline Lender, Issuing Lender or any Lender, any reserve, special
     deposit, compulsory loan, FDIC insurance, capital allocation or similar
     requirement against assets held by, or deposits or other liabilities in or
     for the account of, advances or loans by, or other credit extended by, or
     any other acquisition of funds by, Agent, Swingline Lender, Issuing Lender
     or such Lender or any applicable lending office (except to the extent that
     the reserve and FDIC insurance requirements are reflected in the "Base
     Rate" or "LIBOR Rate"); or

         (iii) imposes on Agent, Swingline Lender, Issuing Lender or any Lender
     any other condition materially more burdensome in nature, extent or
     consequence than those in existence as of the Closing Date;

and the result of any of the foregoing is to (X) increase the cost to Agent,
Swingline Lender, Issuing Lender or any Lender of making, renewing, maintaining
or participating in the Loans or issuing or participating in the Letters of
Credit or to reduce any amount receivable hereunder or thereunder or (Y) to
require Agent, Swingline Lender, Issuing Lender or any Lender or any applicable
lending office to make any payment calculated by reference to the amount of the
Loan held or interest received by it; then, in any such case, Borrower shall
promptly pay to Agent, Swingline Lender, Issuing Lender or such Lender, as
applicable, upon demand, such amount or amounts (based upon a reasonable
allocation thereof by Agent, Swingline Lender, Issuing Lender or such Lender to
the financing transactions contemplated by this Agreement and affected by this
Section 2.03 (g)) as may be necessary to compensate Agent, Swingline Lender,
Issuing Lender or such Lender for any such additional cost incurred, reduced
amounts received or additional payments made to the extent Agent, Swingline
Lender, Issuing Lender or such Lender generally imposes such additional costs,
losses and payments on other borrowers in similar circumstances. Agent,
Swingline Lender, Issuing Lender or such Lender shall deliver to Borrower and in
the case of a delivery by a Lender, such Lender shall also deliver to Agent, a
written statement in reasonable detail of the claimed additional costs incurred,
reduced amounts received or additional payments made and the basis therefor as
soon as reasonably practicable after such Lender obtains knowledge thereof.

         (h)   Certain Provisions Regarding LIBOR Loans

         (i)   LIBOR Lending Unlawful. If any Lender shall determine in good
     faith that the introduction of or any change in or in the interpretation of
     any law makes it unlawful, or any central bank or other governmental
     authority asserts that it is unlawful, for such Lender to make or maintain
     any Loan as a LIBOR Loan, (A) the obligations of the Lenders to make or
     maintain any Loans as LIBOR Loans shall, upon such determination, forthwith
     be suspended until such Lender shall notify Agent that the circumstances
     causing such suspension no longer exist, and (B) if required by law or such
     assertion, all LIBOR Loans shall automatically convert into Base Rate
     Loans.

                                       30


<PAGE>   35

         (ii)  Deposits Unavailable. If Agent shall have determined in good
     faith that adequate means do not exist for ascertaining the interest rate
     applicable hereunder to LIBOR Loans, then, upon notice from Agent to
     Borrower the obligations of all Lenders to make or maintain Loans as LIBOR
     Loans shall forthwith be suspended until Agent shall notify Borrower that
     the circumstances causing such suspension no longer exist. Agent will give
     such notice when it determines, in good faith, that such circumstances no
     longer exist; provided, however, that Agent shall not have any liability to
     any Person with respect to any delay in giving such notice.

         (iii) Funding Losses. In the event any Lender shall incur any loss or
     expense (including any loss or expense incurred by reason of the
     liquidation or reemployment of deposits or other funds acquired by such
     Lender to make or maintain any portion of any Loan as a LIBOR Loan) as a
     result of.

               (A) any continuance, conversion, repayment or prepayment of the
         principal amount of any LIBOR Loans for any reason whatsoever on a date
         other than the scheduled last day of the Interest Period applicable
         thereto;

               (B) any Loans not being made as LIBOR Loans in accordance with
         the Notice of Borrowing therefor, other than as a result of such
         Lender's breach of its obligation to fund such Loans in accordance with
         the terms hereof,

     then, within fifteen (15) Business Days after Borrower's receipt of the
     written notice of such Lender to Borrower with a copy to Agent, Borrower
     shall reimburse such Lender for such loss or expense; provided however,
     that each Lender will use reasonable efforts to minimize such loss or
     expense. Such written notice (which shall include calculations in
     reasonable detail) shall, in the absence of demonstrable error, be
     conclusive and binding on the parties hereto.

         (i)   Withholding Tax Exemption. Each Lender that is not created or
organized under the laws of the United States of America or a political
subdivision thereof shall deliver to Borrower AND THE AGENT NO LATER THAN THE
Closing Date (or, in the case of a Lender which becomes a Lender pursuant to
Section 11.13. the date upon which such Lender becomes a party hereto) a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender, in a form satisfactory to Borrower and the Agent, to the effect
that such Lender is capable, under the provisions of an applicable treaty
concluded by the United States of America (in which case the certificate shall
be accompanied by three (3) accurate and complete duly executed originals of
Form 1001 of the Internal Revenue Service) or under Section 1442 of the Internal
Revenue Code (in which case the certificate shall be accompanied by three (3)
accurate and complete duly executed originals of Form 4224 of the Internal
Revenue Service), of receiving payments of principal, interest and fees
hereunder without deduction or withholding of United States federal income tax.
Further, if at any time a Lender changes its applicable lending office or
selects an additional applicable lending office, it shall, at the same time or
promptly thereafter, but only to the extent the certificate and forms previously
delivered by it hereunder are no longer applicable or effective, deliver to
Borrower and Agent in replacement for, or in

                                       31


<PAGE>   36

addition to, the certificate and forms previously delivered by it hereunder, a
true and accurate certificate executed in duplicate by a duly authorized officer
of such Lender accompanied by three (3) accurate and complete duly executed
originals of either Form 1001 of the Internal Revenue Service or Form 4224 of
the Internal Revenue Service, whichever is applicable, indicating that such
Lender is entitled to receive payments of principal, interest and fees for the
account of such changed or additional applicable lending office under this
Agreement without deduction or withholding of United States federal tax. Each
Lender further agrees to deliver to Borrower and the Agent a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender
accompanied by three (3) accurate and complete duly executed originals of either
Form 1001 of the Internal Revenue Service or Form 4224 of the Internal Revenue
Service, whichever is appropriate, substantially in a form satisfactory to
Borrower and the Agent, before or promptly upon the occurrence of any event
requiring a change in the most recent certificate or Internal Revenue Service
form previously delivered by it to Borrower and the Agent pursuant to this
Section 2.03 (j). Further, each Lender which delivers a certificate accompanied
by Form 1001 of the Internal Revenue Service covenants and agrees to deliver to
Borrower and the Agent within fifteen (15) days prior to January 1, 1999, and
every third (3rd) anniversary of such date thereafter, on which this Agreement
is still in effect, another such certificate and three (3) accurate and complete
original signed copies of Form 1001 (or any successor form or forms required
under the Internal Revenue Code or the applicable regulations promulgated
thereunder), and each Lender that delivers a certificate accompanied by Form
4224 of the Internal Revenue Service covenants and agrees to deliver to Borrower
and the Agent within fifteen (15) days prior to the beginning of each subsequent
taxable year of such Lender during which this Agreement is still in effect,
another such certificate and three (3) accurate and complete original signed
copies of Internal Revenue Service Form 4224 (or any successor form or forms
required under the Internal Revenue Code or the applicable regulations
promulgated hereunder). If (i) any Lender is required under this Section 2.03(j)
to provide a certificate or other evidence described above and fails to deliver
to Borrower and Agent such certificate or other evidence or (ii) any Lender
delivers a certificate to the effect that, as a result of the adoption of or any
change in any law, treaty, rule, regulation, guideline or determination of a
Governmental Authority after the date such Lender became a party hereto, such
Lender is not capable of receiving payments of interest hereunder without
deduction or withholding of United States of America federal income tax as
specified therein and that it is not capable of recovering the full amount of
the same from a source other than Borrower, then, to the extent required by law,
as the sole consequence of such Lender's failure to deliver the certificate
described in (i) above or such Lender's delivery of the certificate described in
(ii) above, Borrower shall be entitled to deduct or withhold taxes from the
payments owed to such Lender.

         2.04. Fees.

         (a)   Loan Fee. On the Closing Date, Borrower shall pay to Agent, on
behalf of Agent and Lenders, a loan fee in the amount of Three Hundred Thousand
Dollars ($300,000).

         (b)   Unused Facility Fee. Until the Obligations are paid in full and
this Agreement is terminated or, if sooner. the date the Commitments terminate,
and subject to Section 11.04(b), Borrower shall pay to Agent, for the account
of each Lender, an Unused

                                       32


<PAGE>   37

Facility Fee accruing from and after the Closing Date at the rate described
below upon the amount during each calendar quarter of (i) the Facility, minus
(ii) the sum of (A) the average daily aggregate principal balance of all Loans
then outstanding other than Swingline Loans and (B) the average daily aggregate
face amount of all outstanding Letters of Credit (the "Unused Amount"). The
Unused Facility Fee will be calculated and will accrue at the rate per annum of
fifteen one-hundredths of one percent (.15%). Subject to Section 11.04(b), each
Lender shall be entitled to receive its Pro Rata Share of such Unused Facility
Fee. All such Unused Facility Fees payable under this paragraph shall be payable
in arrears on the fifth Business Day in each calendar quarter beginning with the
first calendar quarter after the Closing Date.

         (c) Agency Fees. Borrower shall pay Agent such fees as are provided for
in the agency and arrangement fee agreement between Agent and Borrower, as in
existence from time to time.

         (d) Letter of Credit Fee. With respect to each Letter of Credit,
Borrower agrees to pay to Agent (i) a letter of credit fee equal to the
Applicable Margin on the face amount of such Letter of Credit for the term of
such Letter of Credit to be distributed by Agent to each Lender according to its
Pro Rata Share payable in arrears on the fifth Business Day in each calendar
quarter beginning with the first calendar quarter after the Closing Date and
ending on the date of the expiration, return or termination of such Letter of
Credit if such date is a date other than the first Business Day of a calendar
month and (ii) a non-refundable issuing fee of $500.00 solely for the account of
Issuing Lender, payable in full on the date of issuance thereof.

         (e) Payment of Fees. The fees described in this Section 2.04 represent
compensation for services rendered and to be rendered separate and apart from
the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
California in immediately available funds and shall be non-refundable when paid.
If Borrower fails to make any payment of fees or expenses specified or referred
to in this Agreement due to Agent or Lenders, including without limitation those
referred to in this Section 2.04 or otherwise under this Agreement or any
separate fee agreement between Borrower and Agent relating to this Agreement,
when due, the amount due shall bear interest until paid at the Base Rate and,
after five (5) days at the rate specified in Section 2.03(d) (but not to exceed
the maximum rate permitted by applicable law) and shall constitute part of the
Obligations. All fees described in this Section 2.04 which are expressed as a
per annum charge shall be calculated on the basis of the actual number of days
elapsed in a three hundred sixty (360) day year.

         2.05. Payments.

         (a)   Voluntary Prepayments. Borrower may, upon not less than three (3)
Business Days prior written notice (or with written notice not later than 1:00
P.M. (California time) on the same Business Day in the case of a Swingline
Loan), at any time and from time to time, prepay any Loans, without premium or
penalty (other than as set forth in Section

                                       33


<PAGE>   38

2.03(h)(iii)), in whole or in part in amounts not less than One Hundred Thousand
Dollars ($100,000) or integral multiples of Twenty-Five Thousand Dollars
($25,000) in excess of One Hundred Thousand Dollars ($100,000). Any notice of
prepayment given to Agent under this Section 2.05(a) shall specify the date of
prepayment and the aggregate principal amount of the prepayment. All prepayments
of principal shall be accompanied by a payment of all accrued and unpaid
interest thereon.

         (b)   Manner and Time of Payment. All payments of principal, interest
and fees hereunder payable to Agent, Swingline Lender, Issuing Lender or the
Lenders shall be made without condition or reservation of right and free of
set-off or counterclaim, in Dollars and by (i) wire transfer (pursuant to
Agent's written wire transfer instructions) of immediately available funds,
delivered to Agent not later than 11:00 A.M. (California time) (or 2:00 P.M.
(California time) in the case of a Swingline Loan) on the date due; and funds
received by Agent after that time and date shall be deemed to have been paid on
the next succeeding Business Day or (ii) by check (pursuant to Agent written
check payment instructions) delivered to Agent, such check and the payment
intended to be covered thereby to be deemed to have been paid on the date Agent
receives immediately available funds therefor. All payments of principal,
interest and fees hereunder shall be made by (i) wire transfer of immediately
available funds to Wells Fargo Bank, N.A. (ABA number 121000248) for credit to
account number AC2963507207, reference MHC Operating Limited Partnership, loan
number 6023AMC with telephonic notice to Patrick Hickey at (310) 335-9409 or
(ii) check payable to Wells Fargo Bank, N.A., and delivered to Agent at 2120 E.
Park Place, Suite 100, El Segundo, California, 90245, Attn: Patrick Hickey, or
to such other bank, account or address as Agent may specify in a written notice
to Borrower.

         (c)   Payments on Non-Business Days. Whenever any payment to be made by
Borrower hereunder shall be stated to be due on a day which is not a Business
Day, payments shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in Section 2.04, as the case
may be.

         2.06. Increased Capital. If either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) compliance
by Agent, Swingline Lender, Issuing Lender or any Lender with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law and whether or not the failure to comply therewith would
be unlawful) made or issued after the Closing Date affects or would affect the
amount of capital required or expected to be maintained by Agent, Swingline
Lender, Issuing Lender or such Lender or any corporation controlling Agent,
Swingline Lender, Issuing Lender or such Lender, and Agent, Swingline Lender,
Issuing Lender or such Lender determines that the amount of such capital is
increased by or based upon the existence of the obligations of Agent, Swingline
Lender, Issuing Lender or such Lender, then, upon demand by Agent, Swingline
Lender, Issuing Lender or such Lender, Borrower shall immediately pay to Agent,
Swingline Lender, Issuing Lender or such Lender, from time to time as specified
by Agent, Swingline Lender, Issuing Lender or such Lender, additional amounts
sufficient to compensate Agent, Swingline Lender, Issuing Lender or such Lender
in the light of such circumstances, to the extent that Agent, Swingline Lender,
Issuing Lender or such Lender reasonably determines



                                       34

<PAGE>   39

such increase in capital to be allocable to the existence of the obligations of
Agent, Swingline Lender, Issuing Lender or such Lender hereunder and to the
extent Agent, Swingline Lender, Issuing Lender or such Lender generally imposes
such amounts on other borrowers in similar circumstances. A certificate as to
such amounts submitted to Borrower by Agent, Swingline Lender, Issuing Lender or
such Lender shall, in the absence of manifest error, be conclusive and binding
for all purposes.

         2.07. Notice of Increased Costs. Each of Agent, Swingline Lender,
Issuing Lender and the Lenders agrees that, as promptly as reasonably
practicable after it becomes aware of the occurrence of an event or the
existence of a condition which would cause it to be affected by any of the
events or conditions described in Section 2.03(g) or (h), or Section 2.06, it
will notify Borrower and provide in such notice a reasonably detailed
calculation of the amount due from Borrower, and provide a copy of such notice
to Agent, of such event and the possible effects thereof. If Agent, Swingline
Lender, Issuing Lender or the affected Lender shall fail to notify Borrower of
the occurrence of any such event or the existence of any such condition within
ninety (90) days following the end of the month during which such event occurred
or such condition arose, then Borrower's liability for any amounts described in
said Sections 2.03(g) and (h) and 2.06 incurred by Agent, Swingline Lender,
Issuing Lender or such affected Lender as a result of such event or condition
shall be limited to those attributable to the period occurring subsequent to the
ninetieth (90th) day prior to the date upon which Agent, Swingline Lender,
Issuing Lender or such affected Lender actually notified Borrower of such event
or condition.

         2.08. Option to Replace Lenders.

         (a)   Lenders. If any Lender shall make any demand for payment or
reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (a) there does not then exist any Unmatured Event of Default
or Event of Default and (b) the circumstances resulting in such demand for
payment or reimbursement are not applicable to all Lenders, Borrower may
terminate the Commitment of such Lender, in whole but not in part, by (i) giving
such Lender and Agent not less than three (3) Business Days prior written notice
thereof, which notice shall be irrevocable and effective only upon receipt
thereof by such Lender and Agent and shall specify the effective date of such
termination, (ii) paying to such Lender (and there shall become due and payable)
on such date the outstanding principal amount of all Loans made by such Lender,
all interest thereon, and all other Obligations owed to such Lender, including,
without limitation, amounts owing under Sections 2.03(g), 2.03(h)(iii), 2.04 and
2.06, if any, and (iii) pursuant to the provisions of Section 11.13, proposing
the introduction of a replacement Lender reasonably satisfactory to Agent, or
obtaining the agreement of one or more existing Lenders, to assume the entire
amount of the Commitment of the Lender whose Commitment is being terminated, on
the effective date of such termination. Upon the satisfaction of all of the
foregoing conditions, such Lender which is being terminated pursuant to this
Section 2.08 shall cease to be a "Lender" for purposes of this Agreement
provided that Borrower shall continue to be obligated to such Lender under
Sections 12.01 and 12.02 (and any other indemnifications contained herein or in
any other Loan Document) with respect to or on account of unpaid, unliquidated,
unknown or similar claims or liabilities accruing prior to such Lender ceasing
to be a "Lender" for purposes of this Agreement.

                                       35


<PAGE>   40

         (b)   Agent, Swingline Lender and Issuing Lender. If Agent, Swingline
Lender or Issuing Lender shall make any demand for payment or reimbursement
pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06, then, provided
that (a) there does not then exist any Unmatured Event of Default or Event of
Default and (b) the circumstances resulting in such demand for payment or
reimbursement are not applicable to all Lenders, Borrower may remove Agent by
(i) giving the Lenders and Agent not less than thirty (30) Business Days prior
written notice thereof, and (ii) paying to Agent, Swingline Lender and Issuing
Lender (and there shall become due and payable) on such date all other
Obligations owed to Agent, Swingline Lender and Issuing Lender, including,
without limitation, amounts owing under Sections 2.03(g), 2.03(h), 2.04 and
2.06, if any. Agent, Swingline Lender and Issuing Lender shall be replaced in
accordance with the provisions of Section 11.09 hereof.

         2.09. Letters of Credit.

         (a)   Letter of Credit Availability. Subject to the terms and
conditions set forth in this Agreement, at any time and from time to time
through the date that is thirty (30) days prior to the Maturity Date, Issuing
Lender shall issue such Letters of Credit for the account of Borrower as
Borrower may request in accordance with this Section 2.09; provided that (i)
upon issuance of such Letters of Credit, the sum of the aggregate principal
amount of all outstanding Loans (including Swingline Loans) plus the aggregate
face amount of all outstanding Letters of Credit shall not exceed Loan
Availability, provided, that if a Base Rate Loan is being made pursuant to
Section 2.09(e) hereof to reimburse Issuing Lender for a drawn Letter of Credit,
to avoid a duplicative reduction in the amount of Loan availability, the drawn
Letter of Credit shall not be considered outstanding; (ii) the aggregate face
amount of all outstanding Letters of Credit shall not exceed Thirty Million
Dollars ($30,000,000); and (iii) unless all Lenders otherwise consent in
writing, the term of any Letter of Credit shall not extend or be extended beyond
the date which is ten (10) days prior to the Maturity Date and no Letter of
Credit shall contain an automatic extension or renewal clause. Use of funds
drawn under Letters of Credit shall be subject to the same conditions as those
for use of Loan proceeds set forth in Section 7.01(i) hereof.

         (b)   Request for Letter of Credit. Borrower shall deliver to Agent and
Issuing Lender a duly executed letter of credit application substantially in the
form attached as Exhibit H hereto (a "Letter of Credit Application") not later
than 10:00 PM, (California time), at least five (5) Business Days prior to the
date upon which a requested Letter of Credit is to be issued. Borrower shall
further deliver to Agent and Issuing Lender such additional instruments and
documents as Issuing Lender may reasonably require, in conformity with customary
and commercially reasonable practices or law, in connection with the issuance of
such Letter of Credit.

         (c)   Issuance of Letters of Credit. Subject to the conditions set
forth in this Agreement, Issuing Lender shall issue the Letter of Credit on or
before 5:00 P.M. Pacific Time, on or before the day which is five (5) Business
Days following receipt of the documents last due pursuant to Section 2.09(b)
hereof in respect thereof. Upon issuance of a Letter of Credit, Issuing Lender
shall promptly notify Lenders of the amount and terms thereof. Issuing Lender


                                       36



<PAGE>   41

shall provide copies of each Letter of Credit to Lenders promptly following
issuance thereof and shall notify Lenders promptly of all payments,
reimbursements, expirations, negotiations, transfers and other activity with
respect to outstanding Letters of Credit.

         (d) Participations. Each Lender, upon issuance by Issuing Lender of a
Letter of Credit in accordance with the provisions of this Agreement, shall be
deemed to have purchased without recourse a risk participation from Issuing
Lender in such Letter of Credit and the obligations arising thereunder, in each
case in an amount equal to its Pro Rata Share of the obligations under such
Letter of Credit, and shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and be obligated to pay to Issuing Lender
therefor and discharge when due, its Pro Rata Share of the obligations arising
under such Letter of Credit.

         (e) Reimbursement. In the event of any drawing or request for drawing
under any Letter of Credit, Issuing Lender will promptly notify Borrower and
Agent thereof. Unless Borrower shall notify Issuing Lender of its intent to
otherwise reimburse Issuing Lender immediately upon receipt of notice from
Issuing Lender of a drawing under a Letter of Credit, Borrower shall be deemed
to have requested Base Rate Loans in the amount of the drawing as provided in
subsection (f) hereof, the proceeds of which will be used to satisfy the
reimbursement obligations. Borrower shall reimburse Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a Loan obtained
hereunder or otherwise) in same day funds as provided herein. If Borrower shall
fail to reimburse Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to the Base
Rate plus two percent (2%). Borrower's reimbursement obligations hereunder shall
be absolute and unconditional under all circumstances irrespective of any rights
of set-off, counterclaim or defense to payment Borrower may claim or have
against Issuing Lender, Agent, the Lenders, the beneficiary of the Letter of
Credit drawn upon or any other Person, including, without limitation, any
defense based on any failure of Borrower to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of Credit;
provided, however, that (i) the Borrower shall not be obligated to reimburse
Issuing Lender and (ii) Lenders shall not be obligated to fund Loans or purchase
participations hereunder in reimbursement of Issuing Lender, for any wrongful
payment made by Issuing Lender under a Letter of Credit as a result of acts or
omissions constituting bad faith, willful misconduct or gross negligence on the
part of Issuing Lender. The Letter of Credit Obligations will be evidenced by
the Letter of Credit Note.

         (f) Repayment with Loans. On any day on which Borrower shall have
requested, or been deemed to have requested, Base Rate Loans to reimburse a
drawing under a Letter of Credit, Agent shall give notice to the Lenders-that
such Loans have been requested or deemed requested in connection with a drawing
under a Letter of Credit, in which case such Loans (collectively, a "Letter of
Credit Mandatory Borrowing") shall be immediately made by all Lenders (without
giving effect to any termination of the Commitments pursuant to Section 10.02
hereof) pro rata based on each Lender's Pro Rata Share and the proceeds thereof
shall be paid directly to Issuing Lender for application to the respective
Letter of Credit Obligations. Each Lender hereby irrevocably agrees to make such
Loans promptly upon any such request or deemed request in the amount and in the
manner specified in the preceding sentence and on the

                                       37


<PAGE>   42

same such date (or the next Business Day if such notice is received after 10:00
A.M. (California time)) notwithstanding (i) the amount of the Letter of Credit
Mandatory Borrowing may not comply with the minimum amount for Borrowings
otherwise required hereunder, (ii) whether any conditions specified in Section
4.02 are then satisfied, (iii) whether an Event of Default or Unmatured Event of
Default then exists, (iv) failure of any such request or deemed request for a
Borrowing to be made by the time otherwise required in Section 2.01 hereof, (v)
the date of such Letter of Credit Mandatory Borrowing (provided that such date
must be a Business Day), or (vi) any termination of the Commitments immediately
prior to such Letter of Credit Mandatory Borrowing or contemporaneously
therewith. In the event that any Letter of Credit Mandatory Borrowing cannot for
any reason occur in respect of a Letter of Credit on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to Borrower), then each Lender
hereby agrees that it shall forthwith fund (as of the date the Letter of Credit
Mandatory Borrowing would otherwise have occurred, but adjusted for any payments
received from Borrower on or after such date and prior to such funding) its
participation interest in the outstanding obligations arising in connection with
such Letter of Credit, provided that (A) all interest payable on Borrower's
reimbursement obligation with respect to such Letter of Credit shall be for the
account of Issuing Lender until but excluding the day upon which the Letter of
Credit Mandatory Borrowing would otherwise have occurred, and (B) in the event
of a delay between the day upon which the Letter of Credit Mandatory Borrowing
would otherwise have occurred and the time any funding of a participation
pursuant to this sentence is actually made, the funding Lender shall be required
to pay to the Issuing Lender interest on the principal amount of such
participation for each day from and including the day upon which the Letter of
Credit Mandatory Borrowing would otherwise have occurred to but excluding the
date of funding of such participation, at the rate equal to the Federal Funds
Rate, for the two (2) Business Days after the date the Letter of Credit
Mandatory Borrowing would otherwise have occurred, and thereafter at a rate
equal to the Base Rate.

         (g) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit shall,
for purposes hereof, be treated in all respects the same as if it were the
issuance of a new Letter of Credit hereunder.

         (h) Uniform Customs and Practices. Issuing Lender may have the Letters
of Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
deemed in all respects to be a part thereof.

         (i) Collateralization at Termination Date. Upon the occurrence of the
Termination Date prior to the expiration of all Letters of Credit, Borrower
shall provide to Issuing Lender a standby letter of credit issued by a bank with
a rating of its senior unsecured debt obligations of not less than A by Moody's,
in form and substance satisfactory to Issuing Lender, in favor of Issuing Lender
in a face amount equal to the outstanding Letters of Credit on that date, or
shall make other provisions satisfactory to Issuing Lender and Agent for the
full collateralization, by cash or cash equivalent, of such outstanding Letters
of Credit. In the event of failure of Borrower to comply with the requirement of
this Section 2.09(i), such portion of the

                                       38


<PAGE>   43

face amount of all outstanding Letters of Credit as to which Borrower has failed
to comply shall be deemed to be immediately due and payable.

         (j)   Limitation of Liability. Borrower assumes all risks of the acts
or omissions of any beneficiary or transferee of any Letter of Credit with
respect to its use of such Letter of Credit absent the bad faith, gross
negligence or willful misconduct of Issuing Lender. Neither Issuing Lender,
Agent, any Lender nor any of their respective officers, directors, employees or
agents shall be liable or responsible for, nor shall Borrower's obligations
hereunder in respect of such Letters of Credit be impaired as a result of any of
the following absent the bad faith, gross negligence or willful misconduct of
Issuing Lender:

         (i)   any lack of validity or enforceability of any Letter of Credit or
     any other agreement or instrument relating thereto (such Letter of Credit
     and any other agreement or instrument relating thereto being, collectively,
     the "Letter of Credit Documents");

         (ii)  the use that may be made of any Letter of Credit or any acts or
     omissions of any beneficiary or transferee in connection therewith;

         (iii) any statement or any other document presented under a Letter of
     Credit proving to be forged, fraudulent, invalid or insufficient in any
     respect or any statement therein being untrue or inaccurate in any,
     respect;

         (iv)  the existence of any claim, setoff, defense or other right that
     Borrower may have at any time against any beneficiary or any transferee of
     a Letter of Credit (or any Persons for whom any such beneficiary or any
     such transferee may be acting), Issuing Lender or any other Person, whether
     in connection with the transactions contemplated by the Letter of Credit
     Documents or any unrelated transaction;

         (v)   Failure of any documents to bear any reference or adequate
     reference to the Letter of Credit; or

         (vi)  any other circumstances whatsoever in making or failing to make
     payment under any Letter of Credit.

In furtherance and not in limitation of the foregoing, Issuing Lender may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary,
absent the bad faith, gross negligence or willful misconduct of Issuing Lender.

         (k)   Lenders. Any action taken or omitted to be taken by Issuing
Lender under or in connection with any Letter of Credit, if taken or omitted in
the absence of bad faith, gross negligence or willful misconduct, shall not put
Issuing Lender under any resulting liability to any, Lender or relieve that
Lender of its obligations hereunder to Issuing Lender. In determining whether to
pay under any Letter of Credit, Issuing Lender shall have no obligations, to
Lenders other than to confirm that any documents required to be delivered under
such Letter of Credit

                                       39

<PAGE>   44

appear to have been delivered and that they appear to comply on their face with
the requirements of such Letter of Credit.

         (1)   Indemnification. Borrower shall indemnify and hold harmless
Issuing Lender, Agent and Lenders from and against any and all claims, damages,
losses, liabilities, reasonable costs and expenses of any kind whatsoever,
including reasonable fees and expenses of attorneys that such indemnified Person
may incur, together with all reasonable costs and expenses resulting from the
compromise or defense of any claims or liabilities hereinafter described, by
reason of or in connection with (i) the execution and delivery or transfer of,
or payment or failure to pay under, any Letter of Credit, (ii) any suit, action
or proceeding brought by any Person to require or present payment under any
Letter of Credit, or (iii) any breach by Borrower of any warranty, covenant,
term or condition in, or the occurrence of any default under, any Letter of
Credit or any related contract; provided, however, that Borrower shall not be
required to indemnify Issuing Lender, Agent or any Lender for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by the willful misconduct, gross negligence, bad faith or fraud
of such indemnified Person; and provided, further, that Issuing Lender will be
liable to Borrower for any damages suffered by Borrower as a result of Issuing
Lender's grossly negligent or willful failure to pay under any Letter of Credit
after the presentment to it of documentation in strict compliance with the terms
and conditions of the Letter of Credit and absent any challenge by any Person
(other than Issuing Lender or any of its affiliates) to the making of such
payment.

         2.10. Swingline Loans


         (a)   Swingline Availability. Subject to the terms and conditions set
forth in this Agreement, Swingline Lender agrees to make certain revolving loans
to Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans")
from time to time during the period from the Closing Date to the fifth day
preceding the Maturity Date; provided, however, that the aggregate amount of
Swingline Loans outstanding at any time shall not exceed the lesser of (i)
THIRTY MILLION DOLLARS ($30,000,000), and (ii) the excess of Loan Availability
over the sum of the aggregate principal amount of all outstanding Loans
(excluding Swingline Loans) plus the aggregate face amount of all outstanding
Letters of Credit, provided, that if a Base Rate Loan is being made pursuant to
Section 2.09(e) hereof to reimburse Issuing Lender for a drawn Letter of Credit,
to avoid a duplicative reduction in the amount of Loan availability, the drawn
Letter of Credit shall not be considered outstanding. Subject to the limitations
set forth herein, any amounts repaid in respect of Swingline Loans may be
reborrowed.

         (b)   Swingline Borrowings

         (i)   Notice of Borrowing. Whenever Borrower desires to borrow under
     this Section 2.10, Borrower shall give Swingline Lender and Agent at Wells
     Fargo Real Estate Group Disbursement Center, 2120 East Park Place, Suite
     100, El Segundo, California 90245, with a copy to Wells Fargo Bank, N.A.,
     225 West Wacker Drive, Suite 2550, Chicago, Illinois 60606, Attn: Account
     Officer, or such other address as Agent shall designate, an original or
     facsimile Notice of Borrowing no later than 11:00 A.M.

                                       40


<PAGE>   45

     (California time) on the proposed date of such borrowing (and confirmed by
     telephone by such time), specifying (A) that a Swingline Loan is being
     requested, (B) the amount of such Swingline Loan, (C) the proposed date of
     such Swingline Loan, which shall be a Business Day, and (D) stating that no
     Event of Default or Unmatured Event of Default has occurred and is
     continuing both before and after giving effect to such Swingline Loan. Such
     notice shall be irrevocable.

         (ii)  Minimum Amounts; Frequency of Swingline Loans. Each Swingline
     Loan shall be in a minimum principal amount of $1,000,000, or an integral
     multiple of $100,000 in excess thereof. Swingline Loans shall be available
     no more frequently than once in any week.

         (iii) Making of Swingline Loans. Swingline Lender shall make the
     proceeds of each Swingline Loan available to Borrower in El Segundo,
     California on the applicable Funding Date in Dollars and in immediately
     available funds not later than 1:00 P.M. (California time) on such Funding
     Date to Borrower's account, at Bank of America, Account Number 75-01943 in
     Chicago, Illinois or such other account specified in the Notice of
     Borrowing and acceptable to Agent.

         (iv)  Repayment of Swingline Loans. Each Swingline Loan shall be due
     and payable on the earliest of (A) five (5) days from the date of the
     applicable Funding Date for such Swingline Loan, (B) the date of the next
     Borrowing under Section 2.01 hereof (other than a Letter of Credit
     Mandatory Borrowing) or (C) the Termination Date. If, and to the extent,
     any Swingline Loans shall be outstanding on the date of any Borrowing under
     Section 2.01 hereof (other than a Letter of Credit Mandatory Borrowing),
     such Swingline Loans shall first be repaid from the proceeds of such
     Borrowing prior to the disbursement of the same to the Borrower. If, and to
     the extent, a Borrowing under Section 2.01 hereof (other than a Letter of
     Credit Mandatory Borrowing) is not requested prior to the Termination Date
     or the end of the five (5) day period after a Swingline Loan is made,
     Borrower shall be deemed to have requested Base Rate Loans in the amount of
     the applicable Swingline Loan then outstanding, the proceeds of which shall
     be used to repay such Swingline Loan to the Swingline Lender. In addition,
     the Swingline Lender may, at any time, in its sole discretion, by written
     notice to Borrower and Agent, demand repayment of its Swingline Loans by
     way of Base Rate Loans, in which case the Borrower shall be deemed to have
     requested Base Rate Loans in the amount of such Swingline Loans then
     outstanding, the proceeds of which shall be used to repay such Swingline
     Loans to the Swingline Lender. Any Borrowing which is deemed requested by
     the Borrower in accordance with this Section 2.10(b)(iv) is hereinafter
     referred to as a "Swingline Mandatory Borrowing". Each Lender hereby
     irrevocably agrees to make Base Rate Loans in accordance with its Pro Rata
     Share promptly upon receipt of notice from the Swingline Lender of any such
     deemed request for a Swingline Mandatory Borrowing in the amount and in the
     manner specified in the preceding sentences and on the date such notice is
     received by such Lender (or the next Business Day if such notice is
     received after 10:00 A.M. (California time)) notwithstanding (I) the amount
     of the Swingline Mandatory Borrowing may not comply with the minimum amount
     for

                                       41


<PAGE>   46

     Borrowings otherwise required hereunder, (II) whether any conditions
     specified in Section 4.02 hereof are then satisfied, (III) whether an Event
     of Default or Unmatured Event of Default then exists, (IV) failure of any
     such deemed request for a Borrowing to be made by the time otherwise
     required in Section 2.01 hereof, (V) the date of such Swingline Mandatory
     Borrowing (provided that such date must be a Business Day), or (VI) any
     termination of the Commitments immediately prior to such Swingline
     Mandatory Borrowing or contemporaneously therewith; provided, however, that
     no Lender shall be obligated to make any Loans under this Section 2.1
     0(b)(iv) if an Event of Default or Unmatured Event of Default then exists
     and the applicable Swingline Loan was made by the Swingline Lender without
     receipt of a written Notice of Borrowing in the form specified in subclause
     (i) above or after Agent had delivered a notice of an Event of Default or
     Unmatured Event of Default which had not been rescinded.

         (v)   Purchase of Participations. In the event that any Swingline
     Mandatory Borrowing cannot for any reason occur on the date otherwise
     required above (including, without limitation, as a result of the
     commencement of a proceeding under the Bankruptcy Code with respect to
     Borrower), then each Lender hereby agrees that it shall forthwith purchase
     (as of the date the Swingline Mandatory Borrowing would otherwise have
     occurred, but adjusted for any payment received from Borrower on or after
     such date and prior to such purchase) from the Swingline Lender such
     participations in the outstanding Swingline Loans as shall be necessary to
     cause each such Lender to share in such Swingline Loans ratably based upon
     its Pro Rata Share, provided that (A) all interest payable on the Swingline
     Loans with respect to any participation shall be for the account of the
     Swingline Lender until but excluding the day upon which the Swingline
     Mandatory Borrowing would otherwise have occurred, and (B) in the event of
     a delay between the day upon which the Swingline Mandatory Borrowing would
     otherwise have occurred and the time any purchase of a participation
     pursuant to this sentence is actually made, the purchasing Lender shall be
     required to pay to the Swingline Lender interest on the principal amount of
     such participation for each day from and including the day upon which the
     Swingline Mandatory Borrowing would otherwise have occurred to but
     excluding the date of payment for such participation, at the rate equal to
     the Federal Funds Rate, for the two (2) Business Days after the date the
     Swingline Mandatory Borrowing would otherwise have occurred, and thereafter
     at a rate equal to the Base Rate. Notwithstanding the foregoing, no Bank
     shall be obligated to purchase a participation in any Swingline Loan if an
     Event of Default or Unmatured Event of Default then exists and such
     Swingline Loan was made by the Swingline Lender without receipt of a
     written Notice of Borrowing in the form specified in subclause (i) above or
     after Agent had delivered a notice of an Event of Default or Unmatured
     Event of Default which had not been rescinded.

         (c)   Interest Rate. Each Swingline Loan shall bear interest at a rate
per annum equal to the Base Rate minus 1.5% per annum.

         2.11. Conversion to Pre-Extension Term Loan. Borrower shall have the
right. exercisable no more than once during the term of this Agreement at any
time prior to August 17.

                                       42

<PAGE>   47
2000, and provided no Event of Default or Unmatured Event of Default exists at
the time such right is exercised or when such conversion would otherwise become
effective hereunder, to convert outstanding Loans (other than Swingline Loans)
in a maximum aggregate amount not to exceed Fifty Million Dollars ($50,000,000)
to a non-amortizing term loan (a "Pre-Extension Term Loan"). Such conversion
shall be effective on the date which is five (5) days after Borrower delivers
notice to Agent setting forth Borrower's election to make such conversion and
the amount of the Pre-Extension Term Loan, and certifying the absence of any
Event of Default or Unmatured Event of Default. No portion of the Pre-Extension
Term Loan which is prepaid in accordance with this Agreement may be reborrowed.

                                  ARTICLE III.
                           SECURED FACILITY CONVERSION

         3.01. Term-Out and Conversion. If Borrower delivers notice to Agent on
or before May 17, 2000, of its intention to exercise its option to extend the
Maturity Date, then Borrower shall on or before August 17, 2000 amend and
restate this Agreement to provide for (and deliver all documents to effect the
terms of) (i) the conversion of all outstanding Loans (including, without
limitation, the Pre-Extension Term Loan) to a term loan, (ii) the termination of
all obligations of Swingline Lender, Issuing Lender and Lenders with respect to
Swingline Loans and Letters of Credit, (iii) first mortgage Liens in favor of
Agent and Lenders (pursuant to security instruments reasonably acceptable to
Agent) on Properties legally or beneficially owned by Borrower that are not
securing any other Indebtedness and were developed for manufactured home
communities, and all personal Property relating thereto owned or leased by
Borrower, (iv) a limitation on borrowings hereunder at all times to a borrowing
base equal to sixty percent (60%) of the Appraised Value (based on "as is"
condition) of the Properties described in clause (iii) above, (v) an "Applicable
Margin" equal to one and three hundred seventy five thousandths percent
(1.375%), (vi) quarterly amortization at a rate based on a 20-year,
straight-line amortization schedule, (vii) mandatory prepayments for failure to
maintain the borrowing base, (viii) repayment on August 17, 2002 (or earlier
without penalty or premium (other than as set forth in Section 2.03(h)(iii)),
(ix) payment of an extension fee of one half percent (.50%) of the principal
amount of the Loans (which, subject to Section 11.04(b), shall be distributed to
each Lender based on its pro rata share), and (x) documentation of the foregoing
in form and substance reasonably acceptable to Agent and the Requisite Lenders.
Such extension of the Maturity Date shall be effective if on August 17, 2000,
(A) Borrower shall have delivered the amendments and documents described in the
preceding sentence, (B) no Event of Default shall have occurred and be
continuing, (C) Borrower shall have delivered a Compliance Certificate dated as
of such date, (D) the representations and warranties contained in this Agreement
are true and correct in all material respects as of such date (except to the
extent such representations and warranties are specific to a certain date in
which case they shall be true and correct as of such date), (E) Borrower shall
have complied with Section 3.02 and (F) no Swingline Loans or Letters of Credit
remain outstanding.

         3.02. Documents. In connection with the election to extend the Maturity
Date described in Section 3.01 hereof, Borrower shall deliver to Agent, sixty
(60) days before the

                                       43
<PAGE>   48

proposed effective date of such extension the following with respect to each
Property beneficially owned by the Borrower and proposed to be pledged to Agent
and Lenders:

         (a) A current, year-to-date operating statement and a two (2) year
historical operating statement for such Property certified by Borrower as being
true and correct as of the date thereof in all material respects and prepared in
accordance with GAAP (as modified by Borrower's past practices);

         (b) A current "rent schedule" for such Property, certified by Borrower
as being true and correct in all material respects and a two (2) year occupancy
history of such Property, if available, in form satisfactory to Agent, and
certified by Borrower to be true and correct in all material respects;

         (c) A copy of the most recent ALTA Owner's Policy of Title Insurance
covering such Property showing the identity of the fee titleholder thereto and
all matters of record;

         (d) Copies of all documents of record reflected in Schedule B of the
Owner's Policy and a copy of the most recent real estate tax bill and notice of
assessment;

         (e) A survey of such Property certified by a surveyor licensed in the
applicable jurisdiction and sufficient in scope and form for Agent to obtain
extended coverage title insurance and otherwise in form and substance reasonably
acceptable to Agent;

         (f) A "Phase I" environmental assessment of such Property not more than
twelve (12) months old that permits the Lenders and Agent to rely on the
performance and results of such environmental assessment or, if older, a letter
update (in form and substance reasonably acceptable to Agent) from the
consulting firm which performed the assessment that permits the Lenders and
Agent to rely on the performance and results of such environmental assessment;

         (g) A certificate from a surveyor, licensed engineer or other
professional satisfactory to Agent that such Property is not located in an area
designated as a wetlands area or a Special Flood Hazard Area as defined by the
Federal Insurance Administration or if the Property is in a Special Flood Hazard
Area; specifying such area;

         (h) Copies of (i) all material agreements relative to such Property,
(ii) the form or forms of tenant lease used at such Property, and (iii)
all material maintenance or service agreements affecting such Property;

         (i) Copies of all engineering, mechanical, structural or maintenance
studies, if any, performed with respect to such Property during the preceding
two (2) years;

         (j) Evidence that such Property complies with applicable zoning and
land use laws;

                                       44

<PAGE>   49

         (k) Insurance in such amounts and in such form as reasonably requested
by Agent; and

         (1) Such other information reasonably requested by Agent in order to
evaluate the Property.

If, after receipt and review of the foregoing documents and information, Agent
is prepared to proceed with acceptance of such Property for purposes of
determining the borrowing base described in Section 3.01(iv) hereof, Agent will
so notify Borrower, and Agent will obtain an Appraisal of such Property in order
to determine the Appraised Value thereof. After obtaining such Appraised Value,
Agent will submit the foregoing documents and information and the Appraised
Value to the Lenders for approval by the Requisite Lenders in accordance with
Section 11.10(a). Such acceptances and approvals by Agent and Requisite Lenders
shall not be unreasonably withheld. Promptly following such approval (and in no
event later than the August 17, 2000), Borrower shall execute and deliver or
cause to be executed and delivered documents and complete all other closing
requirements imposed by Agent, which shall include mortgages, Lender's title
insurance policies, security agreements, surveys, legal opinion of Rosenberg &
Liebentritt, P.C., and such other documents and items as Agent may reasonably
request in form and substance reasonably acceptable to Agent.

                                   ARTICLE IV.
                               CONDITIONS TO LOANS

         4.01. Conditions to Initial Disbursement of Loans. The obligation of
Lenders and Swingline Lender to make the initial disbursement of the Loans shall
be subject to satisfaction of each of the following conditions precedent on or
before the Closing Date:

         (a) Borrower Loan Documents. Borrower shall have executed and delivered
to Agent each of the following, in form and substance acceptable to Agent and
Agent's counsel:

         (i) This Agreement;

         (ii) The Loan Notes, the Swingline Note and the Letter of Credit Note;

         (iii) A solvency certificate;

         (iv) Agent's form of Funds Transfer Agreement and signature
    authorization form; and

         (v) All other documents to be executed by or on behalf of Borrower as
    listed on the Closing Checklist.

         (b) REIT Documents. The REIT shall have executed and delivered to Agent
each of the following, in form and substance acceptable to Agent and Agent's
counsel:

         (i) The REIT Guaranty;

                                       45
<PAGE>   50


         (ii) A solvency certificate;

         (iii) A Compliance Certificate confirming the matters described in
    Section 4.01(i); and

         (iv) All other documents to be executed by or on behalf of the REIT as
    listed on the Closing Checklist.

         (c) Corporate and Partnership Documents. Agent shall have received the
following corporate and partnership documents:

         (i) With respect to Borrower: a certified copy of Borrower's limited
    partnership agreement, a certified copy of Borrower's Certificate of Limited
    Partnership; a certificate of existence for Borrower from the State of
    Illinois; and a certificate of Borrower's Secretary or an officer comparable
    thereto (a "Secretary's Certificate") with respect to Borrower pertaining to
    authorization, incumbency and by-laws, if any; and

         (ii) With respect to the REIT: certified copies of the REIT's
    certificate of incorporation and by-laws; a good standing certificate of the
    REIT from the State of Maryland; and a Secretary's Certificate with respect
    to the REIT pertaining to authorization, incumbency and by-laws.

         (d) Notice of Borrowing. Borrower shall have delivered to Agent the
applicable Notice of Borrowing in accordance with the terms hereof.

         (e) Performance. Borrower, the REIT and each Agreement Party shall have
performed in all material respects all agreements and covenants required by
Agent to be performed by them as a condition to funding the Loans.

         (f) Solvency. Each of the REIT, Borrower and each Agreement Party shall
be Solvent.

         (g) Material Adverse Changes. No change, as reasonably determined by
Agent, shall have occurred during the period commencing on December 31, 1997 and
ending on the Closing Date (the "Interim Period"), which has a Material Adverse
Effect.

         (h) Litigation Proceedings. There shall not have been instituted or, to
the knowledge of Borrower or the REIT, threatened, during the Interim Period,
any litigation or proceeding in any court or by a Governmental Authority
affecting or threatening to affect Borrower, the REIT, any Subsidiary, or any
Agreement Party, in which there is a reasonable possibility of an adverse
decision that could, individually or in the aggregate, have a Material Adverse
Effect.

         (i) No Event of Default, Satisfaction of Financial Covenants. On the
Closing Date and after giving effect to the initial disbursements of the Loans,
no Event of Default or

                                       46


<PAGE>   51

Unmatured Event of Default shall exist and all of the financial covenants
contained in Articles VIII and IX shall be satisfied.

         (j) Opinion of Counsel. Agent shall have received on behalf of Agent
and Lenders a favorable opinion of counsel for Borrower, each Agreement Party
and the REIT dated as of the Closing Date, in form and substance reasonably
satisfactory to Agent and its counsel.

         (k) Due Diligence. Agent shall have completed its review of all other
information delivered by Borrower pursuant to this Section 4.01 and shall have
completed such additional due diligence investigations as Agent deems reasonably
necessary, and such review and investigations shall provide Agent with results
and information which, in Agent's determination, are satisfactory to permit
Agent to enter into this Agreement.

         (1) Representations and Warranties. All representations and warranties
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects.

         (m) Fees. Agent shall have received for the benefit of Agent and
Lenders all fees (or Borrower shall have made arrangements reasonably acceptable
to Agent therefor) then due, and Borrower shall have performed all of its other
obligations as set forth in the Loan Documents to make payments to Agent on or
before the Closing Date and all expenses of Agent incurred prior to such Closing
Date (including without limitation all reasonable attorneys' fees), shall have
been paid by Borrower.

         4.02. Conditions Precedent to All Loans and Issuance of Letters of
Credit. The obligation of each Swingline Lender to make any Swingline Loan
requested to be made by it, the obligation of Lender to make any Loan requested
to be made by it, and the obligation of Issuing Lender to issue any Letter of
Credit requested to be issued by it, on any date, is subject to satisfaction of
the following conditions precedent as of such date:

         (a) Documents. With respect to a request for a Loan, Agent shall have
received in accordance with the provisions of Section 2.01(b) hereof or Section
2.10 hereof (as applicable), an original and duly executed Notice of Borrowing.
With respect to a request for a Letter of Credit, Agent and Issuing Bank shall
have received in accordance with the provisions of Section 2.09(b) hereof, an
original and duly executed Letter of Credit Application together with such other
documents as shall be required under Section 2.09(b) hereof.

         (b) Additional Matters. As of the Funding Date for any Loan or the
issuance date of any Letter of Credit and after giving effect to the Loans
and/or Letters of Credit being requested:

         (i) Representations and Warranties. All of the representations and
    warranties contained in this Agreement and in any other Loan Document (other
    than representations and warranties which expressly speak only as of a
    different date) shall be true and correct in all material respects on and as
    of such Funding Date or issuance date, as though made on and as of such
    date;

                                       47

<PAGE>   52

         (ii) No Default. No Event of Default or Unmatured Event of Default
    shall have occurred and be continuing or would result from the making of the
    requested Loan or issuance for the requested Letter of Credit and all of the
    financial covenants contained in Articles VIII and IX shall be satisfied;

         (iii) No Material Adverse Change. No change shall have occurred which
    shall have a Material Adverse Effect; and

         (iv) Closing Date. The Closing Date shall have occurred.

Each submission by Borrower to Agent of a Notice of Borrowing with respect to a
Loan or a request for a Letter of Credit and the acceptance by Borrower of the
proceeds of each such Loan made hereunder or the issuance of such Letter of
Credit hereunder shall constitute a representation and warranty by Borrower as
of the Funding Date in respect of such Loan or the date such Letter of Credit is
issued that all the conditions contained in this Section 4.02 have been
satisfied.

                                   ARTICLE V.
                         REPRESENTATIONS AND WARRANTIES

         5.01. Representations and Warranties as to Borrower. Borrower hereby
represents and warrants to Agent, Swingline Lender, Issuing Lender and Lenders
as follows:

         (a) Organization; Partnership Powers. Borrower (i) is a limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, (ii) is duly qualified to do business as a
foreign limited partnership and in good standing under the laws of each
jurisdiction in which the nature of its business requires it to be so qualified,
except for those jurisdictions where failure to so qualify and be in good
standing would not have a Material Adverse Effect and (iii) has all requisite
partnership power and authority to own, operate and encumber its property and
assets and to conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Loan Documents.

         (b) Authority. Borrower has the requisite partnership power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the general partner of Borrower, and no other partnership proceedings or
authorizations on the part of Borrower or its general or limited partners are
necessary to consummate such transactions. Each of the Loan Documents to which
Borrower is a party has been duly executed and delivered by Borrower and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights generally and general equitable principles.

         (c) Ownership of Borrower. Schedule 5.01 (c) sets forth the general
partners of Borrower and their respective ownership percentages as of the date
hereof. Except as set forth

                                       48

<PAGE>   53

in the partnership agreement of Borrower, no partnership interests (or any
securities, instruments, warrants, option or purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for partnership interests) of Borrower are subject to issuance
under any security, instrument, warrant, option or purchase rights, conversion
or exchange rights, call, commitment or claim of any right, title or interest
therein or thereto. To Borrower's knowledge, all of the partnership interests in
Borrower have been issued in compliance with all applicable Requirements of Law.

         (d) No Conflict. The execution, delivery and performance by Borrower of
the Loan Documents to which it is or will be a party, and each of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or Certificate of Limited
Partnership or other organizational documents, as the case may be, or the
organizational documents of any Subsidiary of Borrower or (ii) conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under any Requirement of Law, Contractual Obligation or Court
Order of or binding upon Borrower or any of its Subsidiaries, or require
termination of any such Contractual Obligation, the consequences of which
conflict or breach or default or termination would have a Material Adverse
Effect, or result in or require the creation or imposition of any Lien
whatsoever upon any Property (except as contemplated herein).

         (e) Consents and Authorizations. Borrower has obtained all consents and
authorizations required pursuant to its Contractual Obligations with any other
Person, the failure of which to obtain would have a Material Adverse Effect, and
has obtained all consents and authorizations of, and effected all notices to and
filings with, any Governmental Authority necessary to allow Borrower to lawfully
execute, deliver and perform its obligations under the Loan Documents to which
Borrower is a party.

         (f) Governmental Regulation. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940 or any other federal
or state statute or regulation such that its ability to incur indebtedness is
limited or its ability to consummate the transactions contemplated by the Loan
Documents is materially impaired.

         (g) Prior Financials. The Consolidated and Combined Balance Sheet as of
December 31, 1997, the Consolidated and Combined Statement of Operations for the
Year Ended December 31, 1997, and the Consolidated and Combined Statement of
Cash Flows for the Year Ended December 31, 1997 of the REIT contained in the
Form 10-K Annual Report of the REIT as of December 31, 1997 (the "Pre-Closing
Financials") delivered to Agent prior to the date hereof were prepared in
accordance with GAAP in effect on the date such Pre-Closing Financials were
prepared and fairly present the assets, liabilities and financial condition of
the REIT, on a consolidated basis, at such date and the results of its
operations and its cash flows, on a consolidated basis, for the period then
ended.

         (h) Financial Statements; Projections and Forecasts. Each of the
Financial Statements to be delivered to Agent pursuant to Sections 6.01(a) and
(b), (i) has been or will be

                                       49
<PAGE>   54

as applicable, prepared in accordance with the books and records of the REIT, on
a consolidated basis, and (ii) either fairly present, or will fairly present, as
applicable, the financial condition of the REIT, on a consolidated basis, at the
dates thereof (and, if applicable, subject to normal year-end adjustments) and
the results of its operations and cash flows, on a consolidated basis, for the
period then ended. Each of the projections delivered to Agent (A) has been, or
will be, as applicable, prepared by the REIT and the REIT's financial personnel
in light of the past business and performance of the REIT, on a consolidated
basis and (B) represent, or will represent, as of the date thereof, the
reasonable good faith estimates of such personnel.

         (i) Litigation; Adverse Effects.

         (i) There is no action, suit, proceeding, governmental investigation or
    arbitration, at law or in equity, or before or by any Governmental
    Authority, pending, or to the best of Borrower's knowledge, threatened
    against Borrower or any of its Subsidiaries or any of their respective
    Properties, in which there is a reasonable possibility of an adverse
    decision that could have a Material Adverse Effect;

         (ii) Neither Borrower nor any of its Subsidiaries is (A) in violation
    of any Requirement of Law, which violation has a Material Adverse Effect, or
    (B) subject to or in default with respect to any Court Order which has a
    Material Adverse Effect.

         (j) No Material Adverse Change. Since December 31, 1997, there has
occurred no event which has a Material Adverse Effect.

         (k) Payment of Taxes. All tax returns and reports to be filed by
Borrower or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable will not have, in the aggregate, a Material Adverse Effect.
Borrower has no knowledge of any proposed tax assessment against Borrower or any
of its Subsidiaries that will have a Material Adverse Effect, which is not being
actively contested in good faith by such Person.

         (1) Material Adverse Agreements. Neither Borrower nor any of its
Subsidiaries is a party to or subject to any Contractual Obligation or other
restriction contained in its partnership agreement, certificate of partnership,
by-laws, or similar governing documents which has a Material Adverse Effect.

         (m) Performance. Neither Borrower nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation applicable to
it, and no condition exists which, with the giving of notice or the lapse of
time or both, would constitute a default under such Contractual Obligation in
each case, except where the consequences, direct or indirect, of such default or
defaults, if any, will not have a Material Adverse Effect.

                                       50

<PAGE>   55
         (n) Federal Reserve Regulations. No part of the proceeds of the Loan
hereunder will be used to purchase or carry any "margin security" as defined in
Regulation G or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of said Regulation G. Borrower is not engaged primarily in the
business of extending credit for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U. No part of the proceeds of the Loan
hereunder will be used for any purpose that violates, or which is inconsistent
with, the provisions of Regulation X or any other regulation of the Federal
Reserve Board.

         (o) Disclosure. Borrower has not intentionally or knowingly withheld
any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of
Borrower's future performance such representations and warranties are made in
good faith and to the best judgment of Borrower at the time such projections
were made.

         (p) Requirements of Law. To the Borrower's knowledge, Borrower and each
of its Subsidiaries are in compliance with all Requirements of Law (including
without limitation the Securities Act and the Securities Exchange Act, and the
applicable rules and regulations thereunder, state securities law and "Blue Sky"
laws) applicable to them and their respective businesses, in each case, where
the failure to so comply will have a Material Adverse Effect.

         (q) Patents, Trademarks, Permits. Etc. Borrower and each of its
Subsidiaries owns, is licensed or otherwise has the lawful right to use, or have
all permits and other governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary for the
conduct of Borrower's or such Subsidiary's business as currently conducted, the
absence of which would have a Material Adverse Effect. To Borrower's knowledge,
the use of such permits and other governmental approvals, patents, trademarks,
trade names, copyrights, technology, know-how and processes by Borrower or such
Subsidiary does not infringe on the rights of any Person, subject to such claims
and infringements as do not, in the aggregate, have a Material Adverse Effect.

         (r) Environmental Matters. To the knowledge of Borrower, except as
would not have a Material Adverse Effect and except as set forth on Schedule
5.01(r), (i) the Property and operations of Borrower and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of Borrower or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental Laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither Borrower nor any of its Subsidiaries has filed any, notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now, nor to Borrower's knowledge
has there ever been, on or in the Property of Borrower or any of its
Subsidiaries (except in compliance in all material respects with all applicable
Environmental Laws): (A) any underground storage tanks. (B) any

                                       51

<PAGE>   56

asbestos-containing material, (C) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment, (D) any petroleum
hydrocarbons or (E) any chlorinated or halogenated solvents; and (v) neither
Borrower nor any of its Subsidiaries has received any notice or claim to the
effect that it is or may be liable to any Person as a result of the Release or
threatened Release of a Contaminant into the environment.

         (s) ERISA. None of the REIT, Borrower or any Agreement Party is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA, an
"employee welfare benefit plan" as defined in Section 3(l) of ERISA, a
"multiemployer plan" as defined in Sections 4001(a)(3) or 3(37) of ERISA or a
"plan" as defined in Section 4975(e)(1) of the Internal Revenue Code. Except for
a prohibited transaction arising solely because of a Lender's breach of the
covenant set forth in Section 11.23, none of the Obligations, any of the Loan
Documents or the exercise of any of the Agent's or Lenders' rights in connection
therewith constitutes a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and the taxes and penalties imposed by Section 4975 of the Internal Revenue Code
and Section 502(i) of ERISA) or otherwise results in a Lender, the Agent or the
Lenders being deemed in violation of Sections 404 or 406 of ERISA or Section
4975 of the Internal Revenue Code or will by itself result in a Lender, the
Agent or the Lenders being a fiduciary or party in interest under ERISA or a
"disqualified person" as defined in Section 4975(e)(2) of the Internal Revenue
Code with respect to an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code. No assets of the REIT, Borrower or any Agreement Party
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code.

         Each Borrower Plan is in compliance with ERISA and the applicable
provisions of the Internal Revenue Code in all respects except where the failure
to comply would not have a Material Adverse Effect. There are no claims (other
than claims for benefits in the normal course), actions or lawsuits asserted or
instituted against, and none of Borrower, the REIT, any of the Material
Subsidiaries or any of their ERISA Affiliates has knowledge of any threatened
litigation or claims against the assets of any Borrower Plan or against any
fiduciary of such Borrower Plan with respect to the operation of such Borrower
Plan which could have a Material Adverse Effect. No liability to the PBGC has
been, or is likely to be, incurred by Borrower, the REIT, any of the Material
Subsidiaries or their ERISA Affiliates other than such liabilities which, in the
aggregate, would not have a Material Adverse Effect. None of Borrower, the REIT,
any of the Material Subsidiaries or any of their ERISA Affiliates is now
contributing to or has ever contributed to or been obligated to contribute to
any Multiemployer Plan, no employees or former employees of Borrower, the REIT,
any of the Material Subsidiaries or any of their ERISA Affiliates have been
covered by any Multiemployer Plan in respect of their employment by Borrower or
such Material Subsidiary or such ERISA Affiliate. None of Borrower, the REIT,
any of the Material Subsidiaries or any of their ERISA Affiliates has engaged in
a "prohibited transaction," as such term is defined in Section 4975 of the
Internal Revenue Code or in a transaction subject to the prohibitions of Section
406 of ERISA, in connection with any Benefit Plan or Welfare Plan which would
subject Borrower, the REIT. any of the Material Subsidiaries


                                       52

<PAGE>   57

or any of their ERISA Affiliates (after giving effect to any exemption) to the
tax or penalty on prohibited transactions imposed by Section 4975 of the
Internal Revenue Code, Section 502 of ERISA or any other liability under ERISA
which tax, penalty or other liability would have a Material Adverse Effect. None
of the Benefit Plans subject to Title IV of ERISA has any material Unfunded
Pension Liability as to which Borrower, the REIT, any of the Material
Subsidiaries or any of their ERISA Affiliates is or may be liable, which
liability would have a Material Adverse Effect.

         (t) Solvency. Borrower is and will be Solvent after giving effect to
the disbursements of the Loans and the payment and accrual of all fees then
payable.

         (u) Title to Assets; No Liens. Borrower has good, indefeasible and
merchantable title to the Property owned or leased by it, and all such Property
is free and clear of all Liens, except Permitted Liens and Liens permitted by
Section 8.01(b).

         (v) Use of Proceeds. Borrower's use of the proceeds of the Loans are,
and will continue to be, legal and proper uses (and to the extent necessary,
duly authorized by Borrower's partners) and such uses are consistent with all
applicable laws and statutes and Section 7.01(i).

         (w) Subsidiaries and Investment Affiliates. Each Subsidiary and
Investment Affiliate as of the date hereof is set forth on Schedule 5.01(w).
Schedule 5.01(w) sets forth the ownership of each such Subsidiary and Investment
Affiliate and the material Property owned by such Person as of the date hereof.

         (x) Year 2000. Based on a recent assessment, Borrower determined that a
majority of its applications will function properly with respect to dates in the
Year 2000 and thereafter. Borrower has initiated formal communications with all
of its significant suppliers to determine the extent to which Borrower's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. Borrower's total Year 2000 project cost and estimate
to complete do not include the estimated costs and time associated with the
impact of third party Year 2000 issues. There can be no guarantee that the
systems of other companies on which Borrower's systems rely will be timely
converted and would not have an adverse effect on 'Borrower's systems. Borrower
anticipates completing its Year 2000 project no later than December 31, 1998,
which is prior to any impact on its operating systems. The total cost of the
Year 2000 project is estimated to be immaterial assuming third parties remediate
their own Year 2000 issues. This assumption is based on management's best
estimates, which were derived utilizing numerous assumption of future events,
and there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.

         5.02. Representations and Warranties as to the REIT. The REIT hereby
represents and warrants to Agent, Swingline Lender, Issuing Lender and Lenders
as follows:

                                       53

<PAGE>   58

         (a) Organization; Corporate Powers. The REIT (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, (ii) is duly qualified to do business as a foreign corporation and in
good standing under the laws of each jurisdiction in which the nature of its
business requires it to be so qualified, except for those jurisdictions where
failure to so qualify and be in good standing will not have a Material Adverse
Effect, and (iii) has all requisite corporate power and authority to own,
operate and encumber its property and assets and to conduct its business as
presently conducted and as proposed to be conducted in connection with and
following the consummation of the transactions contemplated by the Loan
Documents.

         (b) Authority. The REIT has the requisite corporate power and authority
to execute, deliver and perform each of the Loan Documents to which it is or
will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the Board of Directors of the REIT, and no other corporate proceedings on the
part of the REIT are necessary to consummate such transactions. Each of the Loan
Documents to which the REIT is a party has been duly executed and delivered by
the REIT and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.

         (c) No Conflict. The execution, delivery and performance by the REIT of
the Loan Documents to which it is a party, and each of the transactions
contemplated thereby, do not and will not (i) conflict with or violate its
Articles or Certificate of Incorporation or by-laws, or other organizational
documents, as the case may be, or the organizational documents of Borrower or
any Subsidiary, (ii) conflict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under any Requirement of Law,
Contractual Obligation or Court Order of the REIT, Borrower or any Subsidiary,
or require termination of any such Contractual Obligation, the consequences of
which conflict or breach or default or termination will have a Material Adverse
Effect, or result in or require the creation or imposition of any Lien
whatsoever upon any of its Property, or (iii) require any approval of the
stockholders of the REIT.

         (d) Consents and Authorizations. The REIT has obtained all consents and
authorizations required pursuant to its Contractual Obligations with any other
Person, the failure of which to obtain would have a Material Adverse Effect, and
has obtained all consents and authorizations of, and effected all notices to and
filings with, any Governmental Authority necessary to allow the REIT to lawfully
execute, deliver and perform its obligations under the Loan Documents to which
the REIT is a party.

         (e) Governmental Regulation. The REIT is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940 or any other federal
or state statute or regulation such that its ability to incur indebtedness is
limited or its ability to consummate the transactions contemplated by the Loan
Documents is materially impaired.

                                       54
<PAGE>   59

         (f) Capitalization. To the REIT's knowledge, all of the capital stock
of the REIT has been issued in compliance with all applicable Requirements of
Law.

         (g) Litigation; Adverse Effects.

         (i) There is no action, suit, proceeding, governmental investigation or
    arbitration, at law or in equity, or before or by any Governmental
    Authority, pending, or to best of the REIT's knowledge, threatened against
    the REIT, any of its Subsidiaries or any of their respective Properties in
    which there is a reasonable possibility of an adverse decision that could
    have a Material Adverse Effect.

         (ii) , Neither the REIT nor any of its Subsidiaries is (A) in violation
    of any applicable Requirement of Law, which violation has a Material Adverse
    Effect, or (B) subject to or in default with respect to any Court Order
    which has a Material Adverse Effect.

         (h) Payment of Taxes. All tax returns and reports to be filed by the
REIT or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable would not have, in the aggregate, a Material Adverse Effect. The
REIT has no knowledge of any proposed tax assessment against the REIT or any of
its Subsidiaries that would have a Material Adverse Effect, which is not being
actively contested in good faith by the REIT or such Subsidiary.

         (i) Material Adverse Agreements. The REIT is not a party to or subject
to any Contractual Obligation or other restriction contained in its charter,
by-laws, or similar governing documents which has a Material Adverse Effect.

         (j) Performance. Neither the REIT nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation applicable to
it, and no condition exists which, with the giving of notice or the lapse of
time or both, would constitute a default under such Contractual Obligation in
each case, except where the consequences, direct or indirect, of such default or
defaults, if any, would not have a Material Adverse Effect.

         (k) Securities Activities. The REIT is not engaged principally in the
business of extending credit for the purpose of purchasing or carrying any
"margin stock" (as defined in Regulation U).

         (l) Disclosure. The REIT has not intentionally or knowingly withheld
any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of the
REIT's future performance such representations and warranties are made in good
faith and to the best judgment of the management of the REIT at the time such
projections were made.

                                       55

<PAGE>   60
         (m) Requirements of Law. To the REIT's knowledge, the REIT and each of
its Subsidiaries are in compliance with all Requirements of Law (including
without limitation the Securities Act and the Securities Exchange Act, and the
applicable rules and regulations thereunder, state securities law and "Blue Sky"
laws) applicable to them and their respective businesses, in each case, where
the failure to so comply would have a Material Adverse Effect. After giving
effect to all filings made simultaneously with the Closing Date, the REIT has
made all filings with and obtained all consents of the Commission required under
the Securities Act and the Securities Exchange Act in connection with the
execution, delivery and performance by the REIT of the Loan Documents to which
it is a party.

         (n) Patents, Trademarks, Permits, Etc. The REIT and each of its
Subsidiaries own, are licensed or otherwise have the lawful right to use, or
have all permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of the REIT's or such Subsidiary's business as currently conducted,
the absence of which would have a Material Adverse Effect. To the REIT's
knowledge, the use of such permits and other governmental approvals, patents,
trademarks, trade names, copyrights, technology, know-how and processes by the
REIT or such subsidiary does not infringe on the rights of any Person, subject
to such claims and infringements as do not, in the aggregate, have a Material
Adverse Effect.

         (o) Environmental Matters. To the knowledge of the REIT, except as
would not have a Material Adverse Effect and except as set forth on Schedule
5.01 (r), (i) the Property and operations of the REIT and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of the REIT or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither the REIT nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now, nor to the REIT's knowledge has
there ever been, on or in the Property of the REIT or any of its Subsidiaries
(except in compliance in all material respects with all applicable
Environmental Laws): (A) any underground storage tanks, (B) any asbestos
containing material, (C) any polychlorinated biphenyls (PCB's) used in hydraulic
oils, electrical transformers or other equipment, (D) any petroleum hydrocarbons
or (E) any chlorinated or halogenated solvents; and (v) neither the REIT nor any
of its Subsidiaries has received any notice or claim to the effect that it is or
may be liable to any Person as a result of the Release or threatened Release of
or Contaminant into the environment.

         (p) Solvency. The REIT is and will be Solvent after giving effect to
the disbursement of the Loans and the payment of all fees then payable.

         (q) Status as a REIT. The REIT (i) is a real estate investment trust as
defined in Section 856 of the Internal Revenue Code (or any successor provision
thereto), (ii) has not revoked its election to be a real estate investment
trust, (Iii) has not engaged in any "prohibited

                                       56

<PAGE>   61
transactions" as defined in Section 856(b)(6)(iii) of the Internal Revenue Code
(or any successor provision thereto), except for the transfer of manufactured
home inventory from Borrower to Realty Systems, Inc., a Delaware corporation
(provided that such transfer does not adversely affect the REIT's status as a
real estate investment trust under the Internal Revenue Code), and (iv) for its
current "tax year" (as defined in the Internal Revenue Code) is and for all
prior tax years subsequent to its election to be a real estate investment trust
has been entitled to a dividends paid deduction which meets the requirements of
Section 857 of the Internal Revenue Code.

         (r) Ownership. The REIT does not own any Property or have any interest
in any Person, other than as set forth on Schedule 5.01(w).

         (s) Listing. The common stock of the REIT is and will continue to be
listed for trading and traded on either the New York Stock Exchange or American
Stock Exchange.

         (t) Year 2000. Based on a recent assessment, the REIT determined that a
majority of its applications will function properly with respect to dates in the
Year 2000 and thereafter. The REIT has initiated formal communications with all
of its significant suppliers to determine the extent to which the REIT's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. The REIT's total Year 2000 project cost and estimate
to complete do not include the estimated costs and time associated with the
impact of third party Year 2000 issues. There can be no guarantee that the
systems of other companies on which the REIT's systems rely will be timely
converted and would not have an adverse effect on the REIT's systems. The REIT
anticipates completing its Year 2000 project no later than December 31, 1998,
which is prior to any impact on its operating systems. The total cost of the
Year 2000 project is estimated to be immaterial assuming third parties remediate
their own Year 2000 issues. This assumption is based on management's best
estimates, which were derived utilizing numerous assumption of future events,
and there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.

                                   ARTICLE VI.
                               REPORTING COVENANTS

         Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:

         6.01. Financial Statements and Other Financial and Operating
Information. Borrower shall maintain or cause to be maintained a system of
accounting established and administered in accordance with sound business
practices and consistent with past practice to permit preparation of quarterly
and annual financial statements in conformity with GAAP. Borrower shall deliver
or cause to be delivered to Agent with copies for each Lender:

         (a) Quarterly Financial Statements Certified by CFO. As soon as
practicable. and in any event within fifty (50) days after the end of each
Fiscal Quarter, except the last fiscal

                                     57
<PAGE>   62
Quarter of a Fiscal Year, consolidated balance sheets, statements of income and
expenses and statements of cash flow (collectively, "Financial Statements") for
the REIT, on a consolidated basis, in the form provided to the Commission on the
REIT's Form 10-Q and certified by the REIT's chief financial officer.

          (b) Annual Financial Statements. Within one hundred and twenty (120)
days after the close of each Fiscal Year, annual Financial Statements of the
REIT, on a consolidated basis (in the form provided to the Commission on the
REIT's Form 10K), audited and certified without qualification by the
Accountants.

          (c) Officer's Certificate of Borrower. (i) Together with each delivery
of any Financial Statement pursuant to clauses (a) and (b) above, an Officer's
Certificate of the REIT, stating that (A) the executive officer who is the
signatory thereto, which officer shall be the chief executive officer or the
chief financial officer of the REIT, has reviewed, or caused under his
supervision to be reviewed, the terms of this Agreement and the other Loan
Documents, and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of Borrower, the REIT, the
Subsidiaries, and the Agreement Parties, during the accounting period covered by
such Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not have
knowledge of the existence as of the date of the Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto and (B) such Financial
Statements have been prepared in accordance with the books and records of the
REIT, on a consolidated basis, and fairly present the financial condition of the
REIT, on a consolidated basis, at the date thereof (and, if applicable, subject
to normal year-end adjustments) and the results of operations and cash flows, on
a consolidated basis, for the period then ended; and (ii) together with each
delivery pursuant to clauses (a) and (b) above, a Compliance Certificate
demonstrating, in reasonable detail (which detail shall include actual
calculations), compliance during and at the end of such accounting periods with
the financial covenants contained in 8.01(d) and 8.01(k) and Article IX.

          (d) Knowledge of Event of Default. Promptly upon Borrower obtaining
knowledge (i) of any condition or event which constitutes an Event of Default or
Unmatured Event of Default, or (ii) of any condition or event which has a
Material Adverse Effect, an Officer's Certificate specifying the nature and
period of existence of any such condition or event and the nature of such
claimed Event of Default, Unmatured Event of Default, event or condition, and
what action Borrower, the REIT or the Agreement Party, as the case may be, has
taken, is taking and proposes to take with respect thereto.

          (e) Litigation, Arbitration or Government Investigation. Promptly upon
Borrower obtaining knowledge of (i) the institution of, or threat of, any
material action, suit, proceeding, governmental investigation or arbitration
against or affecting Borrower, any Agreement Party, the REIT, any Subsidiary or
any of their Property not previously disclosed in writing by Borrower to Agent
pursuant to this Section 6.01 (f). or (ii) any material development

                                       58




<PAGE>   63
in any action, suit, proceeding, governmental investigation or arbitration
already disclosed, in which, in either case, there is a reasonable possibility
of an adverse decision that could have a Material Adverse Effect, a notice
thereof to Agent and such other information as may be reasonably available to it
to enable Agent and its counsel to evaluate such matters.

          (f) Failure of the REIT to Qualify as Real Estate Investment Trust.
Promptly upon, and in any event within forty-eight (48) hours after Borrower
first has knowledge of (i) the REIT failing to continue to qualify as a real
estate investment trust as defined in Section 856 of the Internal Revenue Code
(or any successor provision thereof), (ii) any act by the REIT causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the REIT to be subject to the taxes imposed by Section 857(b)(6)
of the Internal Revenue Code (or any successor provision thereto), (iv) the REIT
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Internal Revenue Code, or (v) any challenge
by the IRS to the REIT's status as a real estate investment trust, a notice of
any such occurrence or circumstance.

          (g) Management Reports. Upon and after the occurrence of an Event of
Default, copies of any management reports prepared by the Accountants as soon as
available.

          (h) Property Changes. Notice of any material acquisition, disposition,
merger, or purchase by the REIT, Borrower, any Subsidiary or any Agreement Party
no later than ten (10) days after the consummation thereof, specifying the
nature of the transaction in reasonable detail.

          (i) Other Information. Such other information, reports, contracts,
schedules, lists, documents, agreements and instruments in the possession of the
REIT, Borrower, any Subsidiary, or any Agreement Party with respect to the
business, financial condition, operations, performance, or properties of
Borrower, the REIT, any Subsidiary, or any Agreement Party, as Agent may, from
time to time, reasonably request, including without limitation, annual
information with respect to cash flow projections, budgets, operating statements
(current year and immediately preceding year), rent rolls, lease expiration
reports, leasing status reports, note payable summaries, bullet note summaries,
equity funding requirements, contingent liability summaries, line of credit
summaries, line of credit collateral summaries, wrap note or note receivable
summaries, schedules of outstanding letters of credit, summaries of cash and
Cash Equivalents, projections of management and leasing fees and overhead
budgets, each in the form customarily prepared by the REIT or Borrower. If
Borrower fails to provide Agent with information requested from Borrower within
the time periods provided for herein, or if no time periods are provided for,
within ten (10) Business Days after Agent requests such information, and
provided that Agent gives Borrower reasonable prior notice and an opportunity to
participate, Borrower hereby authorizes Agent to communicate with the
Accountants and authorizes the Accountants to disclose to Agent any and all
financial statements and other information of any kind, including copies of any
management letter or the substance of any oral information, that such
Accountants may have with respect to the collateral or the financial condition.
operations, properties, performance and prospects of Borrower, the REIT, any
Subsidiary, or any Agreement Party. Concurrently therewith, Agent will notify
Borrower of any

                                       59
<PAGE>   64

such communication. At Agent's request, Borrower shall deliver a
letter addressed to the Accountants instructing them to disclose such
information in compliance with this Section 6.01(s).

          6.02. Press Releases; SEC Filings and Financial Statements. The REIT
and Borrower will deliver to the Agent as soon as practicable after public
release all press releases concerning the REIT or Borrower. The REIT and
Borrower will deliver to Agent as soon as practicable after filing with the
Commission, all reports and notices, proxy statements, registration statements
and prospectuses. All materials sent or made available generally by the REIT to
the holders of its publicly-held Securities or to a trustee under any indenture
or filed with the Commission, including all periodic reports required to be
filed with the Commission, will be delivered to Agent as soon as available.

          6.03. Environmental Notices. Except for events or occurrences that
will not result in a Material Adverse Effect, Borrower shall notify Agent, in
writing, as soon as practicable, and in any event within ten (10) days after
Borrower's learning thereof, of any: (a) written notice or claim to the effect
that Borrower, any Agreement Party, the REIT, or any Subsidiary is or may be
liable to any Person as a result of the Release or threatened Release of any
Contaminant into the environment; (b) written notice that Borrower, any
Agreement Party, the REIT, or any Subsidiary is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (c) written notice that any Property of Borrower, any Agreement
Party, the REIT, or any Subsidiary is subject to an Environmental Lien; (d)
written notice of violation to Borrower, any Agreement Party, the REIT, or any
REIT Subsidiary or awareness of a condition which might reasonably result in a
notice of violation of any Environmental Laws by Borrower, the REIT, any REIT
Subsidiary or any Agreement Party; (e) commencement or written threat of any
judicial or administrative proceeding alleging a violation by Borrower, the
REIT, any Subsidiary or any Agreement Party of any Environmental Laws; or (f)
written notice received directly from a Governmental Authority of any changes to
any existing Environmental Laws.

          6.04. Qualifying Unencumbered Properties. Borrower may from time to
time but no more frequently than quarterly deliver notice to the Agent stating
that Borrower intends to designate a Property to become a Qualifying
Unencumbered Property. Such notice shall (i) set forth the name of such Property
(or, if such Property has no name, such notice shall otherwise identify such
Property), and (ii) be accompanied by a statement of income, certified by the
chief financial officer of Borrower, for each such Property for the then most
recently completed Fiscal Quarter (or, if such statement of income is
unavailable, a pro forma financial statement setting forth the Net Operating
Income with respect to such Property for the then current Fiscal Quarter). If
any such Property meets the requirements set forth in the definition of
"Qualifying Unencumbered Properties" and the Agent fails to deliver written
notice to Borrower stating that the Requisite Lenders have disapproved the
designation of such Property as a Qualifying Unencumbered Property (it being
understood that such notice shall provide Borrower with information regarding
why such designation was disapproved by the Requisite Lenders and that the
Requisite Lenders will not unreasonably disapprove such designation) within
twenty (20)

                                       60

<PAGE>   65

days after receipt of such information by Agent, such Property shall become a
Qualifying Unencumbered Property.

                                  ARTICLE VII.
                              AFFIRMATIVE COVENANTS


          Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:

          7.01. With respect to Borrower:

          (a) Existence. Borrower shall, and shall cause each of its
Subsidiaries to, at all times maintain its and their respective partnership
limited liability company, trust or corporate existence, as applicable, and
preserve and keep in full force and effect its and their respective rights and
franchises unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect. Borrower shall maintain its status as a limited
partnership.

          (b) Qualification. Borrower shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses require them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect.

          (c) Compliance with Laws, Etc. Borrower shall, and shall cause each of
its Subsidiaries to, (i) comply with all Requirements of Law and Contractual
Obligations, and all restrictive covenants affecting Borrower and its
Subsidiaries or their respective properties, performance, assets or operations,
and (ii) obtain as needed all Permits necessary for its and their respective
operations and maintain such in good standing, except in each of the foregoing
cases where the failure to do so will not have a Material Adverse Effect or
expose Agent or Lenders to any material liability therefor.

          (d) Payment of Taxes and Claims. (a) Borrower shall, and shall cause
each of its Subsidiaries to, pay (i) all taxes, assessments and other
governmental charges imposed upon it or them or on any of its or their
respective properties or assets or in respect of any of its or their respective
franchises, business, income or property before any penalty or interest accrues
thereon, the failure to make payment of which in such time periods will have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which will have a Material Adverse Effect; provided, however, that
no such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if adequate reserves shall have been set aside therefor in
accordance with GAAP.


                                       61




<PAGE>   66




          (e) Maintenance of Properties; Insurance. Borrower shall, and shall
cause each of its Subsidiaries to, maintain in good repair, working order and
condition, excepting ordinary wear and tear, all of its and their respective
Property (personal and real) and will make or cause to be made all appropriate
repairs, renewals and replacements thereof, in each case where the failure to so
maintain, repair, renew or replace will have a Material Adverse Effect. Borrower
shall, and shall cause each of its Subsidiaries to, maintain with insurance
companies that have a Best Rating of "A- VII" or higher or other insurance
companies reasonably acceptable to Agent that have similar financial resources
and stability, which companies shall be qualified to do business in the states
where such Property is located, the insurance policies and programs reasonably
acceptable to Agent insuring all property and assets material to the operations
of Borrower and each of its Subsidiaries against loss or damage by fire, theft,
burglary, pilferage and loss in transit and business interruption, together with
such other hazards as is reasonably consistent with prudent industry practice,
and maintain liability insurance consistent with prudent industry practice with
financially sound insurance companies qualified to do business in the states
where such property is located. The insurance policies shall provide that they
cannot be terminated or materially modified unless Agent receives thirty (30)
days prior written notice of said termination or modification. At Agent's
reasonable request, Borrower shall furnish evidence of replacement costs,
without cost to Agent, such as are regularly and ordinarily made by insurance
companies to determine the then replacement cost of the improvements on any
Property of Borrower or any of its Subsidiaries. In the event Borrower fails to
cause insurance to be carried as aforesaid, Agent shall have the right (but not
the obligation), with the consent of Requisite Lenders, to place and maintain
insurance required to be maintained hereunder and treat the amounts expended
therefor as additional Obligations, payable on demand; provided, however that
Agent shall give Borrower five (5) days' prior notice of Agent's intent to place
or maintain such insurance during which time Borrower shall have the opportunity
to obtain such insurance. All of the insurance policies required hereunder shall
be in form and substance reasonably satisfactory to Agent. Agent hereby agrees
that Borrower may use blanket policies to satisfy the requirements of this
Section 7.01(e), approves the issuer, form and content of all insurance policies
CURRENTLY carried by Borrower and agrees that such insurance satisfies the
requirements of this Section 7.01(e). Furthermore, Agent agrees that it will
not be unreasonable in exercising any right hereunder to require Borrower to
modify, alter or supplement its insurance policies or coverage or in exercising
any right it may have hereunder to approve any changes Borrower may hereafter
make with respect to its insurance.

          (f) Inspection of Property; Books and Records. Borrower shall permit
and shall cause each of the REIT, each Subsidiary, and each Agreement Party to,
upon reasonable prior notice by Agent to Borrower, permit any authorized
representative(s) designated by Agent to visit and inspect any of its properties
including inspection of financial and accounting records and leases, and to make
copies and take extracts therefrom, all at such times during normal business
hours and as often as Agent may reasonably request. In connection therewith,
Borrower shall pay all reasonable expenses of the types described in Section
12.01. Borrower shall keep, and shall cause each of, the REIT, each Subsidiary
and each Agreement Party to keep proper books of record and account in
conformity with GAAP, as modified and as otherwise required by this Agreement
and applicable Requirements of Law.

                                       62




<PAGE>   67
          (g) Maintenance of Licenses, Permits, Etc. Borrower shall, and shall
cause each of its Subsidiaries to, maintain in full force and effect all
licenses, permits, governmental approvals, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of their respective businesses, except where the failure to obtain any
of the foregoing would not have a Material Adverse Effect; and notify Agent in
writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any such material
license, permit, patent, trademark, trade name, copyright, governmental
approval, franchise authorization or right, except where the suspension,
cancellation, revocation or discontinuance would not have a Material Adverse
Effect.

          (h) Conduct of Business. Except for Permitted Holdings and other
investments permitted under Section 8.01(c), Borrower shall engage only in the
business of owning, operating and developing manufactured home communities,
whether directly or through its Subsidiaries.

          (i) Use of Proceeds. Borrower shall use the proceeds of each Loan only
for general partnership purposes in accordance with the provisions of this
Agreement. Notwithstanding anything contained in this Agreement to the contrary,
no Swingline Loan shall be used more than once for the purpose of refinancing
another Swingline Loan, in whole or part.

          (j) Further Assurance. Borrower shall take and shall cause its
Subsidiaries and each Agreement Party to take all such further actions and
execute all such further documents and instruments as Agent may at any time
reasonably determine to be necessary or advisable to (i) correct any technical
defect or technical error that may be discovered in any Loan Document or in the
execution, acknowledgment or recordation thereof, and (ii) cause the execution,
delivery and performance of the Loan Documents to be duly authorized.

          7.02. With respect to the REIT:

          (a) Corporate Existence. The REIT shall, and shall cause each of its
Subsidiaries to, at all times maintain its and their respective partnership or
corporate existence, as applicable, and preserve and keep in full force and
effect its and their respective rights and franchises unless the failure to
maintain such rights and franchises will not have a Material Adverse Effect.

          (b) Qualification, Name. The REIT shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each juris-
diction in which the nature of its and their businesses requires them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect. The REIT will transact business solely in its
own name.

          (c) Securities Law Compliance. The REIT shall comply in all material
respects with all rules and regulations of the Commission and file all reports
required by the Commission relating to the REIT's publicly-held Securities.


                                       63
<PAGE>   68
          (d) Continued Status as a REIT; Prohibited Transactions. The REIT (i)
will continue to be a real estate investment trust as defined in Section 856 of
the Internal Revenue Code (or any successor provision thereto), (ii) will not
revoke its election to be a real estate investment trust, (iii) will not engage
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Internal Revenue Code (or any successor provision thereto), and (iv) will do all
acts necessary to continue to be entitled to a dividend paid deduction meeting
the requirements of Section 857 of the Internal Revenue Code.

          (e) NYSE Listed Company. The REIT shall cause its common stock at all
times to be listed for trading and be traded on the New York Stock Exchange or
American Stock Exchange.

          (f) Compliance with Laws, Etc. The REIT shall, and shall cause each of
its Subsidiaries to, (i) comply with all Requirements of Law and Contractual
Obligations, and all restrictive covenants affecting the REIT and its
Subsidiaries or their respective properties, performance, prospects, assets or
operations, and (ii) obtain as needed all Permits necessary for its and their
respective operations and maintain such in good standing, except in each of the
foregoing cases where the failure to do so will not have a Material Adverse
Effect.

          (g) Payment of Taxes and Claims. Subject to Section 7.02(d), the REIT
shall, and shall cause each of its Subsidiaries to, pay (i) all taxes,
assessments and other governmental charges imposed upon it or them or on any of
its or their respective properties or assets or in respect of any of its or
their respective franchises, business, income or property before any penalty or
interest accrues thereon, the failure to make payment of which will have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which will have a Material Adverse Effect; provided, however, that no
such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if adequate reserves shall have been set aside therefor in
accordance with GAAP.

                                 ARTICLE VIII.
                               NEGATIVE COVENANTS

          Borrower and the REIT covenant and agree that, on and after the date
hereof, until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:

                                       64

<PAGE>   69

          8.01. With respect to Borrower:

          (a) Indebtedness. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

          (i) the Obligations;

          (ii) trade debt incurred in the normal course of business; and

          (iii) Indebtedness which, after giving effect thereto, may be incurred
     or may remain outstanding without giving rise to an Event of Default or
     Unmatured Event of Default under any provision of Articles VIII and IX.

         (b) Liens. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:

          (i) Liens in favor of Agent securing the Obligations;

          (ii) Permitted Liens; and

          (iii) Liens securing Indebtedness permitted to be incurred and remain
     outstanding pursuant to Section 8.01(a)(iii) which, after giving effect
     thereto, may be incurred or may remain outstanding without giving rise to
     an Event of Default or Unmatured Event of Default under any provision of
     Articles VIII and IX.

         (c) Investments. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly make or own any Investment except:

          (i) Investments in cash and Cash Equivalents;

          (ii) Permitted Holdings;

          (iii) Investments in Subsidiaries and Investment Affiliates owned as
     of the Closing Date;

          (iv) Investments permitted pursuant to Section 8.01(e)(v).

          (v) Controlled Partnership Interests which do not constitute
     Non-Manufactured Home Community Property; and

          (vi) mortgage loans which do not constitute Non-Manufactured Home
     Community Property and which are either eliminated in the consolidation of
     the REIT, Borrower and the Subsidiaries or are accounted for as investments
     in real estate under GAAP.





                                       65

<PAGE>   70

          (d) Distributions and Dividends. Neither Borrower nor the REIT shall
declare or make any dividend or other distribution on account of partnership
interests in excess of ninety-five percent (95%) of Funds From Operations in any
Fiscal Year; provided, however, that if an Event of Default under Section
10.01(a) shall have occurred, neither Borrower nor the REIT shall declare or
make any dividend or other distribution on account of partnership interests in
excess of what is required for the REIT to maintain its status as a real estate
investment trust as defined in Section 856 of the Internal Revenue Code.

          (e) Restrictions on Fundamental Changes.

          (i) Borrower shall not, and shall not permit any of its Subsidiaries
     to, enter into any merger, consolidation, reorganization or
     recapitalization or liquidate, wind-up or dissolve (or suffer any
     liquidation or dissolution), or discontinue its business.

          (ii) Borrower shall remain a limited partnership with the REIT as its
     sole general partner.

          (iii) Borrower shall not change its Fiscal Year.

          (iv) Except for Permitted Holdings and other Investments permitted
     under Section 8.01(c), Borrower shall not engage in any line of business
     other than ownership, operation and development of manufactured home
     communities and the provision of services incidental thereto and the
     brokerage, purchase, and sale of manufactured home units, whether directly
     or through its Subsidiaries and Investment Affiliates.

          (v) Borrower shall not acquire by purchase or otherwise all or
     substantially all of the business, property or assets of, or stock or other
     evidence of beneficial ownership of, any Person, unless after giving effect
     thereto, Borrower is in pro forma compliance with this Agreement.

         (f) ERISA. Neither Borrower nor the REIT shall, and neither shall
permit any Material Subsidiary or any of their ERISA Affiliates to, do any of
the following to the extent that such act or failure to act would result in the
aggregate, after taking into account any other such acts or failure to act, in a
Material Adverse Effect:

          (i) Engage, or knowingly permit a Subsidiary or an ERISA Affiliate to
     engage, in any prohibited transaction described in Section 406 of ERISA or
     Section 4975 of the Internal Revenue Code which is not exempt under Section
     407 or 408 of ERISA or Section 4975(d) of the Internal Revenue Code for
     which a class exemption is not available or a private exemption has not
     been previously obtained from the DOL;

          (ii) Permit to exist any accumulated funding deficiency (as defined in
     Section 302 of ERISA and Section 412 of the Internal Revenue Code), whether
     or not waived;

          (iii) Fail, or permit a Material Subsidiary or an ERISA Affiliate of
     the REIT, Borrower or any Material Subsidiary to fail, to pay timely
     required contributions or

                                       66

<PAGE>   71

     annual installments due with respect to any waived funding deficiency
     to any Plan if such failure could result in the imposition of a Lien or
     otherwise would have a Material Adverse Effect;

          (iv) Terminate, or permit an ERISA Affiliate of the REIT, Borrower or
     any Material Subsidiary to terminate, any Benefit Plan which would result
     in any liability of Borrower or a Material Subsidiary or an ERISA Affiliate
     of the REIT, Borrower or any Material Subsidiary under Title IV of ERISA;
     or

          (v) Fail, or permit any Subsidiary or ERISA Affiliate to fail to pay
     any required installment under section (m) of Section 412 of the Internal
     Revenue Code or any other payment required under Section 412 of the
     Internal Revenue Code on or before the due date for such installment or
     other payment, if such failure could result in the imposition of a Lien or
     otherwise would have a Material Adverse Effect; or

          (vi) Permit to exist any Termination Event;

          (vii) Make, or permit a Material Subsidiary or an ERISA Affiliate of
     the REIT, Borrower or any Material Subsidiary to make, a complete or
     partial withdrawal (within the meaning of ERISA Section 4201) from any
     Multiemployer Plan so as to result in liability to Borrower, a Material
     Subsidiary or any ERISA Affiliate of the REIT, Borrower or any Material
     Subsidiary which would have a Material Adverse Effect; or

          (viii) Permit the total Unfunded Pension Liabilities (using the
     actuarial assumptions utilized by the PBGC) for all Benefit Plans (other
     than Benefit Plans which have no Unfunded Pension Liabilities) to have a
     Material Adverse Effect.


None of the REIT, Borrower nor any Agreement Party shall use any "assets"
(within the meaning of ERISA or Section 4975 of the Internal Revenue Code,
including but not limited to 29 C.F.R. ss. 2510.3-101 or any successor
regulation thereto) of an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code to repay or secure the Obligations if the use of such
assets may result in a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and Section 4975 of the Internal Revenue Code and the taxes and penalties
imposed by Section 4975 of the Internal Revenue Code and Section 502(i) of
ERISA) or in a Lender, Agent or the Lenders being deemed in violation of Section
404 or 406 of ERISA or Section 4975 of the Internal Revenue Code or otherwise by
itself results in or will result in a Lender, Agent or the Lenders being a
fiduciary or party in interest under ERISA or a "disqualified person" as defined
in Section 4975(e)(2) of the Internal Revenue Code with respect to an
"employee benefit plan" within the meaning of Section 3(3) of ERISA or a "plan"
within the meaning of Section 4975(e)(1) of the Internal Revenue Code. Without
limitation of any other provision of this Agreement, none of the REIT, Borrower
or any Agreement Party shall assign, sell, pledge, encumber, transfer,
hypothecate or otherwise dispose of their respective interests or rights (direct
or indirect) in any Loan Document, or attempt to do any of the foregoing or
suffer any of the foregoing, or permit any party) with a direct or indirect
interest or

                                       67
<PAGE>   72

right in any Loan Document to do any of the foregoing, nor shall REIT or
Borrower assign, sell, pledge, encumber, transfer, hypothecate or otherwise
dispose of any of their respective rights or interests (direct or indirect) in
any Agreement Party, Borrower or REIT, as applicable, or attempt to do any of
the foregoing or suffer any of the foregoing, if such action would cause the
Obligations, or the exercise of any of the Agent's or Lenders' rights in
connection therewith, to constitute a prohibited transaction under ERISA or the
Internal Revenue Code (unless Borrower furnishes to Agent a legal opinion
reasonably satisfactory to Agent that the transaction is exempt from the
prohibited transaction provisions of ERISA and the Internal Revenue Code (for
this purpose, the Agent and Lenders agree to supply Borrower all relevant
non-confidential factual information reasonably necessary to such legal opinion
and reasonably requested by Borrower)) or otherwise results in a Lender, the
Agent or the Lenders being deemed in violation of Sections 404 or 406 of ERISA
or Section 4975 of the Internal Revenue Code or otherwise by itself would result
in a Lender, the Agent or the Lenders being a fiduciary or party in interest
under ERISA or a "disqualified person" as defined in Section 4975(e)(2) of the
Internal Revenue Code with respect to an "employee benefit plan" within the
meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section
4975(e)(1) of the Internal Revenue Code.

          (g) Environmental Liabilities. Borrower shall not, and shall not
permit any of its Subsidiaries to, become subject to any Liabilities and Costs
which will have a Material Adverse Effect arising out of or related to (i) the
Release or threatened Release of any Contaminant into the environment, or any
Remedial Action in response thereto, or (ii) any violation of any Environmental
Laws. Notwithstanding the foregoing provision, Borrower and its Subsidiaries
shall have the right to contest in good faith any claim of violation of an
Environmental Law by appropriate legal proceedings and shall be entitled to
postpone compliance with the obligation being contested as long as (i) no Event
of Default shall have occurred and be continuing, (ii) Borrower shall have given
Agent prior written notice of the commencement of such contest, (iii)
noncompliance with such Environmental Law shall not subject Borrower or such
Subsidiary to any criminal penalty or subject Agent to pay any civil penalty or
to prosecution for a crime, and (iv) no portion of any Property material to
Borrower or its condition or prospects shall be in imminent danger of being
sold, forfeited or lost, by reason of such contest or the continued existence of
the matter being contested.

          (h) Amendment of Constituent Documents. Borrower shall not permit any
amendment of its limited partnership agreements, certificate of limited
partnership or by-laws, if any, which would materially and adversely affect
Agent or Lenders or their respective rights and remedies under the Loan
Documents.

          (i) Disposal of Interests. Borrower will not directly or indirectly
convey, sell, transfer, assign, pledge or otherwise encumber or dispose of any
material portion of its partnership interests, stock or other ownership
interests in any Subsidiary or other Person in which it has an interest unless
Borrower has delivered to Agent a Compliance Certificate showing on a pro forma
basis (calculated in a manner reasonably acceptable to Agent) that there would
be no breach of any of the financial covenants contained in Articles VIII and XI
after giving effect to such conveyance, sale, transfer, assignment, pledge, or
other encumbrance or disposition.

                                       68

<PAGE>   73

          (j) Margin Regulations. No portion of the proceeds of any credit
extended under this Agreement shall be used in any manner which might cause the
extension of credit or the application of such proceeds to violate Regulation G,
Regulation U or Regulation X or any other regulation of the Federal Reserve
Board or to violate the Securities Exchange Act or the Securities Act, in each
case as in effect on the date or dates of Borrowings and such use of proceeds.

          (k) Transactions with Affiliates. Borrower shall not and shall not
permit any of its Subsidiaries to enter into, any transaction or series of
related transactions with any Affiliate of Borrower, other than transactions in
the ordinary course of business which are on terms and conditions substantially
as favorable to Borrower or such Subsidiary as would be obtainable by Borrower
or such Subsidiary in an arms-length transaction with a Person other than an
Affiliate.

          8.02. With respect to the REIT:

          (a) Indebtedness. The REIT shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

          (i) the Obligations; and

          (ii) Indebtedness which, after giving effect thereto, may be incurred
     or may remain outstanding without giving rise to an Event of Default or
     Unmatured Event of Default under any provision of Articles VIII and IX.

          (b) Liens. The REIT shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:

          (i) Liens in favor of Agent securing the Obligations;

          (ii) Permitted Liens; and

          (iii) Liens securing Indebtedness permitted to be incurred and remain
     outstanding pursuant to Section 8.02(a)(ii).

          (c) Restriction on Fundamental Changes.

          (i) The REIT shall not enter into any merger, consolidation,
     reorganization or recapitalization or liquidate, wind-up or dissolve (or
     suffer any liquidation or dissolution) or discontinue its business.

          (ii) The REIT shall not change its Fiscal Year.

          (iii) The REIT shall not engage in any line of business other than
     owning partnership interests in Borrower and the interests identified on
     Schedule 5.01(w) as

                                       69
<PAGE>   74

     being owned by the REIT and any other ownership interests in
     Subsidiaries and Investment Affiliates which are permitted under the terms
     of Borrower's partnership agreement.

          (iv) The REIT shall not have an Investment in any Person other than
     Borrower and the interests identified on Schedule 5.01(w) as being owned by
     the REIT and any other ownership interests in Subsidiaries and Investment
     Affiliates which are permitted under the terms of Borrower's partnership
     agreement.

          (v) The REIT shall not acquire an interest in any Property other than
     Securities issued by Borrower and the interests identified on Schedule
     5.01(w) and any other ownership interests in Subsidiaries and Investment
     Affiliates which are permitted under the terms of Borrower's partnership
     agreement.

          (d) Environmental Liabilities. The REIT shall not, and shall not
permit any of its Subsidiaries to become subject to any Liabilities and Costs
which will have a Material Adverse Effect arising out of or related to (i) the
Release or threatened Release of any Contaminant into the environment, or any
Remedial Action in response thereto, or (ii) any violation of any Environmental
Laws. Notwithstanding the foregoing provision, the REIT and its Subsidiaries
shall have the right to contest in good faith any claim of violation of an
Environmental Law by appropriate legal proceedings and shall be entitled to
postpone compliance with the obligation being contested as long as (i) no Event
of Default shall have occurred and be continuing, (ii) the REIT shall have given
Agent prior written notice of the commencement of such contest, (iii)
noncompliance with such Environmental Law shall not subject the REIT or such
Subsidiary to any criminal penalty or subject Agent to pay any civil penalty or
to prosecution for a crime, and (iv) no portion of any Property material to
Borrower or its condition or prospects shall be in imminent danger of being
sold, forfeited or lost, by reason of such contest or the continued existence of
the matter being contested.

          (e) Amendment of Charter or By-Laws. The REIT shall not permit any
amendment of its charter documents or by-laws, which would materially and
adversely affect Agent or Lenders or their respective rights and remedies under
the Loan Documents.

          (f) Disposal of Partnership Interests. The REIT will not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise encumber or
dispose of any of its partnership interests in Borrower.

          (g) Maximum Ownership Interests. No Person or group of Persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act) (other than
Samuel Zell) shall beneficially acquire ownership (within the meaning of Rule
13d-3 promulgated by the Commission under such Act), directly or indirectly, of
more than fifteen percent (15%) of the Securities which have the right to elect
the board of directors of the REIT under ordinary circumstances on a combined
basis, after giving effect to the conversion of any Convertible Securities in
the REIT and Borrower.



                                       70
<PAGE>   75
                                   ARTICLE IX.
                               FINANCIAL COVENANTS

          Borrower covenants and agrees that, on and after the date of this
Agreement and until payment in full of all the Obligations, the expiration of
all Commitments and the termination of this Agreement:

          9.01. Total Liabilities to Gross Asset Value. Borrower shall not
permit the ratio of Total Liabilities to the sum of Gross Asset Values for
Borrower and each of its Subsidiaries to exceed 0.6:1.

          9.02. Secured Debt to Gross Asset Value. Borrower shall not permit the
ratio of Secured Debt to the sum of Gross Asset Values for Borrower and each of
its Subsidiaries to exceed 0.40:1.

          9.03. EBITDA to Interest Expense Ratio. Borrower shall not permit the
ratio of EBITDA for any Fiscal Quarter to Interest Expense for such Fiscal
Quarter to be less than 2.0:1.

          9.04. EBITDA to Fixed Charges Ratio. Borrower shall not permit the
ratio of EBITDA for any Fiscal Quarter to Fixed Charges for such Fiscal Quarter
to be less than 1.75:1.

          9.05. Unencumbered Net Operating Income to Unsecured Interest Expense.
Borrower shall not permit the ratio of Unencumbered Net Operating Income for any
Fiscal Quarter to Unsecured Interest Expense for such Fiscal Quarter to be less
than 1.80:1.

          9.06. Unencumbered Pool. Borrower shall not permit the ratio of (a)
the sum of (i) the Unencumbered Asset Value and (ii) the fair market value of
cash and Cash Equivalents owned by Borrower and subject to no Lien in excess of
$10,000,000 to (b) outstanding Unsecured Debt to be less than 1.80:1.

          9.07. Minimum Net Worth. Borrower will maintain a Net Worth of not
less than Two Hundred Fifty-Eight Million Three Hundred Seventeen Thousand One
Hundred Dollars ($258,317,100) plus ninety percent (90%) of all Net Offering
Proceeds received by the REIT or Borrower after September 30, 1996.

          9.08. Permitted Holdings. Borrower's primary business will be the
ownership, operation and development of manufactured home communities and any
other business activities of Borrower and its Subsidiaries will remain
incidental thereto. Notwithstanding the foregoing, Borrower and its Subsidiaries
may acquire, or maintain or engage in the following Permitted Holdings if and so
long as (i) the aggregate value of such Permitted Holdings, whether held
directly or indirectly by Borrower and its Subsidiaries, does not exceed, at any
time, twenty percent (20%) of Gross Asset Value for Borrower as a whole and (ii)
the value of each such Permitted Holding, whether held directly or indirectly by
Borrower and its Subsidiaries, does not exceed, at any time, the following
percentages of Borrower's Gross Asset Value:



                                       71
<PAGE>   76

<TABLE>
<CAPTION>
                                                          Maximum Percentage
Permitted Holdings                                       of Gross Asset Value
- ------------------                                       --------------------
<S>                                                      <C>
Non-Manufactured Home
Community Property (other
than cash or Cash Equivalents)                                   10%

Land                                                              5%

Securities issued by real estate
investment trusts primarily
engaged in the development,
ownership and management of
manufactured home communities                                     5%

Manufactured Home
Community Mortgages other than
mortgage indebtedness which is
either eliminated in the consolidation
of the REIT, Borrower and the
Subsidiaries or accounted for as
investments in real estate under
GAAP                                                             10%

Manufactured Home
Community Partnership Interests
other than Controlled Partnership
Interests                                                        10%

Development Activity                                             10%
</TABLE>


For purposes of calculating the foregoing percentages the value of each category
shall be calculated in the manner that Gross Asset Value is determined; provided
however, that the Gross Asset Value for Land and Securities shall be equal to
the lesser of (a) the acquisition cost thereof or (b) the current market value
thereof (such market value to be determined in a manner reasonably acceptable to
Agent); provided, further, that the Gross Asset Value of Development Activity
shall be determined in accordance with GAAP.

          9.09. Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter, but
shall be satisfied at all times.

                                   ARTICLE X.
                     EVENTS OF DEFAULT; RIGHTS AND REMEDIES

          10.01. Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:


                                       72
<PAGE>   77

          (a) Failure to Make Payments When Due. (i) The failure to pay in full
any amount due on the Termination Date; (ii) the failure to pay in full any
principal when due; (iii) the failure to pay in full any interest owing
hereunder or under any of the other Loan Documents within ten (10) days after
the due date thereof and, unless Agent has previously delivered two (2) or more
notices of payment default to Borrower during the term of this Agreement (in
which event the following notice shall not be required), Agent shall have given
Borrower written notice that Agent has not received such payment on or before
the date such payment was required to be made and Borrower shall have failed to
make such payment within five (5) days after receipt of such notice; or (iv) the
failure to pay in full any other payment required hereunder or under any of the
other Loan Documents, whether such payment is required to be made to Agent or to
some other Person, within ten (10) days after Agent gives Borrower written
notice that such payment is due and unpaid.

          (b) Dividends. Borrower or the REIT shall breach the covenant set
forth in Section 8.01(d).

          (c) Breach of Financial Covenants. Borrower shall fail to satisfy any
covenant set forth in Article IX and such failure shall continue for forty (40)
days after Borrower's knowledge thereof.

          (d) Other Defaults. Borrower, the REIT or any Agreement Party shall
fail duly and punctually to perform or observe any agreement, covenant or
obligation binding on Borrower, the REIT or any Agreement Party under this
Agreement or under any of the other Loan Documents (other than as described in
Section 7.01(e) or Sections 10.01(a), (b), (c), (e), (g) or (p)), and such
failure shall continue for thirty (30) days after written notice from Agent to
Borrower, the REIT or any Agreement Party (or (i) such lesser period of time as
is mandated by applicable Requirements of Law or (ii) such longer period of time
(but in no case more than ninety (90) days) as is reasonably required to cure
such failure if Borrower, the REIT, or such Agreement Party commences such cure
within such ninety (90) days and diligently pursues the completion thereof).

          (e) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by Borrower, the REIT or any Agreement Party to
Agent or any Lender herein or in any of the other Loan Documents or in any
statement, certificate or financial statements at any time given by Borrower
pursuant to any of the Loan Documents shall be false or misleading in any
material respect on the date as of which made and, with respect to any such
representation or warranty not known by Borrower at the time made or deemed made
to be false or misleading, the defect causing such representation or warranty to
be false or misleading is not removed within thirty (30) days after written
notice thereof from Agent to Borrower.

          (f) Default as to Other Indebtedness. Borrower, the REIT, any
Subsidiary or any Investment Affiliate shall have defaulted under any Other
Indebtedness of such party (other than Non-Recourse Indebtedness) and as a
result thereof the holders of such Other Indebtedness shall have accelerated
such Other Indebtedness (other than Non-Recourse Indebtedness), if the aggregate
amount of such accelerated Other Indebtedness (to the extent of any recourse to

                                       73
<PAGE>   78
Borrower, the REIT or any Material Subsidiary), together with the aggregate
amount of any Other Indebtedness (other than Non-Recourse Indebtedness) of
Borrower, the REIT, any Subsidiary or any Investment Affiliate which has
theretofore been accelerated (to the extent of any recourse to Borrower, the
REIT or any Material Subsidiary) is $10,000,000 or more.

          (g) Involuntary Bankruptcy; Appointment of Receiver, etc.

          (i) An involuntary case or other proceeding shall be commenced against
     the REIT, Borrower, any Subsidiary, or any Agreement Party and the petition
     shall not be dismissed within sixty (60) days after commencement of the
     case, or a court having jurisdiction shall enter a decree or order for
     relief in respect of the REIT, Borrower, any Subsidiary, or any Agreement
     Party, as the case may be, in an involuntary case or other proceeding,
     under any applicable bankruptcy, insolvency or other similar law now or
     hereinafter in effect; or any other similar relief shall be granted under
     any applicable federal, state or foreign law; or

          (ii) A decree or order of a court having jurisdiction in the premises
     for the appointment of a receiver, liquidator, sequestrator, trustee,
     custodian or other officer having similar powers over Borrower, the REIT,
     any Subsidiary, or any Agreement Party, or over all or a substantial part
     of the property of the REIT, Borrower, any Subsidiary, or any Agreement
     Party shall be entered, or an interim receiver, trustee or other custodian
     of the REIT, Borrower, any Subsidiary, or any Agreement Party, or of all or
     a substantial part of the property of the REIT, Borrower, any Subsidiary,
     or any Agreement Party shall be appointed or a warrant of attachment,
     execution or similar process against any substantial part of the property
     of the REIT, Borrower, any Subsidiary, or any Agreement Party shall be
     issued and any such event shall not be stayed, vacated, dismissed, bonded
     or discharged within sixty (60) days of entry, appointment or issuance.

          (h) Voluntary Bankruptcy; Appointment of Receiver, Etc. The REIT,
Borrower, any Subsidiary, or any Agreement Party shall have an order for relief
entered with respect to it or commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking of possession by a receiver,
trustee or other custodian for all or a substantial part of its property; the
REIT, Borrower, any Subsidiary, or any Agreement Party shall make any assignment
for the benefit of creditors or shall be unable or fail, or admit in writing its
inability, to pay its debts as such debts become due; or the general partner(s)
or Board of Directors (or any committee thereof), as applicable, of the REIT,
Borrower, any Subsidiary, or any Agreement Party adopts any resolution or
otherwise authorizes any action to approve any of the foregoing.

          (i) Judgments and Attachments. (i) Any money judgments (other than a
money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writs or warrants of attachment,
or similar processes involving an aggregate amount in excess of $5,000,000 shall
be entered or filed against the REIT, Borrower,

                                       74
<PAGE>   79
any Subsidiary, or any Agreement Party or their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30)
days, or (ii) any judgment or order of any court or administrative agency
awarding material damages shall be entered against the REIT, Borrower, any
Subsidiary, or any Agreement Party in any action under the Federal securities
laws seeking rescission of the purchase or sale of, or for damages arising from
the purchase or sale of, any Securities, such judgment or order shall have
become final after exhaustion of all available appellate remedies and such
judgment or order would have a Material Adverse Effect.

          (j) Dissolution. Any order, judgment or decree shall be entered
against the REIT, Borrower, or any Agreement Party decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of thirty (30) days; or the REIT, Borrower, 'or any
Agreement Party shall otherwise dissolve or cease to exist.

          (k) Loan Documents; Failure of Security or Subordination. Any Loan
Document shall cease to be in full force and effect or any Obligation shall be
subordinated or shall not have the priority contemplated by this Agreement or
the Loan Documents for any reason or any guarantor under any guaranty of all or
any portion of the Obligations shall at any time disavow or deny liability under
such guaranty in writing.

          (l) ERISA Plan Assets. Any assets of Borrower, the REIT or any
Agreement Party shall constitute "assets" (within the meaning of 29 C.F.R. ss.
2510.3-101 or any successor regulation thereto) of an "employee benefit plan"
within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of
Section 4975(e)(1) of the Internal Revenue Code or Borrower, the REIT or any
Agreement Party shall be an "employee benefit plan" as defined in Section 3(3)
of ERISA, a "multiemployer plan" as defined in Sections 4001(a)(3) or 3(37) of
ERISA, or a "plan" as defined in Section 4975(e)(1) of the Internal Revenue
Code.

          (m) ERISA Prohibited Transaction. The Obligations, any of the Loan
Documents or the exercise of any of the Agent's or Lenders' rights in connection
therewith shall constitute a prohibited transaction under ERISA and/or the
Internal Revenue Code (which is not exempt from the restrictions of Section 406
of ERISA or Section 4975 of the Internal Revenue Code and the taxes and
penalties imposed by Section 4975 of the Internal Revenue Code and Section
502(i) of ERISA).

          (n) ERISA Liabilities. (i) Any Termination Event occurs which will or
is reasonably likely to subject Borrower, the REIT, any Material Subsidiary, any
Agreement Party, any ERISA Affiliate thereof or any of them to a liability which
Agent reasonably determines will have a Material Adverse Effect, (ii) the plan
administrator of any Benefit Plan applies for approval under Section 412(d) of
the Internal Revenue Code for a waiver of the minimum funding standards of
Section 412(a) of the Internal Revenue Code and Agent reasonably determines that
the business hardship upon which the Section 412(d) waiver request was based
will or would reasonably be anticipated to subject Borrower, the REIT, any
Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any
of them to a liability which Agent reasonably determines will have a Material
Adverse Effect; (iii) any Benefit Plan shall incur an accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue Code or

                                       75
<PAGE>   80

Section 302 of ERISA) for which a waiver shall not have been obtained in
accordance with the applicable provisions of the Internal Revenue Code or ERISA
which "accumulated funding deficiency" will or would reasonably be anticipated
to subject Borrower, the REIT, any Material Subsidiary, any Agreement Party, or
any ERISA Affiliate thereof or any of them to a liability which the Agent
reasonably determines will have a Material Adverse Effect; (iv) Borrower, the
REIT, any Material Subsidiary, any Agreement Party, or any ERISA Affiliate
thereof or any of them shall have engaged in a transaction which is prohibited
under Section 4975 of the Internal Revenue Code or Section 406 of ERISA which
will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Material Subsidiary, any Agreement Party,
or any ERISA Affiliate thereof or any of them which the Agent reasonably
determines will have a Material Adverse Effect; (v) Borrower, the REIT, any
Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any
of them shall fail to pay when due an amount which it shall have become liable
to pay to the PBGC, a Plan or a trust established under Title IV of ERISA which
failure will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Material Subsidiary, any Agreement Party,
or any ERISA Affiliate thereof or any of them which the Agent reasonably
determines will have a Material Adverse Effect; (vi) a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
a Benefit Plan must be terminated or have a trustee appointed to administer such
Plan which condition will or would reasonably be anticipated to result in the
imposition of a liability on Borrower, the REIT, any Material Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them which the Agent
reasonably determines will have a Material Adverse Effect; (vii) a Lien shall be
imposed on any assets of Borrower, the REIT, any Material Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them in favor of the
PBGC or a Plan which the Agent reasonably determines will have a Material
Adverse Effect; (viii) Borrower, the REIT, any Material Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them shall suffer a
partial or complete withdrawal from a Multiemployer Plan or shall be in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from a complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA) from such Multiemployer Plan which
will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Material Subsidiary, any Agreement Party,
or any ERISA Affiliate thereof or any of them which the Agent reasonably
determines will have a Material Adverse Effect; or (ix) a proceeding shall be
instituted by a fiduciary of any Multiemployer Plan against Borrower, the REIT,
any Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof
or any of them to enforce Section 515 of ERISA which will or would reasonably be
anticipated to result in the imposition of a liability on Borrower, the REIT,
any Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or
any of them which the Agent reasonably determines will have a Material Adverse
Effect.

          (o) Solvency. Borrower, any Agreement Party or the REIT shall cease to
be Solvent.

          (p) Board of Directors. During any 12-month period, individuals who
were directors of the REIT on the first day of such period shall not constitute
a majority of the board of directors of the REIT.

                                       76
<PAGE>   81

          (q) Term Loan Credit Agreement. An "Event of Default" shall have
occurred under the Term Loan Credit Agreement.

          An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with Section 12.05.

          10.02. Rights and Remedies.

          (a) Acceleration. Upon the occurrence of any Event of Default with
respect to Borrower described in the foregoing Section 10.01(g) or 10.01(h),
the Commitments (including the obligations of Swingline Lender and Issuing
Lender) shall automatically and immediately terminate and the unpaid principal
amount of and any and all accrued interest on the Loans and all of the other
Obligations shall automatically become immediately due and payable, with all
additional interest from time to time accrued thereon and without presentment,
demand or protest or other requirements of any kind (including without
limitation valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate or notice of acceleration), all of which are hereby
expressly waived by Borrower, and the obligations of Lenders to make any Loans
hereunder shall thereupon terminate; and upon the occurrence and during the
continuance of any other Event of Default, Agent shall, at the request of, or
may, with the consent of, Requisite Lenders, by written notice to Borrower, (i)
declare that the Commitments (including the obligations of Swingline Lender and
Issuing Lender) are terminated, whereupon the Commitments and the obligation of
Lenders to make any Loans hereunder shall immediately terminate, and/or (ii)
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loans and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower. Upon
the occurrence of and during the continuance of an Event of Default, no
Agreement Party shall be permitted to make any distributions or dividends
without the prior written consent of Agent. Upon the occurrence of an Event of
Default or an acceleration of the Obligations, Agent and Lenders may exercise
all or any portion of the rights and remedies set forth in the Loan Documents.

          (b) Access to Information. Notwithstanding anything to the contrary
contained in the Loan Documents, upon the occurrence of and during the
continuance of an Event of Default, Agent shall be entitled to request and
receive, by or through Borrower or appropriate legal process, any and all
information concerning the REIT, Borrower, any Subsidiary of Borrower, any
Investment Affiliate, any Agreement Party, or any property of any of them, which
is reasonably available to or obtainable by Borrower.

          (c) Waiver of Demand. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all valuation, appraisal and exemption laws.


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<PAGE>   82
         (d) Waivers, Amendments and Remedies. No delay or omission of Agent or
Lenders to exercise any right under any Loan Document shall impair such right or
be construed to be a waiver of any Event of Default or an acquiescence therein,
and any single or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in a writing signed by Agent after
obtaining written approval thereof or the signature thereon of those Lenders
required to approve such waiver, amendment or other variation, and then only to
the extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to Agent and Lenders until the Obligations have been paid in full, the
Commitments have expired or terminated and this Agreement has been terminated.

         10.03. Rescission. If at any time after acceleration of the maturity of
the Loans, Borrower shall pay all arrears of interest and all payments on
account of principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Unmatured Events of Default (other than nonpayment of principal of
and accrued interest on the Loans due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 12.05, then by
written notice to Borrower, Requisite Lenders may elect, in the sole discretion
of Requisite Lenders to rescind and annul the acceleration and its consequences;
but such action shall not affect any subsequent Event of Default or Unmatured
Event of Default or impair any right or remedy in connection therewith. The
provisions of the preceding sentence are intended merely to bind Lenders to a
decision which may be made at the election of Requisite Lenders; they are not
intended to benefit Borrower and do not give Borrower the right to require
Lenders to rescind or annul any acceleration hereunder, even if the conditions
set forth herein are met.

         10.04. Suspension of Lending. At any time during which an Unmatured
Event of Default exists pursuant to Section 10.01(c) or Section 10.01(d) and
is not cured (by improvement in the applicable financial measure by compliance
with the applicable financial covenant in such 40-day period or as provided in
Section 10.01(d)), Borrower shall have no right to receive any additional
Loans.

                                  ARTICLE XI.
                               AGENCY PROVISIONS

         11.01. Appointment

         (a) Each Lender hereby designates and appoints Wells Fargo as Agent of
such Lender under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Loan Documents and to exercise such powers
as are set forth herein or therein, together with such other powers as are
reasonably incidental thereto. Agent agrees to act as such on the express
conditions contained in this Article XI.

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<PAGE>   83


         (b) The provisions of this Article XI are solely for the benefit of
Agent and Lenders, and Borrower shall not have any rights to rely on or enforce
any of the provisions hereof. In performing its functions and duties under this
Agreement, Agent shall act solely as Agent of Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower.

         11.02. Nature of Duties. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be administrative in nature. Subject
to the provisions of Sections 11.05 and 11.07, Agent shall administer the Loans
in the same manner as it administers its own loans. Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Loan Documents, expressed or implied, is
intended or shall be construed to impose upon Agent any obligation in respect of
this Agreement or any of the Loan Documents except as expressly set forth herein
or therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the REIT, Borrower, the Subsidiaries, the
Investment Affiliates, and each Agreement Party in connection with the making
and the continuance of the Loans hereunder and shall make its own assessment of
the creditworthiness of the REIT, Borrower, the Subsidiaries, the Investment
Affiliates, and each Agreement Party, and, except as specifically provided
herein, Agent shall not have any duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter.

         11.03. Loan Disbursements

         (a) Promptly after receipt of a Notice of Borrowing for a Loan to be
made pursuant to Section 2.01 hereof, but in no event later than one (1)
Business Day prior to the proposed Funding Date for a Base Rate Loan or two (2)
Business Days prior to the proposed Funding Date for a LIBOR Loan, Agent shall
notify each Lender of the proposed Borrowing and the Funding Date set forth
therein. Each Lender shall make available to Agent (or the funding bank or
entity designated by Agent), the amount of such Lender's Pro Rata Share of such
Borrowing in immediately available funds not later than the times designated in
Section 11.03(b). Unless Agent shall have been notified by any Lender prior to
such time for funding in respect of any borrowing that such lender does not
intend to make available to Agent such Lender's Pro Rata Share of such
Borrowing, Agent may assume that such Lender has made such amount available to
Agent and Agent, in its sole discretion, may, but shall not be obligated to,
make available to Borrower a corresponding amount. If such corresponding amount
is not in fact made available to Agent by such Lender on or prior to a Funding
Date, such Lender agrees to pay to Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to Borrower until the date such amount is paid or repaid to
Agent, at the Federal Funds Rate. If such Lender shall pay to Agent such
corresponding amount, such amount so paid shall constitute such Lender's Pro
Rata Share of such Borrowing. If such Lender shall not pay to Agent such
corresponding amount after reasonable attempts are made by Agent to collect such
amounts from such Lender, Borrower agrees to repay to Agent forthwith on demand
such corresponding amount together with interest

                                       79


<PAGE>   84




thereon, for each day from the date such amount is made available to Borrower
until the date such amount is repaid to Agent, at the interest rate applicable
thereto.

         (b) Requests by Agent for funding by Lenders of Loans will be made by
telecopy. Each Lender shall make the amount of its Loan available to Agent in
Dollars and in immediately available funds, to such bank and account, in El
Segundo, California as Agent may designate, not later than 10:00 A.M.
(California time) on the Funding Date designated in the Notice of Borrowing with
respect to such Loan. Nothing in this Section 11.03(b) shall be deemed to
relieve any Lender of its obligation hereunder to make its Pro Rata Share of
Loans on any Funding Date, nor shall any Lender be responsible for the failure
of any other Lender to perform its obligations to make any Loan hereunder, and
the Commitment of any Lender shall not be increased or decreased as a result of
the failure by any other Lender to perform its obligation to make a Loan.

         11.04. Distribution and Apportionment of Payments

         (a) Subject to Section 11.04(b), payments actually received by Agent
for the account of Lenders shall be paid to them promptly after receipt thereof
by Agent, but in any event prior to 3:00 P.M. (California time) on the day of
receipt (if received by 11:00 A.M. (California time) on such day), or within one
(1) Business Day thereafter (if received after 11:00 A.M. (California time) on
the day of receipt), provided that Agent shall pay to such Lenders interest
thereon at the Federal Funds Rate from the Business Day on which such funds are
required to be paid to Lenders by Agent until such funds are actually paid in
immediately available funds to such Lenders. All payments of principal and
interest in respect of outstanding Loans (other than Swingline Loans), all
payments of the fees described in this Agreement (other than agency and
arrangement fees described in Section 2.04(c)), and all payments in respect of
any other Obligations shall be allocated among such of Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Agent shall promptly, but in any event within two (2) Business
Days (with interest thereon, if required pursuant to this Section 11.04(a)),
distribute to each Lender at its primary address set forth on the appropriate
counterpart signature page hereof or on the Assignment and Assumption, or at
such other address as a Lender may request in writing, such funds as it may be
entitled to receive, provided that Agent shall in any event not be bound to
inquire into or determine the validity, scope or priority of any interest or
entitlement of any Lender and may suspend all payments and seek appropriate
relief (including without limitation instructions from Requisite Lenders, or all
Lenders, as applicable, or an action in the nature of interpleader) in the event
of any doubt or dispute as to any apportionment or distribution contemplated
hereby. The order of priority herein is set forth solely to determine the rights
and priorities of Lenders as among themselves and may at any time or from time
to time be changed by Lenders as they may elect, in writing in accordance with
Section 12.05, without necessity of notice to or consent of or approval by
Borrower or any other Person.

         (b) Notwithstanding any provision hereof to the contrary, until such
time as a Defaulting Lender has funded its Pro Rata Share of a Loan (other than
a Swingline Loan but including a Mandatory Borrowing) or draw on a Letter of
Credit which was previously a Non Pro

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<PAGE>   85
Rata Loan, or all other Lenders have received payment in full (whether by
repayment or prepayment) of the principal and interest due in respect of such
Non Pro Rata Loan, all of the Obligations owing to such Defaulting Lender
hereunder shall be subordinated in right of payment, as provided in the
following sentence, to the prior payment in full of all principal, interest and
fees in respect of all Non Pro Rata Loans in which the Defaulting Lender has not
funded its Pro Rata Share (such principal, interest and fees being referred to
as "Senior Loans"). All amounts paid by Borrower and otherwise due to be applied
to the Obligations owing to the Defaulting Lender pursuant to the terms hereof
shall be distributed by Agent to the other Lenders in accordance with their
respective Pro Rata Shares (recalculated for purposes hereof to exclude the
Defaulting Lender's Commitment), until all Senior Loans have been paid in full.
This provision governs only the relationship among Agent, each Defaulting
Lender, and the other Lenders; nothing hereunder shall limit the obligation of
Borrower to repay all Loans in accordance with the terms of this Agreement. The
provisions of this section shall apply and be effective regardless of whether an
Event of Default occurs and is then continuing, and notwithstanding (i) any
other provision of this Agreement to the contrary, (ii) any instruction of
Borrower as to its desired application of payments or (iii) the suspension of
such Defaulting Lender's right to vote on matters which are subject to the
consent or approval of Requisite Lenders, Super majority Lenders, or all
Lenders.  No Unused Facility Fee shall accrue in favor of, or be payable to,
such Defaulting Lender from the date of any failure to fund Loans (other than
Swingline Loans but including Loans made pursuant to Mandatory Borrowings) or
draws on Letters of Credit or reimburse Agent for any Liabilities and Costs as
herein provided until such failure has been cured and, without limitation of
other provisions set forth in this Agreement, Agent shall be entitled to (i)
collect interest from such Lender for the period from the date on which the
payment was due until the date on which the payment is made at the Federal Funds
Rate for each day during such period, (ii) withhold or set off, and to apply to
the payment of the defaulted amount and any related interest, any amounts to be
paid to such Defaulting Lender under this Agreement, and (iii) bring an action
or suit against such Defaulting Lender in a court of competent jurisdiction to
recover the defaulted amount and any related interest. In addition, the
Defaulting Lender shall indemnify, defend and hold Agent and each of the other
Lenders harmless from and against any and all Liabilities and Costs plus
interest thereon at the default rate set forth in the Loan Documents for funds
advanced by Agent or any other Lender on account of the Defaulting Lender which
they may sustain or incur by reason of or as a direct consequence of the
Defaulting Lender's failure or refusal to abide by its obligations under this
Agreement.

         11.05. Rights, Exculpation, Etc. Neither Agent, any Affiliate of Agent,
nor any of their respective officers, directors, employees, agents, attorneys or
consultants, shall be liable to any Lender for any action taken or omitted by
them hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that Agent shall be liable for its gross negligence or willful
misconduct in the performance of its express obligations hereunder. In the
absence of gross negligence or willful misconduct, Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith pursuant
to Section 11.04, and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Person to whom
payment was due, but not made, shall be to

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<PAGE>   86




recover from the recipients of such payments any payment in excess of the amount
to which they are determined to have been entitled. Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement, or any of the
other Loan Documents, or any of the transactions contemplated hereby and
thereby; or for the financial condition of the REIT, Borrower, any Subsidiary,
any Investment Affiliate, or any Agreement Party. Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any of the Loan Documents
or the financial condition of the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party, or the existence or possible existence of any
Unmatured Event of Default or Event of Default. Agent may at any time request
instructions from Lenders with respect to any actions or approvals which, by the
terms of this Agreement or of any of the Loan Documents, Agent is permitted or
required to take or to grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from Requisite Lenders or Supermajority
Lenders, as the case may be. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of Requisite Lenders, Supermajority Lenders
or, where applicable, all Lenders. Agent shall promptly notify each Lender at
any time that the Requisite Lenders or Supermajority Lenders, as the case may
be, have instructed Agent to act or refrain from acting pursuant hereto.

         11.06. Reliance. Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents, telecopies or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountant and other experts selected by it.

         11.07. Indemnification. To the extent that Agent or Issuing Lender is
not reimbursed and indemnified by Borrower, Lenders will reimburse, within ten
(10) days after notice from Agent, and indemnify Agent and Issuing Lender for
and against any and all Liabilities and Costs which may be imposed on, incurred
by, or asserted against it (in its capacity as Agent or Issuing Lender) in any
way relating to or arising out of this Agreement or any of the other Loan
Documents or any action taken or omitted by Agent or Issuing Lender (in its
capacity as Agent or Issuing Lender) under this Agreement or any of the other
Loan Documents, in proportion to each Lender's Pro Rata Share, provided that no
Lender shall be liable for any portion of such Liabilities and Costs resulting
from Agent's or Issuing Lender's gross negligence or willful misconduct, bad
faith or fraud. The obligations of Lenders under this Section 11.07 shall
survive the payment in full of all Obligations and the termination of this
Agreement. In the event that after payment and distribution of any amount by
Agent to Lenders, any Lender or third party, including Borrower, any creditor of
Borrower or a trustee in bankruptcy, recovers from

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Agent any amount found to have been wrongfully paid to Agent or disbursed by
Agent to Lenders, then Lenders, in proportion to their respective Pro Rata
Shares, shall reimburse Agent for all such amounts. Notwithstanding the
foregoing, Agent shall not be obligated to advance Liabilities and Costs and may
require the deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or made
payable.

         11.08. Agent Individually. With respect to its Pro Rata Share of the
Commitments hereunder and the Loans made by it, Agent shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders", "Requisite Lenders", "Supermajority Lenders", or
any similar terms may include Agent in its individual capacity as a Lender, one
of the Requisite Lenders or one of the Supermajority Lenders, but Requisite
Lenders and Supermajority Lenders shall not include Agent solely in its capacity
as Agent and need not necessarily include Agent in its capacity as a Lender.
Agent and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with Borrower or any of
its Subsidiaries or Affiliates as if it were not acting as Agent pursuant
hereto.

         11.09. Successor Agent; Resignation of Agent, Removal of Agent

         (a) Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) Business Days prior
written notice to Lenders and Borrower. For good cause, by a determination of
all the Lenders (excluding for such determination the Agent in its capacity as a
Lender), the Agent may be removed at any time by giving at least thirty (30)
Business Days prior written notice to Agent and Borrower. Such resignation or
removal shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clauses (b) and (c) below or as otherwise provided
below.

         (b) Upon any such notice of resignation by or removal of Agent,
Requisite Lenders shall appoint a successor Agent with the consent of Borrower,
which shall not be unreasonably withheld or delayed (and approval from Borrower
shall not be required upon the occurrence and during the continuance of an Event
of Default). Any successor Agent must be a bank (i) the senior debt obligations
of which (or such Bank's parent's senior debt obligations) are rated not less
than Baa-1 by Moody's Inc. or a comparable rating by a rating agency acceptable
to Requisite Lenders, (ii) which has total assets in excess of Ten Billion
Dollars ($10,000,000,000) and (iii) which is a Lender as of the date of such
succession holding a Commitment without participants equal to at least ten
percent (10%) of the Facility. Agent hereby agrees to remit to any successor
Agent, a pro rata portion of any annual agent's fee received by Agent, in
advance, for the one-year period covered by such agent's fee based upon the
portion of such year then remaining.

         (c) If a successor Agent shall not have been so appointed within said
thirty (30) Business Day period, the retiring or removed Agent, with the consent
of Borrower, which may not be unreasonably withheld or delayed (and which
approval from Borrower shall not be required upon the occurrence and during the
continuance of an Event of Default), shall then

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<PAGE>   88


appoint a successor Agent who shall meet the requirements described in
subsection (b) above and who shall serve as Agent until such time, if any, as
Requisite Lenders, with the consent of Borrower, which may not be unreasonably
withheld or delayed (and which approval from Borrower shall not be required upon
the occurrence and during the continuance of an Event of Default), appoint a
successor Agent as provided above.

         (d) Any Person succeeding Wells Fargo (or any successor to Wells Fargo)
as Agent hereunder shall also serve as Issuing Lender and Swingline Lender;
provided, however, that the issuer of any Letter of Credit outstanding at the
time of such succession shall retain all of the rights and protections of
Issuing Lender hereunder with respect to such Letter of Credit.

         11.10. Consents and Approvals

         (a) Each Lender authorizes and directs Agent to enter into the Loan
Documents other than this Agreement for the benefit of Lenders. Each Lender
agrees that any action taken by Agent at the direction or with the consent of
Requisite Lenders or the Supermajority Lenders and any action taken by Agent not
requiring consent by Requisite Lenders, Supermajority Lenders, or all Lenders in
accordance with the provisions of this Agreement or any Loan Document, and the
exercise by Agent at the direction or with the consent of Requisite Lenders or
the Supermajority Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all Lenders, except for actions specifically requiring the
approval of all Lenders. All communications from Agent to Lenders requesting
Lenders determination, consent, approval or disapproval (i) shall be given in
the form of a written notice to each Lender, (ii) shall be accompanied by a
description of the matter or item as to which such determination, approval,
consent or disapproval is requested, or shall advise each Lender where such
matter or item may be inspected, or shall otherwise describe the matter or issue
to be resolved, (iii) shall include, if reasonably requested by a Lender and to
the extent not previously provided to such Lender, written materials and a
summary of all oral information provided to Agent by Borrower in respect of the
matter or issue to be resolved, and (iv) shall include Agent's recommended
course of action or determination in respect thereof. Each Lender shall reply
promptly, but in any event within fifteen (15) Business Days after receipt of
the request therefor from Agent (the "Lender Reply Period"). Unless a Lender
shall give written notice to Agent that it objects to the recommendation or
determination of Agent (together with a written explanation of the reasons
behind such objection) within the Lender Reply Period, such Lender shall be
deemed to have approved of or consented to such recommendation or determination.
With respect to decisions requiring the approval of Requisite Lenders,
Supermajority Lenders or all Lenders, Agent shall submit its recommendation or
determination for approval of or consent to such recommendation or determination
to all Lenders and upon receiving the required approval or consent shall follow
the course of action or determination recommended to Lenders by Agent or such
other course of action recommended by Requisite Lenders or Supermajority
Lenders, as the case may be, and each non-responding Lender shall be deemed to
have concurred with such recommended course of action. The following amendments,
modifications or waivers shall require the consent of the Requisite Lenders:

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<PAGE>   89




         (i) If any collateral secures the Loans, approval of acceptance of such
    collateral or the construction of any improvements thereon;

         (ii) Waiver of Sections 8.01(h) or 8.02(f);

         (iii) Acceleration following an Event of Default pursuant to Section
    10.02(a) (except for any Event of Default pursuant to Sections 10.01(g) or
    10.01(h)) or rescission of such acceleration pursuant to Section 10.03;

         (iv) Approval of the exercise of remedies requiring the consent of the
    Requisite Lenders under Section 10.02(a);

         (v) Appointment of a successor Agent in accordance with Sections
    11.09(b) and (c);

         (vi) Approval of Protective Advances, except for Protective Advances
    not requiring such approval pursuant to Section 11.11(a);

         (vii) Approval of the Post Foreclosure Plan in accordance with Section
    11.11(f); or

         (viii) Disapproval of any Property as a Qualifying Unencumbered
    Property.

         (b) The consent of the Supermajority Lenders shall be required to amend
or modify Sections 9.01, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07 or 10.01(a) or to
waive any requirement thereof or to amend or modify this Section 11.10(b).

         (c) In addition to the required consents or approvals referred to in
Section 12.05, Agent may at any time request instructions from Requisite Lenders
with respect to any actions or approvals which, by the terms of this Agreement
or of any of the Loan Documents, Agent is permitted or required to take or to
grant without instructions from any Lenders, and if such instructions are
promptly requested, Agent shall be absolutely entitled to refrain from taking
any action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from taking any action or withholding
any approval under any of the Loan Documents until it shall have received such
instructions from Requisite Lenders. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement, any of the other Loan
Documents in accordance with the instructions of Requisite Lenders or, where
applicable, Supermajority Lenders or all Lenders. Agent shall promptly notify
each Lender at any time that the Requisite Lenders or Supermajority Lenders have
instructed Agent to act or refrain from acting pursuant hereto.

         11.11. Consents and Approvals as to Collateral

         (a) Agent is hereby authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, from time to time
prior to an Event of

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<PAGE>   90


Default, to take any action with respect to any collateral securing the
Obligations or Loan Document which may be necessary to perfect and maintain
perfected Agent's Liens upon such collateral. Agent may make, and shall be
reimbursed for, Protective Advance(s) during any one calendar year with respect
to each Property included in such collateral up to the sum of (i) amounts
expended to pay real estate taxes, assessments and governmental charges or
levies imposed upon such collateral (ii) amounts expended to pay insurance
premiums for policies of insurance related to such collateral, and (iii) Five
Hundred Thousand Dollars ($500,000). Protective Advances in excess of said sum
during any calendar year for any such Property shall require the consent of
Requisite Lenders.

         (b) Lenders hereby irrevocably authorize Agent, at its option and in
its discretion, to release any Lien granted to or held by Agent upon any
collateral securing the Obligations (i) upon termination of the Commitments and
repayment and satisfaction of all Loans, and all other Obligations and the
termination of this Agreement or (ii) if approved, authorized or ratified in
writing by all Lenders.

         (c) So long as no Unmatured Event of Default or Event of Default is
then continuing, upon receipt by Agent of any such written confirmation as
referenced in Section 11.11(b)(ii) from all Lenders of its authority to
release collateral securing the Obligations, and upon at least three (3)
Business Days prior written request by Borrower, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be necessary
to evidence the release of the Liens granted to Agent for the benefit of Lenders
herein or pursuant hereto upon such collateral. Notwithstanding the foregoing,
with respect to any release of any Lien granted to or held by Agent upon any
such collateral, (i) Agent shall not be required to execute any such document on
terms which, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
Borrower in respect of) any Property which shall continue to constitute part of
such collateral.

         (d) Except as provided in this Agreement, Agent shall have no
obligation whatsoever to any Lender or to any other Person to assure that any
collateral exists or is owned by Borrower or any Agreement Party or is cared
for, protected or insured or has been encumbered or that any Liens granted to
agent in any Loan Documents or pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority.

         (e) Should Agent commence any proceeding or in any way seek to enforce
its rights or remedies under the Loan Documents, irrespective of whether as a
result thereof Agent shall acquire title to any collateral, either through
foreclosure, deed in lieu of foreclosure, or otherwise, each Lender, upon demand
therefor from time to time, shall contribute its share (based on its Pro Rata
Share) of the reasonable costs and/or expenses of any such enforcement or
acquisition, including, but not limited to, fees of receivers or trustees, court
costs, title company charges, filing and recording fees, appraisers' fees and
fees and expenses of attorneys to the extent not otherwise reimbursed by
Borrower. Without limiting the generality of the foregoing,

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each Lender shall contribute its share (based on its Pro Rata Share) of all
reasonable costs and expenses incurred by Agent (including reasonable attorneys'
fees and expenses) if Agent employs counsel for advice or other representation
(whether or not any suit has been or shall be filed) with respect to any
collateral or any part thereof, or any of the Loan Documents, or the attempt to
enforce any security interest or Lien on any collateral, or to enforce any
rights of Agent or any of Borrower's or any other party's obligations under any
of the Loan Documents, but not with respect to any dispute between Agent and any
other Lender(s). It is understood and agreed that in the event Agent determines
it is necessary to engage counsel for Lenders from and after the occurrence of
an Event of Default, said counsel shall be selected by Agent and written notice
of such selection, together with a copy of such counsel's engagement letter and
fee estimate, shall be delivered to Lenders.

         (f) In the event that any collateral is acquired by Agent as the result
of a foreclosure or the acceptance of a deed or assignment in lieu of
foreclosure, or is retained in satisfaction of all or any part of Borrower's or
any Agreement Party's obligations, title to any such collateral or any portion
thereof shall be held in the name of Agent or a nominee or subsidiary of Agent,
as agent, for the ratable benefit of Agent and Lenders. Agent shall prepare a
recommended course of action for such collateral (the "Post-Foreclosure Plan"),
which shall be subject to the approval of the Requisite Lenders. Agent shall
administer the collateral in accordance with the Post-Foreclosure Plan, and upon
demand therefor from time to time, each Lender will contribute its share (based
on its Pro Rata Share) of all reasonable costs and expenses incurred by Agent
pursuant to the Post-Foreclosure Plan, including without limitation, any
operating losses. To the extent there is net operating income from such
collateral, Agent shall, in accordance with the Post-Foreclosure Plan, determine
the amount and timing of distributions to Lenders. All such distributions shall
be made to Lenders in accordance with their respective Pro Rata Shares. Lenders
acknowledge that if title to any collateral is obtained by Agent or its nominee,
such collateral will not be held as a permanent investment but will be
liquidated as soon as practicable. Agent shall undertake to sell such
collateral, at such price and upon such terms and conditions as the Requisite
Lenders shall reasonably determine to be most advantageous. Any purchase money
mortgage or deed of trust taken in connection with the disposition of such
collateral in accordance with the immediately preceding sentence shall name
Agent, as agent for Lenders, as the beneficiary or mortgagee. In such case,
Agent and Lenders shall enter into an agreement with respect to such purchase
money mortgage defining the rights of Lenders in the same Pro Rata Shares as
provided hereunder, which agreement shall be in all material respects similar to
this Agreement insofar as this Agreement is appropriate or applicable.

         11.12. Lender Actions Against Collateral. Except as provided in
Article XII, each Lender agrees that it will not take any action, nor institute
any actions or proceedings, against Borrower, the REIT, any Agreement Party or
any other obligor hereunder or under the Loan Documents with respect to
exercising claims against or rights in any collateral without the consent of
Requisite Lenders.

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         11.13. Assignments and Participations

          (a) Subject to the provisions of Section 11.13(j), after first
obtaining the approval of Agent and Borrower, which approval will not be
unreasonably withheld (and which approval from Borrower shall not be required
upon the occurrence and during the continuance of an Event of Default), each
Lender may assign to one or more banks, finance companies, insurance or other
financial institutions all or a portion of its rights and obligations under this
Agreement in accordance with the provisions of this Section (including without
limitation all or a portion of its Commitment and the Loans owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of the assigning Lender's rights and obligations under
this Agreement and the assignment shall cover the same percentage of such
Lender's Commitment and Loans, (ii) unless Agent and Borrower otherwise consent
(which consent of Borrower shall not be required upon the occurrence and during
the continuance of an Event of Default), the aggregate amount of the Commitment
of the assigning Lender being assigned to a Person that is not already a Lender
hereunder pursuant to each such assignment (determined as of the date of the
Assignment and Assumption with respect to such assignment) shall in no event be
less than Ten Million Dollars ($10,000,000) and shall be an integral multiple of
One Million Dollars ($1,000,000), (iii) the parties to each such assignment
shall execute and deliver to Agent, for its approval and acceptance, an
Assignment and Assumption and (iv) Agent shall receive from the assignor or
assignors for its sole account a processing fee of Three Thousand Dollars
($3,000). Without restricting the right of Agent or Borrower to reasonably
object to any bank, finance company, insurance or other financial institution
becoming an assignee of an interest of a Lender hereunder, each proposed
assignee must be an existing Lender or a bank, finance company, insurance or
other financial institution which (i) has (or, in the case of a bank which is a
subsidiary, such bank's parent has) a rating of its senior debt obligations of
not less than Baa-1 by Moody's or a comparable rating by a rating agency
acceptable to Agent and (ii) has total assets in excess of Ten Billion Dollars
($10,000,000,000). Upon such execution, delivery, approval and acceptance, and
upon the effective date specified in the applicable Assignment and Assumption,
(A) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been validly and effectively assigned to
it pursuant to such Assignment and Assumption, have the rights and obligations
of a Lender hereunder and (B) the Lender-assignor thereunder shall, to the
extent that rights and obligations hereunder have been validly and effectively
assigned by it pursuant to such Assignment and Assumption, relinquish its rights
and be released from its obligations under this Agreement.

         (b) By executing and delivering an Assignment and Assumption, the
Lender-assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Assumption, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT, Borrower,
any Subsidiary, any Investment Affiliate, or any Agreement

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Party or the performance or observance by the REIT, Borrower, any Subsidiary,
any Investment Affiliate, or any Agreement Party of any of their respective
obligations under any Loan Document or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Article VI or delivered pursuant to Article VI to the date of
such assignment and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (iv) such assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.

         (c) Agent shall maintain at its address referred to on the counterpart
signature pages hereof a copy of each Assignment and Assumption delivered to and
accepted by it and shall record the names and addresses of each Lender and the
Commitment of, and principal amount of the Loans owing to, such Lender from time
to time. Borrower, Agent and Lenders may treat each Person whose name is so
recorded as a Lender hereunder for all purposes of this Agreement.

         (d) Upon its receipt of an Assignment and Assumption executed by an
assigning Lender and an assignee, Agent shall, if such Assignment and Assumption
has been properly completed and is in substantially the form of Exhibit A, (i)
accept such Assignment and Assumption, (ii) record the information contained
therein and (iii) give prompt notice thereof to Borrower. Upon request, Borrower
will execute and deliver to Agent an appropriate replacement promissory note or
replacement promissory notes in favor of each assignee (and assignor, if such
assignor is retaining a portion of its Commitment and Loans) reflecting such
assignee's (and assignor's) Pro Rata Share(s) of the Facility. Upon execution
and delivery of such replacement promissory notes, the original promissory note
or notes evidencing all or a portion of the Commitments and Loans being assigned
shall be canceled and returned to Borrower.

         (e) Subject to the provisions of Section 11.13(j), each Lender may sell
participations to one or more banks, finance companies, insurance or other
financial institutions in or to all or a portion of its rights and obligations
under this Agreement (including without limitation all or a portion of its
Commitment and the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement (including without limitation its Commitment
to Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) Borrower, Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and with regard to any and all payments to be
made under this Agreement and (iv) the holder of any such participation shall
not be entitled

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to voting rights under this Agreement except that such Participant may have the
contractual right in the applicable participation agreement to prevent (A)
increases in the Facility, (B) extensions of the Maturity Date (except as
provided in this Agreement), (C) decreases in the interest rates described in
this Agreement and (D) the release of all or substantially all of the
collateral, except as specifically authorized in Sections 11.10 or 11.11.

         (f) Borrower will use reasonable efforts to cooperate with Agent and
Lenders in connection with the assignment of interests under this Agreement or
the sale of participations herein.

         (g) Anything in this Agreement to the contrary notwithstanding, and
without the need to comply with any of the formal or procedural requirements of
this Agreement, including Section 11.13, any Lender may at any time and from
time to time pledge and assign all or any portion of its rights under all or any
of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from its obligations thereunder. To
facilitate any such pledge or assignment, Agent shall, at the request of such
Lender, enter into a letter agreement with the Federal Reserve Bank in, or
substantially in, the form of the exhibit to Appendix C to the Federal Reserve
Bank of New York Operating Circular No 12.

         (h) Anything in this Agreement to the contrary notwithstanding, any
Lender may assign all or any portion of its rights and obligations under this
Agreement to a Lender Affiliate of such Lender without first obtaining the
approval of Agent and Borrower, provided that (i) at the time of such assignment
such Lender is not a Defaulting Lender, (ii) such assigning Lender is not
released from any obligations hereunder unless the assignee has total assets in
excess of Ten Billion Dollars ($10,000,000,000); (iii) such Lender gives Agent
and Borrower at least fifteen (15) days prior written notice of any such
assignment; (iv) the parties to each such assignment execute and deliver to
Agent an Assignment and Assumption, and (v) Agent receives from assignor for its
sole account a processing fee of Three Thousand Dollars ($3,000).

         (i) No Lender shall be permitted to assign or sell all or any portion
of its rights and obligations under this Agreement to Borrower or any Affiliate
of Borrower.

         (j) Anything in this Agreement to the contrary notwithstanding, so long
as no Event of Default shall have occurred and be continuing, no Lender shall be
permitted to enter into an assignment of, or sell a participation interest in,
its rights and obligations hereunder which would result in such Lender holding a
Commitment without participants of less than Ten Million Dollars ($10,000,000).
In the event Agent ceases to hold a Commitment without participants of less than
ten percent (10%) of the Facility, Agent shall resign from the performance of
all of its functions and duties hereunder; provided, however, that no such
resignation shall be required during the continuance of an Event of Default.

         (k) By its execution of this Agreement, each Existing Lender hereby
assigns and sells to the Lenders accepting the same as set forth below, without
recourse, representation or warranty (except as expressly provided herein), that
portion of its "Commitment" under the

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Existing Credit Agreement which is in excess of its Pro Rata Share of the
aggregate "Commitments" under the Existing Credit Agreement (collectively, the
"Excess Existing Commitments"). By its execution of this Agreement, each of the
Lenders which were not parties to the Existing Credit Agreement (each a "New
Lender") and each Existing Lender whose Pro Rata Share of the aggregate
"Commitments" under the Existing Credit Agreement exceeds its "Commitment" under
the Existing Credit Agreement hereby accepts the portion of the Excess Existing
Commitments which is equal to (i) in the case of a New Lender, the amount of its
Pro Rata Share of the aggregate "Commitments" under the Existing Credit
Agreement, and (ii) in the case of an Existing Lender whose Pro Rata Share of
the aggregate "Commitments" under the Existing Credit Agreement exceeds its
"Commitments" under the Existing Credit Agreement, the amount of such excess.
Each Lender hereby acknowledges and agrees that, as of the date hereof and after
giving effect to this Agreement, its Commitment hereunder is in the amount shown
on the signature page of such Lender attached to this Agreement. Each Existing
Lender hereby represents and warrants that it is the legal and beneficial owner
of the interests being assigned by it in accordance with this Section 11.13(k)
and that such interests are free and clear of any adverse claim.

         11.14. Ratable Sharing. Subject to Sections 11.03 and 11.04, Lenders
agree among themselves that (i) with respect to all amounts received by them
which are applicable to the payment of the Obligations, equitable adjustment
will be made so that, in effect, all such amounts will be shared among them
ratably in accordance with their Pro Rata Shares, whether received by voluntary
payment, by the exercise of the right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations or the collateral, (ii) if any of them shall by voluntary payment or
by the exercise of any right of counterclaim, set-off, banker's lien or
otherwise, receive payment of a proportion of the aggregate amount of the
Obligations held by it which is greater than its Pro Rata Share of the payments
on account of the Obligations, the one receiving such excess payment shall
purchase, without recourse or warranty, an undivided interest and participation
(which it shall be deemed to have done simultaneously upon the receipt of such
payment) in such Obligations owed to the others so that all such recoveries with
respect to such Obligations shall be applied ratably in accordance with their
Pro Rata Shares; provided, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to that party to the extent necessary to adjust for such recovery, but
without interest except to the extent the purchasing party is required to pay
interest in connection with such recovery. Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 11.14
may, to the fullest extent permitted by law, exercise all its rights of payment
(including, subject to Section 12.04, the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.

         11.15. Delivery of Documents. Agent shall as soon as reasonably
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary set forth on the Closing Checklist
attached hereto as Exhibit B and (ii) all documents of which Agent receives
copies

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from Borrower for distribution to Lenders pursuant to Sections 6.01 and 12.07.
In addition, within ten (10) Business Days after receipt of a request in writing
from a Lender for written information or documents provided by or prepared by
Borrower, the REIT or any Agreement Party, Agent shall deliver such written
information or documents to such requesting Lender if Agent has possession of
such written information or documents in its capacity as Agent or as a Lender.

         11.16. Notice of Events of Default. Except as expressly provided in
this Section 11.16, Agent shall not be deemed to have knowledge or notice of
the occurrence of any Unmatured Event of Default or Event of Default (other than
nonpayment of principal of or interest on the Loans) unless Agent has received
notice in writing from a Lender or Borrower referring to this Agreement or the
other Loan Documents, describing such event or condition and expressly stating
that such notice is a notice of an Unmatured Event of Default or Event of
Default. Should Agent receive such notice of the occurrence of an Unmatured
Event of Default or Event of Default, or should Agent send Borrower a notice of
Unmatured Event of Default or Event of Default, Agent shall promptly give notice
thereof to each Lender.

                                  ARTICLE XII.

                                 MISCELLANEOUS

         12.01. Expenses

         (a) Generally. Borrower agrees, within thirty (30) days after receipt
of a written notice from Agent, to pay, or reimburse Agent for, all of Agent's
reasonable costs and expenses incurred by Agent at any time (whether prior to,
on or after the date of this Agreement) in connection with (A) its own audit and
investigation of Borrower and the collateral, if any, pledged pursuant to
Article III; (B) the negotiation, preparation and execution of this Agreement
(including without limitation the satisfaction or attempted satisfaction of any
of the conditions set forth in Article IV) and the other Loan Documents and the
making of the Loans; (C) the review and, if applicable, acceptance of collateral
pursuant to Article III including appraisal fees, title charges, recording fees
and reasonable attorneys' fees and costs incurred in connection therewith; (D)
the creation, perfection or protection of Agent's Liens on such collateral
(including without limitation any reasonable fees and expenses for title and
lien searches, local counsel in various jurisdictions, filing and recording fees
and taxes, duplication costs and corporate search fees); (E) administration such
collateral, including without limitation obtaining periodic Appraisals of such
collateral; and (F) the collection or enforcement of any of the Obligations.

         (b) After Event of Default. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable costs and expenses, including
without limitation reasonable attorneys' fees and disbursements incurred by
Agent or Lenders after the occurrence of an Event of Default (i) in enforcing
any Obligation or in foreclosing against any collateral for the Obligations or
exercising or enforcing any other right or remedy available by reason of such
Event of Default; (ii) in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of a
"work-out" or in any insolvency

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or bankruptcy proceeding; (iii) in commencing, defending or intervening in any
litigation or in filing a petition, complaint, answer, motion or other pleadings
in any legal proceeding relating to Borrower, the REIT or any Agreement Party
and related to or arising out of the transactions contemplated hereby; (iv) in
taking any other action in or with respect to any suit or proceeding (whether in
bankruptcy or otherwise); (v) in protecting, preserving, collecting, leasing,
selling, taking possession of, or liquidating any such collateral; or (vi)
attempting to enforce or enforcing any Lien in any such collateral or any other
rights under the Loan Documents; provided, however, that the attorneys' fees and
disbursements for which Borrower is obligated under this subsection (b) shall be
limited to the reasonable non-duplicative fees and disbursements of counsel for
Agent and counsel for all Lenders as a group. For purposes of this Section 12.01
(b), (i) counsel for Agent shall mean a single outside law firm representing
Agent plus any additional law firms providing special local law representation
in connection with the enforcement of the Loan Documents, and (ii) counsel for
all Lenders as a group shall mean a single outside law firm representing such
Lenders as a group.

         12.02. Indemnity

         (a) Generally. Borrower shall indemnify and defend Agent, Swingline
Lender, Issuing Lender and each Lender and their respective affiliates,
participants, officers, directors, employees and agents (each an "Indemnitee")
against, and shall hold each such Indemnitee harmless from, any and all losses,
damages (whether general, punitive or otherwise), liabilities, claims, causes
of action (whether legal, equitable or administrative), judgments, court costs
and legal or other expenses (including reasonable attorneys' fees) which such
Indemnitee may suffer or incur: (i) in connection with claims made by third
parties against such Indemnitee for losses or damages suffered by such third
party as a result of (A) such Indemnitee's performance of this Agreement or any
of the other Loan Documents, including without limitation such Indemnitee's
exercise or failure to exercise any rights, remedies or powers in connection
with this Agreement or any of the other Loan Documents or (B) the failure by
Borrower, the REIT or any Agreement Party to perform any of their respective
obligations under this Agreement or any of the other Loan Documents as and when
required hereby or thereby, including without limitation any failure of any
representation or warranty of Borrower, the REIT or any Agreement Party to be
true and correct; (ii) in connection with any claim or cause of action of any
kind by any Person to the effect that such Indemnitee is in any way responsible
or liable for any act or omission by Borrower, the REIT or any Agreement Party,
whether on account of any theory of derivative liability or otherwise, (iii) in
connection with the past, present or future environmental condition of any
Property owned by Borrower, the REIT, Subsidiary or any Agreement Party, the
presence of asbestos-containing materials at any such Property, the presence of
Contaminants in groundwater at any such Property, or the Release or threatened
Release of any Contaminant into the environment from any such Property; or (iv)
in connection with any claim or cause of action of any kind by any Person which
would have the effect of denying such Indemnitee the full benefit or protection
of any provision of this Agreement or an), of the other Loan Documents.

         (b) ERISA. Without limitation of the provisions of subsection (a)
above, Borrower shall indemnify and hold each Indemnitee free and harmless from
and against all loss.

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costs (including reasonable attorneys' fees and expenses), expenses, taxes, and
damages (including consequential damages) such Indemnitee may suffer or incur by
reason of the investigation, defense and settlement of claims and in obtaining
any prohibited transaction exemption under ERISA or the Internal Revenue Code
necessary in such Indemnitee's reasonable judgment by reason of the inaccuracy
of the representations and warranties set forth in the first paragraph of
Section 5.01(s) or a breach of the provisions set forth in the last paragraph
of Section 8.01(f).

         (c) Exceptions; Limitations. Notwithstanding anything to the contrary
set forth in this Section 12.02, Borrower shall have no obligation to any
Indemnitee hereunder with respect to (i) any intentional tort, fraud or act of
gross negligence or bad faith which any Indemnitee is personally determined by
the judgment of a court of competent jurisdiction (sustained on appeal, if any)
to have committed, (ii) any liability of such Indemnitee to any third party
based upon contractual obligations of such Indemnitee owing to such third party
which are not expressly set forth in the Loan Documents or (iii) violations of
Environmental Laws relating to a Property which are caused by the act or
omission of such Indemnitee after such Indemnitee takes possession of such
Property and which would not have occurred if such Indemnitee had exercised
reasonable care under the circumstances. In addition, the indemnification set
forth in this Section 12.02 in favor of any officer, director, partner, employee
or agent of Agent, Swingline Lender, Issuing or any Lender shall be solely in
their respective capacities as such officer, director, partner, employee or
agent. Such indemnification in favor of any affiliate of Agent, Swingline
Lender, Issuing Lender or any Lender shall be solely in its capacity as the
provider of services to Agent, Swingline Lender, Issuing Lender or such Lender
in connection with this Agreement, and such indemnification in favor of any
participant of Agent or any Lender shall be solely in its capacity as a
participant in the Commitments and the Loans.

         (d) Payment; Survival. Borrower shall pay any amount owing under this
Section 12.02 within thirty (30) days after written demand therefor by the
applicable Indemnitee together with reasonable supporting documentation
therefor. The indemnity set forth in this Section 12.02 shall survive the
payment of all amounts payable pursuant to, and secured by, this Agreement and
the other Loan Documents. Payment by any Indemnitee shall not be a condition
precedent to the obligations of Borrower under this Section 12.02. To the extent
that any indemnification obligation set forth in this Section 12.02 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of the applicable
indemnified matter.

         12.03. Change in Accounting Principles. Except as otherwise provided
herein, if any changes in accounting principles from those used in the
preparation of the most recent financial statements delivered to Agent pursuant
to the terms hereof are hereinafter required or permitted by the rules,
regulations, pronouncements and opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and are adopted by the REIT,
Borrower, any Subsidiary, any Investment Affiliate, or any Agreement Party with
the agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the

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<PAGE>   99


financial covenants, standards or terms found herein, the parties hereto agree
to enter into negotiations in order to amend such provisions so as to equitably
reflect such changes with the desired result that the criteria for evaluating
the financial condition of the REIT, on a consolidated basis, shall be the same
after such changes as if such changes had not been made; provided, however, that
no change in GAAP that would affect the method of calculation of any of the
financial covenants, standards or terms shall be given effect in such
calculations until such provisions are amended, in a manner satisfactory to
Agent and all Lenders, to so reflect such change in accounting principles.

         12.04. Setoff. In addition to any Liens granted to Agent and any rights
now or hereafter granted under applicable law and not by way of limitation of
any such Lien or rights, upon the occurrence and during the continuance of any
Event of Default, Agent and each Lender are hereby authorized by Borrower at any
time or from time to time, with concurrent notice to Borrower, or to any other
Person (any such notice being hereby expressly waived) to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured but not including trust accounts) and any other
indebtedness at any time held or owing by Agent or such Lender solely to or for
the credit or the account of Borrower against and on account of the Obligations
of Borrower to Agent or such Lender including but not limited to all Loans and
all claims of any nature or description arising out of or connected with this
Agreement or any of the other Loan Documents, irrespective of whether or not (a)
Agent or such Lender shall have made any demand hereunder or (b) Agent shall
have declared the principal of and interest on the Loans and other amounts due
hereunder to be due and payable as permitted by Article XI and although said
obligations and liabilities, or any of them, may be contingent or unmatured.

         12.05. Amendments and Waivers. No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) as provided in Section 11.10(a)
and Borrower provided that the agreement of Requisite Lenders shall not be
required for amendments or modifications that are purely of a clerical nature or
that correct a manifest error and no termination or waiver of any such provision
of this Agreement (including without limitation any waiver of an Event of
Default which does not specifically require the consent of all Lenders), or
consent to any departure by Borrower therefrom, shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders) as provided in Section 11.10(a), which Requisite Lenders shall have
the right to grant or withhold at their sole discretion, except that the
amendments, modifications or waivers specified in Section 11.10(b) shall
require the consent of the Supermajority Lenders and the following amendments,
modifications or waivers shall require the consent of all Lenders (other than
Section 12.05(j) which shall require the consent of all Lenders other than
Agent):

         (a) Increasing the Commitments or any Lender's Commitments;

         (b) Changing the principal amount or final maturity of the Loans;

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         (c) Reducing or increasing the interest rates applicable to the Loans
(other than Swingline Loans);

         (d) Reducing the rates on which fees payable pursuant hereto are
determined;

         (e) Forgiving or delaying any amount payable under Article II (other
than late fees);

         (f) Changing the definition of "Requisite Lenders," "Loan
Availability," "Supermajority Lenders," or "Pro Rata Shares";

         (g) Changing any provision contained in Section 12.05;

         (h) Releasing any obligor under any Loan Document, unless such release
is otherwise required by the terms of this Agreement or any other Loan Document;

         (i) Issuing a Letter of Credit for a term extending beyond the Maturity
Date;

         (j) Removal of Agent for good cause in accordance with Section
11.09(a); and

         (k) Modifying or waiving any other provision herein which specifically
requires the consent of all Lenders;

Notwithstanding anything to the contrary contained in this Agreement, Borrower
shall have no right to consent to any amendment, modification, termination or
waiver of any provision of Article XI hereof; provided, however, that no
amendment, modification, termination or waiver of Section 11.09(b), 11.09(c),
11.1O(a), or 11.13 (except subsection (i) thereof) which has an adverse
effect on Borrower or Borrower's rights hereunder shall be effective without the
written concurrence of Borrower. Agent and Lenders further acknowledge and agree
that the remaining provisions of Article XI are intended to and shall continue
to address only the rights and obligations of Agent and Lenders amongst each
other and do not and shall not impose obligations or restrictions upon Borrower
or result in any way in the loss of any rights, claims or defenses of Borrower.
No amendment, modification, termination or waiver of any provision of Article XI
hereof or any other provision referring to any Agent, Swingline Lender or
Issuing Lender shall be effective without the written concurrence of the Agent,
Swingline Lender or Issuing Lender, as applicable. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on Borrower in any case shall entitle
Borrower to any other further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section shall be binding on each assignee,
transferee or recipient of Agent's powers, functions or duties or any Lender's
Commitment under this Agreement or the Loans at the time outstanding.

         12.06. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such

                                       96


<PAGE>   101


covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Unmatured Event of Default if such action
is taken or condition exists.

         12.07. Notices and Delivery. Unless otherwise specifically provided
herein, any consent, notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied or sent
by courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or if
deposited in the United States mail (registered or certified, with postage
prepaid and properly addressed) upon receipt or refusal to accept delivery.
Notices to Agent, Swingline Lender or Issuing Lender pursuant to Article II
shall not be effective until received by Agent, Swingline Lender or Issuing
Lender, as applicable. For the purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
Section 12.07) shall be as set forth below each party's name on the signature
pages hereof, or, as to each party, at such other address as may be designated
by such party in a written notice to all of the other parties. All deliveries to
be made to Agent for distribution to the Lenders shall be made to Agent at the
addresses specified for notice on the signature page hereto and, in addition, a
sufficient number of copies of each such delivery shall be delivered to Agent
for delivery to each Lender at the address specified for deliveries on the
signature page hereto or such other address as may be designated by Agent or
Lenders in a written notice.

         12.08. Survival of Warranties, Indemnities and Agreements. All
agreements, representations, warranties and indemnities made or given herein or
pursuant hereto shall survive the execution and delivery of this Agreement and
the other Loan Documents and the making and repayment of the Loans hereunder and
such indemnities shall survive termination hereof

         12.09. Failure or Indulgence Not Waiver, Remedies Cumulative. Except as
otherwise expressly provided in this Agreement or any other Loan Document, no
failure or delay on the part of Agent, Swingline Lender, Issuing Lender or any
Lender in the exercise of any power, right or privilege under any of the Loan
Documents shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under the Loan Documents are cumulative to and not exclusive
of any rights or remedies otherwise available.

         12.10. Marshalling; Recourse to Security, Payments Set Aside. Neither
any Lender, Swingline Lender, Issuing Lender nor Agent shall be under any
obligation to marshall any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations. Recourse to security
shall not be required at any time. To the extent that Borrower makes a payment
or payments to Agent, Swingline Lender, Issuing Lender or the Lenders or Agent,
Swingline Lender, Issuing Lender or the Lenders enforce their Liens or exercise
their rights of set off, and such payment or payments or the proceeds of such
enforcement or set off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery. the

                                       97


<PAGE>   102


Obligations or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or set off had
not occurred.

         12.11. Severability. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

         12.12. Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

         12.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

         12.14. Limitation of Liability. To the extent permitted by applicable
law, no claim may be made by Borrower, the REIT, any Lender or any other Person
against Agent, Swingline Lender, Issuing Lender or any Lender, or the
affiliates, directors, officers, employees, attorneys or agents of any of them,
for any punitive damages in respect of any claim for breach of contract or any
other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and Borrower, the REIT, and each Lender hereby waive,
release and agree not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.

         12.15. Successors and Assigns. This Agreement and the other Loan
Documents shall be BINDING UPON THE PARTIES HERETO AND THEIR RESPECTIVE
successors and permitted assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of Agent and Lenders. The terms
and provisions of this Agreement shall inure to the benefit of any permitted
assignee or transferee of the Loans and the Commitments of Lenders under this
Agreement, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Agent and Lenders shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Borrower's rights or any interest therein hereunder, and
Borrower's duties and obligations hereunder, shall not be assigned (whether
directly, indirectly, by operation of law or otherwise) without the consent of
all Lenders.

         12.16. Usury Limitation. Each Loan Document is expressly limited so
that in no contingency or event whatsoever, whether by reason of error of fact
or law, payment, prepayment or advancement of the proceeds of Loans,
acceleration of maturity of the unpaid principal balance of the Loans, or
otherwise, shall the amount paid or agreed to be paid to Lenders for the use,
forbearance, or retention of money, including any, fees or charges collected or
made in

                                       98

<PAGE>   103




connection with the Loans which may be treated as interest under applicable law,
if any, exceed the maximum legal limit (if any such limit is applicable) under
United States federal laws or state laws (to the extent not preempted by federal
law, if any), now or hereafter governing the interest payable under such Loan
Documents. If, from any circumstances whatsoever, fulfillment of any provision
hereof or any of the other Loan Documents at the time performance of such
provision shall be due, shall involve transcending the limit of validity (if
any) prescribed by law which a court of competent jurisdiction may deem
applicable hereto, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstances Lenders
shall ever receive as interest an amount which would exceed the maximum legal
limit (if any such limit is applicable), such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance due
under the Loan Documents and not to the payment of interest or, if necessary, to
Borrower. Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, this provision shall control every other provision of all
Loan Documents.

         12.17. Confidentiality. Agent, Swingline Lender, Issuing Lender and
Lenders shall use reasonable efforts to assure that any information about
Borrower, the REIT, Subsidiaries and Investment Affiliates (and their respective
Properties) not generally disclosed to the public which is furnished to Agent,
Swingline Lender, Issuing Lender or Lenders pursuant to the provisions of this
Agreement or any of the other Loan Documents is used only for the purposes of
this Agreement and the other Loan Documents and shall not be divulged to any
other Person other than Agent, Swingline Lender, Issuing Lender and Lenders and
their respective affiliates, officers, directors, employees and agents who are
actively and directly participating in the evaluation, administration or
enforcement of the Obligations; provided, however, that nothing herein shall
affect the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for Agent,
Swingline Lender, Issuing Lender or Lenders or to their accountants, (iii) to
bank examiners and auditors, (iv) to any transferee or participant or
prospective transferee or participant hereunder who agrees to be bound by this
provision, (v) in connection with the enforcement of the rights of Agent,
Swingline Lender, Issuing Lender and Lenders under this Agreement and the other
Loan Documents, or (vi) in connection with any litigation to which Agent,
Swingline Lender, Issuing Lender or any Lender is a party so long as Agent,
Swingline Lender, Issuing Lender or such Lender provides Borrower with prior
written notice of the need for such disclosure and exercises reasonable efforts
to obtain a protective order with respect to such information from the court or
other tribunal before which such litigation is pending.

         12.18. Consent to Jurisdiction and Service of Process; Waiver of Jury
Trial-, Waiver Of Permissive Counterclaims. EXCEPT WITH RESPECT TO FORECLOSURE
PROCEEDINGS AGAINST ANY COLLATERAL WHICH BY REQUIREMENT OF LAW MUST BE BROUGHT
IN THE JURISDICTION WHERE SUCH COLLATERAL IS LOCATED, ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST BORROWER OR THE REIT WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE AND ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER OR
THE REIT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT

                                       99


<PAGE>   104




JURISDICTION HAVING SITUS WITHIN THE BOUNDARIES OF THE FEDERAL COURT DISTRICT OF
THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, BORROWER AND THE REIT ACCEPT, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY
FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. BORROWER AND THE REIT
HEREBY DESIGNATE AND APPOINT ELLEN KELLEHER, ESQ., MANUFACTURED HOME
COMMUNITIES, INC., TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS
60606, TO RECEIVE ON THEIR BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS
IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. SUCH APPOINTMENT SHALL BE
REVOCABLE ONLY WITH AGENT'S PRIOR WRITTEN APPROVAL. BORROWER AND THE REIT
IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS RESPECTIVE NOTICE ADDRESS
SPECIFIED ON THE SIGNATURE PAGES HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON
RECEIPT. BORROWER, THE REIT, AGENT AND LENDERS IRREVOCABLY WAIVE (A) TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, AND (B) ANY OBJECTION (INCLUDING WITHOUT LIMITATION ANY OBJECTION
OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET
FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. BORROWER
AND THE REIT AGREE THAT THEY WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIM IN ANY
PROCEEDING BROUGHT BY LENDER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.

         12.19. Counterparts; Effectiveness; Inconsistencies. This Agreement and
any amendments, waivers, consents or supplements may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective when Borrower, the
initial Lenders, Swingline Lender, Issuing Lender and Agent have duly executed
and delivered counterpart execution pages of this Agreement to each other
(delivery) by Borrower and the REIT to Lenders and by any Lender to Borrower,
the REIT and any other Lender being deemed to have been made by delivery to
Agent). This Agreement and each of the other Loan Documents shall be construed
to the extent reasonable to be consistent one with the other, but to

                                       100


<PAGE>   105




the extent that the terms and conditions of this Agreement are actually and
directly inconsistent with the terms and conditions of any other Loan Document,
this Agreement shall govern.

         12.20. Construction. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.

         12.21. Entire Agreement. This Agreement, taken together with all of the
other Loan Documents and all certificates and other documents delivered by
Borrower to Agent in connection herewith, embodies the entire agreement and
supersede all prior agreements, written and oral, relating to the subject matter
hereof.

         12.22. Agent's Action for Its Own Protection Only. The authority herein
conferred upon Agent, and any action taken by Agent, to inspect any Property
will be exercised and taken by Agent for its own protection only and may not be
relied upon by Borrower for any purposes whatsoever, and Agent shall not be
deemed to have assumed any responsibility to Borrower with respect to any such
action herein authorized or taken by Agent. Any review, investigation or
inspection conducted by Agent, any consultants retained by Agent or any agent or
representative of Agent in order to verify independently Borrower's satisfaction
of any conditions precedent to Loans, Borrower's performance of any of the
covenants, agreements and obligations of Borrower under this Agreement, or the
validity of any representations and warranties made by Borrower hereunder
(regardless of whether or not the party conducting such review, investigation or
inspection should have discovered that any of such conditions precedent were not
satisfied or that any such covenants, agreements or obligations were not
performed or that any such representations or warranties were not true), shall
not affect (or constitute a waiver by Agent or Lenders of) (i) any of Borrower's
representations and warranties under this Agreement or Agent's or Lenders'
reliance thereon or (ii) Agent's or Lenders' reliance upon any certifications of
Borrower required under this Agreement or any other facts, information or
reports furnished to Agent and Lenders by Borrower hereunder.

         12.23. Lenders' ERISA Covenant. Each Lender, by its signature hereto or
on the applicable Assignment and Assumption, hereby agrees (a) that on the date
any Loan is disbursed hereunder no portion of such Lender's Pro Rata Share of
such Loan will constitute "assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an "employee benefit plan" within the meaning of Section 3(3) of
ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Internal
Revenue Code, and (b) that following such date such Lender shall not allocate
such Lender's Pro Rata Share of any Loan to an account of such Lender if such
allocation (i) by itself would cause such Pro Rata Share of such Loan to then
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code and (ii) by itself would cause such Loan to constitute
a prohibited transaction under ERISA or the Internal Revenue Code (which is not
exempt from the restrictions of Section 406 of ERISA and Section 4975 of the
Internal Revenue Code and the

                                       101


<PAGE>   106


taxes and penalties imposed by Section 4975 of the Internal Revenue Code and
Section 502(i) of ERISA) or any Agent or Lender being deemed in violation of
Section 404 of ERISA.

         12.24. Documentation Agent and Syndication Agent. Each of the parties
to this Agreement acknowledges and agrees that the obligations of Documentation
Agent and Syndication Agent hereunder shall be limited to those obligations that
are expressly set forth herein, if any, and Documentation Agent and Syndication
Agent shall not be required to take any action or assume any liability except as
may be required in their respective capacities as a Lender hereunder. Each of
the parties to this Agreement agrees that, for purposes of the indemnifications
set forth herein, the term "Agent" shall be deemed to include Documentation
Agent and Syndication Agent.

                            [SIGNATURE PAGES FOLLOW]

                                       102

<PAGE>   107


        IN WITNESS WHEREOF, the parties here to have executed this Agreement as
of the date first written above.






                                   "Borrower"
                                    --------

                                         MHC OPERATION LIMITED
                                         PARTNERSHIP, an Illinois limited
                                         partnership

                                         By:  MANUFACTURED HOME
                                              COMMUNITIES, INC., A Maryland
                                              corporation as General Partner


                                         By:    Ellen Kelleher
                                             --------------------------------
                                         Name:  Ellen Kelleher
                                              -------------------------------
                                         Title: Executive VP/General Counsel
                                                -----------------------------

                                         Address:
                                         Two North Riverside Plaza Suite 800
                                         Chicago, Illinois 60606
                                         Telecopy: 312/474-0205













                                      S-1
<PAGE>   108


                                     "REIT"
                                      ----

                                           MANUFACTURED HOME
                                           COMMUNITIES, INC., a Maryland
                                           corporation



                                           By:    Ellen Kelleher
                                              ------------------------------
                                           Name:  Ellen Kelleher
                                                ----------------------------
                                           Title: Executive VP/General Counsel

                                           Address:
                                           Two North Riverside Plaza, Suite 800
                                           Chicago, Illinois 60606
                                           Telecopy: 312/474-0205


















                                      S-2


<PAGE>   109


                                     WELLS FARGO BANK, N.A.
                                     as Agent, Swingline Lender, Issuing Lender
                                     and a Lender



                                     By:    STEVEN R. LOWERY
                                        ---------------------------------
                                     Name:  STEVEN R. LOWERY
                                          -------------------------------
                                     Title: VICE PRESIDENT
                                           ------------------------------

                                     Address:
                                     225 West Wacker Drive
                                     Suite 2550
                                     Chicago, Illinois 60601
                                     Attn: Senior Loan Officer
                                     Telecopy: 312/782-0969

                                     WITH A COPY TO:
                                     Wells Fargo & Co.
                                     Real Estate Group
                                     420 Montgomery Street, Floor 6
                                     San Francisco, Calif. 94163
                                     Attn: Chief Credit Officer
                                     Telecopy: 415/391-2971

                                     WITH A COPY TO (FOR
                                     FINANCIAL STATEMENTS AND REPORTING
                                     INFORMATION ONLY):

                                     Wells Fargo Bank
                                     2030 Main Street
                                     Suite 800
                                     Irvine, California 92714
                                     Attn: Deborah Autry
                                     Telecopy: 714/851-9442

                                     Commitment: $50,000,000
                                                 33.333333%











                                      S-3
<PAGE>   110


                                    COMMERZBANK
                                    AKTIENGESELLSCHAFT, Chicago
                                    Branch, as a Lender



                                    By:    JAMES J. HENRY
                                       ---------------------------
                                    Name:  JAMES J. HENRY
                                         -------------------------
                                    Title: SENIOR VICE PRESIDENT
                                          ------------------------

                                    By:    F. MARCUS PERRY
                                        --------------------------
                                    Name:  F. MARCUS PERRY
                                         --------------------------
                                    Title: ASSISTANT TREASURER
                                          -------------------------

                                    Address:
                                    Two World Financial Center
                                    New York, New York 10281-1050
                                    Attention: Douglas P. Traynor
                                    Telecopy: 212/266-7569

                                    Commitment: $33,333,333.33
                                                22.222222%















                                      S-4
<PAGE>   111


                                   MORGAN GUARANTY TRUST
                                   COMPANY OF NEW YORK, as
                                   Documentation Agent and as a Lender



                                   By:    TIMOTHY V. O'DONOVAN
                                      ---------------------------
                                   Name:  TIMOTHY V. O'DONOVAN
                                        -------------------------
                                   Title: VICE PRESIDENT
                                         ------------------------

                                   Address:
                                   60 Wall Street, 22nd Floor
                                   New York, New York 10260-0060
                                   Attention: Timothy O'Donovan
                                   Telecopy: 212/648-8111

                                   commitment: $33,333,333.34
                                               22.222222%



















                                      S-5
<PAGE>   112


                                   BANK OF AMERICA NATIONAL
                                   TRUST AND SAVINGS ASSOCIATION,
                                   as Syndication Agent and as a Lender



                                   By:    Megan McBride
                                       --------------------------
                                   Name:  Megan McBride
                                        -------------------------
                                   Title: Vice President
                                         ------------------------

                                   Address:
                                   231 S. LaSalle Street, 15th Floor
                                   Chicago, Illinois 60697
                                   Attn: Megan McBride
                                   Telecopy: 312/974-4970

                                   Commitment: $33,333,333.33
                                               22.222222%





















                                      S-6
<PAGE>   113

                                    EXHIBIT A

                            ASSIGNMENT AND ASSUMPTION

                  THIS ASSIGNMENT AND ASSUMPTION (the "Agreement") is dated this
day of____________,_____,by and between ______________ ("Assigning Lender") and
_________________ ("Assignee Lender").

                  WHEREAS, Assigning Lender is the holder of that certain
promissory note (the "Note") in the principal amount of $______________________,
dated _________ ____, ____, and executed by MHC Operating Limited Partnership,
an Illinois limited partnership ("Borrower"), for the benefit of Assigning
Lender. The Note evidences Assigning Lender's "Pro Rata Share" of the "Loans"
made or to be made under that certain Second Amended and Restated Credit
Agreement, dated as of April ____, 1998 (as amended, supplemented or restated
from time to time, the "Credit Agreement"). Capitalized terms used herein
without definition have the meanings provided in the Credit Agreement.

                  1. Assignment

                  (a) For value received, the Assigning Lender hereby sells,
assigns, conveys and delivers to Assignee Lender, and Assignee Lender hereby
purchases from Assigning Lender, a __% interest in the Loans and the Facility
(collectively, the "Assigned Rights and Obligations"). After giving effect
hereto, the Assignee Lender will have a Commitment of a $__________, Pro Rata
Share of ____%.

                  (b) Agent shall pay to Assignee Lender all principal,
interest, Unused Facility Fees and other amounts that are paid by or on behalf
of Borrower pursuant to the Loan Documents and are attributable to the Assigned
Rights and Obligations ("Borrower Amounts"), that accrue on and after the date
hereof. If Assigning Lender receives or collects any such Borrower Amounts,
Assigning Lender shall promptly pay them to Assignee Lender.

                  2. Representations and Warranties

                  (a) Each of Assigning Lender and Assignee Lender represents
and warrants to the other and to Agent as follows:

                        (i) It has full power and authority, and has taken all
         action necessary, to execute and deliver this Agreement and to fulfill
         its obligations under, and to consummate the transactions contemplated
         by, this Agreement;

                        (ii) The making and performance of this Agreement and
         all documents required to be executed and delivered by it hereunder do
         not and will not violate any law or regulation applicable to it;

<PAGE>   114

                        (iii) This Agreement has been duly executed and
         delivered by it and constitutes its legal, valid and binding obligation
         enforceable in accordance with its terms; and

                        (iv) All approvals, authorizations or other actions by,
         or filing with, any governmental authority necessary for the validity
         or enforceability of its obligations under this Agreement have been
         made or obtained.

                  (b) Assigning Lender represents and warrants to Assignee
Lender that Assigning Lender owns the Assigned Rights and Obligations free and
clear of any lien or other encumbrance and that the assignment contemplated
hereby complies with the provisions of the first sentence of Section 11.13 (a)
of the Credit Agreement.

                  (c) Assignee Lender represents and warrants to Assigning
Lender as follows:

                        (i) Assignee Lender has made and shall continue to make
         its own independent investigation of the financial condition, affairs
         and creditworthiness of Borrower and any other person or entity
         obligated under the Loan Documents (collectively, "Credit Parties," and
         the value of any collateral now or hereafter securing any of the
         obligations);

                        (ii) Assignee Lender has received copies of the Loan
         Documents and such other documents, financial statements and
         information as it has deemed appropriate to make its own credit
         analysis and decision to enter into this Agreement; and

                        (iii) The assignment contemplated hereby complies with
         the provisions of the second sentence of Section 11.13 (a) of the
         Credit Agreement.

                  3. No Assigning Lender Responsibility. Assigning Lender makes
no representation or warranty regarding, and assumes no responsibility to
Assignee Lender for:

                  (a) The execution (by any party other than Assigning Lender),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of the Loan Documents or any representations, warranties, recitals
or statements made in the Loan Documents or in any financial or other written or
oral statement, instrument, report, certificate or any other document made or
furnished or made available by Assigning Lender to Assignee Lender or by or on
behalf of any Credit Party to Assigning Lender or Assignee Lender in connection
with the Loan Documents and the transactions contemplated thereby;

                  (b) The performance or observance of any of the terms,
covenants or agreements contained in any of the Loan Documents or as to the
existence or possible existence of any Unmatured Event of Default or Event of
Default under the Loan Documents;

                                        2

<PAGE>   115


                  (c) The accuracy or completeness of any information provided
to Assignee Lender, whether by Assigning Lender or by or on behalf of any Credit
Party; or

                  (d) Any investigation of the financial condition, affairs or
creditworthiness of any of the Borrower or the REIT, or the value of any
collateral, in connection with the assignment of the Assigned Rights and
Obligations or to provide Assignee Lender with any credit or other information
with respect thereto, whether coming into its possession before the date hereof
or at any time or times thereafter.

                  4. Assignee Lender Bound By Credit Agreement. Effective on the
date hereof, Assignee Lender (a) shall be deemed to be a party to the Credit
Agreement, (b) agrees to be bound by the Credit Agreement to the same extent as
it would have been if it had been an original Lender thereunder, and (c) agrees
to perform in accordance with their respective terms all of the obligations
which are required under the Loan Documents to be performed by it as a Lender.
Assignee Lender appoints and authorizes Agent to take such actions as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to Agent by the terms thereof, together with such powers as are reasonably
incidental thereto.

                  5. Assigning Lender Released From Credit Agreement. Effective
on the date hereof, and to the extent of the Assigned Rights and Obligations,
Assigning Lender shall relinquish its rights and be released from its
obligations under the Credit Agreement and the other Loan Documents; provided,
however, that Assigning Lender shall retain all of its rights to indemnification
under the Credit Agreement and the other Loan Documents for any events, acts or
omissions occurring before the date hereof.

                  6. General

                  (a) No term or provision of this Agreement may be amended,
waived or terminated orally, but only by an instrument signed by the parties
hereto.

                  (b) If Assigning Lender has not assigned its entire remaining
Commitment and Loans to Assignee Lender, Assigning Lender may at any time and
from time to time grant to others, subject to applicable provisions in the
Credit Agreement, assignments of or participations in all of Assigning Lender's
remaining Loans or Commitment.

                  (c) All payments to Assigning Lender or Assignee Lender
hereunder shall, unless otherwise specified by the party entitled thereto, be
made in Dollars, in immediately available funds, and to the address or account
specified on the signature pages of this Agreement. The address of Assignee
Lender for notice purposes under the Credit Agreement shall be as specified on
the signature pages of this Agreement.

                                        3

<PAGE>   116


                  (d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.

                  (e) This Agreement is executed to be effective as of the date
set forth above.

                            [SIGNATURE PAGE FOLLOWS]










                                       4





<PAGE>   117






                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.

                                   ________________________________, as
                                   Assigning Lender

                                   By:___________________________
                                   Name:_________________________
                                   Title:________________________



                                   Pro Rata Share (after giving effect to this
                                   Agreement):____________%
                                   Commitment (after giving effect to this
                                   Agreement):$________________

                                   Assigning Lender's Payment Instructions:


                                   ______________________________
                                   ABA No.:______________________
                                   Account No.:__________________
                                   Ref.:_________________________


ASSUMPTION:


                  The undersigned Assignee Lender hereby accepts the above sale
and assignment and agrees to be bound by the obligations of the Credit Agreement
and the Loan Documents and hereby assumes the obligations of a Lender
thereunder.


                                   ______________________________,as Assignee
                                   Lender

                                   By:___________________________
                                   Name:_________________________
                                   Title:________________________

                                   Pro Rata Share (after giving effect to this
                                   Agreement):______________%
                                   Commitment (after giving effect to this
                                   Agreement):$__________________

                                        5

<PAGE>   118



                                   Address for Notice and Delivery:


                                   _______________________________

                                   _______________________________

                                   _______________________________
                                   Attention:_____________________
                                   Telephone: (___)____-____
                                   Telecopy: (___)____-____


                                   Assignee Lender's Payment Instructions:


                                   ________________________________
                                   ABA No.:_________________________
                                   Account No.:_______________________
                                   Ref.:_____________________________







                                       6

<PAGE>   119


ACKNOWLEDGED AND AGREED:

WELLS FARGO BANK, N.A., as Agent

By:_____________________________
Name:___________________________
Title:__________________________

MHC OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership, as Borrower

By:  MANUFACTURED HOME COMMUNITIES,
     INC., a Maryland corporation, as General Partner

     By:_________________________________
     Name:_______________________________
     Title:______________________________

ACKNOWLEDGED:

MANUFACTURED HOME COMMUNITIES, INC.,
a Maryland corporation, as Guarantor

By:__________________________________
Name:________________________________
Title:_______________________________





                                       7






<PAGE>   120




                                    EXHIBIT B

                            AMENDMENT AND RESTATEMENT
                            OF $150,000,000 REVOLVING
                              CREDIT AGREEMENT FOR
                        MHC OPERATING LIMITED PARTNERSHIP


                               CLOSING CHECKLIST

1.   Loan Documents

     _____ 1.01  Amended and Restated Revolving Credit Agreement

     _____ 1.02  Amended and Restated Notes for each Bank

                 ___   a.   Wells Fargo Bank, National Association
                 ___   b.   Bank of America National Trust and Savings
                            Association
                 ___   c.   Morgan Guaranty Trust Company of New York
                 ___   d.   Commerzbank Aktiengesellschaft

     _____ 1.03  Swingline Note

     _____ 1.04  Letter of Credit Note

     _____ 1.05  Agent's form of Funds Transfer Agreement and signature
                 authorization form

     _____ 1.06  The REIT Guaranty

     _____ 1.07  Solvency Certificate of Borrower

     _____ 1.08  Solvency Certificate of the REIT

     _____ 1.09  Compliance Certificate (referencing Section 4.01(i)

     _____ 1.10  Intentionally omitted

II.  Evidence of Existence and Authorization

     _____ 2.01  Opinion of Borrower's counsel

     _____ 2.02  Certified copy of Borrower's Limited Partnership Agreement and
                 Certificate of Limited Partnership (and all amendments thereto)

     _____ 2.03  Certificate of Existence for Borrower from Secretary of State
                 of Illinois


<PAGE>   121




     _____ 2.04  Intentionally omitted

     _____ 2.05  Certified copy of the REIT's Certificate of Incorporation (and
                 all amendments thereto)

     _____ 2.06  Certificate of Good Standing for the REIT from the Secretary
                 of State of Maryland

     _____ 2.07  Certificate of the REIT's Secretary with respect to (i)
                 authorization, (ii) incumbency, (iii) bylaws and (iv)
                 resolutions

III. Miscellaneous

     _____ 3.01  Assignment and Assumption by and between Wells Fargo and First
                 Chicago

     _____ 3.02  Existing Notes (marked canceled for return to Borrower)

                 ___   a.   Wells Fargo Bank, National Association
                 ___   b.   Bank of America Illinois
                 ___   c.   Morgan Guaranty Trust Company of New York
                 ___   d.   First National Bank of Chicago

     _____ 3.03  Wells Fargo $50 Million Note (marked canceled for return to
                 Borrower)

     _____ 3.04  Forms 4224 from Banks (as appropriate)

     _____ 3.05  Agent's Fee Letter

     _____ 3.06  Authorizations from Banks and Borrower to release signature
                 pages

     _____ 3.07  Payoff of Wells Fargo $50 Million Bridge Loan

     _____ 3.08  Payment of fees and expenses



<PAGE>   122




                             EXHIBIT C TO REVOLVER

                             COMPLIANCE CERTIFICATE

         This Compliance Certificate is delivered pursuant to the Second Amended
and Restated Credit Agreement dated as of April 28, 1998 (as amended,
supplemented and restated from time to time, the "Credit Agreement"), among MHC
Operating Limited Partnership, the Lenders (as defined therein or made party
thereto), and Wells Fargo Bank, N.A., as Agent. All capitalized defined terms
used herein shall have the meaning ascribed to such terms in the Credit
Agreement.

         1.   The undersigned hereby certifies that the undersigned has reviewed
the terms of the Credit Agreement and other Loan Documents and has made a review
in reasonable detail of the transactions consummated by and financial condition
of the REIT, the Borrower, the Subsidiaries and the Agreement Parties during the
accounting period covered by the financial statements being delivered to Lender
along with this Compliance Certificate and

              (a) Such review has not disclosed the existence during or at the
         end of such accounting period, and the undersigned does not have
         knowledge of the existence as of the date hereof, of any condition or
         event which constitutes an Unmatured Event of Default or an Event of
         Default (except as set forth in paragraph (b) hereof).

              (b) The financial statements being delivered to Agent along with
         this Compliance Certificate have been prepared in accordance with the
         books and records of the REIT, on a consolidated basis, and fairly
         present the financial condition of the REIT, on a consolidated basis,
         at the date thereof (if applicable, subject to normal year-end
         adjustments) and the results of operations and cash flows, on a
         consolidated basis, for the period then ended.

              (c) The nature and period of existence of the condition(s) or
         event(s) which constitute an Unmatured Event(s) of Default or an
         Event(s) of Default is (are) as follows: None.

              (d) Borrower (is taking) (is planning to take) the following
         action with respect to the condition(s) or event(s) set forth in
         paragraph (b) above: N/A

         2.   As of the end of the most recently ended accounting period:

              (a) Total Liabilities to Gross Asset Value. Total Liabilities:

         $________________ Gross Asset Value:  $________________ Ratio:_________
         (Ratio not to exceed 0.6:1).

              (b) Secured Debt to Gross Asset Value.  Secured Debt:
         $________________ Gross Asset Value:  $__________________Ratio:________
         (Ratio not to exceed 0.4:1).


<PAGE>   123



              (c) EBITDA to Interest Expense Ratio. EBITDA: $_______________
         interest Expense: $______________ Ratio: _______ (Ratio not to be less
         than 2.0:1).

              (d) EBITDA to Fixed Charges Ratio. EBITDA: ______________________
         Fixed Charges: $_______________ Ratio: ____ (Ratio not to be less than
         1.75:1).

              (e) Unencumbered Net Operating Income to Unsecured Interest
         Expense. Unencumbered Net Operating Income: $________________
         Unsecured Interest Expense: $______________ Ratio: ______ (Ratio not to
         be less than 1.80:1).

              (f) Unencumbered Pool. Borrower shall not permit the ratio of (a)
         the sum of (i) Unencumbered Asset Value: $_______________ (ii) Cash and
         Cash Equivalents owned by Borrower subject to no Lien in excess of
         $10MM: $_________ to (b) outstanding Unsecured Debt: $_________ Ratio:
         (Ratio not to be less than 1.80:1).

              (g) Minimum Net Worth. Borrower will maintain Net Worth of not
         less than $258,317,100 plus 90% of all Net Offering Proceeds received
         by the REIT or Borrower after September 30, 1996. Net Worth: $________.

              (h) Permitted Holdings. Borrower and its Subsidiaries may acquire
         or maintain the following Permitted Holdings so long as (i) the
         aggregate value whether held directly or indirectly by Borrower and
         its Subsidiaries does not exceed, at any time, 20% of Gross Asset Value
         for the Borrower as a whole and (ii) the value of each Permitted
         Holding does not exceed, at any time the following percentages of
         Borrower's Gross Asset Value:

<TABLE>
<CAPTION>

                                                                    % OF GROSS
                         PERMITTED HOLDINGS               MAXIMUM   ASSET VALUE
- ------------------------------------------------------  ----------  ------------
<S>                                                      <C>        <C>
         - Non manufactured home community property         10%        ___%
           (other than cash or Cash Equivalents)

         - Land                                              5%        ___%

         - Securities (issued by REITs primarily             5%        ___%
           engaged in the development, ownership and
           management of Manufactured Home
           communities)

         - Manufactured Home Community Mortgage             10%        ___%
           other than mortgage indebtedness which is
           either eliminated in the consolidation of
           the REIT; Borrower and the Subsidiaries or
           accounted for as investments in real estate
</TABLE>

<PAGE>   124

<TABLE>

<S>                                                         <C>        <C>

           under GAAP

         - Manufactured Home Community Partnership          10%        ___%
           Interest other than Controlled Partnership
           Interests

         - Development Activity                             10%        ___%
</TABLE>

         3. All representations and warranties contained in the above-referenced
Credit Agreement remain true and correct in all material respects. No Event of
Default described in Section 10.01(g) or Section 10.01(h) has occurred and no
other Event of Default or Unmatured Event of Default has occurred and is
continuing. There has been no Material Adverse Effect to the Borrower or the
REIT.

         4. As of the end of the Fiscal Quarter covered by the financial
statements being delivered to Agent along with this Compliance Certificate, the
weighted average occupancy rate of the Properties listed on Exhibit F to the
Credit Agreement together with those designated by Borrower is at least
eighty-five percent (85%)




Date: ________________                 ____________________________________
                                       Mr. Thomas P. Heneghan
                                       Chief Financial Officer of the REIT


<PAGE>   125


                                   EXHIBIT D

                              REVOLVING LOAN NOTE

$________________                                               April______,1998

         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of
_____________________ ("Lender") at c/o Wells Fargo Bank, N.A., 2120 E. Park
Place, Suite 100. El Segundo, California, 90245; the principal sum of ________
Dollars ($_____________) or, if less, the aggregate unpaid principal amount of
the "Loans" disbursed by Lender pursuant to that certain Second Amended and
Restated Credit Agreement, dated as of the date hereof, as amended, supplemented
or restated from time to time (the "Credit Agreement"), among Borrower,
Manufactured Home Communities, Inc., the "Lenders" thereunder and Wells Fargo
Bank, N.A., as Agent for the said Lenders ("Agent"), together with interest on
the unpaid principal balance hereof at the rates provided below from the date
such principal is advanced until payment in full thereof.

         This Note is one of the Loan Notes referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Lender upon the happening of certain stated events. Any
capitalized term used herein, unless otherwise defined herein, shall have the
meaning ascribed to such term in the Credit Agreement.

         The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement. Borrower may make voluntary prepayments of all or a portion of
the Loans, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

         Interest on the Loans is payable on the terms and at the rates set
forth in the Credit Agreement. In addition to the interest charges described in
the Credit Agreement, the Credit Agreement provides for the payment by Borrower
of various other charges and fees as set forth more fully in the Credit
Agreement.

         Upon the occurrence of an Event of Default described in Section
10.01(g) or Section 10.01 (h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable. Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.



<PAGE>   126




         Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Agent on behalf of the Lenders may extend the time of payment
of this Note, postpone the enforcement hereof, grant any indulgences, release
any party primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Lender's right of recourse against Borrower, which right is hereby
expressly reserved.

         This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

         Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                         MHC OPERATING LIMITED PARTNERSHIP, an
                         Illinois limited partnership

                         By:  MANUFACTURED HOME COMMUNITIES,
                              INC., a Maryland corporation, as General Partner

                              By:________________________________

                              Name:______________________________

                              Title:_____________________________




                                      S-2


<PAGE>   127




                                    EXHIBIT E

                                 SWINGLINE NOTE

$30.000.000                                                  April ______, 1998

         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Wells
Fargo Bank. N.A. ("Swingline Lender") at 2120 E. Park Place, Suite 100, El
Segundo, California, 90245, the principal sum of THIRTY MILLION and NO/100
Dollars ($30.000.000) or, if less, the aggregate unpaid principal amount of
"Swingline Loans" disbursed by the Swingline Lender pursuant to Section 2.10 of
that certain Second Amended and Restated Credit Agreement, dated as of the date
hereof, as amended, supplemented or restated from time to time (the "Credit
Agreement"), among Borrower, Manufactured Home Communities, Inc., the "Lenders"
thereunder, and Wells Fargo Bank, as Agent for the said Lenders ("Agent"),
together with interest on the unpaid principal balance hereof at the rates
provided below from the date such principal is advanced until payment in full
thereof.

         This Note is the Swingline Note referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Swingline Lender upon the happening of certain stated events.
Any capitalized term used herein, unless otherwise defined herein, shall have
the meaning ascribed to such term in the Credit Agreement.

         The principal amount of this Note will be due and payable in accordance
with the provisions of Section 2.10(b) of the Credit Agreement. Borrower may
make voluntary prepayments of all or a portion of any Swingline Loan upon
written notice not later than 1:00 p.m. (California time) on the same Business
Day, pursuant to the provisions of Section 2.05 of the Credit Agreement.

         Interest on the Swingline Loans is payable on the terms and at the
rates set forth in the Credit Agreement. In addition to the interest charges
described in the Credit Agreement, the Credit Agreement provides for the payment
by Borrower of various other charges and fees as set forth more fully in the
Credit Agreement.

         Upon the occurrence of an Event of Default described in Section
10.01(g) or Section 10.01(h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable. Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.



                                      S-1
<PAGE>   128




         Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, the Swingline Lender may extend the time of payment of this
Note, postpone the enforcement hereof, grant any indulgences. release any party
primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Swingline Lender's right of recourse against Borrower, which right
is hereby expressly reserved.

         This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

         Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                               MHC OPERATING LIMITED PARTNERSHIP, an
                               Illinois limited partnership

                               By: MANUFACTURED HOME COMMUNITIES, INC.,
                                    a Maryland corporation, as General Partner

                                    By:____________________________

                                    Name:__________________________

                                    Title:_________________________


                                      S-2

<PAGE>   129




                              EXHIBIT F TO REVOLVER

                       QUALIFYING UNENCUMBERED PROPERTIES
                               AS OF MARCH 31,1998



Apollo Village                                Sweetbriar
Aspen Meadow                                  The Heritage
Bear Creek                                    The Mark
Bonner Springs                                Waterford Estates
Brook Gardens                                 Woodland Hills
Bums Harbor Estate                            Independence Hill
Cabana                                        Northstar
Camelot Meadows                               Dellwood
Carefree Manor                                Briarwood
Carriage Cove                                 Pheasant Ridge
Carriage Park                                 Quivira
Colony Park                                   Holiday Village-IA
Country Meadows                               Rockwood
Countryside North                             Falconwood
Creekside                                     All Seasons
Del Rey                                       Coralwood
Desert Skies                                  Four Seasons
Em Ja Ha                                      Quail Hollow
Fairview Manor                                Royal Oaks
Five Seasons                                  San Jose 1-4
Flamingo West                                 Sea Oaks
Fun N Sun                                     Shadowbrook
Golf Vista Estates Consolidated               Sunshadow
Heritage Village                              Westwood Village
Hillcrest                                     Quail Meadows
Holiday Ranch                                 Arrowhead Village
Lake Fairways                                 Mariners Cove
Lakewood Village                              Landings
McNicol                                       Meadows of Chantilly
Oak Bend                                      Nassau Park
Sunrise Heights                               Pine Lakes



<PAGE>   130


                                    EXHIBIT G

                              LETTER OF CREDIT NOTE

$30.000.000                                                April_______, 1998

         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Wells
Fargo Bank. N.A. ("Issuing Lender") at 2120 E. Park Place, Suite 100, El
Segundo, California, 90245, the principal sum of THIRTY MILLION and NO/100
Dollars ($30.000.000) or, if less, the aggregate unpaid principal amount of
unreimbursed drawings under any Letter of Credit issued pursuant to Section 2.09
of that certain Second Amended and Restated Credit Agreement, dated as of the
date hereof, as amended, supplemented or restated from time to time (the "Credit
Agreement"), among Borrower, Manufactured Home Communities, Inc., the "Lenders"
thereunder and Wells Fargo Bank. as Agent for the said Lenders ("Agent"),
together with interest on the unpaid principal balance hereof at the rates
provided below from the date such unreimbursed drawing is made until payment in
full thereof. Any capitalized term used herein, unless otherwise defined herein,
shall have the meaning ascribed to such term in the Credit Agreement.

         This Note is the Letter of Credit Note referred to in and governed by
the Credit Agreement. The amount of any drawing under a Letter of Credit will be
due and payable on the date of such drawing pursuant to Section 2.09(e) of the
Credit Agreement.

         Interest on the obligations evidenced hereby is payable on the terms
and at the rates set forth in the Credit Agreement.

         Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Issuing Lender may extend the time of payment of this Note,
postpone the enforcement hereof, grant any indulgences, release any party
primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Issuing Lender's right of recourse against Borrower, which right is
hereby expressly reserved.

         This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted. and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.


                                       1



<PAGE>   131


         Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                              MHC OPERATING LIMITED PARTNERSHIP, an
                              Illinois limited partnership

                              By: MANUFACTURED HOME COMMUNITIES, INC.,
                                   a Maryland corporation, as General Partner

                                   By:_________________________

                                   Name:_______________________

                                   Title:______________________









                                       2

<PAGE>   132

<TABLE>
<S><C>
                                                                                                                           EXHIBIT H

WELLS FARGO BANK                                                                                        APPLICATION ________________
                                                                                                       FOR STANDBY LETTER OF CREDIT
- ------------------------------------------------------------------------------------------------------------------------------------
TO: WELLS FARGO BANK, N.A.     DATE:        FOR BANK       LETTER OF CREDIT NO.          DOCUMENT TRACK NO.
    TRADE SERVICES DIVISION                 USE ONLY

- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE ISSUE AN IRREVOCABLE LETTER OF CREDIT ON THE TERMS SET FORTH BELOW AND UNLESS OTHERWISE SPECIFIED
_____________ SPECIAL INSTRUCTIONS. FORWARD THE LETTER OF CREDIT TO THE BENEFICIARY BY:

[ ]________ MAIL  [ ] AIRMAIL WITH BRIEF ADVICE BY CABLE/TELEX  [ ] FULL CABLE/TELEX   [ ] __________________________________

- ------------------------------------------------------------------------------------------------------------------------------------
___________________ BANK: (If isn't blank, Wells Fargo may select)                 Beneficiary: (Name and Address)





- ------------------------------------------------------------------------------------------------------------------------------------
Applicant: (Name and Address)                                                      AMOUNT: (In words)



                                                                                   -------------------------------------------------
                                                                                   (In figure)              (Currency)
- ------------------------------------------------------------------------------------------------------------------------------------
AVAILABILITY: Unless otherwise specified herein, the Letter of Credit is to be     EXPIRATION DATE:
available with Wells Fargo's issuing office by payment of draft(s) drawn at        -------------------------------------------------
at sight on Wells Fargo's or, at Wells Fargo's option, with any bank(s) or with    Place of Expiration: Unless otherwise specified
a bank nominated by Wells Fargo by negotiation of draft(s) drawn at sight on       herein, the Letter of Credit is to expire at
Wells Fargo.                                                                       Wells Fargo's issuing office or, if the Letter of
                                                                                   Credit is available with any bank(s) or with a
                                                                                   specific bank other that Wells Fargo's issuing
                                                                                   office, at such place as Wells Fargo shall elect.
- ------------------------------------------------------------------------------------------------------------------------------------
DOCUMENT(S): Draft's are to be accompanied by: (Attach additional signed sheet(s). If necessary, and label as attachments to this
Application.)










              * that certain Second Amended and Restated Credit Agreement dated as of April 28, 1998 among MHC Operating Limited
                Partnership, Manufactured Home Communities, Inc., the Lenders therein and Wells Fargo Bank, N.A. as Agent for said
                Lenders.
- ------------------------------------------------------------------------------------------------------------------------------------
DRAWINGS(S): [ ] Partial drawings are permitted. (More than one draft may be drawn and presented under the Letter of Credit.)
             [ ] Only one draft may be drawn and presented under the Letter of Credit, and:
                 [ ] the draft must be for the full amount of the Letter of Credit.  [ ] the draft may be for less than the full
                                                                                         amount of the Letter of Credit.
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS: (Attach additional signed sheet(s), If necessary, and label as attachments to this Application.)





- ------------------------------------------------------------------------------------------------------------------------------------
TRANSFERABILITY: (If not checked, the Letter of Credit will not be transferable.) [ ] The Letter of Credit is to be transferable,
with transfer charges for:   [ ] Applicant's account   [ ] Beneficiary's Account
- ------------------------------------------------------------------------------------------------------------------------------------
INQUIRIES:    Direct tax: Telephone Number:
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT'S AGREEMENT AND SIGNATURE: My/Our signature here indicates agreement to all the terms and conditions on this application
and my/our agreement that the Letter of Credit and its issuance will be governed by the terms and conditions
of_________________________________________________. This Application is signed by Applicant's duly authorized representative or
representatives on the date specified above.



- ----------------------------------------------------------------------       -------------------------------------------------------
APPLICANT                                                                               ADDRESS

- ------------------------------------------------  --------------------       -------------------------------------------------------
AUTHORIZED SIGNATURE                                TITLE                               ADDRESS

- ------------------------------------------------  --------------------       -------------------------------------------------------
AUTHORIZED SIGNATURE                               TITLE                                ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------


         FOR BANK USE ONLY (To be Completed by Approving Bank Officer)
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIFIED INSTRUCTIONS:    (Specify any terms and conditions to be applicable to the Letter of Credit
                           which differ from those specified on Applicant's RMI Form F163.)
                                                                                                 -----------------------------------
                                                                                                 COLLATERAL CODE      PURPOSE CODE

- ------------------------------------------------------------------------------------------------------------------------------------
Applicant's signature on this Application is verified. Issuance of the Letter of Credit has been approved in accordance with Bank's
credit policies and procedures.

- ------------------------------------------------------------------------------------------------------------------------------------
_________ OFFICER'S NAME (Please type or print     APPROVING OFFICER'S OFFICE (Please Type or Print)   MAC             AU

- ------------------------------------------------------------------------------------------------------------------------------------
APPROVING OFFICER'S SIGNATURE          PHONE       AFS INTERFACE REQUIRED          STANDALONE TRANSACTIONS             DATE

- ------------------------------------------------------------------------------------------------------------------------------------
  </TABLE>
<PAGE>   133


                                   EXHIBIT I

                               NOTICE OF BORROWING

Re:       Amended and Restated Credit Agreement dated as of April ___, 1998, as
          amended, supplemented and restated from time to time among MHC
          Operating Limited Partnership, Manufactured Home Communities, Inc.,
          the Lenders thereunder and Wells Fargo Bank. N.A., as agent for said
          Lenders ("Agent") (the "Credit Agreement")

Wells Fargo Disbursement Center
2120 East Park Place
Suite 100
El Segundo, California 90245

This notice represents the Borrower's request for a Borrowing pursuant to
Section [2.01] [2.10] of the Credit Agreement on __________________________ (the
"Funding Date") in the principal amount of $_____________ on the terms set forth
on the attached schedule. All capitalized terms used herein and not defined
herein shall have the meanings ascribed to them in the Credit Agreement.

Borrower hereby certifies that (a) all conditions set forth in Article IV of the
Credit Agreement to the disbursement of the Loan hereby requested will be
satisfied on the Funding Date, (b) the proposed Borrowing complies with the
terms of the Credit Agreement, and (c) no Event of Default or Unmatured Event of
Default has occurred and is continuing either before or after giving effect to
such Borrowing.

Dated: April _, 1998

                                       MHC Operating Limited Partnership,
                                       an Illinois limited partnership

                                       By:  Manufactured Home Communities.
                                            Inc., a Maryland corporation, as its
                                            General Partner

                                       By:______________________________________

                                       Name:____________________________________

                                       Title:___________________________________

cc:       Wells Fargo Bank, N.A.
          225 W. Wacker Drive
          Suite 2550
          Chicago, Illinois 60606
          Attn: Account Officer


<PAGE>   134




                                  SCHEDULE 1 TO
                               NOTICE OF BORROWING

PROPOSED LOAN FUNDING

1.  Type of Loan:

    ___  Borrowing pursuant to Section 2.01
    ___  Swingline Loan pursuant to Section 2.10

2.  Proposed Funding Date: ______________________

3.  Amount of Proposed Loan: $___________________

                   Yes ____  No ____
4.  Base Rate:         ____     ____
                       ____     ____
5.  Libor Rate:        ____     ____ ($1,000,000 or integral
                                            multiples of $100,000)
                  (Indicate with an "x")

6.  Specify Interest Period for LIBOR Loan (if applicable), indicate with
    "x."

        < 30 DAYS    30 DAYS   60 DAYS   90 DAYS   180 DAYS  360 DAYS
       [          ][        ][        ][        ][         ][        ]


CERTAIN CONDITIONS

(i)    All Notices of Borrowing are to be submitted no later than 10:00 a.m.
       (California time), not less than three (3) nor more than five (5)
       Business days prior to the proposed Funding Date, provided however,
       that a Notice of Borrowing with respect to a Swingline Loan may be
       submitted no later than 11.00 a.m. (California Time) on the proposed
       Funding Date.

(ii)   All Loans (including Swingline Loans) are required to be in minimum
       amounts of One Million Dollars ($1,000.000) or integral multiples of
       One Hundred Thousand Dollars ($100,000) in excess thereof.

(iii)  Swingline Loans bear interest as provided in Section 2.10(c) of the
       Credit Agreement. Items 4, 5 and 6 above are not applicable to a Notice
       of Borrowing with respect to Swingline Loans.

(iv)   An Interest Period having a duration of less than one (1) month is
       available with the reasonable approval of Agent (unless any Lender has
       previously advised Agent and Borrower that it is unable to enter into
       LIBOR contracts for an Interest Period of such duration).



<PAGE>   135


                                   EXHIBIT J

                       NOTICE OF CONTINUATION/CONVERSION

TODAY'S DATE:      _______________

TO:      WELLS FARGO BANK, N.A.
         DISBURSEMENT AND OPERATIONS CENTER
         FAX #(310) 615-1014 OR (310) 615-1016
         ATTENTION: RATE OPTION DESK

________________________________________________________________________________
________________________________________________________________________________


                      BORROWER INTEREST RATE OPTION REQUEST
                         Rate Quote Line (310) 335-9472

LOAN# _______________________   BORROWER NAME: __________________________

RATE SET DATE: ______________   INTEREST PERIOD COMMENCEMENT DATE:_______ (1350)

INTEREST PERIOD (TERM): _________________________(i.e. 1, 2, 3, 6 months, etc.
                                                  as allowed per the Credit
                                                  Agreement)

INDEX: ___________________   RATE: _________% + _________=_______________(1350).
          (i.e. Libor)                           Spread   Applicable Rate

LIBOR LOAN EXPIRING ON ______________ (Date):    $___________________

1)  AMOUNT ROLLING OVER      $______________   FROM OBLGN#:______

2)  ADD: AMT TRANSFERRED FROM
         BASE RATE LOAN      $______________   FROM OBLGN#:______TO OBLGN:______
                                                           (5522)         (5022)
3)  ADD: AMT TRANSFERRED FROM
         OTHER LIBOR LOAN    $______________   FROM OBLGN#:______TO OBLGN:______
                                                           (5522)         (5022)
    ADD: AMT TRANSFERRED FROM
         OTHER LIBOR LOAN    $______________   FROM OBLGN#:______TO OBLGN:______
                                                           (5522)         (5022)

4)  LESS: AMT TRANSFERRED TO
         BASE RATE LOAN      $______________   FROM OBLGN#:______TO OBLGN:______
                                                           (5522)         (5022)
TOTAL LIBOR LOAN:            $______________

Borrower confirms, represents and warrants to Lender (a) that this Notice of
Continuation/Conversion is subject to the terms and conditions of that certain
Second Amended and Restated Credit Agreement dated as of_________ ___, 1999,
by and among Borrower, Manufactured Home Communities, Inc., the "Lenders"
thereunder and Wells Fargo Bank, N.A., as Agent for the said Lenders (the
"Credit Agreement"), (b) that terms, words and phrases used but not defined in
this Notice of Continuation/Conversion have the meanings attributed thereto in
the Credit Agreement. and (c) that no Event of Default or Unmatured Event of
Default has occurred and is continuing.

REQUESTED BY (as allowed per documents):____________  TELEPHONE #:(___)_________
PRINT NAME:_________________________________________  FAX #:(___)_______________

________________________________________________________________________________
________________________________________________________________________________
          WELLS FARGO BANK ACKNOWLEDGMENT OF RECEIPT AND CONFIRMATION
FIXED RATE EXPIRATION DATE:______________________(2301)
REQUEST VERIFIED BY:_____________________________       DATE:___________________
REQUEST APPROVED BY:_____________________________       DATE:___________________
CONFIRMATION FAXED TO CUSTOMER BY:_______________       DATE:________TIME:______

________________________________________________________________________________
________________________________________________________________________________
                      WELLS FARGO BANK OPERATIONS USE ONLY
TRACKING #:_________ LOAN AU:_________ LOAN SU:_________ OBLIGOR #:_____________
CHARGECODE: 100      BASIS:___________ EARN TYPE:  0     BAL TYPE:  000   (1350)
SPECIAL PRODUCT TYPE CODE: (If change required)_______________________    (2305)
TDR: NO___ YES___ (Fax to loan acctg) UPDATE BILLING SCHEDULE: NO___YES___(1370)
________________________________________________________________________________
DATA ENTRY COMPLETED BY:______________ DATE:____________ BATCH ID:______________
DATA ENTRY AUDITED BY:__________________________________ DATE:__________________

<PAGE>   136

                         SCHEDULE 5.01 (C) TO REVOLVER

                          General Partners of Borrower

Manufactured Home Communities, Inc. owns approximately an 80% general
partnership interest.

<PAGE>   137

                         Schedule 5.01 (r) to Revolver

                         Environmental Compliance Issues


ASBESTOS. Limited quantities of asbestos containing materials ("ACMs") are
present in various building materials such as floor coverings, acoustical tiles
and decorative treatments located at certain Properties. The ACMs present at
these Properties are generally in good condition, and possess low probabilities
for disturbance. Borrower has implemented comprehensive operations and
maintenance plans for Properties where ACMs are present or reasonably suspected.
Property managers are being trained to deal effectively with the in-place
maintenance of ACMs. ACMs will be property removed by Borrower in the ordinary
course of renovation and construction and all damaged ACMs will be replaced
immediately; however, in certain circumstances, Borrower may determine to
encapsulate rather than remove damaged ACMs.

STORAGE TANKS. A number of above ground fuel tanks ("ASTs") and underground
storage tanks ("USTs") are located on the Properties. Four of the manufactured
housing communities, Camelot Meadows, McNicol, Nassau and Mariner's Cove, have
several active and/or inactive USTs (approximately 225 USTs between the four
Properties) used for the storage of residential heating fuel. A June 1994 site
assessment (conducted prior to the Borrower's ownership of the Properties)
conducted by ATEC Environmental Consultants at Camelot Meadows and McNicol
identified six potential leaking underground storage tanks ("LUSTs"). The LUSTs
were removed by Ogden Environmental in March 1998. A Site Investigation Work
Plan has been submitted to Delaware Department of Natural Resources. The
Borrower does not believe that any future remediation that may be required of
the LUST's will have a Material Adverse Effect.

WASTE WATER TREATMENT PLANTS ("WWTPs"). WWTPs are operated at several of the
Properties. Two WWTPs, those at Oak Tree Village and Bums Harbor Estates, are
currently under an Order Pursuant to the Clean Water Act to implement various
corrective actions to conform to National Pollution Discharge Elimination System
permit requirements and conditions. United States Environmental Protection
Agency ("USEPA") and Indiana Department of Environmental Management ("IDEM") may
assess certain penalties for past non compliance. Borrower has implemented most
of the corrective actions proposed to it by USEPA/IDEM and Borrower intends to
complete the remaining corrective actions in due course.


<PAGE>   138


                         SCHEDULE 5.01 (W) TO REVOLVER

                     Subsidiaries and Investment Affiliates

Manufactured Home Communities, Inc. ("MHC") owns 100% of the stock of:

     MHC-QRS Bay Indies, Inc.           MHC-QRS Western, Inc.
     MHC Lending QRS, Inc.              MHC-QRS Two, Inc.
     MHC-QRS, Inc.                      MHC-QRS Blue Ribbon Communities, Inc.
     MHC-QRS DeAnza, Inc.               QRS Gold Medal Communities, Inc.

MHC owns an approximately an 80% general partner interest in MHC Operating
Limited Partnership ("MHC OP").

MHC-QRS DeAnza, Inc. is the 1% general partner of

     MHC-DeAnza Financing Limited Partnership (owns the beneficial interest in
                                               six manufactured home communities
                                               purchased from affiliates of
                                               DeAnza Group, Inc.)

MHC-QRS Bay Indies, Inc. is the 1% general partner of

     MHC-Bay Indies Financing Limited Partnership (owns the beneficial interest
                                                   in Bay Indies manufactured
                                                   home community)

MHC Lending QRS, Inc. is the 1% general partner of

     MHC Lending Limited Partnership (owns certain loans)

MHC-QRS, Inc. is the 1% general partner of

     MHC Financing Limited Partnership (owns the beneficial interest in 29
                                        manufactured home communities)

MHC-QRS Two, Inc. is the 1% general partner of
     MHC Financing Limited Partnership Two (owns some or all of the beneficial
                                            interest in 26 manufactured home
                                            communities or recreational vehicle
                                            parks)

MHC-QRS Blue Ribbon Communities, Inc. is the 1% general partner of
     Blue Ribbon Communities Limited Partnership (currently an inactive "shelf"
                                                  entity)

QRS Gold Medal Communities, Inc. is the 1% general partner of
     Gold Medal Communities Limited Partnership (currently an inactive "shelf"
                                                 entity)

MHC OP is the 99% limited partner of:

     MHC Financing Limited Partnership
     MHC Lending Limited Partnership
     MHC-Bay Indies Financing Limited Partnership
     MHC-DeAnza Financing Limited Partnership
     MHC Financing Limited Partnership Two

<PAGE>   139




     Blue Ribbon Communities Limited Partnership
     Gold Medal Communities Limited Partnership

MHC OP owns the amount set forth below of the limited partnership interests in
the following entities:

     ELL-CAP XX - Mon Dak                              4.88%
     ELL-CAP[Diversified 75 - Naples Estates            100%
     ELL-CAP/Diversified 80 - Rehobeth Beach          87.13%
     ELL-CAP/Diversified 80 Associates                91.75%
     ELL-CAP 97 Laguna Lake Associates                15.69%

MHC OP is a 49% member of Trails Associates LLC and a 49% member of Plantation
Company LLC

MHC OP owns the beneficial interest in the manufactured home communities not
beneficially owned by a financing partnership.

MHC OP is the 1% general partner of:

    MHC Management Limited Partnership
    MHC DAG Management Limited Partnership

MHC OP owns 100% of the non-voting preferred stock of:

    LP Management Corporation
    DeAnza Group, Inc.

LP Management Corp. is the 99% limited partner of MHC Management Limited
Partnership.

DeAnza Group, Inc. is the 99% limited partner of MHC DAG Management Limited
Partnership.

MHC OP owns 100% of the non-voting preferred stock of Realty Systems, Inc.
("RSI").

     Equity Group Investments, Inc. owns 100% of the non-voting common stock of
     RSI.

     Equity-RSI Limited Partnership owns 100% of the voting common stock of RSI.

MHC Management Limited Partnership owns 100% of the stock of MHC Systems, Inc.

RSI owns 100% of the stock of Realty Systems Nevada. Inc.

<PAGE>   140


                              REVOLVING LOAN NOTE

$50,000,000                                                    April 28, 1998


         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Wells
Fargo Bank, N.A., 2120 E. Park Place, Suite 100, El Segundo, California, 90245,
the principal sum of Fifty Million Dollars ($50,000,000) or, if less, the
aggregate unpaid principal amount of the "Loans" disbursed by Lender pursuant
to that certain Second Amended and Restated Credit Agreement, dated as of the
date hereof, as amended, supplemented or restated from time to time (the
"Credit Agreement"), among Borrower, Manufactured Home Communities, Inc., the
"Lenders" thereunder and Wells Fargo Bank, N.A., as agent for the said Lenders
("Agent"), together with interest on the unpaid principal balance hereof at the
rates provided below from the date such principal is advanced until payment in
full thereof.

         This Note is one of the Loan Notes referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Lender upon the happening of certain stated events.  Any
capitalized term used herein unless otherwise defined herein, shall have the
meaning ascribed to such term in the Credit Agreement.

         The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement.  Borrower may make voluntary prepayments of all or a portion
of the Loans, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

         Interest on the Loans is payable on the terms and at the rates set
forth in the Credit Agreement.  In addition to the interest charges described
in the Credit Agreement, the Credit Agreement provides for the payment by
Borrower of various other charges and fees as set forth more fully in the
Credit Agreement.

         Upon the occurrence of an Event of Default described in Section
10.01(g) or Section 10.01(h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable.  Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.
<PAGE>   141
          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Agent on behalf of the Lenders may extend the time of payment
of this Note, postpone the enforcement hereof, grant any indulgences, releases
any party primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing lender's right of recourse against Borrower, which right is hereby
expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                                   MHC OPERATING LIMITED PARTNERSHIP, an
                                   Illinois limited partnership

                                   By:   MANUFACTURED HOME COMMUNITIES,
                                         INC., a Maryland corporation, as
                                         General Partner

                                By:     /s/ Thomas P. Heneghan
                                       ------------------------------
                                Name:  Thomas P. Heneghan
                                       ------------------------------
                                       EVP & CFO
                                Title: ------------------------------


                                      S-2
<PAGE>   142
                              REVOLVING LOAN NOTE

$33,333,333.33                                                    April 28, 1998

         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Bank
of America National Trust and Savings Association ("Lender") at c/o Wells Fargo
Bank, N.A., 2120 E. Park Place, Suite 100, El Segundo, California, 90245, the
principal sum of Thirty Three Million Three Hundred Thirty Three Thousand
Thirty Three Dollars and 33/100 ($33,333,333.33) or, if less, the aggregate
unpaid principal amount of the "Loans" disbursed by Lender pursuant to that
certain Second Amended and Restated Credit Agreement, dated as of the date
hereof, as amended, supplemented or restated from time to time (the "Credit
Agreement"), among Borrower, Manufactured Home Communities, Inc., the "Lenders"
thereunder and Wells Fargo Bank, N.A., as Agent for the said Lenders ("Agent"),
together with interest on the unpaid principal balance hereof at the rates
provided below from the date such principal is advanced until payment in full
thereof.

         This Note is one of the Loan Notes referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Lender upon the happening of certain stated events.  Any
capitalized term used herein, unless otherwise defined herein, shall have the
meaning ascribed to such term in the Credit Agreement.

         The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement.  Borrower may make voluntary prepayments of all or a portion
of the Loans, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

         Interest on the Loans is payable on the terms and at the rates set
forth in the Credit Agreement.  In addition to the interest charges described
in the Credit Agreement, the Credit Agreement provides for the payment by
Borrower of various other charges and fees as set forth more fully in the
Credit Agreement.

         Upon the occurrence of an Event of Default described in Section 10.01
(g) or Section 10.01 (h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable.  Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.
<PAGE>   143
          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Agent on behalf of the Lenders may extend the time of payment
of this Note, postpone the enforcement hereof, grant any indulgences, releases
any party primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing lender's right of recourse against Borrower, which right is hereby
expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                                   MHC OPERATING LIMITED PARTNERSHIP, an
                                   Illinois limited partnership

                                   By:   MANUFACTURED HOME COMMUNITIES,
                                         INC., a Maryland corporation, as
                                         General Partner

                                By:     /s/ Thomas P. Heneghan
                                       ------------------------------
                                Name:  Thomas P. Heneghan
                                       ------------------------------
                                       EVP & CFO
                                Title: ------------------------------

                                      S-2
<PAGE>   144
                              REVOLVING LOAN NOTE

$33,333,333.34                                        April 28, 1998

         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Morgan
Guaranty Trust Company of New York ("Lender") at c/o Wells Fargo Bank, N.A.,
2120 E. Park Place, Suite 100, El Segundo, California, 90245, the principal sum
of Thirty Three Million Three Hundred Thirty Three Thousand Thirty Three
Dollars and 34/100 ($33,333,333.34) or, if less, the aggregate unpaid principal
amount of the "Loans" disbursed by Lender pursuant to that certain Second
Amended and Restated Credit Agreement, dated as of the date hereof, as amended,
supplemented or restated from time to time (the "Credit Agreement"), among
Borrower, Manufactured Home Communities, Inc., the "Lenders" thereunder and
Wells Fargo Bank, N.A., as Agent for the said Lenders ("Agent"), together with
interest on the unpaid principal balance hereof at the rates provided below
from the date such principal is advanced until payment in full thereof.

         This Note is one of the Loan Notes referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Lender upon the happening of certain stated events. Any
capitalized term used herein, unless otherwise defined herein, shall have the
meaning ascribed to such term in the Credit Agreement.

         The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement. Borrower may make voluntary prepayments of all or a portion
of the Loans, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

         Interest on the Loans is payable on the terms and at the rates set
forth in the Credit Agreement.  In addition to the interest charges described
in the Credit Agreement, the Credit Agreement provides for the payment by
Borrower of various other charges and fees as set forth more fully in the
Credit Agreement.

         Upon the occurrence of an Event of Default described in Section
10.01(g) or Section 10.01(h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable. Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.
<PAGE>   145


         Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Agent on behalf of the Lenders may extend the time of payment
of this Note, postpone the enforcement hereof, grant any indulgences, release
any part primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Lender's right or recourse against Borrower, which right is hereby
expressly reserved.

         This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

         Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                                   MHC OPERATING LIMITED PARTNERSHIP, an
                                   Illinois limited partnership


                                   By:  MANUFACTURED HOME COMMUNITIES,
                                        INC., a Maryland corporation,
                                        as General Partner

                                        By: /s/ Thomas P. Heneghan
                                           -------------------------
                                        Name: Thomas P. Heneghan
                                             -----------------------
                                        Title: EVP & CFO
                                              ----------------------


                                      S-2
<PAGE>   146
                               REVOLVING LOAN NOTE

$33,333,333.33                                                    April 28, 1998


          FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of
Commerzbank Aktiengesellschaft ("Lender") at c/o Wells Fargo Bank, N.A., 2120 E.
Park Place, Suite 100, El Segundo, California, 90245, the principal sum of
Thirty Three Million Three Hundred Thirty Three Thousand Three Hundred Thirty
Three Dollars and 33/100 ($33,333,333.33) or, if less, the aggregate unpaid
principal amount of the "Loans" disbursed by Lender pursuant to that certain
Second Amended and Restated Credit Agreement, dated as of the date hereof, as
amended, supplemented or restated from time to time (the "Credit Agreement"),
among Borrower, Manufactured Home Communities, Inc., the "Lenders" thereunder
and Wells Fargo Bank, N.A., as Agent for the: said Lenders ("Agent"), together
with interest on the unpaid principal balance hereof at the rates provided below
from the date such principal is advanced until payment in full thereof.

          This Note is one of the Loan Notes referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Lender upon the happening of certain stated events. Any
capitalized term used herein, unless otherwise defined herein, shall have the
meaning ascribed to such term in the Credit Agreement.

          The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement. Borrower may make voluntary prepayments of all or a portion of
the Loans, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

          Interest on the Loans is payable on the terms and at the rates set
forth in the Credit Agreement. In addition to the interest charges described in
the Credit Agreement, the Credit Agreement provides for the payment by Borrower
of various other charges and fees as set forth more fully in the Credit
Agreement.

          Upon the occurrence of an Event of Default described in Section
10.01(g) or Section 10.01(h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable. Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.


<PAGE>   147


          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Agent on behalf of the Lenders may extend the time of payment
of this Note, postpone the enforcement hereof, grant any indulgences, release
any party primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Lender's right of recourse against Borrower, which right is hereby
expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                          MHC OPERATING LIMITED PARTNERSHIP, an
                          Illinois limited partnership

                          By: MANUFACTURED HOME COMMUNITIES,
                              INC., a Maryland corporation, as General Partner

                              By:  /s/ Thomas P. Heneghan
                                 ------------------------
                              Name: Thomas P. Heneghan
                                   ----------------------
                              Title: EVP & CFO
                                   ----------------------

                                      S-2

<PAGE>   148

                                 SWINGLINE NOTE


$30,000,000                                                       April 28, 1998

          FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Wells
Fargo Bank, N.A. ("Swingline Lender") at 2120 E. Park Place, Suite 100, El
Segundo, California, 90245, the principal sum of THIRTY MILLION and NO/100
Dollars ($30,000,000) or, if less, the aggregate unpaid, principal amount of
"Swingline Loans" disbursed by the Swingline Lender pursuant to Section 2.10 of
that certain Second Amended and Restated Credit Agreement, dated as of the date
hereof, as amended, supplemented or restated from time to time (the "Credit
Agreement"), among Borrower, Manufactured Home Communities, Inc., the "Lenders"
thereunder, and Wells Fargo Bank, as Agent for the said Lenders ("Agent"),
together with interest on the unpaid principal balance hereof at the rates
provided below from the date such principal is advanced until payment in full
thereof.

          This Note is the Swingline Note referred to in and governed by the
Credit Agreement, which Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof and payment of certain
additional sums to Swingline Lender upon the happening of certain stated events.
Any capitalized term used herein, unless otherwise defined herein, shall have
the meaning ascribed to such term in the Credit Agreement.

          The principal amount of this Note will be due and payable in
accordance with the provisions of Section 2.10(b) of the Credit Agreement.
Borrower may make voluntary prepayments of all or a portion of any Swingline
Loan upon written notice not later than 1:00 p.m. (California time) on the same
Business Day, pursuant to the provisions of Section 2.05 of the Credit
Agreement.

          Interest on the Swingline Loans is payable on the terms and at the
rates set forth in the Credit Agreement. In addition to the interest charges
described in the Credit Agreement, the Credit Agreement provides for the payment
by Borrower of various other charges and fees as set forth more fully in the
Credit Agreement.

          Upon the occurrence of an Event of Default described in Section
10.01(g) or Section 10.01(h) of the Credit Agreement, this Note shall,
without demand, notice or legal process of any kind, automatically become
immediately due and payable. Upon and after the occurrence and continuance of
any other Event of Default, this Note may, at the option or with the consent of
Requisite Lenders, and without demand, notice or legal process of any kind
(except as specifically set forth in the Credit Agreement), be declared, and
immediately shall become, due and payable, unless such Event of Default is
waived or such acceleration is rescinded as provided in the Credit Agreement.


                                      S-1
<PAGE>   149




          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, the Swingline Lender may extend the time of payment of this
Note, postpone the enforcement hereof, grant any indulgences, release any party
primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Swingline Lender's right of recourse against Borrower, which right
is hereby expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                             MHC OPERATING LIMITED PARTNERSHIP, an
                             Illinois limited partnership

                             By: MANUFACTURED HOME COMMUNITIES, INC.,
                                   a Maryland corporation, as General Partner


                                   By:  /s/ Thomas P. Heneghan
                                      -----------------------------
                                   Name:  Thomas P. Heneghan
                                        ---------------------------
                                   Title:  EVP & CFO
                                         --------------------------


                                      S-2
<PAGE>   150


                             LETTER OF CREDIT NOTE

$30,000,000                                                       April 28, 1998

          FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Wells
Fargo Bank, N.A. ("Issuing Lender") at 2120 E. Park Place, Suite 100, El
Segundo, California, 90245, the principal sum of THIRTY MILLION and NO/100
Dollars ($30,000,000) or, if less, the aggregate unpaid principal amount of
unreimbursed drawings under any Letter of Credit issued pursuant to Section 2.09
of that certain Second Amended and Restated Credit Agreement, dated as of the
date hereof, as amended, supplemented or restated from time to time (the "Credit
Agreement"), among Borrower, Manufactured Home Communities, Inc., the "Lenders"
thereunder and Wells Fargo Bank, as Agent for the said Lenders ("Agent"),
together with interest on the unpaid principal balance hereof at the rates
provided below from the date such unreimbursed drawing is made until payment in
full thereof. Any capitalized term used herein, unless otherwise defined herein,
shall have the meaning ascribed to such term in the Credit Agreement.

          This Note is the Letter of Credit Note referred to in and governed by
the Credit Agreement. The amount of any drawing under a letter of Credit will be
due and payable on the date of such drawing pursuant to Section 2.09 of the
credit Agreement.

          Interest on the obligations evidenced hereby is payable on the terms
and at the rates set forth in the Credit Agreement.

          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are hereby waived by Borrower, except to the extent
specifically provided for in the Credit Agreement. Subject to the terms of the
Credit Agreement, Issuing Lender may extend the time of payment of this Note,
postpone the enforcement hereof, grant any indulgences, release any party
primarily or secondarily liable hereon or agree to any substitution,
subordination, exchange or release of any security without affecting or
diminishing Issuing Lender's right of recourse against Borrower, which right is
hereby expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

                                       1
<PAGE>   151


          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                                MHC OPERATING LIMITED PARTNERSHIP, an
                                Illinois limited partnership

                                By: MANUFACTURED HOME COMMUNITIES, INC.,
                                      a Maryland corporation, as General Partner

                                      By: /s/ Thomas P. Heneghan
                                         -------------------------------
                                      Name: Thomas P. Heneghan
                                           -----------------------------
                                      Title: EVP & CFO
                                            ----------------------------


                                       2
<PAGE>   152


                              AMENDED AND RESTATED
                                  REIT GUARANTY
                     (Manufactured Home Communities, Inc.)

          This REIT Guaranty (this "Guaranty") is made as of April 28, 1998 by
Manufactured Home Communities, Inc., a Maryland corporation ("Guarantor"),
in favor of the Lenders (as defined in the "Credit Agreement" described below)
and Wells Fargo Bank, N.A. ("Agent"), in its capacity as agent for the Lenders
and as a Lender.

                                    Recitals

          Concurrently with the execution and delivery of this Guaranty, MHC
Operating Limited Partnership, an Illinois limited partnership ("Borrower"),
Guarantor, Agent and Lenders are entering into a certain Second Amended and
Restated Credit Agreement of even date herewith (the "Credit Agreement")
pursuant to which Lenders are agreeing to provide a revolving credit facility to
Borrower. This Guaranty is executed and delivered in order to induce Agent and
Lenders to enter into the Credit Agreement. Unless otherwise specified herein,
the capitalized defined terms used herein shall have the meanings ascribed to
such terms in the Credit Agreement.

                                    Guaranty

          1. For valuable consideration, receipt of which is hereby
acknowledged, Guarantor hereby unconditionally guaranties the full and prompt
payment when due and performance of all of the Obligations. The Guarantor agrees
that this Guaranty is a guaranty of payment and performance and not of
collection. Nothing herein shall be construed as requiring Agent or Lenders to
exhaust its remedies against Borrower, or to foreclose any security interest
that may in the future be granted to Agent in any collateral or to exercise any
other remedies available to it, as a condition to proceeding against Guarantor
hereunder.

                        Additional Agreements and Waivers

          2. Guarantor hereby agrees that its obligations under this Guaranty
shall be unconditional, irrespective of (i) the validity or enforceability of
the Obligations or any part thereof, or of any other Loan Document, (ii) the
absence of any attempt to collect the Obligations from Borrower or any other
guarantor or other action to enforce the same, (iii) the waiver or consent by
Agent or Lenders with respect to any provision of any Loan Document or any other
agreement now or hereafter executed by Borrower and delivered to Agent and
Lenders, (iv) the failure by Agent to take any steps to perfect and maintain any
Liens that may in the future be granted to Agent against any collateral, (v)
Agent's election, in any proceeding instituted under Chapter 11 of Title 11 of
the United States Code (11 U.S.C. Section 101 et seq.), as amended (the
"Bankruptcy Code") of the application of Section 1111(b)(2) of the
Bankruptcy Code, (vi) any borrowing or grant of a security interest by Borrower
as debtor-in-possession, under Section 364 of the Bankruptcy Code, (vii) the
disallowance, under Section 502 of the Bankruptcy Code,



<PAGE>   153




of all or any portion of Agent's or Lenders' claim(s) for repayment of the
Obligations, or (viii) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of Borrower or a guarantor.

          3. Effective until the repayment in full of the Obligations, no
payment made by or for the account or benefit of Guarantor (including, without
limitation, (i) a payment made by Guarantor in respect of the Obligations, (ii)
a payment made by any Person under any other guaranty of the Obligations or
(iii) a payment made by means of set-off or other application of funds by Agent
or any of the Lenders) pursuant to this Guaranty shall entitle Guarantor, by
subrogation or otherwise, to any payment by Borrower or from or out of any
property of Borrower, and Guarantor shall not exercise any right or remedy
against Borrower or any property of Borrower including, without limitation, any
right of contribution or reimbursement by reason of any performance by Guarantor
under this Guaranty. Without limitation of any of the foregoing, any
Indebtedness (including, without limitation, interest obligations) of Borrower
to Guarantor now or hereafter existing shall be, and such Indebtedness hereby
is, deferred, postponed and subordinated to the repayment in full of the
Obligations. The provisions of this paragraph shall survive the termination of
this Guaranty or the release or discharge of Guarantor from liability hereunder.
Guarantor and Agent hereby agree that Borrower is and shall be a third party
beneficiary of the provisions of this paragraph.

          4. To the extent permitted by law, Guarantor further waives all
notices to which Guarantor might otherwise be entitled, except as otherwise
expressly provided for herein, in the Credit Agreement or in any other agreement
or document executed in connection with the transactions contemplated by the
Credit Agreement. Without limitation of the foregoing, Guarantor, to the extent
permitted by applicable law, hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of receivership or
bankruptcy of the Borrower, protest or notice with respect to the Obligations,
all setoffs and counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor and
notices of acceptance of this Guaranty, the benefits of all statutes of
limitation, and all other demands whatsoever (and shall not require that the
same be made on the Borrower as a condition precedent to Guarantor's obligations
hereunder). Guarantor further waives all notices of the existence, creation or
incurring of new or additional indebtedness, arising either from additional
loans extended to the Borrower or otherwise, and also waives, to the extent
permitted by law, all notices that the principal amount or any portion thereof,
and/or any interest on any instrument or document evidencing all or any part of
the Obligations is due, notices of any and all proceedings to collect from the
maker, any endorser or any guarantor of all or any part of the Obligations or
from any other party, and, to the extent permitted by law, notices of exchange,
sale, surrender or other handling of any security given to the Lenders and the
Agent to secure payment of all or any part of the Obligations.

          5. Guarantor covenants that this Guaranty will not be discharged
except by complete and irrevocable payment and performance of the obligations
and liabilities guaranteed

                                       2
<PAGE>   154


herein. No notice to Guarantor or any other party shall be required for Agent or
Lenders to make demand hereunder. Such demand shall constitute a mature and
liquidated claim against Guarantor. Upon the occurrence of an Event of Default
described in Section 10.01(g) or Section 10.01(h) or upon the occurrence and
continuance of any other Event of Default, Agent may, at its sole election,
proceed directly and at once, without notice, against Guarantor to collect and
recover the full amount or any portion of the Obligations, without first
proceeding against Borrower. any other Person or any other collateraL Agent and
Lenders shall have the exclusive right to determine the application of payments
and credits, if any, from Guarantor, Borrower or from any other person, firm or
corporation, on account of the Obligations.

          6. To the extent permitted by applicable law, Agent is hereby
authorized, without notice or demand to Guarantor (but without limiting any
requirements of notice and demand to Borrower) and without affecting the
liability of Guarantor hereunder or under any of the other Loan Documents
executed by Guarantor, from time to time, (i) to renew, extend, accelerate or
otherwise change the time for payment of, or other terms relating to, all or
any part of the Obligations, or to otherwise modify, amend or change the terms
of any of the Loan Documents; (ii) to accept partial payments on all or any part
of the Obligations; (iii) to take and hold security or collateral for the
payment of all or any part of the Obligations, or any guaranties of all or an),
part of the Obligations or other liabilities of Borrower, (iv) to exchange,
enforce, waive and release any such security or collateral; (v) to apply such
security or collateral and direct the order or manner of sale thereof as in its
discretion it may determine; (vi) to settle, release, exchange, enforce, waive,
compromise or collect or otherwise liquidate all or any part of the Obligations,
any guaranty of all or any part of the Obligations and any security or
collateral for the Obligations or for any such guaranty. Guarantor agrees, to
the extent permitted by applicable law, that any of the foregoing may be done in
any manner, without affecting or impairing the obligations of Guarantor
hereunder or under any of the other Loan Documents executed by Guarantor.

          7. At any time after maturity of the Obligations, Agent may, in its
sole discretion, with notice (solely as may be provided for in the Credit
Agreement) to Guarantor and regardless of the acceptance of any collateral for
the payment hereof, appropriate and apply toward payment of the Obligations (i)
any Indebtedness due or to become due from Agent or any of Lenders to Guarantor
and (ii) any moneys, credits or other property belonging to Guarantor at any
time held by or coming into the possession of Agent or any of Lenders or any
affiliates thereof, whether for deposit or otherwise. Agent and Lenders shall
appropriate and apply towards payment of the Obligations only moneys, credits or
other property of Guarantor and of Guarantor's direct and indirect wholly-owned
subsidiaries.

          8. Notwithstanding any provision of this Guaranty to the contrary, it
is not intended that this Guaranty constitute a "Fraudulent Conveyance" (as
defined below). Consequently, Guarantor agrees that if the Guaranty would, but
for the application of this sentence. constitute a Fraudulent Conveyance, this
Guaranty shall be valid and enforceable only


                                       3
<PAGE>   155


to the maximum extent that would not cause this Guaranty to constitute a
Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have
been amended accordingly at all relevant times. For purposes hereof, a
"Fraudulent Conveyance" means a fraudulent conveyance under Section 548 of the
Bankruptcy Code (or any successor section) or a fraudulent conveyance or
fraudulent transfer under the provisions of any applicable fraudulent conveyance
or fraudulent transfer law or similar law of any state, nation or other
governmental unit, as in effect from time to time.

          9. The obligations of Guarantor under this Guaranty shall not be
altered, limited or affected by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Borrower or by any defense which Borrower may have by reason
of the order, decree or decision of any court or administrative body resulting
from any such proceeding. Guarantor acknowledges and agrees that any interest
on the Obligations which accrues after the commencement of any such proceeding
(or, if interest on any portion of the Obligations ceases to accrue by
operation of law by reason of the commencement of said proceeding, such interest
as would have accrued on any such portion of the Obligations if said proceedings
had not been commenced) shall be included in the Obligations, since it is the
intention of the parties that the amount of the Obligations which is guaranteed
by Guarantor pursuant to this Guaranty should be determined without regard to
any rule of law or order which may relieve Borrower of any portion of such
Obligations. Guarantor will permit, to the extent permitted by law, any trustee
in bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Agent for the benefit of the Lenders, or
allow the claim of Agent in respect of, any such interest accruing after the
date on which such proceeding is commenced.

          10. Guarantor consents and agrees that neither Agent nor any Lender
shall be under any obligation to marshal any assets in favor of Guarantor or
against or in payment of any or all of the Obligations. Guarantor further agrees
that, to the extent that Borrower makes a payment or payments to Agent or
Lenders, or Agent receives any proceeds of any collateral, for its benefit and
the ratable benefit of Lenders, which payment or payments or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to Borrower, its estate, trustee, receiver or any
other party, including without limitation Guarantor, under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Obligations or the part thereof which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction
occurred, and this Guaranty shall continue to be in existence and in full force
and effect, irrespective of whether any evidence of indebtedness has been
surrendered or cancelled.

          11. No delay on the part of Agent or Lenders in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Agent or Lenders of any right or remedy shall preclude any further
exercise thereof; nor shall any modification or

                                       4
<PAGE>   156




waiver of any of the provisions of this Guaranty be binding upon Agent or
Lenders, except as expressly set forth in a writing duly signed and delivered on
Agent's behalf by an authorized officer or agent of Agent. Agent's or Lenders'
failure at any time or times hereafter to require strict performance by Borrower
or Guarantor of any of the provisions, warranties, terms and conditions
contained in any Loan Document, agreement, guaranty instrument or document now
or at an), time or times executed by Borrower, Guarantor or any other Person
obligated under the Loan Documents shall not constitute a waiver of or affect
or diminish any right of Agent and Lenders at any time or times hereafter to
demand strict performance thereof and such right shall not be deemed to have
been waived by any act or knowledge of Agent or Lenders, or their respective
agents, officers or employees, unless such waiver is contained in an instrument
in writing signed by an officer or agent of Agent and directed to Borrower,
Guarantor or such other Person, as applicable, specifying such waiver. No waiver
by Agent or Lenders of any default shall operate as a waiver of any other
default or the same default on a future occasion, and no action by Agent or
Lenders permitted hereunder shall in any way affect or impair Agent's or
Lenders' rights or the obligations of Guarantor under this Guaranty. Any
determination by a court of competent jurisdiction of an amount owing by
Borrower to Agent or Lenders, or both, shall be conclusive and binding on
Guarantor irrespective of whether Guarantor was a party to the suit or action in
which such determination was made.

          12. Guarantor will file all claims against Borrower in any bankruptcy
or other proceeding in which the filing of claims is required or permitted by
law upon any indebtedness of Borrower to Guarantor or claim against Borrower by
Guarantor and will assign to Agent for the benefit of the Lenders all rights of
Guarantor thereunder. If Guarantor does not file any such claim, Agent, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of
Guarantor or, in Agent's discretion, to assign the claim and to cause proof of
claim to be filed in the name of Agent's nominee. Agent or its nominee shall
have the sole right to accept or reject any plan proposed in such proceeding and
to take any other action which a party filing a claim is entitled to take. In
all such cases, whether in administration, bankruptcy or otherwise, the person
or persons authorized to pay such claim shall pay to Agent the full amount
payable on such claims, and, to the full extent necessary for that purpose,
Guarantor hereby assigns to Agent for the benefit of the Lenders all of
Guarantor's rights to any such payments or distributions to which Guarantor
would otherwise be entitled; provided, however, that Guarantor's obligations
hereunder shall not be satisfied except to the extent that Agent receives cash
by reason of any such payment or distribution. If Agent receives anything
hereunder other than cash, the same shall be held as collateral for amounts due
under this Agreement.

          13. This Guaranty shall be binding upon Guarantor and upon the
successor and permitted assigns of Guarantor and shall inure to the benefit of
Agent's and Lenders' respective successors and assigns. All references herein to
Borrower shall be deemed to include its successors, transferees and permitted
assigns and all references herein to Agent or Lenders shall be deemed to include
their successors, transferees and assigns. Borrower's successors and permitted
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of


                                       5
<PAGE>   157




or for Borrower. All references to the singular shall be deemed to include the
plural, and vice versa, where the context so requires.

          14. Guarantor is fully aware of the financial condition of Borrower
and is executing and delivering this Guaranty based solely upon Guarantor's own
independent investigation of all matters pertinent hereto and is not relying in
any manner upon any representation or statement of Agent. Guarantor represents
and warrants that Guarantor is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Agent to
furnish to Guarantor any information now or hereafter in Agent's possession
concerning the same or any other matter. By executing this Guaranty, Guarantor
knowingly accepts the full range of risks encompassed within. a contract of this
type, which risks Guarantor acknowledges. Guarantor shall have no right to
require Agent to obtain or disclose any information with respect to the
Obligations, the financial condition or character of Borrower or Borrower's
ability to perform the Obligations, the existence or nonexistence of any other
guaranties of all or any part of the Obligations, any action or nonaction on the
part of Agent, Borrower, or any other person, or any other matter, fact or
occurrence whatsoever.

          15. Guarantor understands and agrees that, in accordance with the
terms of the Credit Agreement, any Lender may elect, at any time, to sell,
assign, or participate all or any part of such Lender's interest in the Loans
and the Facility, and that any such sale, assignment or participation may be to
one or more Persons as provided in Section 11. 13 of the Credit Agreement.
Subject to Section 12.17 of the Credit Agreement, Guarantor further agrees that
Agent or any Lender may disseminate to any such potential purchaser(s),
assignee(s) or participant(s) all documents and information (including without
limitation all financial information) which has been or is hereafter provided to
or known to Agent or any Lender with respect to: (a) the Property owned or
leased by Guarantor and its operation; (b) any party connected with the Loans
(including, without limitation, Guarantor, Borrower, any partner of Borrower or
Guarantor or any other guarantor); and/or (c) any lending relationship other
than the Facility which Agent or any Lender may have with any party connected
with the Facility.

          16. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST GUARANTOR WITH RESPECT TO
THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE AND ALL JUDICIAL PROCEEDINGS
BROUGHT BY GUARANTOR WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING
SITUS WITHIN THE BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE NORTHERN
DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, GUARANTOR
ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES
TO BE BOUND BY ANY FINAL JUDGMENT

                                       6
<PAGE>   158


RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. GUARANTOR
HEREBY DESIGNATES AND APPOINTS ELLEN KELLEHER, ESQ., MANUFACTURED HOME
COMMUNITIES, INC., TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS
60606, TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS
IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. SUCH APPOINTMENT SHALL BE
REVOCABLE ONLY WITH AGENT'S PRIOR WRITTEN APPROVAL GUARANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED ON THE SIGNATURE PAGES
HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT. GUARANTOR AGENT AND
LENDERS IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, AND (B) ANY OBJECTION
(INCLUDING WITHOUT LIMITATION ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY
OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST GUARANTOR IN
THE COURTS OF OTHER JURISDICTION. GUARANTOR AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIM IN ANY PROCEEDING BROUGHT BY AGENT OR A LENDER WITH
RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT.

          17. This Guaranty shall be governed by, and shall be construed and
enforced accordance with, the laws of the State of Illinois without regard to
conflict of law principles.

          18. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.

          19. This Guaranty amends and restates in its entirety that certain
REIT Guaranty dated as of August 16, 1994 executed by Guarantor in connection
with the Original Credit Agreement, as such REIT Guaranty has been heretofore
amended, modified and confirmed.

                            [SIGNATURE PAGE FOLLOWS]


                                       7

<PAGE>   159




          IN WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor
as of this 28th day of April, 1998.

                            GUARANTOR:

                            MANUFACTURED HOME COMMUNITIES, INC.
                            a Maryland corporation

                            By: /s/ Ellen Kelleher
                               ------------------------------
                            Name: Ellen Kelleher
                                 ----------------------------
                            Title: Executive VP/General Counsel
                                  ---------------------------

                            Address:  Two North Riverside Plaza, Suite 800
                                      Chicago, Illinois 60606


                                      S-1
<PAGE>   160


                              SOLVENCY CERTIFICATE
                       (MHC Operating Limited Partnership)

          I, Thomas P. Heneghan, the Chief Financial Officer of Manufactured
Home Communities, Inc., a Maryland corporation (the "REIT"), which is the
general partner of MHC Operating Limited Partnership, an Illinois limited
partnership (the "Borrower"), in my capacity as Chief Financial Officer of the
REIT, hereby certify to Wells Fargo Bank, N.A. as agent for the lenders (the
"Lenders") under the Second Amended and Restated Credit Agreement of even date
herewith (as amended, supplemented or restated from time to time, the "Credit
Agreement) by and among the Borrower, the REIT, Agent and the Lenders, and to
the Lenders that:

          1. I am the duly elected, qualified and acting Chief Financial Officer
of the REIT, which is the general partner of the Borrower, and I am familiar
with the business and financial matters hereinafter described.

          2. This Certificate, is made and delivered to Wells Fargo Bank, N.A.,
as Agent on behalf of the Lenders, for the purpose of inducing the Lenders to
advance the Loans (as defined in the Credit Agreement) to Borrower, pursuant to
the Credit Agreement. Each capitalized term used herein without definition shall
have the meaning ascribed to such term in the Credit Agreement.

          3. Immediately following the execution of the Loan Documents to which
it is a party, including without limitation, the Credit Agreement, the Borrower
will be able to pay its debts as they mature, will have capital sufficient to
carry on its business and all businesses in which it presently intends to engage
and will have assets which will have a present fair salable value and a fair
valuation greater than the amount of its liabilities, whether direct or
contingent.

          4. The Borrower does not intend to incur debts beyond its ability to
pay them as they mature.

          5. The Borrower does not contemplate filing a petition in bankruptcy
or for an arrangement or reorganization under Federal bankruptcy law, nor to its
knowledge are there any threatened bankruptcy or insolvency proceedings against
the Borrower.

                            [SIGNATURE PAGE FOLLOWS]


                                       1
<PAGE>   161




Dated: April 28, 1998

                            MHC OPERATING LIMITED PARTNERSHIP, an
                            Illinois limited partnership

                            By: MANUFACTURED HOME
                            COMMUNITIES, INC., a Maryland corporation as
                            General Partner

                                 By:  /s/ Thomas P. Heneghan
                                    ----------------------------
                                 Name: Thomas P. Heneghan
                                      --------------------------
                                 Title: EVP & CFO
                                       -------------------------

                 Signature page to Solvency Certificate of MHC
                   Operating Limited Partnership (Revolver).


                                      S-1
<PAGE>   162


                              SOLVENCY CERTIFICATE
                      (Manufactured Home Communities, Inc.)

          I, Thomas P. Heneghan, the Chief Financial Officer of Manufactured
Home Communities, Inc., a Maryland corporation (the "REIT"), which is the
general partner of MHC Operating Limited Partnership, an Illinois limited
partnership (the "Borrower"), in my capacity as Chief Financial Officer of the
REIT, hereby certify to Wells Fargo Bank, N.A. as agent for the lenders (the
"Lenders") under the Second Amended and Restated Credit Agreement of even date
herewith (as amended, supplemented or restated from time to time, the "Credit
Agreement) by and among the Borrower, the REIT, Agent and the Lenders, and to
the Lenders that:

          1. I am the duly elected, qualified and acting Chief Financial Officer
of the REIT, which is the general partner of the Borrower, and I am familiar
with the business and financial matters hereinafter described.

          2. This Certificate is made and delivered to Wells Fargo Bank, N.A.,
as Agent on behalf of the Lenders, for the purpose of inducing the Lenders to
advance the Loans (as defined in the Credit Agreement) to Borrower, pursuant to
the Credit Agreement. Each capitalized term used herein without definition shall
have the meaning ascribed to such term in the Credit Agreement.

          3. Immediately following the execution of the Loan Documents to which
it is a party, including without limitation, the REIT Guarantee, the REIT will
be able to pay its debts a they mature, will have capital sufficient to carry on
its business and all businesses in which it presently intends to engage and will
have assets which will have a present fair salable value and fair valuation
greater than the amount of its liabilities, whether direct or contingent.

          4. The REIT does not intend to incur debts beyond its ability to pay
them as they mature.

          5. The REIT does not contemplate filing a petition in bankruptcy or
for an arrangement or reorganization under Federal bankruptcy law, nor to its
knowledge are there any threatened bankruptcy or insolvency proceedings against
the REIT

                            [SIGNATURE PAGE FOLLOWS]


                                       1
<PAGE>   163


Dated: April 28, 1998

                                MANUFACTURED HOME COMMUNITIES,
                                INC., a Maryland corporation, as General Partner

                                By:  /s/ Thomas P. Heneghan
                                   ----------------------------
                                Name: Thomas P. Heneghan
                                     --------------------------
                                Title: EVP & CFO
                                      -------------------------


                   Signature page to Solvency Certificate of
                Manufactured Home Communities, Inc. (Revolver).

                                      S-1
<PAGE>   164




                             COMPLIANCE CERTIFICATE

          This Compliance Certificate is delivered pursuant to the Second
Amended and Restated Credit Agreement dated as of April 28, 1998 (as amended,
supplemented and restated from time to time, the "Credit Agreement"), among MHC
Operating Limited Partnership, the Lenders (as defined therein or made party
thereto), and Wells Fargo Bank, N.A., as Agent. All capitalized defined terms
used herein shall have the meaning ascribed to such terms in the Credit
Agreement.

          1. The undersigned hereby certifies that the undersigned has reviewed
the terms of the Credit Agreement and other Loan Documents and has made a review
in reasonable detail of the transactions consummated by and financial condition
of the REIT, the Borrower, the Subsidiaries and the Agreement Parties during the
accounting period covered by the financial statements being delivered to Lender
along with this Compliance Certificate and

          (a) Such review has not disclosed the existence during or at the end
     of such accounting period, and the undersigned does not have knowledge of
     the existence as of the date hereof, of any condition or event which
     constitutes an Unmatured Event of Default or an Event of Default (except as
     set forth in paragraph (b) hereof).

          (b) The financial statements being delivered to Agent along with this
     Compliance Certificate have been prepared in accordance with the books and
     records of the REIT, on a consolidated basis, and fairly present the
     financial condition of the REIT, on a consolidated basis, at the date
     thereof (if applicable, subject to normal year-end adjustments) and the
     results of operations and cash flows, on a consolidated basis, for the
     period then ended.

          (c) The nature and period of existence of the condition(s) or event(s)
     which constitute an Unmatured Event(s) of Default or an Event(s) of Default
     is (are) as follows: None.

          (d) Borrower (is taking) (is planning to take) the following action
     with respect to the condition(s) or event(s) set forth in paragraph (b)
     above: N/A

          2. As of the end of the most recently ended accounting period (March
 31, 1998):

          (a) Total Liabilities to Gross Asset Value. Total Liabilities:
     $589,989,000.00 Gross Asset Value: $1,183,980,000.00. Ratio: 0.49:1 (Ratio
     not to exceed 0.6:1).

          (b) Secured Debt to Gross Asset Value. Secured Debt: $409,500,000.00.
     Gross Asset Value: $1,183,980,000.00. Ratio: 0.35:1 (Ratio not to exceed
     0.4:1).

          (c) EBITDA to Interest Expense Ratio. EBITDA: $25,824,000.00. Interest
     Expense: $10,019,000.00. Ratio: 2.61 (Ratio not to be less than 2.0:1).

          (d) EBITDA to Fixed Charges Ratio. EBITDA: $25,824,000.00. Fixed
     Charges: $11,954,000.00. Ratio: 2.2:1 (Ratio not to be less than 1.75:1).


                                       1

<PAGE>   165


          (e) Unencumbered Net Operating Income to Unsecured Interest Expense.
     Unencumbered Net Operating Income: $11,336,000.00. Unsecured Interest
     Expense: $2,360,000.00. Ratio: 4.8:1 (Ratio not to be less than 1.80:1).

          (f) Unencumbered Pool. Borrower shall not permit the ratio of (a) the
     sum of (i) Unencumbered Asset Value: $518,236,000.00; (ii) Cash and Cash
     Equivalents owned by Borrower subject to no Lien in excess of $10MM: $0 to
     (b) outstanding Unsecured Debt: $150,488,000.00. Ratio: 3.4:1 (Ratio not to
     be less than 1.80:1).

          (g) Minimum Net Worth. Borrower will maintain Net Worth of not less
     than $258,317,100 plus 90% of all Net Offering Proceeds received by the
     REIT or Borrower after September 30, 1996. Net Worth: $386,878,000.00.

          (h) Permitted Holdings. Borrower and its Subsidiaries may acquire or
     maintain the following Permitted Holdings so long as (i) the aggregate
     value whether held directly or indirectly by Borrower and its Subsidiaries
     does not exceed, at any time, 20% of Gross Asset Value for the Borrower as
     a whole and (ii) the value of each Permitted Holding does not exceed, at
     any time the following percentages of Borrower's Gross Asset Value:

<TABLE>
<CAPTION>
                                                                     % OF GROSS
                PERMITTED HOLDINGS                     MAXIMUM       ASSET VALUE
- ------------------------------------------------  ----------------  -------------
<S>  <C>                                          <C>               <C>
- --   Non manufactured home community property            10%            0.6%
     (other than cash or Cash Equivalents)

- --   Land                                                 5%            0%

- --   Securities (issued by REITs primarily                5%            0%
     engaged in the development, ownership and
     management of Manufactured Home communities)


- --   Manufactured Home Community Mortgage                10%            1.1%
     other than mortgage indebtedness which is
     either eliminated in the consolidation of
     the REIT, Borrower and the Subsidiaries or
     accounted for as investments in real estate
     under GAAP

- --   Manufactured Home Community Partnership             10%            0.5%
     Interest other than Controlled Partnership
     Interests


- --   Development Activity                                10%            0.5%
</TABLE>



          3. All representations and warranties contained in the
above-referenced Credit Agreement remain true and correct in all material
respects. No Event of Default described in Section 10.01(g) or Section 10.01(h)
has occurred and no other Event of Default or Unmatured

                                       2
<PAGE>   166


Event of Default has occurred and is continuing. There has been no Material
Adverse Effect to the Borrower or the REIT.

          4. As of the end of the Fiscal Quarter covered by the financial
statements being delivered to Agent along with this Compliance Certificate, the
weighted average occupancy rate of the Properties listed on Exhibit F to the
Credit Agreement together with those designated by Borrower is at least
eight-five percent (85%)

Date: April 28, 1998                            /s/ Thomas P. Heneghan
                                                --------------------------------
                                                Mr. Thomas P. Heneghan
                                                Chief Financial Officer the REIT



                                       3

<PAGE>   1
                                                                    EXHIBIT 10.3


                            FIRST AMENDMENT TO SECOND
                      AMENDED AND RESTATED CREDIT AGREEMENT

          THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
is dated as of December 18, 1998 (this "Amendment"), and is among MHC OPERATING
LIMITED PARTNERSHIP, an Illinois limited partnership ("Borrower"), MANUFACTURED
HOME COMMUNITIES, INC., a Maryland corporation (the "REIT"), each of the
undersigned "Lenders", WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity
as "Agent", "Swingline lender" and "Issuing Lender", BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, in its capacity as "Syndication Agent", and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as "Documentation Agent". Capitalized
terms used herein and not defined herein shall have the meanings ascribed to
them in the Credit Agreement referenced below.

          WHEREAS, the parties hereto have previously entered into that certain
Second Amended and Restated Credit Agreement dated as of April 28, 1998 (the
"Credit Agreement"); and

          WHEREAS, the parties hereto now desire to (i) increase the amount of
the Facility from One Hundred Fifty Million Dollars ($150,000,000) to One
Hundred Seventy-Five Million Dollars ($175,000,000), and (ii) add LASALLE
NATIONAL BANK ("LNB") as a "Lender" under the Credit Agreement. The Lenders who
are original parties to the Credit Agreement are herein referred to as the
"Existing Lenders."

          NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto agree as follows:

          1. Facility Amount. The amount of the Facility is hereby increased
from One Hundred Fifty Million Dollars ($150,000,000) to One Hundred
Seventy-Five Million Dollars ($175,000,000). The amount by which the Facility is
increased is referred to herein as the "Facility Increase Amount."

          2. Assignment and Assumption. Each Existing Lender hereby assigns to
LNB that portion of its Commitment equal to its Pro Rata Share of the Facility
Increase Amount. LNB hereby accepts and assumes such portions of the Commitments
of the Existing Lenders, and shall hereafter constitute a "Lender" under the
Credit Agreement with a Commitment as described in Section 3 hereof. Each
Existing Lender hereby represents and warrants that it is not in default of any
of its obligations under the Credit Agreement.

          3. Commitments. As of the date hereof, the Commitment of each of the
undersigned Lenders shall be in the amount set out under such Lender's name
under the heading "Commitment" on the counterpart signature pages attached to
this Amendment.


                                       1

<PAGE>   2




          4. Conditions to Effectiveness. The effectiveness of this Agreement is
subject to satisfaction of each of the following conditions precedent:

          (a) Borrower shall have executed and delivered to Agent for the
     benefit of LNB a Loan Note in favor of LNB in the amount of Twenty-Five
     Million Dollars ($25,000,000) and substantially in the form attached hereto
     as Exhibit A;

          (b) Borrower shall have delivered to Agent for the benefit of the
     Existing Lenders and LNB the following corporate and partnership
     documents:

               (i) With respect to Borrower: a certified copy of Borrower's
          limited partnership agreement; a certified copy of Borrower's
          Certificate of Limited Partnership; a certificate of existence for
          Borrower from the State of Illinois; and a certificate of Borrower's
          Secretary or an officer comparable thereto (a "Secretary's
          Certificate") with respect to Borrower and pertaining to
          authorization, incumbency and by-laws, if any; and

               (ii) With respect to the REIT: certified copies of the REIT's
          certificate of incorporation and by-laws; a good standing certificate
          of the REIT from the State of Maryland; and a Secretary's Certificate
          with respect to the REIT pertaining to authorization, incumbency and
          by-laws; and

          (c) Borrower shall have delivered to Agent for the benefit of the
     Existing Lenders and LNB a favorable opinion of counsel for Borrower and
     the REIT in form and substance reasonably satisfactory to Agent and its
     counsel.

          5. LNB Acknowledgments. LNB hereby represents and warrants to each of
the Existing Lenders as follows:


          (a) LNB has made and shall continue to make its own independent
     investigation of the financial condition, affairs and creditworthiness of
     Borrower and any other person or entity obligated under the Loan Documents.

          (b) LNB has received copies of the Loan Documents and such other
     documents, financial statements and information as it has deemed
     appropriate to make its own credit analysis and decision to become a Lender
     under the Credit Agreement.

          6. No Existing Lender Responsibility. No Existing Lender makes any
representation or warranty regarding, or assumes any responsibility to LNB for:

                                        2



<PAGE>   3


          (a) The execution, effectiveness, genuineness, validity,
     enforceability, collectibility or sufficiency of the Loan Documents or any
     representations, warranties, recitals or statements made in the Loan
     Documents or in any financial or other written or oral statement,
     instrument, report, certificate or any other documents furnished or made
     available to LNB with respect to the Facility, Borrower or the REIT;

          (b) The performance or observance of any of the terms, covenants or
     agreements contained in any of the Loan Documents or as to the existence or
     possible existence of any Unmatured Event of Default or Event of Default
     under the Loan Documents;

          (c) The accuracy or completeness of any information furnished or made
     available to LNB with respect to the Facility, Borrower or the REIT; or

          (d) Any investigation of the financial condition, affairs or
     creditworthiness of Borrower or the REIT, or to provide LNB with any credit
     or other information with respect thereto.

          7. LNB Bound by Credit Agreement. Effective on the date hereof, LNB
(a) shall be deemed to be a party to the Credit Agreement, (b) agrees to be
bound by the Credit Agreement to the same extent as it would have been if it had
been an original Lender thereunder, and (c) agrees to perform in accordance with
their respective terms all of the obligations which are required under the Loan
Documents to be performed by it as a Lender which first arise on or after the
date hereof. LNB appoints and authorizes Agent to take such actions as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to Agent by the terms thereof, together with such powers as are reasonably
incidental thereto. Without limitation of the foregoing, LNB agrees to be bound
by the provisions of Section 12.23 of the Credit Agreement.

          8. Consent of Borrower and the REIT.

          (a) Borrower hereby consents to the assignment and assumption set
     forth in Section 2 hereof, and the inclusion of LNB as a Lender under the
     Loan Documents as provided herein.

          (b) The REIT hereby consents to the terms of this Amendment and agrees
     that the REIT Guaranty remains valid and enforceable and that the REIT has
     no defenses or offsets to enforcement against the REIT under the REIT
     Guaranty. The REIT hereby confirms that the REIT Guaranty remains effective
     with respect to the Loans, the maximum principal amount of which is
     increased by the increase in the amount of the Facility as provided herein.


                                       3

<PAGE>   4



          9. Representations and Warranties. Borrower hereby represents and
warrants as follows:

          (a) All of the representations and warranties contained in the Credit
     Agreement and in the other Loan Documents are true and correct in all
     material respects on and as of the date hereof except to the extent such
     representation and warranty is made as of a specified date, in which case
     such representation and warranty is true and correct as of such specified
     date.

          (b) No Event of Default or Unmatured Event of Default exists as of the
     date hereof.

          10. Effect on Credit Agreement. The Credit Agreement and all other
Loan Documents (each as amended, supplemented or otherwise modified hereby)
shall remain in full force and effect and are hereby ratified and confirmed in
all respects. Except as expressly provided herein or pursuant hereto, the
execution, delivery, performance and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or any Lender under
the Loan Documents, nor constitute a waiver of any provisions of any of the Loan
Documents.

          11. Miscellaneous

          (a) Execution in Counterparts. This Amendment may be executed in any
     number of counterparts, and each such counterpart, when so executed and
     delivered, shall be deemed to be an original and binding upon the party
     signing such counterpart; all such counterparts taken together shall
     constitute one and the same instrument.

          (b) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
     CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
     ILLINOIS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

          (c) Headings. Section headings in this Amendment are included herein
     for convenience of reference only and shall not constitute a part of this
     Amendment for any other purpose.

          (d) Entire Agreement. This Amendment is the entire agreement among the
     parties with respect to the matters addressed herein, and may not be
     modified except by written modification signed by all parties hereto.


                                        4

<PAGE>   5




          (e) Successors and Assigns. This Amendment shall be binding upon and
     inure to the benefit of the parties hereto and their respective heirs,
     successors, personal representatives and assigns (as permitted under the
     Credit Agreement).

          (f) Fees and Expenses. Simultaneously herewith, Borrower has paid a
     loan fee to LNB and an amendment fee to the Existing Lenders in amounts
     previously agreed among Borrower and LNB and Borrower and the Existing
     Lenders, as the case may be. Pursuant to Section 12.01(a) of the Credit
     Agreement, Borrower hereby agrees to promptly pay all reasonable attorneys'
     fees and expenses or other costs or expenses incurred by Agent in
     connection with this Amendment and the transactions contemplated hereby.

                            [SIGNATURE PAGES FOLLOW]



                                       5

<PAGE>   6



          IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date set forth above.

                    MHC OPERATING LIMITED PARTNERSHIP, an
                    Illinois limited partnership

                            By: MANUFACTURED HOME
                            COMMUNITIES, INC., a Maryland corporation, as
                            General Partner

                            By: /s/ Ellen Kelleher
                               ------------------------------------------------
                            Name:  ELLEN KELLEHER
                                 ----------------------------------------------
                            Title: EXECUTIVE VICE PRESIDENT & GENERAL COUNSEL
                                  ---------------------------------------------

                    MANUFACTURED HOME COMMUNITIES, INC., a
                    Maryland corporation

                            By: /s/ Ellen Kelleher
                               ------------------------------------------------
                            Name:  ELLEN KELLEHER
                                 ----------------------------------------------
                            Title: EXECUTIVE VICE PRESIDENT & GENERAL COUNSEL
                                  ---------------------------------------------


                                      S-1
<PAGE>   7


                 WELLS FARGO BANK, NATIONAL ASSOCIATION, as
                 Agent, Swingline Lender, Issuing Lender and a Lender

                          By: /s/ Steven R. Lowery
                             -------------------------------
                          Name:  STEVEN R. LOWERY
                               -----------------------------
                          Title:  VICE PRESIDENT
                                ----------------------------
                 Commitment: $50,000,000



                                       S-2


<PAGE>   8





                           BANK OF AMERICA NATIONAL TRUST AND
                           SAVINGS ASSOCIATION, as Syndication Agent and a
                           Lender

                                    By: /s/ Megan McBride
                                       ---------------------------
                                    Name:  Megan McBride
                                         -------------------------
                                    Title:  Vice President
                                          ------------------------

                           Commitment: $33,333,333.33



                                      S-3


<PAGE>   9


                           MORGAN GUARANTY TRUST COMPANY OF NEW
                           YORK, as Documentation Agent and a Lender

                                    By: /s/ Richard L. Dugoff
                                       ---------------------------
                                    Name:  Richard L. Dugoff
                                         -------------------------
                                    Title:  Vice President
                                          ------------------------

                           Commitment: $33,333,333.33



                                      S-4

<PAGE>   10



                         COMMERZBANK AKTIENGESELLSCHAFT, Chicago
                         Branch, as a Lender

                                  By: /s/ Douglas P. Traynor /s/ Christian Berry
                                     -------------------------------------------
                                  Name:  Douglas P. Traynor  Christian Berry
                                       -----------------------------------------
                                  Title:  Vice President     Assistant Treasurer
                                        ----------------------------------------

                         Commitment: $33,333,333.33



                                      S-5


<PAGE>   11


                               LASALLE NATIONAL BANK, as a Lender

                                    By: /s/ Peter Margolin
                                       ---------------------------------
                                    Name:  Peter Margolin
                                         -------------------------------
                                    Title:  Commercial Banking Officer
                                          ------------------------------

                               Commitment: $25,000,000

                               Address:
                               LaSalle National Bank
                               135 South LaSalle
                               3rd Floor, Suite 1225
                               Chicago, Illinois 60603
                               Attention: Peter Margolin
                               Telecopy: 312-904-6691




                                       S-6

<PAGE>   1
                                                                    EXHIBIT 10.4



                      AMENDED AND RESTATED CREDIT AGREEMENT

                                   (TERM LOAN)

                                      AMONG

                       MHC OPERATING LIMITED PARTNERSHIP,
                        AN ILLINOIS LIMITED PARTNERSHIP,
                                  AS BORROWER,

                      MANUFACTURED HOME COMMUNITIES, INC.,
                             A MARYLAND CORPORATION,
                                    THE REIT,

                             WELLS FARGO BANK, N.A.,

                         BANK OF AMERICA NATIONAL TRUST
                            AND SAVINGS ASSOCIATION,

                         COMMERZBANK AKTIENGESELLSCHAFT,
                                 CHICAGO BRANCH

                                       AND

                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK,

                          TOGETHER WITH THOSE ASSIGNEES
                        BECOMING PARTIES HERETO PURSUANT
                          TO SECTION 10.11, AS LENDERS,

                             WELLS FARGO BANK, N.A.,
                                    AS AGENT

                           DATED AS OF APRIL 28, 1998


<PAGE>   2

<TABLE>
<S>                                                                                                          <C>
RECITALS......................................................................................................1
ARTICLE I - DEFINITIONS ......................................................................................1
1.01  Certain Defined Terms ..................................................................................1
1.02  Computation of Time Periods............................................................................21
1.03  Terms..................................................................................................21
ARTICLE II - LOAN ...........................................................................................22
2.01  Making of Loan and Repayment ..........................................................................22
2.02  Borrowing and Interest Rate Election Authorization ....................................................25
2.03  Interest on the Loan...................................................................................25
2.04  Fees...................................................................................................30
2.05  Payments...............................................................................................30
2.06  Increased Capital......................................................................................31
2.07  Notice of Increased Costs .............................................................................31
2.08  Option to Replace Lenders .............................................................................32
ARTICLE III - CONDITIONS TO LOAN ............................................................................33
3.01  Conditions to Disbursement of Loan ....................................................................33
ARTICLE IV - REPRESENTATIONS AND WARRANTIES .................................................................35
4.01  Representations and Warranties as to Borrower .........................................................35
4.02  Representations and Warranties as to the REIT .........................................................40
ARTICLE V - REPORTING COVENANTS .............................................................................44
5.01  Financial Statements and Other Financial and Operating Information ....................................44
5.02  Press Releases; SEC Filings and Financial Statements ..................................................47
5.03  Environmental Notices .................................................................................47
5.04  Qualifying, Unencumbered Properties ...................................................................47
ARTICLE VI - AFFIRMATIVE COVENANTS ..........................................................................48
6.01  With respect to Borrower: .............................................................................48
6.02  With respect to the REIT: .............................................................................50
ARTICLE VII - NEGATIVE COVENANTS ............................................................................51
7.01  With respect to Borrower: .............................................................................52
7.02  With respect to the REIT: .............................................................................56
ARTICLE VIII - FINANCIAL COVENANTS ..........................................................................58
8.01  Total Liabilities to Gross Asset Value ................................................................58
</TABLE>


<PAGE>   3

<TABLE>
<S>                                                                                                         <C>
8.02  Secured Debt to Gross Asset Value .....................................................................58
8.03  EBITDA to Interest Expense Ratio.......................................................................58
8.04  EBITDA to Fixed Charges Ratio .........................................................................58
8.05  Unencumbered Net Operating Income to Unsecured Interest Expense .......................................58
8.06  Unencumbered Pool......................................................................................58
8.07  Minimum Net Worth......................................................................................59
8.08  Permitted Holdings.....................................................................................59
8.09  Calculation............................................................................................60
ARTICLE IX - EVENTS OF DEFAULT; RIGHTS AND REMEDIES .........................................................60
9.01  Events of Default......................................................................................60
9.02  Rights and Remedies....................................................................................64
9.03  Rescission.............................................................................................65
ARTICLE X -AGENCY PROVISIONS ................................................................................66
10.01 Appointment............................................................................................66
10.02 Nature of Duties.......................................................................................66
10.03 Loan Continuation/Conversion...........................................................................66
10.04 Distribution and Apportionment of Payments.............................................................67
10.05 Rights, Exculpation, Etc...............................................................................68
10.06 Reliance...............................................................................................69
10.07 Indemnification........................................................................................69
10.08 Agent Individually ....................................................................................69
10.09 Successor Agent; Resignation of Agent; Removal of Agent ...............................................69
10.10 Consents and Approvals ................................................................................70
10.11 Assignments and Participations ........................................................................72
10.12 Ratable Sharing .......................................................................................75
10.13 Delivery of Documents .................................................................................76
10.14 Notice of Events of Default ...........................................................................76
ARTICLE XI - MISCELLANEOUS ..................................................................................76
11.01 Expenses...............................................................................................76
11.02 Indemnity .............................................................................................77
11.03 Change in Accounting Principles .......................................................................78
11.04 Setoff.................................................................................................79
</TABLE>


                                       ii
<PAGE>   4

<TABLE>
<S>                                                                                                         <C>
11.05 Amendments and Waivers.................................................................................79
11.06 Independence of Covenants .............................................................................80
11.07 Notices and Delivery ..................................................................................81
11.08 Survival of Warranties, Indemnities and Agreements ....................................................81
11.09 Failure or Indulgence Not Waiver; Remedies Cumulative .................................................81
11.10 Marshaling; Recourse to Security; Payments Set Aside ..................................................81
11.11 Severability...........................................................................................82
11.12 Headings...............................................................................................82
11.13 Governing Law..........................................................................................82
11.14 Limitation of Liability................................................................................82
11.15 Successors and Assigns.................................................................................82
11.16 Usury Limitation.......................................................................................82
11.17 Confidentiality........................................................................................83
11.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL; WAIVER OF
PERMISSIVE COUNTERCLAIMS.....................................................................................83
11.19 Counterparts; Effectiveness; Inconsistencies ..........................................................84
11.20 Construction ..........................................................................................84
11.21 Entire Agreement ......................................................................................85
11.22 Agent's Action for Its Own Protection Only ............................................................85
11.23 Lenders' ERISA Covenant................................................................................85
</TABLE>



EXHIBITS

A    -   Assignment and Assumption
B    -   Closing Checklist
C    -   Compliance Certificate
D    -   Loan Note
E-1  -   Notice of Borrowing
E-2  -   Notice of Continuation
F    -   Qualified Unencumbered Properties

SCHEDULES

4.01(c) - Ownership of Borrower
4.01(r) - Environmental Matters
4.01(v) - Subsidiaries and Investment Affiliates



                                      iii
<PAGE>   5


                      AMENDED AND RESTATED CREDIT AGREEMENT

         THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of April 28,
1998 (as amended, supplemented or modified from time to time, the "Agreement")
and is among MHC Operating Limited Partnership, an Illinois limited partnership
("Borrower"), Manufactured Home Communities. Inc., a Maryland corporation (the
"REIT"), each of the Lenders, as hereinafter defined, and Wells Fargo Bank, N.A.
("Wells Fargo") in its capacity as Agent and as a Lender, Bank of America
National Trust and Savings Association, as Syndication Agent and as a Lender,
Morgan Guaranty Trust Company of New York, as Documentation Agent and as a
Lender, and Commerzbank Aktiengesellschaft, Chicago Branch, as a Lender.

                                    RECITALS

         A.   Borrower and the REIT have executed and delivered to Agent and the
Lenders that certain Credit Agreement dated as of April 3, 1997, by and among
Borrower, the REIT, Agent and the Lenders (the "Existing Credit Agreement"); and

         B.   Borrower, the REIT, Agent and the Lenders desire to amend and
restate the Existing Credit Agreement in its entirety to increase the term loan
facility provided thereby from Sixty Million Dollars ($60,000,000) to One
Hundred Million Dollars ($100,000.000), and make certain other modifications as
hereinafter set forth.

                                    AGREEMENT

                                    ARTICLE I

                                   DEFINITIONS

         1.01 Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings (such meanings to be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):

         "Accommodation Obligations" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of which that
person is liable for any Indebtedness or other obligation or liability of
another Person, including without limitation and without duplication (i) any
such Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans. advances, stock
purchases, capital


<PAGE>   6



contributions or otherwise), or to maintain solvency, assets, level of income,
or other financial condition, or to make payment other than for value received
and (ii) any obligation of such Person arising through such Person's status as a
general partner of a general or limited partnership with respect to any
Indebtedness, obligation or liability of such general or limited partnership.

         "Accountants" means any nationally recognized independent accounting
firm.

         "Adjusted Asset Value" means, as of any date of determination, (i) for
any Property for which an acquisition or disposition by Borrower or any
Subsidiary has not occurred in the Fiscal Quarter most recently ended as of such
date, the product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to such Property in a manner reasonably
acceptable to Agent, and the denominator of which is eight hundred seventy-five
ten thousandths (0.0875), and (ii) for any Property which has been acquired by
Borrower or any Subsidiary in the Fiscal Quarter most recently ended as of such
date, the Net Price of the Property paid by Borrower or its Subsidiaries for
such Property.

         "Affiliates" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, (b) the ownership of a general partnership interest in such Person
or (c) the ownership of twenty-five percent (25%) or more of the limited
partnership interests (or other ownership interests with similarly limited
voting rights) in such Person; provided, however, that in no event shall the
Affiliates of Borrower or any Subsidiary or any Investment Affiliate include
Persons holding direct or indirect ownership interests in the REIT or any other
real estate investment trust which holds a general partnership interest in
Borrower if such Person does not otherwise constitute an "Affiliate" hereunder;
provided, further, that the REIT and Borrower shall at all times be deemed
Affiliates of each other.

         "Agent" means Wells Fargo in its capacity as administrative agent for
the Lenders under this Agreement, and shall include any successor Agent
appointed pursuant hereto and shall be deemed to refer to Wells Fargo in its
individual capacity as a Lender where the context so requires.

         "Agreement" has the meaning ascribed to such term in the Preamble
hereto.

         "Agreement Party" means any Person, other than the REIT and Borrower.
which concurrently with this Agreement or hereafter executes and delivers a
guaranty in connection with this Agreement, which as of the date of
determination, is in force and effect.


                                       2
<PAGE>   7


         "Assignment and Assumption" means an Assignment and Assumption in the
form of Exhibit A hereto (with blanks appropriately filled in) delivered to
Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to Section 10.11.

         "Balloon Payment" means, with respect to any loan constituting
Indebtedness, any required principal payment of such loan which is either (i)
payable at the maturity of such Indebtedness or (ii) in an amount which exceeds
twenty-five percent (25%) of the original principal amount of such loan;
provided, however, that the final payment of a fully amortizing loan shall not
constitute a Balloon Payment.

         "Base Rate" means, on any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall at all times be equal to
the higher of (a) the base rate of interest per annum established from time to
time by Wells Fargo, and designated as its prime rate and in effect on such day,
and (b) the Federal Funds Rate as announced by the Federal Reserve Bank of New
York in effect on such day plus one half percent (0.5%) per annum. Each change
in the Base Rate shall become effective automatically as of the opening of
business on the date of such change in the Base Rate, without prior written
notice to Borrower or Lenders. The Base Rate may not be the lowest rate of
interest charged by any bank, Agent or Lender on similar loans.

         "Base Rate Loans" means that portion of the Loan bearing interest at
the Base Rate.

         "Base Rent" means the aggregate rent received by Borrower from tenants
which lease manufactured community home sites owned by Borrower minus any
amounts specifically identified as and representing payments for trash removal,
cable television, water, electricity, taxes, other utilities, and other rent
which reimburses expenses related to tenant's occupancy.

         "Benefit Plan" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which a Person or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the immediately preceding five (5) years, was
maintained administered, contributed to or was required to contribute to, or
under which a Person or any ERISA Affiliate may have any liability.

         "Borrower" has the meaning ascribed to such term in the preamble
hereto.

         "Borrower Plan" shall mean any Plan (A) which Borrower, any of its
Subsidiaries or any of its ERISA Affiliates maintains administers, contributes
to or is required to contribute to, or, within the five years prior to the
Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which Borrower, any of its Subsidiaries or any of its
ERISA Affiliates may incur any liability and (B) which covers any employee or
former employee of Borrower, any of its Subsidiaries or any of its ERISA
Affiliates (with respect to their relationship with such entities).



                                       3
<PAGE>   8


         "Borrower's Share" means Borrower's or the REIT's direct or indirect
share of the assets, liabilities, income, expenses or expenditures, as
applicable, of an Investment Affiliate based upon Borrower's or the REIT's
percentage ownership (whether direct or indirect) of such Investment Affiliate,
as the case may be.

         "Business Day" means (a) with respect to any payment or rate
determination of LIBOR Loans, a day, other than a Saturday or Sunday, on which
Agent is open for business in Chicago and San Francisco and on which dealings in
Dollars are carried on in the London inter bank market, and (b) for all other
purposes any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the States of California and Illinois, or is a day on which
banking institutions located in California and Illinois are required or
authorized by law or other governmental action to close.

         "Capital Expenditures" means, as applied to any Person for any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities during that period and including that portion of Capital Leases
which is capitalized on the balance sheet of a Person) by such Person during
such period that, in conformity with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
reflected in the balance sheet of such Person, excluding any expenditures
reasonably determined by such Person as having been incurred for expansion of
the number of manufactured home sites at a manufactured home community owned by
such Person.

         "Capital Leases," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person, excluding ground leases.

         "Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof,
(b) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two nationally recognized rating services
reasonably acceptable to Agent; (c) domestic corporate bonds, other than
domestic corporate bonds issued by Borrower or any of its Affiliates, maturing
no more than 2 years after the date of acquisition thereof and, at the time of
acquisition, having a rating of at least A or the equivalent from two nationally
recognized rating services reasonably acceptable to Agent; (d) variable-rate
domestic corporate notes or medium term corporate notes, other than notes issued
by Borrower or any of its Affiliates, maturing or resetting no more than I year
after the date of acquisition thereof and having a rating of at least AA or the
equivalent from, two nationally recognized rating services reasonably acceptable
to Agent; (e) commercial paper (foreign and domestic) or master notes, other
than commercial paper or master notes issued by

                                       4
<PAGE>   9




Borrower or any of its Affiliates, and, at the time of acquisition, having a
long-term rating of at least A or the equivalent from a nationally recognized
rating services reasonably acceptable to Agent and having a short-term rating of
at least A-1 and P-1 from S&P and Moody's, respectively (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then the highest
rating from such other nationally recognized rating services reasonably
acceptable to Agent); (f) domestic and Eurodollar certificates of deposit or
domestic time deposits or Eurotime deposits or bankers' acceptances (foreign or
domestic) that are issued by a bank (I) which has, at the time of acquisition, a
long-term rating of at least A or the equivalent from a nationally recognized
rating service reasonably acceptable to Agent and (II) if a domestic bank, which
is a member of the Federal Deposit Insurance Corporation; and (g) overnight
securities repurchase agreements, or reverse repurchase agreements secured by
any of the foregoing types of securities or debt instruments, provided that the
collateral supporting such repurchase agreements shall have a value not less
than 101% of the principal amount of the repurchase agreement plus accrued
interest.

         "Closing Checklist" means the Closing Checklist attached hereto as
Exhibit B, as the same may be amended by the parties.

         "Closing, Date" means the date on which this Agreement shall become
effective in accordance with Section 11. 19, which date shall be April 28, 1998
or such later date as to which Agent and Borrower agree in writing.

         "Commission" means the Securities and Exchange Commission.

         "Commitment" means, with respect to any Lender, the principal amount
set out under such Lender's name under the heading "Loan Commitment" on the
counterpart signature pages attached to this Agreement or as set forth on an
Assignment and Assumption complying with Section 10.11 and executed by such
Lender, as assignee, as such amount may be adjusted pursuant to the terms of
this Agreement.

         "Compliance Certificate" means a certificate in the form of Exhibit C
hereto delivered to Agent by Borrower pursuant to Section 5.01(c) and covering
Borrower's compliance with the financial covenants contained in Articles VII
and VIII hereof.

         "Contaminant" means any pollutant (as that term is defined in 42 U.S.C.
9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C. 1362(13)),
hazardous substance (as that term is defined in 42 U.S.C. 9601(14)), hazardous
chemical (as that term is defined by 29 C.F.R. Section 1910.1200(c)), toxic
substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), or any constituent of any such substance or waste, including, but not
limited to hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, urea formaldehyde insulation, radioactive
materials, biological substances, PCBs, pesticides, herbicides, asbestos, sewage
sludge, industrial slag, acids, metals, or solvents.



                                       5
<PAGE>   10




         "Continuation/Conversion Date" means, with respect to the continuation
of a LIBOR Loan or the conversion of a Base Rate Loan into a LIBOR Loan, and
vice versa, the date of such continuation or conversion.

         "Contractual Obligation," as applied to any Person, means any provision
of any Securities issued by that Person or any indenture, mortgage, deed of
trust, lease, contract, undertaking, document or instrument to which that Person
is a party or by which it or any of its properties is bound, or to which it or
any of its properties is subject (including without limitation any restrictive
covenant affecting such Person or any of its properties).

         "Controlled Partnership Interests" means ownership interests held by
the REIT and/or Borrower in a partnership or joint venture where the REIT or
Borrower (independently or collectively) has control over the management and
operations of the partnership or joint venture.

         "Convertible Securities" means evidences of indebtedness, shares of
stock, limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible into or
exchangeable for, with or without payment of additional consideration, shares of
common stock of the REIT or partnership interests of Borrower, as the case may
be, either immediately or upon the arrival of a specified date or the happening
of a specified event.

         "Court Order" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon the Person in
question.

         "Debt Service" means, for any period, Interest Expense for such period
plus scheduled principal amortization (exclusive of Balloon Payments) for such
period on all Indebtedness of the REIT, on a consolidated basis, plus, the
REIT's and Borrower's actual or potential liability, on a consolidated basis,
for scheduled principal amortization (exclusive of Balloon Payments) for such
period on all Indebtedness of Investment Affiliates that is recourse to the
REIT, Borrower or any Material Subsidiary.

         "Development Activity" means construction in process, that is being
performed by or at the direction of Borrower, of any manufactured home community
that will be owned and operated by Borrower upon completion of construction,
other than (i) construction in process of manufactured home communities not
owned by Borrower and for which Borrower has no contractual obligation to
purchase until completion of construction or (ii) construction in process for
the purpose of expanding manufactured home communities that have been operated
by Borrower or another owner for at least one (1) year prior to the commencement
of such expansion.

         "Documentation Agent means Morgan Guaranty Trust Company of New York in
its capacity as documentation agent for the Lenders under this Agreement



                                       6
<PAGE>   11


         "DOL" means the United States Department of Labor and any successor
department or agency.

         "Dollars" and "$" means the lawful money of the United States of
America.

         "EBITDA" means, for any period (i) Net Income for such period, plus
(ii) depreciation and amortization expense and other non-cash items deducted in
the calculation of Net Income for such period, plus (iii) Interest Expense
deducted in the calculation of Net Income for such period, plus, (iv) Taxes
deducted in the calculation of Net Income for such period, minus (v) the gains
(and plus the losses) from extraordinary or unusual items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of Net
Income for such period, minus (vi) earnings of Subsidiaries for such period
distributed to third parties, all of the foregoing without duplication.

         "Environmental Laws" means all federal, state, district, local and
foreign laws, and all orders, consent orders, judgments, notices, permits or
demand letters issued, promulgated or entered thereunder, relating to pollution
or protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or industrial substances or Contaminants into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contamination, chemicals, industrial
substances or Contaminants. The term Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"); the Toxic Substances Control Act, as
amended; the Hazardous Materials Transportation Act, as amended; the Resource
Conservation and Recovery Act, as amended ("RCRA"); the Clean Water Act, as
amended; the Safe Drinking Water Act, as amended; the Clean Air Act, as amended;
all analogous state laws; the plans, rules, regulations or ordinances adopted,
or other criteria and guidelines promulgated pursuant to the preceding laws or
other similar laws, regulations, rules or ordinances now or hereafter in effect
regulating public health, welfare or the environment.

         "Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under federal or state environmental laws or
regulations, or (b) damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a Contaminant into
the environment

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

         "ERISA Affiliate" means any (a) corporation which is, becomes, or is
deemed by any Governmental Authority to be a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the Internal Revenue
Code) as a Person or is so deemed by such Person, (b) partnership, trade or
business (whether or not incorporated) which is,


                                       7


<PAGE>   12


becomes or is deemed by any Governmental Authority to be under common control
(within the meaning of Section 414(c) of the Internal Revenue Code) with such
Person or is so deemed by such Person, (c) any Person which is, becomes or is
deemed by any Governmental Authority to be a member of the same "affiliated
service group" (as defined in Section 414(m) of the Internal Revenue Code) as
such Person or is so deemed by such Person, or (d) any other organization or
arrangement described in Section 414(o) of the Internal Revenue Code which is,
becomes or is deemed by such Person or by any Governmental Authority to be
required to be aggregated pursuant to regulations issued under Section 414(o) of
the Internal Revenue Code with such Person pursuant to Section 414(o) of the
Internal Revenue Code or is so deemed by such Person.

         "Event of Default" means any of the occurrences set forth in Article IX
after the expiration of any applicable grace period expressly provided therein.

         "Existing Credit Agreement" has the meaning set forth in the Recitals
hereto.

         "Existing Loan" means the "Loan" as defined in the Existing Credit
Agreement.

         "Existing Pro Rata Share" means, with respect to any Lender, such
Lender's "Pro Rata Share" as defined in the Existing Credit Agreement.

         "Extended Maturity Date" means April 3, 2002.

         "Extension Notice" has the meaning ascribed to such term in Section
2.01(d).

         "Facility" means the loan facility of One Hundred Million Dollars
($100,000,000) described in Section 2.01 (a).

         "FDIC" means the Federal Deposit Insurance Corporation or any successor
thereto.

         "Federal Funds Rate" means, for any period, a fluctuating interest
rate, rounded upwards to the nearest one hundredth of one percent (0.01%), per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.

         "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any governmental authority succeeding to its functions.

         "Financial Statements" has the meaning ascribed to such term in Section
5.01(a).

         "Fiscal Quarter" means a fiscal quarter of a Fiscal Year.



                                       8

<PAGE>   13




         "Fiscal Year" means the fiscal year of Borrower and the REIT which
shall be the twelve (12) month period ending on the last day of December in each
year.

         "Fixed Charges" for any Fiscal Quarter period means the sum of (i) Debt
Service for such period, (ii) 3% of Base Rent for such period, and (iii)
Borrower's Share of Capital Expenditures from Investment Affiliates for such
period.

         "Funds from Operations" means the definition of "Funds from Operations"
of the National Association of Real Estate Investment Trusts on the date of
determination (before allocation of minority interests).

         "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements, and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination and which are consistent with the past practices of the REIT and
Borrower.

         "Governmental Authority" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

         "Gross Asset Value" means (subject to the proviso in Section 8.08),
with respect to any Person as of any date of determination, the sum of the
Adjusted Asset Values for each Property then owned by such Person plus the value
of any cash or Cash Equivalent owned by such Person and not subject to any Lien.

         "Indebtedness," as applied to any Person (and without duplication),
means (a) all indebtedness, obligations or other liabilities (whether secured,
unsecured, recourse, non-recourse, direct, senior or subordinate) of such Person
for borrowed money, (b) all indebtedness obligations or other liabilities of
such Person evidenced by Securities or other similar instruments, (c) all
reimbursement obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's account or
other similar instruments for which a contingent liability exists, (d) all
obligations of such Person to pay the deferred purchase price of Property or
services, (e) all obligations in respect of Capital Leases of such Person, (f)
all Accommodation Obligations of such Person, (g) all indebtedness, obligations
or other liabilities of such Person or others secured by a Lien on any asset of
such Person, whether or not such indebtedness, obligations or liabilities are
assumed by, or are a personal liability of, such Person, (h) all indebtedness,
obligations or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange agreements
excluding all indebtedness, obligations or other liabilities in respect of such
Interest Rate Contracts to the extent that the aggregate notional amount
thereof does not exceed the aggregate principal amount of any outstanding fixed
or floating rate Indebtedness, obligations or other liabilities permitted under
this Agreement that exist as of the date that such Interest Rate



                                        9


<PAGE>   14


Contracts are entered into or that are incurred no more than thirty (30) days
after such Interest Rate Contracts are entered into and (i) ERISA obligations
currently due and payable.

         "Interest Expense" means, for any period and without duplication, total
interest expense, whether paid, accrued or capitalized (including the interest
component of Capital Leases but excluding interest expense covered by an
interest reserve established under a loan facility) of the REIT, on a
consolidated basis and determined in accordance with GAAP, plus the REIT's and
Borrower's actual or potential liability, on a consolidated basis, for accrued,
paid or capitalized interest with respect to Indebtedness of Investment
Affiliates that is recourse to the REIT, Borrower or any Material Subsidiary.

         "Interest Period" means, relative to any LIBOR Loans, the period
beginning on (and including) the date on which such LIBOR Loans are made as, or
converted into, LIBOR Loans, and shall end on (but exclude) the day which
numerically corresponds to such date one (I), two (2), three (3), six (6) or
twelve (12) months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in either case as
Borrower may select in its relevant Notice of Continuation/Conversion pursuant
to Section 2.01 (b); provided, however, that:

         (a) if such Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next following Business Day
(unless such next following Business Day is the first Business Day of a calendar
month, in which case such Interest Period shall end on the Business Day next
preceding such numerically corresponding day);

         (b) no Interest Period may end later than the Termination Date; and

         (c) with the reasonable approval of Agent (unless any Lender has
previously advised Agent and Borrower that it is unable to enter into LIBOR
contracts for an Interest Period of such duration), an Interest Period may have
a duration of less than one (1) month.

         "Interest Rate Contracts" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.

         "Interim Period" has the meaning ascribed to such term in Section
3.01(g).

         "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.

         "Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of Securities, or of a beneficial
interest in Securities, of any other Person, and any direct or indirect loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, advances to employees and similar items
made or incurred in the ordinary course of business), or capital contribution by
such Person to


                                       10


<PAGE>   15




any other Person, including all Indebtedness and accounts owed by that other
Person which are not current assets or did not arise from sales of goods or
services to that Person in the ordinary course of business. The amount of any
Investment shall be determined in conformity with GAAP.

         "Investment Affiliate" means any Person in whom the REIT, Borrower or
any Subsidiary holds an equity interest, directly or indirectly, whose financial
results are not consolidated under GAAP with the financial results of the REIT
or Borrower on the consolidated financial statements of the REIT and Borrower.

         "Investment Mortgages" means mortgages securing indebtedness directly
or indirectly owed to Borrower or any of its Subsidiaries, including
certificates of interest in real estate mortgage investment conduits.

         "IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.

         "Land" means unimproved real estate purchased or leased or to be
purchased or leased by Borrower or any of its Subsidiaries for the purpose of
future development of improvements.

         "Lender Affiliate "as applied to any Lender, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Lender. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means (a) the possession,
directly or indirectly, of the power to vote more than fifty percent (50%) of
the Securities having voting power for the election of directors of such Person
or otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise, or (b) the ownership of a general partnership interest or a
limited partnership interest representing more than fifty (50%) of the
outstanding limited partnership interests of a Person.

         "Lender Reply Period" has the meaning ascribed to such term in Section
10.10(a).

         "Lender Taxes" has the meaning ascribed to such term in Section
2.03(g).

         "Lenders" means Wells Fargo and any other bank, finance company,
insurance or other financial institution which is or becomes a party to this
Agreement by execution of a counterpart signature page hereto or an Assignment
and Assumption, as assignee.

         "Liabilities and Costs" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including punitive and treble
damages), costs, disbursements and expenses (including without limitation
reasonable attorneys', experts' and consulting fees


                                       11

<PAGE>   16




and costs of investigation and feasibility studies), fines, penalties and
monetary sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.

         "LIBOR" means, relative to any Interest Period for any LIBOR Loan, the
rate of interest obtained by dividing (i) the rate of interest determined by
Agent (whose determination shall be conclusive absent manifest error, which
shall not include any lower determination by any other banks) equal to the rate
(rounded upwards, if necessary, to the nearest one one-hundredth of one percent
(.01%)) per annum reported by Wells Fargo at which Dollar deposits in
immediately available funds are offered by Wells Fargo to leading banks in the
Eurodollar inter bank market at or about 11:00 AM London time two (2) Business
Days prior to the beginning of such Interest Period for delivery on the first
day of such Interest Period for a period approximately equal to such Interest
Period and in an amount equal or comparable to the LIBOR Loan to which such
Interest Period relates, by (ii) a percentage expressed as a decimal equal to
one (1) minus the LIBOR Reserve Percentage.

         "LIBOR Loans" means those portions of the Loan bearing interest, at all
times during an Interest Period applicable to such portion, at a fixed rate of
interest determined by reference to LIBOR.

         "LIBOR Margin" means one percent (1.00%).

         "LIBOR Reserve Percentage" means, relative to any Interest Period, the
average daily maximum reserve requirement (including, without limitation, all
basic, emergency, supplemental, marginal and other reserves) which is imposed
under Regulation D, as Regulation D may be amended, modified or supplemented, on
"Eurocurrency liabilities" having a term equal to the applicable Interest Period
(or in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any bank to United States residents), which
requirement shall be expressed as a decimal. LIBOR shall be adjusted
automatically on, and as of the effective date of, any change in the LIBOR
Reserve Percentage.

         "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights-of-way, zoning restrictions and the like),
lien (statutory or other) preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including without
limitation any conditional sale or other title retention agreement, the interest
of a lessor under a Capital Lease, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement (other than a financing statement filed by a "true" lessor pursuant to
9-408 of the Uniform Commercial Code) naming the owner of the asset to which
such Lien relates as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.

                                       12


<PAGE>   17


         "Loan" means the One Hundred Million Dollar ($100,000,000) loan made
pursuant to this Agreement and the Existing Credit Agreement.

         "Loan Documents" means, this Agreement, the Loan Notes, the REIT
Guaranty, and all other agreements, instruments and documents (together with
amendments and supplements thereto and replacements thereof) now or hereafter
executed by the REIT. Borrower or any Agreement Party, which evidence, guaranty
or secure the Obligations.

         "Loan Increase" means that portion of the Loan in excess of the
Existing Loan.

         "Loan Notes" means the promissory notes evidencing the Loan in the
aggregate original principal amount of One Hundred Million Dollars
($100,000,000) executed by Borrower in favor of Lenders, as they may be amended,
supplemented, replaced or modified from time to time. The initial Loan Notes and
any replacements thereof shall be substantially in the form of Exhibit D. The
Loan Notes shall be issued in substitution for the "Loan Notes" issued pursuant
to the Existing Credit Facility.

         "Manufactured Home Community Mortgages" means Investment Mortgages
issued by any Person engaged primarily in the business of developing, owning,
and managing manufactured home communities.

         "Manufactured Home Community Partnership Interests" means partnership
or joint venture interests issued by any Person engaged primarily in the
business of developing, owning, and managing manufactured home communities.

         "Material Adverse Effect" means a material adverse effect upon (i) the
ability of Borrower or the REIT to perform its covenants and obligations under
this Agreement and the other Loan Documents or (ii) the ability of Agent or
Lenders to enforce the Loan Documents. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has or will result in a
Material Adverse Effect," and the phrase "has no (or does not have a) Material
Adverse Effect" or "will not result in a Material Adverse Effect" or words
substantially similar thereto shall in all cases be intended to mean "does not
or will not result in a Material Adverse Effect."

         "Material Subsidiary" means any Subsidiary having a Gross Asset Value
in excess of One Hundred Million Dollars ($ 100,000,000).

         "Maturity Date" means April 3, 2000.

         "Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, and its successors and assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the Agent.

                                       13
<PAGE>   18


         "Multiemployer Plan" means an employee benefit plan defined in Section
4001 (a)(3) or Section 3(37) of ERISA which is, or within the immediately
preceding six (6) years was, maintained, administered, contributed to by or was
required to be contributed to by a Person or any ERISA Affiliate, or under which
a Person or any ERISA Affiliate may incur any liability.

         "Net Income" means, for any period, the net income (or loss) after
Taxes of the REIT, on a consolidated basis, for such period calculated in
conformity with GAAP.

         "Net Offering Proceeds" means all cash or other assets received by the
REIT or Borrower as a result of the sale of common stock, preferred stock,
partnership interests, limited liability company interests, Convertible
Securities or other ownership or equity interests in the REIT or Borrower less
customary costs and discounts of issuance paid by the REIT or Borrower, as the
case may be.

         "Net Operating Income" means, for any period, and with respect to any
Qualifying Unencumbered Property, the net operating income of such Qualifying
Unencumbered Property (attributed to such Property in a manner reasonably
acceptable to Agent) for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past practices of the
REIT and Borrower, and (iii) inclusive of an allocation of reasonable management
fees and administrative costs to such Qualifying Unencumbered Property
consistent with the past practices of the REIT and Borrower, except that, for
purposes of determining Net Operating Income, income shall not (a) include
security or other deposits, lease termination or other similar charges,
delinquent rent recoveries, unless previously reflected in reserves, or any
other items reasonably deemed by Agent to be of a non-recurring nature or (b) be
reduced by depreciation or amortization or any other non-cash item.

         "Net Price" means, with respect to the purchase of any Property by
Borrower or any Subsidiary, without duplication, (i) cash and Cash Equivalents
paid as consideration for such purchase, plus (ii) the principal amount of any
note or other deferred payment obligation delivered in connection with such
purchase (except as described in clause (iv) below), plus (iii) the value of any
other consideration delivered in connection with such purchase or sale
(including, without limitation, shares in the REIT and operating partnership
units or preferred operating partnership units in Borrower) (as reasonably
determined by Agent), minus (iv) the value of any consideration deposited into
escrow or subject to disbursement or claim upon the occurrence of any event,
minus (v) reasonable costs of sale and taxes paid or payable in connection with
such purchase.

         "Net Worth" means, at any time, the tangible net worth of the REIT
determined in accordance with GAAP, on a consolidated basis, not including
depreciation and amortization expense of the REIT since September 30, 1996 and
not including the REIT's share of depreciation and amortization expense of
Investment Affiliates since September 30, 1996. The

                                       14


<PAGE>   19




parties hereto acknowledge that the Net Worth as of December 31, 1997 was Three
Hundred Sixty Nine Million Nine Hundred Sixty One Thousand Dollars
($369,961,000).

         "Non-Recourse Indebtedness" means any single loan with respect to which
recourse for payment is limited to (i) specific assets related to a particular
Property or group of Properties encumbered by a Lien securing such Indebtedness,
so long as the Adjusted Asset Value for such Property, or the total of the
Adjusted Asset Values for such group of Properties, does not exceed One Hundred
Million Dollars ($100,000,000) or (ii) any Subsidiary which is not a Material
Subsidiary; provided, however, that personal recourse to the REIT, on a
consolidated basis, or to Borrower by a holder of any such loan for fraud,
misrepresentation, misapplication of cash, waste, environmental claims and
liabilities and other circumstances customarily excluded by institutional
lenders from exculpation provisions and/or included in separate indemnification
on agreements in non-recourse financing of real estate shall not, by itself,
prevent such loan from being characterized as Non-Recourse Indebtedness.

         "Non-Manufactured Home Community Property" means Property which is not
(i) used for lease, operation or use of manufactured home communities, (ii)
Land, (iii) Securities consisting of stock issued by real estate investment
trusts engaged primarily in the development, ownership and management of
manufactured home communities, (iv) Manufactured Home Community Mortgages or (v)
Manufactured Home Community Partnership Interests.

         "Notice of Borrowing" means a notice of borrowing duly executed by an
authorized officer of Borrower substantially in the form of Exhibit E-1.

         "Notice of Continuation/Conversion" means a notice of continuation or
conversion of or to a LIBOR Loan duly executed by an authorized officer of
Borrower substantially in the form of Exhibit E-2.

         "Obligations" means, from time to time, all Indebtedness of Borrower
owing to Agent, any Lender, or any Person entitled to indemnification pursuant
to Section 11.02, or any of their respective successors, transferees or assigns,
of every type and description, whether or not evidenced by any note, guaranty or
other instrument, arising under or in connection with this Agreement or any
other Loan Document, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest, charges, expenses, fees,
reasonable attorneys' fees and disbursements and any other sum now or hereafter
chargeable to Borrower under or in connection with this Agreement or any other
Loan Document. Notwithstanding anything to the contrary contained in this
definition, Obligations shall not be deemed to include any obligations or
liabilities of Borrower to Agent or any Lender under an Interest Rate Contract,
foreign currency exchange agreement or other Contractual Obligation unless the
same is among Borrower and all Lenders. Obligations shall also not include the
"Obligations" under the Revolving Credit Agreement.


                                       15


<PAGE>   20


         "Officer's Certificate" means a certificate signed by a specified
officer of a Person certifying as to the matters set forth therein.

         "Other Indebtedness" means all Indebtedness other than the Obligations.

         "Original Closing Date" means the "Closing Date" as defined in the
Existing Credit Agreement.

         "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.

         "Permit" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.

         "Permitted Holdings" means any of the holdings and activities described
in Section 8.08, but only to the extent permitted in Section 8.08.

         "Permitted Liens" means:

         (a) Liens for Taxes, assessments or other governmental charges not yet
due and payable or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted in accordance with
Sections 6.01(d) or 6.02(g);

         (b) statutory liens of carriers, warehousemen, mechanics, materialmen
and other similar liens imposed by law, which are incurred in the ordinary
course of business for sums not more than sixty (60) days delinquent or which
are being contested in good faith in accordance with Sections 6.01(d) or
6.02(g);

         (c) deposits made in the ordinary course of business to secure
liabilities to insurance carriers;

         (d) Liens for purchase money obligations for equipment; provided that
(i) the Indebtedness secured by any such Lien does not exceed the purchase price
of such equipment, (ii) any such Lien encumbers only the asset so purchased and
the proceeds upon sale, disposition, loss or destruction thereof, and (iii) such
Lien, after giving effect to the Indebtedness secured thereby, does not give
rise to an Event of Default or Unmatured Event of Default pursuant to Section
7.01(a)(iii);

         (e) easements, rights-of-way, zoning restrictions, other similar
charges or encumbrances and all other items listed on Schedule B to Borrower's
owner's title insurance policies for any of Borrower's real Properties, so long
as the foregoing do not interfere in any material respect with the use or
ordinary conduct of the business of Borrower and do not diminish in any
material respect the value of the Property to which it is attached or for which
it is listed; or

                                       16


<PAGE>   21


         (f) Liens and judgments which have been or will be bonded or released
of record within thirty (30) days after the date such Lien or judgment is
entered or filed against the REIT, Borrower, any Subsidiary or any Agreement
Party.

         "Person" means any natural person, employee, corporation, limited
partnership, limited liability partnership, general partnership, joint stock
company, limited liability company, joint venture, association, company, trust,
bank-, trust company, land trust, business trust. real estate investment trust
or other organization, whether or not a legal entity, or any other
nongovernmental entity, or any Governmental Authority.

         "Plan" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which a Person or an ERISA
Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA.

         "Pre-Closing Financials" has the meaning ascribed to such term in
Section 4.01(g).

         "Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the aggregate amount
of all of the Lenders' Commitments, as adjusted from time to time in accordance
with the provisions of this Agreement.

         "Property" means, with respect to any Person, any real or personal
property, building, facility, structure, equipment or unit, or other asset owned
by such Person.

         "Qualifying Unencumbered Property" means (a) the Properties listed on
Exhibit F hereto and (b) any Property designated by Borrower from time to time
pursuant to Section 5.04 which (i) is an operating manufactured home community
property wholly-owned (directly or beneficially) by Borrower or any Subsidiary
wholly-owned, directly or indirectly by Borrower and/or the REIT, (ii) is not
subject (nor are any equity interests in such Property subject) to a Lien which
secures Indebtedness of any Person other than a Permitted Lien, (iii) is not
subject (nor are any equity interests in such Property subject) to any covenant,
condition, or other restriction which prohibits or limits the creation or
assumption of any Lien upon such Property (except as set forth in the Revolving
Credit Agreement), and (iv) has not been designated by the Agent in a notice to
Borrower as not acceptable to the Requisite Lenders pursuant to Section 5.04;
provided, however, that the weighted average occupancy rate of the Properties
listed on Exhibit F together with those designated by Borrower to be Qualifying
Unencumbered Properties pursuant to Section 5.04 (excluding expansion areas of
such Properties which are purchased and/or developed on or after the Closing
Date) shall be at least eighty-five percent (85%); provided, further that
Borrower may, upon at least fifteen (15) Business Days prior notice to Agent,
designate that any Property listed on Exhibit F or otherwise designated as a
Qualifying Unencumbered Property is no longer a Qualifying Unencumbered Property
(and upon such designation such Property shall no longer be a Qualifying
Unencumbered Property).


                                       17


<PAGE>   22


         "Regulation D" means Regulation D of the Federal Reserve Board as in
effect from time to time.

         "Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.

         "Regulation T" means Regulation T of the Federal Reserve Board as in
effect from time to time.

         "Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.

         "Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.

         "REIT" has the meaning ascribed to such term in the preamble hereto.

         "REIT Guaranty" means the Amended and Restated REIT Guaranty of even
date herewith executed by the REIT in favor of Agent and the Lenders.

         "Release" may be either a noun or a verb and means the release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escaping, dumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.

         "Remedial Action" means any action undertaken pursuant to Environmental
Laws to (a) clean up, remove, remedy, respond to, treat or in any other way
address Contaminants in the indoor or outdoor environment; (b) prevent the
Release or threat of Release or minimize the further Release of Contaminants so
they do not migrate or endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; or (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care.

         "Reportable Event" means any of the events described in Section 4043(b)
of ERISA, other than an event for which the thirty (30) day notice requirement
is waived by regulations, or any of the events described in Section 4062(f) or
4063(a) of ERISA.

         "Requirements of Law" means, as to any Person, the charter and by-laws,
partnership agreements or other organizational or governing documents of such
Person, and any law, rule or regulation, permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations G, T, U and X and any certificate
of occupancy,

                                       18
<PAGE>   23


zoning ordinance, building or land use requirement or Permit or occupational
safety or health law, rule or regulation.

         "Requisite Lenders" means, collectively, Lenders whose Pro Rata Shares,
in the aggregate, are at least sixty-six and two-thirds percent (66 2/3%).

         "Revolving Credit Agreement" means that certain Second Amended and
Restated Credit Agreement of even date herewith by and among Borrower, the REIT,
Wells Fargo, as Agent, and the lenders named therein.

         "S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
its successors and assigns, and, if Standard & Poor's Rating Group shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Agent.

         "Secretary's Certificate" has the meaning ascribed to such term in
Section 3.01(c)(i).

         "Secured Debt" means Indebtedness, the payment of which is secured by a
Lien on any real Property owned or leased by the REIT, Borrower, or any
Subsidiary.

         "Securities" means any stock, partnership interests, shares, shares of
beneficial interest, voting trust certificates, bonds, debentures, 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, but shall not include any evidence of
the Obligations.

         "Securities Act" means the Securities Act of 1933, as amended to the
date hereof and from time to time hereafter, and any successor statute.

         "Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended to the date hereof and from time to time hereafter, and any successor
statute.

         "Solvent" means as to any Person at the time of determination, such
Person (a) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (b) is
able to pay all of its debts as such debts mature; and (c) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.

         "Subsidiary" means any Person whose financial results are consolidated
under GAAP with the financial results of the REIT or Borrower on the
consolidated financial statements of the REIT or Borrower.



                                       19
<PAGE>   24


         "Supermajority Lenders" means Lenders whose Pro Rata Shares, in the
aggregate, are at least eighty-five percent (85%).

         "Syndication Agent" means Bank of America National Trust and Savings
Association in its capacity as syndication agent for the Lenders under this
Agreement.

         "Taxes" means all federal, state, local and foreign income and gross
receipts taxes.

         "Termination Date" has the meaning ascribed to such term in Section
2.01(d).

         "Termination Event" means (a) any Reportable Event, (b) the withdrawal
of a Person, or an ERISA Affiliate from a Benefit Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (c) the occurrence of an obligation arising under Section 4041 of ERISA
of a Person or an ERISA Affiliate to provide affected parties with a written
notice of an intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA, (d) the institution by the PBGC of
proceedings to terminate any Benefit Plan under Section 4042 of ERISA or to
appoint a trustee to administer any Benefit Plan, (e) any event or condition
which constitutes grounds under Section 4042 of ERISA for the appointment of a
trustee to administer a Benefit Plan, (f) the partial or complete withdrawal of
such Person or any ERISA Affiliate from a Multiemployer Plan which would have a
Material Adverse Effect, or (g) the adoption of an amendment by any Person or
any ERISA Affiliate to terminate any Benefit Plan which is subject to Title IV
of ERISA or Section 412 of the Internal Revenue Code or the treatment of an
amendment to a Benefit Plan as a termination under ERISA.

         "Total Liabilities" means, without duplication, all Indebtedness of the
REIT, on a consolidated basis, plus all other items which, in accordance with
GAAP, would be included as liabilities on the liability side of the balance
sheet of the REIT (including, without limitation, accounts payable incurred in
the ordinary course of business), on a consolidated basis, plus the actual or
potential liability of the REIT, Borrower or any Material Subsidiary for any
Indebtedness of Investment Affiliates that is recourse to the REIT, Borrower or
any Material Subsidiary; provided, however, that "Total Liabilities" shall not
include dividends declared by the REIT or Borrower which are permitted under
Section 7.01(d) but not yet paid.

         "Unencumbered Asset Value" means, as of any date of determination, (i)
a fraction, the numerator of which is the product of four (4) and the
Unencumbered Net Operating Income for the most recently ended Fiscal Quarter
which is attributable (in a manner reasonably acceptable to Agent) to Qualifying
Unencumbered Properties owned (directly or beneficially) by Borrower or any
Subsidiary wholly-owned, directly or indirectly, by Borrower and/or the REIT,
for the entire Fiscal Quarter and the denominator of which is eight hundred
seventy-five ten-thousandths (0.0875) plus (ii) the aggregate of the Net Prices
paid by Borrower or such Subsidiary or their respective Affiliates for all
Qualifying Unencumbered Properties which have been acquired in the Fiscal
Quarter most recently ended.


                                       20



<PAGE>   25
          "Unencumbered Net Operating income" means for any Fiscal Quarter, Net
Operating Income for such period from each Qualifying Unencumbered Property
owned (directly or beneficially) by Borrower.

          "Unfunded Pension Liabilities" means the excess of a Benefit Plan's
accrued benefits, as defined in Section 3(23) of ERISA, over the current value
of that Plan's assets, as defined in Section 3(26) of ERISA.

          "Uniform Commercial Code" means the Uniform Commercial Code as in
effect on the date hereof in the State of Illinois.

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

          "Unsecured Debt" means, as of any date of determination, the sum of
(i) Indebtedness of the REIT, Borrower or any Subsidiary, which is not Secured
Debt or accounts payable plus (ii) that portion of accounts payable of the REIT,
Borrower or any Subsidiary incurred in the ordinary course of business, the
payment of which is not secured by a Lien on any property owned or leased by the
REIT, Borrower or any Subsidiary, which at the date of determination exceeds two
percent (2%) of the sum of Gross Asset Values of Borrower and each of its
Subsidiaries.

          "Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.

          "Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which a Person or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or within the
immediately preceding five years maintained, administered, contributed to or
was required to contribute to, or under which a Person or any ERISA Affiliate
may incur any liability.

          "Wells Fargo" has the meaning ascribed to such term in the preamble
hereto.

          1.02 Computation of Time Periods. In this Agreement, unless otherwise
specified, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to and including." Periods of days referred to in
this Agreement shall be counted in calendar days unless Business Days are
expressly prescribed.

          1.03 Terms

          (a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP, provided that for purposes of references to the financial
results of the "REIT, on a consolidated basis," the


                                       21
<PAGE>   26

REIT shall be deemed to own one hundred percent (100%) of the partnership
interests in Borrower.

          (b) Any time the phrase "to the best of Borrower's knowledge" or a
phrase similar thereto is used herein, it means: "to the actual knowledge of the
executive officers of Borrower and the REIT, after reasonable inquiry of those
agents, employees or contractors of the REIT, Borrower, any Agreement Party or
any Subsidiary who could reasonably be anticipated to have knowledge with
respect to the subject matter or circumstances in question and review of those
documents or instruments which could reasonably be anticipated to be relevant to
the subject matter or circumstances in question."

          (c) In each case where the consent or approval of Agent, Requisite
Lenders, Supermajority Lenders or all Lenders is required or their
non-obligatory action is requested by Borrower, such consent, approval or action
shall be in the sole and absolute discretion of Agent and, as applicable, each
Lender, unless otherwise specifically indicated.

          1.04 Interrelationship with the Existing Credit Agreement. Effective
on the Closing Date, this Agreement shall amend and restate the provisions of
the Existing Credit Agreement in their entirety, and the Existing Loan and the
Loan Increase shall together constitute the Loan and be governed exclusively by
the terms of this Agreement. Borrower hereby acknowledges that no Existing
Lender is currently in default of its obligations under the Existing Credit
Agreement. Each Existing Lender hereby waives any Event of Default or Unmatured
Event of Default arising from the failure of Borrower to comply with the
provisions of Section 8.01 of the Existing Credit Agreement prior to the Closing
Date.

                                   ARTICLE II

                                      LOAN

          2.01 Making of Loan and Repayment.

          (a) Loan Availability.

               (i) Subject to the terms and conditions set forth in this
     Agreement and in reliance on the representation and warranties of Borrower
     and the REIT set forth in this Agreement, each Lender hereby agrees to make
     its share of the Loan Increase to Borrower on the Closing Date in an amount
     equal to such Lender's Commitment. The Loan will be evidenced by the Loan
     Notes.

               (ii) The Loan may be voluntarily prepaid pursuant to Section
     2.05(a), but Borrower may not reborrow any amounts so prepaid. The
     principal balance of the Loan shall be payable in full on the Termination
     Date.


                                       22

<PAGE>   27

          (b) Notice of Borrowing: Continuation/Conversion. Borrower shall give
Agent, at Wells Fargo Disbursement Center, 2120 East Park Place, Suite 100, El
Segundo, California, 90245, with a copy to Wells Fargo Bank, N.A., 225 West
Wacker Drive, Suite 2550, Chicago, Illinois, 60606, Attn: Account Officer, or
such other address as Agent shall designate, an original or facsimile Notice of
Borrowing no later than 10:00 A.M. (California time), not less than three (3)
nor more than five (5) Business Days prior to the Closing Date. The Notice of
Borrowing shall specify whether the Loan Increase will be a Base Rate Loan or a
LIBOR Loan and, if a LIBOR Loan, the applicable Interest Period. Any Notice of
Borrowing pursuant to this Section 2.01(b) shall be irrevocable. Borrower may
elect (A) so long as no Event of Default has occurred and is continuing, to
convert Base Rate Loans or any portion thereof into LIBOR Loans, (B) to convert
LIBOR Loans or any portion thereof into Base Rate Loans, or (C) so long as no
Event of Default has occurred and is continuing, to continue any LIBOR Loans or
any portion thereof for an additional Interest Period; provided, however, that
the amount of the Loan being continued as or converted to LIBOR Loans shall, in
the aggregate, equal One Million Dollars ($1,000,000) or an integral multiple of
One Hundred Thousand Dollars ($100,000) in excess thereof. The applicable
Interest Period for the continuation of any LIBOR Loan shall commence on the day
on which the next preceding Interest Period expires. Each such election shall be
made by giving Agent, at 2120 E. Park Place, Suite 100, El Segundo, California,
90245, Attn: Kathleen Mederios, a Notice of Continuation/Conversion by 10:00
A.M. (California time) on the date of a conversion to a Base Rate Loan, or by
10:00 A.M. (California time) not less than three (3) nor more than five (5)
Business Days prior to the date of a conversion to or continuation of a LIBOR
Loan, specifying, in each case (1) whether a conversion or continuation is to
occur, (2) the amount of the conversion or continuation, (3) the Interest Period
therefor, in the case of a conversion to or continuation of a LIBOR Loan, and
(4) the date of the conversion or continuation (which date shall be a Business
Day). Agent shall promptly notify each Lender, but in any event within one (1)
Business Day after receipt of such notice, of its receipt of each such notice
and the contents thereof. Notwithstanding anything to the contrary contained
herein and subject to the default interest provisions contained in Section 2.03,
if an Event of Default occurs, all LIBOR Loans will convert to Base Rate Loans
upon the expiration of the applicable Interest Periods therefor or the date the
Loan becomes due, whichever occurs first. Except as provided above, the
conversion of a LIBOR Loan to a Base Rate Loan shall only occur on the last
Business Day of the Interest Period relating to such LIBOR Loan. In the absence
of an effective election by Borrower of a LIBOR Loan and Interest Period in
accordance with the above procedures prior to the third (3rd) Business Day prior
to the expiration of the then current Interest Period with respect to any LIBOR
Loan, interest on such LIBOR Loan shall accrue at the interest rate then
applicable to a LIBOR Loan for an Interest Period of thirty (30) days, effective
immediately upon the expiration of the then-current Interest Period, without
prejudice, however, to the right of Borrower to elect a Base Rate Loan or a
different Interest Period in accordance with the terms and provisions of this
Agreement; provided, however, that if such continuation shall cause the number
of LIBOR Loan tranches to exceed three (3), such LIBOR Loan shall be converted
to a Base Rate Loan.


                                       23
<PAGE>   28

          (c) Making of Loan Increase. Subject to Section 10.03. Agent shall
make the proceeds of the Loan Increase available to Borrower in El Segundo,
California on the Closing Date and shall disburse such funds in Dollars and in
immediately available funds not later than 1:00 P.M. Chicago time to Borrower's
account, at Bank of America, Account Number 75-01943 in Chicago, Illinois, or
such other account specified in the Notice of Borrowing acceptable to Agent,
with a confirming telephone call to Roger Vollmer at (312) 466-3211 or Judy
Pultorak at (312) 466-3415.

          (d) Term; Principal Payment. The outstanding balance of the Loan shall
be payable in full on the earlier to occur of (A) the Maturity Date, and (B) the
acceleration of the Loan pursuant to Section 9.02(a) (the "Termination Date");
provided, however, that Borrower shall have one (1) option to extend the
Maturity Date to the Extended Maturity Date, to be exercised by providing Agent
with written notice of Borrower's desire to so extend the Maturity Date (the
"Extension Notice") no earlier than one hundred eighty (180) days prior to the
Maturity Date and no later than thirty (30) days prior to the Maturity Date;
provided, further, that Borrower shall have the right to such extension only if
all of the following conditions are satisfied:

          (i) no Event of Default or Unmatured Event of Default shall have
     occurred and be continuing as of the Maturity Date;

          (ii) all representations and warranties contained in this Agreement
     and the other Loan Documents shall be true and correct in all material
     respects as of the Maturity Date except to the extent they relate to a
     specific date;

          (iii) Agent shall have received Officer's Certificates of the REIT
     dated as of the Maturity Date stating that the executive officer who is the
     signatory thereto, which officer shall be the chief executive officer or
     the chief financial officer of the REIT, has reviewed, or caused under his
     supervision to be reviewed, the terms of this Agreement and the other Loan
     Documents, and has made, or caused to be made under his supervision, a
     review in reasonable detail of the transactions and condition of Borrower,
     the REIT, the Subsidiaries, and the Agreement Parties, and that (A) such
     review has not disclosed the existence as of the date of such Officer's
     Certificate, and that the signers do not have knowledge of the existence as
     of the date of such Officer's Certificate, of any condition or event which
     constitutes an Event of Default or Unmatured Event of Default and (B) all
     representations and warranties contained in this Agreement and the other
     Loan Documents are true and correct in all material respects as of the
     date of such Officer's Certificate except to the extent they relate to a
     specific date; and

          (iv) on or before the Maturity Date, Agent shall have received, on
     behalf of Agent and Lenders, an extension fee in the amount of fifteen
     one-hundredths of one percent (0.15%) of the outstanding principal amount
     of the Loan as of the Maturity Date.

                                       24

<PAGE>   29

          In the event Agent has not received an Extension Notice on or before
the date which is sixty (60) days prior to the Maturity Date, Agent shall so
notify Borrower in writing.

          2.02 Borrowing and Interest Rate Election Authorization. Borrower
shall provide Agent with documentation satisfactory to Agent indicating the
names of those employees or agents of Borrower authorized by Borrower to sign
Notices of Borrowing and Continuation/Conversion, the Extension Notice and to
receive callback confirmations, and Agent and Lenders shall be entitled to rely
on such documentation until notified in writing by Borrow of any change(s) of
the persons so authorized. Agent shall be entitled to act in good faith on the
instructions of anyone identifying himself as one of the Persons so authorized,
and Borrower shall be bound thereby in the same manner as if such Person were
actually so authorized. Borrower agrees to indemnify, defend and hold Lenders
and Agent harmless from and against any and all Liabilities and Costs which may
arise or be created by the acceptance of instructions for making the Loan.

          2.03 Interest on the Loan.

          (a) Base Rate Loans. Subject to Section 2.03(d), all Base Rate Loans
shall bear interest on the average daily unpaid principal amount thereof from
the date made until paid in full at a fluctuating rate per annum equal to the
Base Rate.

          (b) LIBOR Loans. Subject to Section 2.03(d), all LIBOR Loans shall
bear interest on the unpaid principal amount thereof during the Interest Period
applicable thereto at a rate per annum equal to the sum of LIBOR for such
Interest Period plus the LIBOR Margin. Upon receipt of a Notice of Borrowing or
Continuation/Conversion requesting the making of, continuation of and/or
conversion to LIBOR Loans, Agent shall determine LIBOR applicable to the
Interest Period for such LIBOR Loans, and shall give notice thereof to Borrower
and Lenders; provided, however, that failure to give such notice shall not
affect the validity of such rate. Each determination by Agent of LIBOR shall be
conclusive and binding upon the parties hereto in the absence of demonstrable
error. LIBOR Loans shall be in tranches of One Million Dollars ($1,000,000) or
One Hundred Thousand Dollar ($100,000) increments in excess thereof. No more
than three (3) LIBOR Loan tranches shall be outstanding at any one time.

          (c) Interest Payments. Subject to Section 2.03(d), interest accrued on
the Loan shall be payable by Borrower in arrears on the first Business Day of
the first calendar month following the Closing Date, and the first Business Day
of each succeeding calendar month thereafter, and on the Termination Date.

          (d) Default Interest. Notwithstanding the rates of interest specified
in Sections 2.03(a) and 2.03(b) and the payment dates specified in Section
2.03(c), effective immediately upon demand by Agent after the occurrence of an
Event of Default and during the continuance of any Event of Default, the
principal balance of the Loan then outstanding and, to the extent permitted by
applicable law, any interest payments on the Loan not paid when due shall bear
interest payable upon demand at a rate which is five percent (5%) per annum in
excess of the rate.

                                       25
<PAGE>   30

or rates of interest otherwise payable under this Agreement. All other amounts
due Agent or Lenders (whether directly or for reimbursement) under this
Agreement or any of the other Loan Documents if not paid when due, or if no time
period is expressed, if not paid within fifteen (15) days after written demand
to Borrower, shall bear interest from and after demand at the rate which is five
percent (5%) per annum in excess of the lowest rate or rates of interest
otherwise payable under this Agreement, or, if no portion of the Loan is then
outstanding, at the rate which is five percent (5%) per annum in excess of the
rate of interest applicable to Base Rate Loans.

          (e) Late Fee. Borrower acknowledges that late payment to Agent will
cause Agent and Lenders to incur costs not contemplated by this Agreement. Such
costs include without limitation processing and accounting charges. Therefore,
if Borrower fails timely to pay any sum due and payable hereunder through the
Termination Date (other than payments of principal), unless waived by Agent,
pursuant to Section 11.05(e), a late charge of four cents ($.04) for each dollar
of any interest payment due hereon and which is not paid within fifteen (15)
days after such payment is due or of any other amount due hereon (other than
payments of principal) and which is not paid within thirty (30) days after such
payment is due, shall be charged by Agent (for the benefit of Lenders) and paid
by Borrower for the purpose of defraying the expense incident to handling such
delinquent payment; provided, however, that no late charges shall be assessed
with respect to any amount for which Borrower is obligated to pay interest at
the rate specified in Section 2.03(d), provided, further, that in no event shall
Agent or Lenders be required to refund any late fees paid by Borrower,
notwithstanding the preceding proviso. Borrower and Agent agree that this late
charge represents a reasonable sum considering all of the circumstances existing
on the date hereof and represents a fair and reasonable estimate of the costs
that Agent and Lenders will incur by reason of late payment. Borrower and Agent
further agree that proof of actual damages would be costly and inconvenient.
Acceptance of any late charge shall not constitute a waiver of the default with
respect to the overdue installment, and shall not prevent Agent from exercising
any of the other rights available hereunder or any other Loan Document. Such
late charge shall be paid without prejudice to any other rights of Agent.

          (f) Computation of Interest. Interest and fees shall be computed on
the basis of the actual number of days elapsed in the period during which
interest or fees accrue and a year of three hundred sixty (360) days. In
computing interest on the Loan, the date of the making of the Loan shall be
included and the date of payment shall be excluded. Notwithstanding subsections
(a), (b), (d) and (e) above, interest in respect of the Loan or any portion
thereof shall not exceed the maximum rate permitted by applicable law.

          (g) Changes; Legal Restrictions. In the event that after the Closing
Date (A) the adoption of or any change in any law, treaty, rule, regulation,
guideline or determination of a court or Governmental Authority or any change in
the interpretation or application thereof by a court or Governmental Authority,
or (B) compliance by Agent or any Lender with any request or directive made or
issued after the Closing Date (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful) from any
central bank or other Governmental Authority or quasi-governmental authority:


                                       26

<PAGE>   31

          (i) subjects Agent or any Lender to any tax, duty or other charge of
     any kind with respect to the Facility, this Agreement or any of the other
     Loan Documents or changes the basis of taxation of payments to Agent or
     such Lender of principal, fees, interest or any other amount payable
     hereunder, except for net income, gross receipts, gross profits or
     franchise taxes imposed by any jurisdiction and not specifically based upon
     loan transactions (all such non-excepted taxes, duties and other charges
     being hereinafter referred to as "Lender Taxes");

          (ii) imposes, modifies or holds applicable, in the determination of
     Agent or any Lender, any reserve, special deposit, compulsory loan, FDIC
     insurance, capital allocation or similar requirement against assets held
     by, or deposits or other liabilities in or for the account of, advances or
     loans by, or other credit extended by, or any other acquisition of funds
     by, Agent or such Lender or any applicable lending office (except to the
     extent that the reserve and FDIC insurance requirements are reflected in
     the "Base Rate" or "LIBOR"); or

          (iii) imposes on Agent or any Lender any other condition materially
     more burdensome in nature, extent or consequence than those in existence as
     of the Closing Date;

and the result of any of the foregoing is to (X) increase the cost to Agent or
any Lender of making, renewing, maintaining or participating in any portion of
the Loan or to reduce any amount receivable hereunder or thereunder or (Y) to
require Agent or any Lender or any applicable lending office to make any payment
calculated by reference to the amount of the portion of the Loan held or
interest received by it under such portion of the Loan; then, in any such case,
Borrower shall promptly pay to Agent or such Lender, as applicable, upon demand,
such amount or amounts (based upon a reasonable allocation thereof by Agent or
such Lender to the financing transactions contemplated by this Agreement and
affected by this Section 2.03(g)) as may be necessary to compensate Agent or
such Lender for any such additional cost incurred, reduced amounts received or
additional payments made to the extent Agent or such Lender generally imposes
such additional costs, losses and payments on other borrowers of Agent or such
Lenders in similar circumstances. Agent or such Lender shall deliver to Borrower
and in the case of a delivery by a Lender, such Lender shall also deliver to
Agent, a written statement in reasonable detail of the claimed additional costs
incurred, reduced amounts received or additional payments made and the basis
therefor as soon as reasonably practicable after such Lender obtains knowledge
thereof.

       (h) Certain Provisions Regarding LIBOR Loans.

          (i) LIBOR Lending Unlawful. If any Lender shall determine in good
     faith that the introduction of or any change in or in the interpretation of
     any law makes it unlawful, or any central bank or other governmental
     authority asserts that it is unlawful, for such Lender to convert any Base
     Rate Loan into a LIBOR Loan or maintain any Loan


                                       27
<PAGE>   32

     as a LIBOR Loan, (A) the obligations of the Lenders to convert any
     Base Rate Loan into a LIBOR Loan or maintain any LIBOR Loans shall, upon
     such determination, forthwith be suspended until such Lender shall notify
     Agent that the circumstances causing such suspension no longer exist, and
     (B) if required by law or such assertion, all LIBOR Loans shall
     automatically convert into Base Rate loans.

          (ii) Deposits Unavailable. If Agent shall have determined in good
     faith that adequate means do not exist for ascertaining the interest rate
     applicable hereunder to LIBOR Loans, then, upon notice from Agent to
     Borrower the obligations of all Lenders to convert any Base Rate Loan into
     a LIBOR Loan or maintain any Loan as a LIBOR Loan shall forthwith be
     suspended until Agent shall notify Borrower that the circumstances causing
     such suspension no longer exist. Agent will give such notice when it
     determines, in good faith, that such circumstances no longer exist;
     provided, however, that Agent shall not have any liability to any Person
     with respect to any delay in giving such notice.

          (iii) Funding Losses. In the event any Lender shall incur any loss or
     expense (including any loss or expense incurred by reason of the
     liquidation or reemployment of deposits or other funds acquired by such
     Lender to make or maintain any portion of the Loan as a LIBOR Loan) as a
     result of:

               (A) any continuance, conversion, repayment or prepayment of the
          principal amount of any LIBOR Loans for any reason whatsoever on a
          date other than the scheduled last day of the Interest Period
          applicable thereto;

               (B) any Base Rate Loans not being converted into LIBOR Loans or
          any LIBOR Loans not being continued as LIBOR Loans in accordance with
          the Notice of Continuation/Conversion therefor, other than as a result
          of such Lender's breach of its obligation to continue or convert such
          Loan in accordance with the terms hereof;

     then, within fifteen (15) Business Days after Borrower's receipt of the
     written notice of such Lender to Borrower with a copy to Agent, Borrower
     shall reimburse such Lender for such loss or expense; provided, however,
     that each Lender will use reasonable efforts to minimize such loss or
     expense. Such written notice (which shall include calculations in
     reasonable detail) shall, in the absence of demonstrable error, be
     conclusive and binding on the parties hereto.

          (i) Withholding Tax Exemption. Each Lender that is not created or
organized under the laws of the United States of America or a political
subdivision thereof shall deliver to Borrower and the Agent no later than the
Closing Date (or, in the case of a Lender which becomes a Lender pursuant to
Section 10.11, the date upon which such Lender becomes a party hereto) a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender in a form satisfactory to Borrower and the Agent, to the effect
that such Lender is


                                       28
<PAGE>   33



capable, under the provisions of an applicable treaty concluded by the United
States of America (in which case the certificate shall be accompanied by three
(3) accurate and complete duly executed originals of Form 1001 of the
Internal Revenue Service) or under Section 1442 of the Internal Revenue Code (in
which case the certificate shall be accompanied by three (3) accurate and
complete duly executed originals of Form 4224 of the Internal Revenue Service),
of receiving payments of principal, interest and fees hereunder without
deduction or withholding of United States federal income tax. Further, if at any
time a Lender changes its applicable lending office or selects an additional
applicable lending office, it shall, at the same time or promptly thereafter,
but only to the extent the certificate and forms previously delivered by it
hereunder are no longer applicable or effective, deliver to Borrower and Agent
in replacement for, or in addition to, the certificate and forms previously
delivered by it hereunder, a true and accurate certificate executed in duplicate
by a duly authorized officer of such Lender accompanied by three (3) accurate
and complete duly executed originals of either Form 1001 of the Internal
Revenue Service or Form 4224 of the Internal Revenue Service, whichever is
applicable, indicating that such Lender is entitled to receive payments of
principal, interest and fees for the account of such changed or additional
applicable lending office under this Agreement without deduction or withholding
of United States federal tax. Each Lender further agrees to deliver to Borrower
and the Agent a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender accompanied by three (3) accurate and complete
duly executed originals of either Form 1001 of the Internal Revenue Service or
Form 4224 of the Internal Revenue Service, whichever is appropriate,
substantially in a form satisfactory to Borrower and the Agent, before or
promptly upon the occurrence of any event requiring a change in the most recent
certificate or Internal Revenue Service form previously delivered by it to
Borrower and the Agent pursuant to this Section 2.03(j). Further, each Lender
which delivers a certificate accompanied by Form 1001 of the Internal Revenue
Service covenants and agrees to deliver to Borrower and the Agent within fifteen
(15) days prior to January 1, 1999, and every third (3rd) anniversary of such
date thereafter, on which this Agreement is still in effect, another such
certificate and three (3) accurate and complete original signed copies of Form
1001 (or any successor form or forms required under the Internal Revenue Code
or the applicable regulations promulgated thereunder), and each Lender that
delivers a certificate accompanied by Form 4224 of the Internal Revenue Service
covenants and agrees to deliver to Borrower and the Agent within fifteen (15)
days prior to the beginning of each subsequent taxable year of such Lender
during which this Agreement is still in effect, another such certificate and
three (3) accurate and complete original signed copies of Internal Revenue
Service Form 4224 (or any successor form or forms required under the Internal
Revenue Code or the applicable regulations promulgated hereunder). If (i) any
Lender is required under this Section 2.03(j) to provide a certificate or other
evidence described above and fails to deliver to Borrower and Agent such
certificate or other evidence or (ii) any Lender delivers a certificate to the
effect that, as a result of the adoption of or any change in any law, treaty,
rule, regulation, guideline or determination of a Governmental Authority after
the date such Lender became a party hereto, such Lender is not capable of
receiving payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and that it is
not capable of recovering the full amount of the same from a source other than
Borrower, then, to the extent required by

                                       29
<PAGE>   34


law, as the sole consequence of such Lender's failure to deliver the certificate
described in (i) above or such Lender's delivery of the certificate described in
(ii) above. Borrower shall be entitled to deduct or withhold taxes from the
payments owed to such Lender.

          2.04 Fees.

          (a) Loan Fee. On the Closing Date, Borrower shall pay Agent, on behalf
of Agent and Lenders, a loan increase fee in the amount of Sixty Thousand
Dollars ($60,000).

          (b) Agency Fees. Borrower shall pay Agent such fees as are provided
for in the agency and arrangement fee agreement between Agent and Borrower, as
in existence from time to time.

          (c) Payment of Fees. The fees described in this Section 2.04
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
California in immediately available funds and shall be non-refundable when paid.
If Borrower fails to make any payment of fees or expenses specified or referred
to in this Agreement due to Agent or Lenders, including without limitation those
referred to in this Section 2.04 or otherwise under this Agreement or any
separate fee agreement between Borrower and Agent relating to this Agreement,
when due, the amount due shall bear interest until paid at the Base Rate and,
after five (5) days at the rate specified in Section 2.03(d) (but not to exceed
the maximum rate permitted by applicable law) and shall constitute part of the
Obligations. All fees described in this Section 2.04 which are expressed as a
per annum charge shall be calculated on the basis of the actual number of days
elapsed in a three hundred sixty (360) day year.

          2.05 Payments.

          (a) Voluntary Prepayments. Borrower may, upon not less than three (3)
Business Days prior written notice, at any time and from time to time, prepay,
without premium or penalty (other than as set forth in Section 2.03(h)(iii)),
the Loan in whole or in part in amounts not less than One Hundred Thousand
Dollars ($100,000) or integral multiples of Twenty-Five Thousand Dollars
($25,000) in excess of One Hundred Thousand Dollars ($100,000). Any notice of
prepayment given to Agent under this Section 2.05(a) shall specify the date of
prepayment and the aggregate principal amount of the prepayment. All prepayments
of principal shall be accompanied by a payment of all accrued and unpaid
interest thereon.

          (b) Manner and Time of Payment. All payments of principal, interest
and fees hereunder payable to Agent or the Lenders shall be made without
condition or reservation of right and free of set-off or counterclaim, in
Dollars and by (i) wire transfer (pursuant to Agent's written wire transfer
instructions) of immediately available funds, delivered to Agent not later

                                       30
<PAGE>   35
than 11:00 A.M. (California time) on the date due; and funds received by Agent
after that time and date shall be deemed to have been paid on the next
succeeding Business Day or (ii) by check (pursuant to Agent's written check
payment instructions) delivered to Agent, such check and the payment intended to
be covered thereby to be deemed to have been paid on the date Agent receives
immediately available funds therefor. All payments of principal, interest and
fees hereunder shall be made by (i) wire transfer of immediately available funds
to Wells Fargo Bank, N.A. (ABA number 121000248) for credit to account number
2934507203 reference MHC Operating Limited Partnership, loan number 1561ZMC with
telephonic notice to Patrick Hickey at (310) 335-9409, or (ii) check payable to
Wells Fargo Bank, N.A. and delivered to Agent at 2120 E. Park Place, Suite 100,
El Segundo, California, 90245, Attn: Patrick Hickey, or to such other bank,
account or address as Agent may specify in a written notice to Borrower.


               (c)  Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in Section 2.04, as the case
may be.

               2.06 Increased Capital. If either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) compliance
by Agent or any Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law and whether
or not the failure to comply therewith would be unlawful) made or issued after
the Closing Date affects/or would affect the amount of capital required or
expected to be maintained by Agent or such Lender or any corporation controlling
Agent or such Lender, and Agent or such Lender determines that the amount of
such capital is increased by or based upon the existence of Agent's obiligations
hereunder or such Lender's obligation to maintain, continue or convert to LIBOR
Loans hereunder, then, upon demand by Agent or such Lender, Borrower shall
immediately pay to Agent or such Lender, from time to time as specified by Agent
or such Lender, additional amounts sufficient to compensate Agent or such Lender
in the light of such circumstances, to the extent that Agent or such Lender
reasonably determines such increase in capital to be allocable to the existence
of Agent's obligations hereunder or such Lender's commitment and to the extent
Agent or such Lender generally imposes such amounts on other borrowers of Agent
or Lender in similar circumstances. A certificate as to such amounts in
reasonable detail submitted to Borrower by Agent or such Lender shall, in the
absence of manifest error, be conclusive and binding for all purposes.

               2.07 Notice of Increased Costs. Each Lender agrees that, as
promptly as reasonably practicable after it becomes aware of the occurrence of
an event or the existence of a condition which would cause it to be affected by
any of the events or conditions described in Section 2.03(g) or (h), or Section
2.06, it will notify Borrower and provide in such notice a reasonably detailed
calculation of the amount due from Borrower, and provide a copy of such notice
to Agent, of such event and the possible effects thereof. If Agent or the
affected Lender shall fail to notify Borrower of the occurrence of any such
event or the existence of any such


                                       31
<PAGE>   36



condition within ninety (90) days following the end of the month during which
such event occurred or such condition arose then Borrower's liability for any
amounts described in said Sections 2.03(g) and (h) and 2.06 incurred by Agent or
such affected Lender as a result of such event or condition shall be limited to
those attributable to the period occurring subsequent to the ninetieth (90th)
day prior to the date upon which Agent or such affected Lender actually notified
Borrower of such event or condition.

         2.08 Option to Replace Lenders.

         (a)  Lenders. If any Lender shall make any demand for payment or
reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (a) there does not then exist any Unmatured Event of Default
or Event of Default and (b) the circumstance resulting in such demand for
payment or reimbursement are not applicable to all Lenders, Borrower may
terminate the Commitment of such Lender, in whole but not in part, by (i) giving
such Lender and Agent not less than three (3) Business Days prior written notice
thereof, which notice shall be irrevocable and effective only upon receipt
thereof such Lender and Agent and shall specify the effective date of such
termination, (ii) paying to such Lender (and there shall become due and payable)
on such date the outstanding principal amount of the portion of the Loan made by
such Lender, all interest thereon, and all other Obligations owed to such
Lender, including, without limitation, amounts owing under Sections 2.03(g),
2.03(h)(iii), 2.04 and 2.06, if any, and (iii) pursuant to the provisions of
Section 10.11, proposing the introduction of a replacement Lender reasonably
satisfactory to Agent, or obtaining the agreement of one or more existing
Lenders, to assume the entire amount of the Commitment of the Lender whose
Commitment is being terminated, on the effective date of such termination. Upon
the satisfaction of all of the foregoing conditions, such Lender which is being
terminated pursuant to this Section 2.08 shall cease to be a "Lender" for
purposes of this Agreement provided that Borrower shall continue to be obligated
to such Lender under Sections 11.01 and 11.02 (and any other indemnifications
contained herein or in any other Loan Document) with respect to or on account of
unpaid, unliquidated, unknown or similar claims or liabilities accruing prior to
such Lender ceasing to be a "Lender" for purposes of this Agreement.

         (b)   Agent. If Agent shall make any demand for payment or
reimbursement pursuant to Section 2.03(g), Section 2.03(h) or Section 2.06,
then, provided that (i) there does not then exist any Unmatured Event of Default
or Event of Default and (ii) the circumstances resulting in such demand for
payment or reimbursement are not applicable to all Lenders. Borrower may remove
Agent by (x) giving the Lenders and Agent not less than thirty (30) Business
Days prior written notice thereof, and (y) paying to Agent (and there shall
become due and payable) on such date all other Obligations owed to Agent,
including, without limitation, amounts owing under Sections 2.03(g), 2.03(h),
2.04 and 2.06, if any. Agent shall be replaced in accordance with the provisions
of Section 10.09 hereof.


                                       32

<PAGE>   37
                                  ARTICLE III

                          CONDITIONS TO LOAN INCREASE

         3.01 Conditions to Disbursement of Loan Increase.  The obligation of
Lenders to make the Loan Increase shall be subject to satisfaction of each of
the following conditions precedent on or before the Closing Date:

         (a)  Borrower Loan Documents.  Borrower shall have executed and
delivered to Agent each of the following, in form and substance acceptable to
Agent and Agent's counsel:

               (i)   This Agreement;

               (ii)  The Loan Notes;

               (iii) A solvency certificate;

               (iv)  Agent's form of Funds Transfer Agreement and signature
    authorization form; and

               (v)   All other documents to be executed by or on behalf of
    Borrower as listed on the Closing Checklist.

         (b)  REIT Documents.  The REIT shall have executed and delivered to
Agent each of the following, in form and substance acceptable to Agent and
Agent's counsel:

               (i)   The REIT Guaranty;

               (ii)  A solvency certificate;

               (iii) A Compliance Certificate confirming the matters described
    in Section 3.01(i); and

               (iv)  All other documents to be executed by or on behalf of the
    REIT as listed on the Closing Checklist.

         (c)  Corporate and Partnership Documents.  Agent shall have received
the following corporate and partnership documents:

              (i)  With respect to Borrower: a certified copy of Borrower's
    limited partnership agreement; a certified copy of Borrower's Certificate of
    Limited Partnership; a certificate of existence for Borrower from the State
    of Illinois; and a certificate of Borrower's Secretary or an officer
    comparable thereto (a "Secretary's Certificate") with respect to Borrower
    pertaining to authorization, incumbency and by-laws, if any; and



                                       33
<PAGE>   38
              (ii) With respect to the REIT: certified copies of the REIT's
    certificate of incorporation and by-laws; a good standing certificate of the
    REIT from the State of Maryland; and a Secretary's Certificate with respect
    to the REIT pertaining to authorization, incumbency and by-laws.

         (d) Notice of Borrowing. Borrower shall have delivered to Agent a
Notice of Borrowing in compliance with Section 2.01(b).

         (e) Performance. Borrower, the REIT and each Agreement Party shall have
performed in all material respects all agreements and covenants required by
Agent to be performed by them as a condition to funding the Loan Increase.

         (f) Solvency. Each of the REIT, Borrower and each Agreement Party shall
be Solvent.

         (g) Material Adverse Changes. No change, as reasonably determined by
Agent, shall have occurred during the period commencing on December 31, 1997 and
ending on the Closing Date (the "Interim Period"), which has a Material Adverse
Effect.

         (h) Litigation Proceedings. There shall not have been instituted or, to
the knowledge of Borrower or the REIT, threatened, during the Interim Period,
any litigation or proceeding in any court or by a Governmental Authority
affecting or threatening to affect Borrower, the REIT, any Subsidiary, or any
Agreement Party, in which there is a reasonable possibility of an adverse
decision that could, individually or in the aggregate, have a Material Adverse
Effect.

         (i) No Event of Default; Satisfaction of Financial Covenants. On the
Closing Date and after giving effect to the disbursement of the Loan, no Event
of Default or Unmatured Event of Default shall exist and all of the financial
covenants contained in Articles VII and VIII shall be satisfied.

         (j) Opinion of Counsel. Agent shall have received on behalf of Agent
and Lenders a favorable opinion of counsel for Borrower, each Agreement Party
and the REIT dated as of the Closing Date, in form and substance reasonably
satisfactory to Agent and its counsel.

         (k) Due Diligence. Agent shall have completed its review of all other
information delivered by Borrower pursuant to this Section 3.01 and shall have
completed such additional due diligence investigations as Agent deems reasonably
necessary, and such review and investigations shall provide Agent with results
and information which, in Agent's determination, are satisfactory to permit
Agent to enter into this Agreement.

         (l) Representations and Warranties. All representations and warranties
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects.



                                       34
<PAGE>   39


         (m) Fees. Agent shall have received for the benefit of Agent and
Lenders all fees (or Borrower shall have made arrangements reasonably acceptable
to Agent therefor) then due, and Borrower shall have performed all of its other
obligations as set forth in the Loan Documents to make payments to Agent on or
before the Closing Date and all expenses of Agent incurred prior to such Closing
Date (including without limitation all reasonable attorneys' fees), shall have
been paid by Borrower.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         4.01 Representations and Warranties as to Borrower. In order to induce
Lenders to make the Loan Increase, Borrower hereby represents and warrants to
Lenders as follows:

         (a) Organization; Partnership Powers. Borrower (i) is a limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, (ii) is duly qualified to do business as a
foreign limited partnership and in good standing under the laws of each
jurisdiction in which the nature of its business requires it to be so qualified,
except for those jurisdictions where failure to so qualify and be in good
standing would not have a Material Adverse Effect and (iii) has all requisite
partnership power and authority to own, operate and encumber its property and
assets and to conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the Loan
contemplated by the Loan Documents.

         (b) Authority. Borrower has the requisite partnership power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the general partner of Borrower, and no other partnership proceedings or
authorizations on the part of Borrower or its general or limited partners are
necessary to consummate such transactions. Each of the Loan Documents to which
Borrower is a party has been duly executed and delivered by Borrower and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights generally and general equitable principles.

         (c) Ownership of Borrower. Schedule 4.01(c) sets forth the general
partners of Borrower and their respective ownership percentages as of the date
hereof. Except as set forth in the partnership agreement of Borrower, no
partnership interests (or any securities, instruments, warrants, option or
purchase rights, conversion or exchange rights, calls, commitments or claims of
any character convertible into or exercisable for partnership interests) of
Borrower are subject to issuance under any security, instrument, warrant,
option or purchase rights, conversion or exchange rights, call, commitment or
claim of any right, title or interest therein or thereto. To Borrower's
knowledge, all of the partnership interests in Borrower have been issued in
compliance with all applicable Requirements of Law.



                                       35


<PAGE>   40




         (d) No Conflict. The execution, delivery and performance by Borrower of
the Loan Documents to which it is or will be a party, and each of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or Certificate of Limited
Partnership or other organizational documents, as the case may be, or the
organizational documents of any Subsidiary of Borrower or (ii) conflict with,
result in a breach of or constitute (with or without notice or lapse of time
or both) a default under any Requirement of Law, Contractual Obligation or Court
Order of or binding upon Borrower or any of its Subsidiaries, or require
termination of any such Contractual Obligation, the consequences of which
conflict or breach or default or termination would have a Material Adverse
Effect, or result in or require the creation or imposition of any Lien
whatsoever upon any Property (except as contemplated herein).

         (e) Consents and Authorizations. Borrower has obtained all consents and
authorizations required pursuant to its Contractual Obligations with any other
Person, the failure of which to obtain would have a Material Adverse Effect, and
has obtained all consents and authorizations of, and effected all notices to and
filings with, any Governmental Authority necessary to allow Borrower to lawfully
execute, deliver and perform its obligations under the Loan Documents to which
Borrower is a party.

         (f) Governmental Regulation. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940 or any other federal
or state statute or regulation such that its ability to incur indebtedness is
limited or its ability to consummate the transactions contemplated by the Loan
Documents is materially impaired.

         (g) Prior Financials. The Consolidated and Combined Balance Sheet as of
December 31, 1997, the Consolidated and Combined Statement of Operations for the
Year Ended December 31, 1997, and the Consolidated and Combined Statement of
Cash Flows for the Year Ended December 31, 1997, of the REIT contained in the
Form 10-K Annual Report of the REIT as of December 31, 1997 (the "Pre-Closing
Financials") delivered to Agent prior to the date hereof were prepared in
accordance with GAAP in effect on the date such Pre-Closing Financials were
prepared and fairly present the assets, liabilities and financial condition of
the REIT, on a consolidated basis, at such date and the results of its
operations and its cash flows, on a consolidated basis, for the period then
ended.

         (h) Financial Statements; Projections and Forecasts. Each of the
Financial Statements to be delivered to Agent pursuant to Sections 5.01(a) and
(b), (i) has been, or will be, as applicable, prepared in accordance with the
books and records of the REIT, on a consolidated basis, and (ii) either fairly
present, or will fairly present, as applicable, the financial condition of the
REIT, on a consolidated basis, at the dates thereof (and, if applicable, subject
to normal year-end adjustments) and the results of its operations and cash
flows, on a consolidated basis, for the period then ended. Each of the
projections delivered to Agent (A) has been or will be, as applicable,
prepared by the REIT and the REIT's financial personnel in light of the past
business


                                       36

<PAGE>   41


and performance of the REIT, on a consolidated basis and (B) represent, or will
represent, as of the date thereof, the reasonable good faith estimates of such
personnel.

         (i) Litigation; Adverse Effects.

              (i) There is no action, suit, proceeding, governmental
    investigation or arbitration, at law or in equity, or before or by any
    Governmental Authority, pending, or to the best of Borrower's knowledge,
    threatened against Borrower or any of its Subsidiaries or any of their
    respective Properties, in which there is a reasonable possibility of an
    adverse decision that could have a Material Adverse Effect;

              (ii) Neither Borrower nor any of its Subsidiaries is (A) in
    violation of any Requirement of Law, which violation has a Material Adverse
    Effect, or (B) subject to or in default with respect to any Court Order
    which has a Material Adverse Effect.

         (j) No Material Adverse Change. Since December 1, 1997, there has
occurred no event which has a Material Adverse Effect.

         (k) Payment of Taxes. All tax returns and reports to be filed by
Borrower or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable will not have, in the aggregate, a Material Adverse Effect.
Borrower has no knowledge of any proposed tax assessment against Borrower or any
of its Subsidiaries that will have a Material Adverse Effect, which is not being
actively contested in good faith by such Person.

         (1) Material Adverse Agreements. Neither Borrower nor any of its
Subsidiaries is a party to or subject to any Contractual Obligation or other
restriction contained in its partnership agreement, certificate of partnership,
by-laws, or similar governing documents which has a Material Adverse Effect.

         (m) Performance. Neither Borrower nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation applicable to
it, and no condition exists which, with the giving of notice or the lapse of
time or both, would constitute a default under such Contractual Obligation in
each case, except where the consequences, direct or indirect, of such default or
defaults, if any, will not have a Material Adverse Effect.

         (n) Federal Reserve Regulations. No part of the proceeds of the Loan
hereunder will be used to purchase or carry any "margin security", as defined in
Regulation G or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of said Regulation G. Borrower is not engaged primarily in



                                       37

<PAGE>   42




the business of extending credit for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U. No part of the proceeds of the Loan
hereunder will be used for any purpose that violates, or which is inconsistent
with, the provisions of Regulation X or any other regulation of the Federal
Reserve Board.

         (o) Disclosure. Borrower has not intentionally or knowingly withheld
any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of
Borrower's future performance such representations and warranties are made in
good faith and to the best judgment of Borrower at the time such projections
were made.

         (p) Requirements of Law. To Borrower's knowledge, Borrower and each of
its Subsidiaries are in compliance with all Requirements of Law (including
without limitation the Securities Act and the Securities Exchange Act, and the
applicable rules and regulations thereunder, state securities law and "Blue Sky"
laws) applicable to them and their respective businesses, in each case, where
the failure to so comply will have a Material Adverse Effect.

         (q) Patents, Trademarks, Permits, Etc. Borrower and each of its
Subsidiaries owns, is licensed or otherwise has the lawful right to use, or have
all permits and other governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary for the
conduct of Borrower's or such Subsidiary's business as currently conducted, the
absence of which would have a Material Adverse Effect. To Borrower's knowledge,
the use of such permits and other governmental approvals, patents, trademarks,
trade names, copyrights, technology, know-how and processes by Borrower or such
Subsidiary does not infringe on the rights of any Person, subject to such claims
and infringements as do not, in the aggregate, have a Material Adverse Effect.

         (r) Environmental Matters. To the knowledge of Borrower, except as
would not have a Material Adverse Effect and except as set forth on Schedule
4.01(r), (i) the Property and operations of Borrower and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of Borrower or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental Laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither Borrower nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into
the environment in violation of any Environmental Laws, except as the same may
have been heretofore remedied; (iv) there is not now, nor to Borrower's
knowledge has there ever been, on or in the Property of Borrower or any of its
Subsidiaries (except in compliance in all material respects with all applicable
Environmental Laws): (A) any underground storage tanks, (B) any asbestos-
containing material, (C) any polychlorinated biphenyls (PCB's) used in hydraulic
oils, electrical transformers or other equipment, (D) any petroleum hydrocarbons
or (E) any chlorinated or halogenated solvents; and (v) neither Borrower nor any
of its Subsidiaries has


                                       38



<PAGE>   43




received any notice or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release of a Contaminant into
the environment.

         (s) ERISA. None of the REIT, Borrower or any Agreement Party, is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA, an
"employee welfare benefit plan" as defined in Section 3(l) of ERISA, a
"multiemployer plan" as defined in Sections 4001(a)(33) or 3(37) of ERISA or a
"plan" as defined in Section 4975(e)(1) of the Internal Revenue Code. Except for
a prohibited transaction arising solely because of a Lender's breach of the
covenant set forth in Section 11.23, none of the Obligations, any of the Loan
Documents or the exercise of any of the Agent's or Lenders' rights in connection
therewith constitutes a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and the taxes and penalties imposed by Section 4975 of the Internal Revenue Code
and Section 502(i) of ERISA) or otherwise results in a Lender, the Agent or the
Lenders being deemed in violation of Sections 404 or 406 of ERISA or Section
4975 of the Internal Revenue Code or will by itself result in a Lender, the
Agent or the Lenders being a fiduciary or party in interest under ERISA or a
"disqualified person" as defined in Section 4975(e)(2) of the Internal Revenue
Code with respect to an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code. No assets of the REIT, Borrower or any Agreement Party
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code.

         Each Borrower Plan is in compliance with ERISA and the applicable
provisions of the Internal Revenue Code in all respects except where the
failure to comply would not have a Material Adverse Effect. There are no claims
(other than claims for benefits in the normal course), actions or lawsuits
asserted or instituted against, and none of Borrower, the REIT, any of the
Material Subsidiaries or any of their ERISA Affiliates has knowledge of any
threatened litigation or claims against the assets of any Borrower Plan or
against any fiduciary of such Borrower Plan with respect to the operation of
such Borrower Plan which could have a Material Adverse Effect. No liability to
the PBGC has been, or is likely to be, incurred by Borrower, the REIT, any of
the Material Subsidiaries or their ERISA Affiliates other than such liabilities
which, in the aggregate, would not have a Material Adverse Effect. None of
Borrower, the REIT, any of the Material Subsidiaries or any of their ERISA
Affiliates is now contributing to or has ever contributed to or been obligated
to contribute to any Multiemployer Plan, no employees or former employees of
Borrower, the REIT, any of the Material Subsidiaries or any of their ERISA
Affiliates have been covered by any Multiemployer Plan in respect of their
employment by Borrower or such Material Subsidiary or such ERISA Affiliate. None
of Borrower, the REIT, any of the Material Subsidiaries or any of their ERISA
Affiliates has engaged in a "prohibited transaction" as such term is defined in
Section 4975 of the Internal Revenue Code or in a transaction subject to the
prohibitions of Section 406 of ERISA, in connection with any Benefit Plan or
Welfare Plan which would subject Borrower, the REIT, any of the Material
Subsidiaries or any of their ERISA Affiliates (after giving effect to any
exemption) to the tax penalty on

                                       39


<PAGE>   44



prohibited transactions imposed by Section 4975 of the Internal Revenue Code,
Section 502 of ERISA or any other liability under ERISA which tax, penalty or
other liability would have a Material Adverse Effect. None of the Benefit Plans
subject to Title IV of ERISA has any material Unfunded Pension Liability as to
which Borrower, the REIT, any of the Material Subsidiaries or any of their ERISA
Affiliates is or may be liable, which liability would have a Material Adverse
Effect.

         (t) Solvency. Borrower is and will be Solvent after giving effect to
the disbursements of the Loan and the payment and accrual of all fees then
payable.

         (u) Use of Proceeds. Borrower's use of the proceeds of the Loan are,
and will continue to be, legal and proper uses (and to the extent necessary,
duly authorized by Borrower's partners) and such uses are consistent with all
applicable laws and statutes.

         (v) Subsidiaries and Investment Affiliates. Each Subsidiary and
Investment Affiliate as of the date hereof is set forth on Schedule 4.01(v).
Schedule 4.01(v) sets forth the ownership of each such Subsidiary and Investment
Affiliate and the material Property owned by such Person as of the date hereof.

         (w) Year 2000. Based on a recent assessment, Borrower determined that a
majority of its applications will function properly with respect to dates in the
Year 2000 and thereafter. Borrower has initiated formal communications with all
of its significant suppliers to determine the extent to which Borrower's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. Borrower's total Year 2000 project cost and estimate
to complete do not include the estimated costs and time associated with the
impact of third party Year 2000 issues. There can be no guarantee that the
systems of other companies on which Borrower's systems rely will be timely
converted and would not have an adverse effect on Borrower's systems. Borrower
anticipates completing its Year 2000 project no later than December 31, 1998,
which is prior to any impact on its operating systems. The total cost of the
Year 2000 project is estimated to be immaterial assuming third parties remediate
their own Year 2000 issues. This assumption is based on management's best
estimates, which were derived utilizing numerous assumption of future events,
and there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.

         4.02 Representations and Warranties as to the REIT. In order to induce
Lenders to make the Loan, REIT hereby represents and warrants to Lenders as
follows:

         (a) Organization; Corporate Powers. The REIT (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, (ii) is duly qualified to do business as a foreign corporation and in
good standing under the laws of each jurisdiction in which the nature of its
business requires it to be so qualified, except for those jurisdictions where
failure to so qualify and be in good standing will not have a Material Adverse
Effect, and (iii) has all requisite corporate power and authority to own,
operate and encumber its property and assets and to conduct its business as
presently conducted and as proposed to be


                                       40

<PAGE>   45


conducted in connection with and following the consummation of the transactions
contemplated by the Loan Documents.

         (b) Authority. The REIT has the requisite corporate power and authority
to execute, deliver and perform each of the Loan Documents to which it is or
will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the Board of Directors of the REIT, and no other corporate proceedings on the
part of the REIT are necessary to consummate such transactions. Each of the Loan
Documents to which the REIT is a party has been duly executed and delivered by
the REIT and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.

         (c) No Conflict. The execution, delivery and performance by the REIT of
the Loan Documents to which it is a party, and each of the transactions
contemplated thereby, do not and will not (i) conflict with or violate its
Articles or Certificate of Incorporation or by-laws, or other organizational
documents, as the case may be, or the organizational documents of Borrower or
any Subsidiary, (ii) conflict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under any Requirement of Law,
Contractual Obligation or Court Order of the REIT, Borrower or any Subsidiary,
or require termination of any such Contractual Obligation, the consequences of
which conflict or breach or default or termination will have a Material Adverse
Effect, or result in or require the creation or imposition of any Lien
whatsoever upon any of its Property, or (iii) require any approval of the
stockholders of the REIT.

         (d) Consents and Authorizations. The REIT has obtained all consents and
authorizations required pursuant to its Contractual Obligations with any other
Person, the failure of which to obtain would have a Material Adverse Effect,
and has obtained all consents and authorizations of, and effected all notices to
and filings with, any Governmental Authority necessary to allow the REIT to
lawfully execute, deliver and perform its obligations under the Loan Documents
to which the REIT is a party.

         (e) Governmental Regulation. The REIT is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940 or any other federal
or state statute or regulation such that its ability to incur indebtedness is
limited or its ability to consummate the transactions contemplated by the Loan
Documents is materially impaired.

         (f) Capitalization. To the REIT's knowledge, all of the capital stock
of the REIT has been issued in compliance with all applicable Requirements of
Law.

         (g) Litigation, Adverse Effects.

              (i) There is no action, suit, proceeding, governmental
    investigation or arbitration, at law or in equity, or before or by any
    Governmental Authority, pending, or



                                       41

<PAGE>   46




    to best of the REIT's knowledge, threatened against the REIT, any of its
    Subsidiaries or any of their respective Properties in which there is a
    reasonable possibility of an adverse decision that could have a Material
    Adverse Effect.

              (ii) Neither the REIT nor any of its Subsidiaries is (A) in
    violation of any applicable Requirement of Law, which violation has a
    Material Adverse Effect, or (B) subject to or in default with respect to any
    Court Order which has a Material Adverse Effect.

         (h) Payment of Taxes. All tax returns and reports to be filed by the
REIT or any of its Subsidiaries have been timely filed, and all taxes,
assessments, fees and other governmental charges shown on such returns have been
paid when due and payable, except such taxes, if any, as are reserved against in
accordance with GAAP, such taxes as are being contested in good faith by
appropriate proceedings or such taxes, the failure to make payment of which when
due and payable would not have, in the aggregate, a Material Adverse Effect. The
REIT has no knowledge of any proposed tax assessment against the REIT or any of
its Subsidiaries that would have a Material Adverse Effect, which is not being
actively contested in good faith by the REIT or such Subsidiary.

         (i) Material Adverse Agreements. The REIT is not a party to or subject
to any Contractual Obligation or other restriction contained in its charter,
by-laws, or similar governing documents which has a Material Adverse Effect.

         (j) Performance. Neither the REIT nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation applicable to
it, and no condition exists which, with the giving of notice or the lapse of
time or both, would constitute a default under such Contractual Obligation in
each case, except where the consequences, direct or indirect, of such default or
defaults, if any, would not have a Material Adverse Effect.

         (k) Securities Activities. The REIT is not engaged principally in the
business of extending credit for the purpose of purchasing or carrying any
"margin stock" (as defined in Regulation U).

         (l) Disclosure. The REIT has not intentionally or knowingly withheld
any material fact from Agent in regard to any matter raised in the Loan
Documents. Notwithstanding the foregoing, with respect to any projections of the
REIT's future performance such representations and warranties are made in good
faith and to the best judgment of the management of the REIT at the time such
projections were made.

         (m) Requirements of Law. To the REIT's knowledge, the REIT and each of
its Subsidiaries are in compliance with all Requirements of Law (including
without limitation the Securities Act and the Securities Exchange Act, and the
applicable rules and regulations thereunder, state securities law and "Blue Sky"
laws) applicable to them and their respective



                                       42

<PAGE>   47




businesses, in each case, where the failure to so comply would have a Material
Adverse Effect. After giving effect to all filings made simultaneously with the
Closing Date, the REIT has made all filings with and obtained all consents of
the Commission required under the Securities Act and the Securities Exchange Act
in connection with the execution, delivery and performance by the REIT of the
Loan Documents to which it is a party.

         (n) Patents, Trademarks, Permits, Etc. The REIT and each of its
Subsidiaries own, are licensed or otherwise have the lawful right to use, or
have all permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of the REIT's or such Subsidiary's business as currently conducted,
the absence of which would have a Material Adverse Effect. To the REIT's
knowledge, the use of such permits and other governmental approvals, patents,
trademarks, trade names, copyrights, technology, know-how and processes by the
REIT or such subsidiary does not infringe on the rights of any Person, subject
to such claims and infringements as do not, in the aggregate, have a Material
Adverse Effect.

         (o) Environmental Matters. To the knowledge of the REIT, except as
would not have a Material Adverse Effect and except as set forth on Schedule
4.01(r), (i) the Property and operations of the REIT and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) none of the Property or operations of the REIT or any of its
Subsidiaries are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment or from the violation of any Environmental laws, which Remedial
Action or other Liabilities and Costs would have a Material Adverse Effect;
(iii) neither the REIT nor any of its Subsidiaries has filed any notice under
applicable Environmental Laws reporting a Release of a Contaminant into the
environment in violation of any Environmental Laws, except as the same may have
been heretofore remedied; (iv) there is not now, nor to the REIT's knowledge has
there ever been, on or in the Property of the REIT or any of its Subsidiaries
(except in compliance in all material respects with all applicable Environmental
Laws): (A) any underground storage tanks, (B) any asbestos-containing material,
(C) any polychlorinated biphenyls (PCB's) used in hydraulic oils, electrical
transformers or other equipment, (D) any petroleum hydrocarbons or (E) any
chlorinated or halogenated solvents; and (v) neither the REIT nor any of its
Subsidiaries has received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of
Contaminant into the environment.

         (p) Solvency. The REIT is and will be Solvent after giving effect to
the disbursement of the Loan and the payment of all fees then payable.

         (q) Status as a REIT. The REIT (i) is a real estate investment trust as
defined in Section 856 of the Internal Revenue Code (or any successor provision
thereto), (ii) has not revoked its election to be a real estate investment
trust, (iii) has not engaged in any "prohibited transactions" as defined in
Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor provision
thereto), except for the transfer of manufactured home inventory from Borrower
to



                                       43

<PAGE>   48
Realty Systems, Inc., a Delaware corporation (provided that such transfer does
not adversely affect the REIT's status as a real estate investment trust under
the Internal Revenue Code), and (iv) for its current "tax year" (as defined in
the Internal Revenue Code) is and for all prior tax years subsequent to its
election to be a real estate investment trust has been entitled to a dividends
paid deduction which meets the requirements of Section 857 of the Internal
Revenue Code.

         (r)  Ownership.  The REIT does not own any Property or have any
interest in any Person other than as set forth on Schedule 4.01(v).

         (s)  Listing.  The common stock of the REIT is and will continue to be
listed for trading and traded on either the New York Stock Exchange or American
Stock Exchange.

         (t)  Year 2000.  Based on a recent assessment, the REIT determined that
a majority of its applications will function properly with respect to dates in
the Year 2000 and thereafter.  The REIT has initiated formal communications with
all of its significant suppliers to determine the extent to which the REIT's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues.  The REIT's total Year 2000 project cost and
estimate to complete do not include the estimated costs and time associated with
the impact of third party Year 2000 issues.  There can be no guarantee that the
systems of other companies on which the REIT's systems rely will be timely
converted and would not have an adverse effect on the REIT's systems.  The REIT
anticipates completing its Year 2000 project no later than December 31, 1998,
which is prior to any impact on its operating systems. The total cost of the
Year 2000 project is estimated to be immaterial assuming third parties remediate
their own Year 2000 issues. This assumption is based on management's best
estimates, which were derived utilizing numerous assumption of future events,
and there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.

                                   ARTICLE V

                              REPORTING COVENANTS

         Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations and termination of this Agreement:

         5.01 Financial Statements and Other Financial and Operating
Information.  Borrower shall maintain or cause to be maintained a system of
accounting established and administered in accordance with sound business
practices and consistent with past practice to permit preparation of quarterly
and annual financial statements in conformity with GAAP.  Borrower shall deliver
or cause to be delivered to Agent with copies for each Lender:

         (a)  Quarterly Financial Statements Certified by CFO.  As soon as
practicable, and in any event within fifty (50) days after the end of each
Fiscal Quarter, except the last fiscal Quarter of a Fiscal Year, consolidated
balance sheets, statements of income and expenses and


                                       44
<PAGE>   49
statements of cash flow (collectively, "Financial Statements") for the REIT, on
a consolidated basis, in the form provided to the Commission on the REIT's Form
10-Q and certified by the REIT's chief financial officer.

         (b) Annual Financial Statements.  Within one hundred and twenty (120)
days after the close of each Fiscal Year, annual Financial Statements of the
REIT, on a consolidated basis (in the form provided to the Commission on the
REIT's Form 10K), audited and certified without qualification by the
Accountants.

         (c) Officer's Certificate of Borrower.  (i) Together with each delivery
of any Financial Statement pursuant to Sections 5.01(a) and (b), an Officer's
Certificate of the REIT stating that (A) the executive officer who is the
signatory thereto, which officer shall be the chief executive officer or the
chief financial officer of the REIT, has reviewed, or caused under his
supervision to be reviewed, the terms of this Agreement and the other Loan
Documents, and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of Borrower, the REIT, the
Subsidiaries, and the Agreement Parties, during the accounting period covered by
such Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not have
knowledge of the existence as of the date of the Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto and (B) such Financial
Statements have been prepared in accordance with the books and records of the
REIT, on a consolidated basis, and fairly present the financial condition of the
REIT, on a consolidated basis at the date thereof (and, if applicable subject to
normal year-end adjustments) and the results of operations and cash flows, on a
consolidated basis, for the period then ended; and (ii) together with each
delivery pursuant to clauses (a) and (b) above, a Compliance Certificate
demonstrating, in reasonable detail (which detail shall include actual
calculations), compliance during and at the end of such accounting periods with
the financial covenants contained in 7.01(d) and 7.01(k) and Article VIII.

         (d) Knowledge of Event of Default.  Promptly upon Borrower obtaining
knowledge (i) of any condition or event which constitutes an Event of Default or
Unmatured Event of Default, or (ii) of any condition or event which has a
Material Adverse Effect, an Officer's Certificate specifying the nature and
period of existence of any such condition or event and the nature of such
claimed Event of Default, Unmatured Event of Default, event or condition, and
what action Borrower, the REIT or the Agreement Party, as the case may be, has
taken, is taking and proposes to take with respect thereto.

         (e) Litigation, Arbitration or Government Investigation.  Promptly upon
Borrower obtaining knowledge of (i) the institution of, or threat of, any
material action, suit, proceeding, governmental investigation or arbitration
against or affecting Borrower, any Agreement Party, the REIT, any Subsidiary or
any of their Property not previously disclosed in

                                       45
<PAGE>   50
writing by Borrower to Agent pursuant to this Section 5.01(e), or (ii) any
material development in any action, suit, proceeding, governmental investigation
or arbitration already disclosed, in which, in either case, there is a
reasonable possibility of an adverse decision that could have a Material Adverse
Effect, a notice thereof to Agent and such other information as may be
reasonably available to it to enable Agent and its counsel to evaluate such
matters.

         (f) Failure of the REIT to Qualify as Real Estate Investment Trust.
Promptly upon, and in any event within forty-eight (48) hours after Borrower
first has knowledge of (i) the REIT failing to continue to qualify as a real
estate investment trust as defined in Section 856 of the Internal Revenue Code
(or any successor provision thereof), (ii) any act by the REIT causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the REIT to be subject to the taxes imposed by Section 857(b)(6)
of the Internal Revenue Code (or any successor provision thereto), (iv) the REIT
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Internal Revenue Code or (v) any challenge by
the IRS to the REIT's status as a real estate investment trust, a notice of any
such occurrence or circumstance.

         (g) Management Reports.  Upon and after the occurrence of an Event of
Default, copies of any management reports prepared by the Accountants as soon as
available.

         (h) Property Changes.  Notice of any material acquisition, disposition,
merger, or purchase by the REIT, Borrower, any Subsidiary or any Agreement Party
no later than ten (10) days after the consummation thereof, specifying the
nature of the transaction in reasonable detail.

         (i) Other Information.  Such other information, reports, contracts,
schedules, lists, documents, agreements and instruments in the possession of the
REIT, Borrower, any Subsidiary, or any Agreement Party with respect to the
business, financial condition, operations, performance, or properties of
Borrower, the REIT, any Subsidiary, or any Agreement Party, as Agent may, from
time to time, reasonably request, including without limitation, annual
information with respect to cash flow projections, budgets, operating statements
(current year and immediately preceding year), rent rolls, lease expiration
reports, leasing status reports, note payable summaries, bullet note summaries,
equity funding requirements, contingent liability summaries, line of credit
summaries, line of credit collateral summaries, wrap note or note receivable
summaries, schedules of outstanding letters of credit, summaries of cash and
Cash Equivalents, projections of management and leasing fees and overhead
budgets, each in the form customarily prepared by the REIT or Borrower.  If
Borrower fails to provide Agent with information requested from Borrower within
the time periods provided for herein, or if no time periods are provided for,
within ten (10) Business Days after Agent requests such information, and
provided that Agent gives Borrower reasonable prior notice and an opportunity to
participate, Borrower hereby authorizes Agent to communicate with the
Accountants and authorizes the Accountants to disclose to Agent any and all
financial statements and other information of any kind, including copies of any
management letter or the substance of any oral information that such Accountants
may have with respect to financial condition, operations,

                                       46
<PAGE>   51
properties, performance and prospects of Borrower, the REIT, any Subsidiary, or
any Agreement Party.  Concurrently therewith, Agent will notify Borrower of any
such communication.  At Agent's request, Borrower shall deliver a letter
addressed to the Accountants instructing them to disclose such information in
compliance with this Section 5.01(i).

         5.02 Press Releases: SEC Filings and Financial Statements.  The REIT
and Borrower will deliver to the Agent as soon as practicable after public
release all press releases concerning the REIT or Borrower.  The REIT and
Borrower will deliver to Agent as soon as practicable after filing with the
Commission, all reports and notices, proxy statements, registration statements
and prospectuses.  All materials sent or made available generally by the REIT
to the holders of its publicly-held Securities or to a trustee under any
indenture or filed with the Commission, including all periodic reports required
to be filed with the Commission, will be delivered to Agent as soon as
available.

         5.03 Environmental Notices.  Except for events or occurrences that will
not result in a Material Adverse Effect, Borrower shall notify Agent, in
writing, as soon as practicable, and in any event within ten (10) days after
Borrower's learning thereof, of any: (a) written notice or claim to the effect
that Borrower, any Agreement Party, the REIT, or any Subsidiary is or may be
liable to any Person as a result of the Release or threatened Release of any
Contaminant into the environment; (b) written notice that Borrower, any
Agreement Party, the REIT, or any Subsidiary is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (c) written notice that any Property of Borrower, any Agreement
Party, the REIT, or any Subsidiary is subject to an Environmental Lien; (d)
written notice of violation to Borrower, any Agreement Party, the REIT, or any
subsidiary or awareness of a condition which might reasonably result in a
notice of violation of any Environmental Laws by Borrower, the REIT, any
subsidiary or any Agreement Party; (e) commencement or written threat of any
judicial or administrative proceeding alleging a violation by Borrower, the
REIT, any Subsidiary or any Agreement Party of any Environmental Laws; or (f)
written notice received directly from a Governmental Authority of any changes to
any existing Environmental Laws.

         5.04 Qualifying Unencumbered Properties.  Borrower may from time to
time but no more frequently than quarterly deliver notice to the Agent stating
that Borrower intends to designate a Property to become a Qualifying
Unencumbered Property.  Such notice shall (i) set forth the name of such
Property (or, if such Property has no name, such notice shall otherwise identify
such Property), and (ii) be accompanied by a statement of income, certified by
the chief financial officer of Borrower, for each such Property for the then
most recently completed Fiscal Quarter (or, if such statement of income is
unavailable, a pro forma financial statement setting forth the Net Operating
Income with respect to such Property for the then current Fiscal Quarter).  If
any such Property meets the requirements set forth in the definition of
"Qualifying Unencumbered Properties" and the Agent fails to deliver written
notice to Borrower stating that the Requisite Lenders have disapproved the
designation of such Property as a Qualifying Unencumbered Property (it being
understood that such notice shall provide Borrower with


                                       47
<PAGE>   52
information regarding why such designation was disapproved by the Requisite
Lenders and that the Requisite Lenders will not unreasonably disapprove such
designation) within twenty (20) days after receipt of such information by Agent,
such Property shall become a Qualifying Unencumbered Property.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

          Borrower and the REIT covenant and agree that, on and after the date
hereof, until payment in full of all of the Obligations and termination of this
Agreement:

          6.01 With respect to Borrower:

          (a) Existence. Borrower shall, and shall cause each of its
Subsidiaries to, at all times maintain its and their respective partnership,
limited liability company, trust or corporate existence, as applicable, and
preserve and keep in full force and effect its and their respective rights and
franchises unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect. Borrower shall maintain its status as a limited
partnership.

          (b) Qualification. Borrower shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses require them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect.

          (c) Compliance with Laws, Etc. Borrower shall, and shall cause each of
its Subsidiaries to, (i) comply with all Requirements of Law and Contractual
Obligations, and all restrictive covenants affecting Borrower and its
Subsidiaries or their respective properties, performance, assets or operations,
and (ii) obtain as needed all Permits necessary for its and their respective
operations and maintain such in good standing, except in each of the foregoing
cases where the failure to do so will not have a Material Adverse Effect or
expose Agent or Lenders to any material liability therefor.

          (d) Payment of Taxes and Claims. (a) Borrower shall, and shall cause
each of its Subsidiaries to, pay (i) all taxes, assessments and other
governmental charges imposed upon it or them or on any of its or their
respective properties or assets or in respect of any of its or their respective
franchises, business, income or property before any penalty or interest accrues
thereon, the failure to make payment of which in such time periods will have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which will have a Material Adverse Effect; provided, however, that no
such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in


                                       48


<PAGE>   53

clause (ii) above need be paid if being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if adequate
reserves shall have been set aside therefor in accordance with GAAP.

          (e) Maintenance of Properties; Insurance. Borrower shall, and shall
cause each of its Subsidiaries to, maintain in good repair, working order and
condition, excepting ordinary wear and tear, all of its and their respective
Property (personal and real) and will make or cause to be made all appropriate
repairs, renewals and replacements thereof, in each case where the failure to so
maintain, repair, renew or replace will have a Material Adverse Effect. Borrower
shall, and shall cause each of its Subsidiaries to, maintain with insurance
companies that have a Best Rating of "A- VII" or higher or other insurance
companies reasonably acceptable to Agent that have similar financial resources
and stability, which companies shall be qualified to do business in the states
where such Property is located, the insurance policies and programs reasonably
acceptable to Agent insuring all property and assets material to the operations
of Borrower and each of its Subsidiaries against loss or damage by fire, theft,
burglary, pilferage and loss in transit and business interruption, together with
such other hazards as is reasonably consistent with prudent industry practice,
and maintain liability insurance consistent with prudent industry practice with
financially sound insurance companies qualified to do business in the states
where such property is located. The insurance policies shall provide that they
cannot be terminated or materially modified unless Agent receives thirty (30)
days prior written notice of said termination or modification. At Agent's
reasonable request, Borrower shall furnish evidence of replacement costs,
without cost to Agent, such as are regularly and ordinarily made by insurance
companies to determine the then replacement cost of the improvements on any
Property of Borrower or any of its Subsidiaries. In the event Borrower fails to
cause insurance to be carried as aforesaid, Agent shall have the right (but not
the obligation), with the consent of Requisite Lenders, to place and maintain
insurance required to be maintained hereunder and treat the amounts expended
therefor as additional Obligations, payable on demand; provided however, that
Agent shall give Borrower five (5) days' prior notice of Agent's intent to place
or maintain such insurance during which time Borrower shall have the opportunity
to obtain such insurance. All of the insurance policies required hereunder shall
be in form and substance reasonably satisfactory to Agent. Agent hereby agrees
that Borrower may use blanket policies to satisfy the requirements of this
Section 6.01(e), approves the issuer, form and content of all insurance
policies currently carried by Borrower and agrees that such insurance satisfies
the requirements of this Section 6.01(e). Furthermore, Agent agrees that it
will not be unreasonable in exercising any right hereunder to require Borrower
to modify, alter or supplement its insurance policies or coverage or in
exercising any right it may have hereunder to approve any changes Borrower may
hereafter make with respect to its insurance.

          (f) Inspection of Property; Books and Records. Borrower shall permit
and shall cause each of the REIT, each Subsidiary, and each Agreement Party to,
upon reasonable prior notice by Agent to Borrower, permit any authorized
representative(s) designated by Agent to visit and inspect any of its properties
including inspection of financial and accounting records and leases, and to make
copies and take extracts therefrom, all at such times during normal



                                       49


<PAGE>   54

business hours and as often as Agent may reasonably request. In connection
therewith, Borrower shall pay all reasonable expenses of the types described in
Section 11.01. Borrower shall keep, and shall cause each of the REIT, each
Subsidiary and each Agreement Party to keep proper books of record and account
in conformity with GAAP, as modified and as otherwise required by this Agreement
and applicable Requirements of Law.

          (g) Maintenance of Licenses, Permits, Etc. Borrower shall, and shall
cause each of its Subsidiaries to, maintain in full force and effect all
licenses, permits, governmental approvals, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of their respective businesses, except where the failure to obtain
any of the foregoing would not have a Material Adverse Effect; and notify Agent
in writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any such material
license, permit, patent, trademark, trade name, copyright, governmental
approval, franchise authorization or right, except where the suspension,
cancellation, revocation or discontinuance would not have a Material Adverse
Effect.

          (h) Conduct of Business. Except for Permitted Holdings and other
Investments permitted under Section 7.01(c), Borrower shall engage only in the
business of owning, operating and developing manufactured home communities,
whether directly or through its Subsidiaries.

          (i) Use of Proceeds. Borrower shall use the proceeds of the Loan
Increase only for the purpose of refinancing indebtedness outstanding under the
Revolving Credit Agreement.

          (j) Further Assurance. Borrower shall take and shall cause its
Subsidiaries and each Agreement Party to take all such further actions and
execute all such further documents and instruments as Agent may at any time
reasonably determine to be necessary or advisable to (i) correct any technical
defect or technical error that may be discovered in any Loan Document or in the
execution, acknowledgment or recordation thereof and (ii) cause the execution,
delivery and performance of the Loan Documents to be duly authorized.

          6.02 With respect to the REIT:

          (a) Corporate Existence. The REIT shall, and shall cause each of its
Subsidiaries to, at all times maintain its and their respective partnership or
corporate existence, as applicable, and preserve and keep in full force and
effect its and their respective rights and franchises unless the failure to
maintain such rights and franchises will not have a Material Adverse Effect.

          (b) Qualification, Name. The REIT shall, and shall cause each of its
Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its and their businesses requires them to be
so qualified except for those jurisdictions where failure to so qualify does not
have a Material Adverse Effect. The REIT will transact business solely in its
own name.


                                       50
<PAGE>   55

          (c) Securities Law Compliance. The REIT shall comply in all material
respects with all rules and regulations of the Commission and file all reports
required by the Commission relating to the REIT's publicly-held Securities.

          (d) Continued Status as a REIT Prohibited Transactions. The REIT (i)
will continue to be a real estate investment trust as defined in Section 856 of
the Internal Revenue Code (or any successor provision thereto), (ii) will not
revoke its election to be a real estate investment trust, (iii) will not engage
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Internal Revenue Code (or any successor provision thereto), and (iv) will do all
acts necessary to continue to be entitled to a dividend paid deduction meeting
the requirements of Section 857 of the Internal Revenue Code.

          (e) NYSE Listed Company. The REIT shall cause its common stock at all
times to be listed for trading and be traded on the New York Stock Exchange or
American Stock Exchange.

          (f) Compliance with Laws, Etc. The REIT shall, and shall cause each of
its Subsidiaries to, (i) comply with all Requirements of Law and Contractual
Obligations, and all restrictive covenants affecting the REIT and its
Subsidiaries or their respective properties, performance, prospects, assets or
operations, and (ii) obtain as needed all Permits necessary for its and their
respective operations and maintain such in good standing, except in each of the
foregoing cases where the failure to do so will not have a Material Adverse
Effect.

          (g) Payment of Taxes and Claims. Subject to Section 6.02(d), the REIT
shall, and shall cause each of its Subsidiaries to, pay (i) all taxes,
assessments and other governmental charges imposed upon it or them or on any of
its or their respective properties or assets or in respect of any of its or
their respective franchises, business, income or property before any penalty or
interest accrues thereon, the failure to make payment of which will have a
Material Adverse Effect, and (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) which have become due and
payable and which by law have or may become a Lien (other than a Permitted Lien)
upon any of its or their respective properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto, the failure to make
payment of which will have a Material Adverse Effect; provided, however, that no
such taxes, assessments, and governmental charges referred to in clause (i)
above or claims referred to in clause (ii) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if adequate reserves shall have been set aside therefor in
accordance with GAAP.

                                   ARTICLE VII

                               NEGATIVE COVENANTS

          Borrower and the REIT covenant and agree that, on and after the date
hereof, until payment in full of all of the Obligations and termination of
this Agreement:



                                       51

<PAGE>   56



          7.01 With respect to Borrower:

          (a) Indebtedness. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

              (i)   the Obligations;

              (ii)  trade debt incurred in the normal course of business; and

              (iii) Indebtedness which, after giving effect thereto, may be
incurred or may remain outstanding without giving rise to an Event of Default or
Unmatured Event of Default under any provision of Articles VII and VIII.

          (b) Liens. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property, except:

               (i)  Permitted Liens; and

               (ii) Liens securing Indebtedness permitted to be incurred and
remain outstanding pursuant to Section 7.01(a)(iii), which, after giving effect
thereto, may be incurred or may remain outstanding without giving rise to an
Event of Default or Unmatured Event of Default under any provision of Articles
VII and VIII.

          (c)  Investments. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly make or own any Investment except:

               (i)   Investments in cash and Cash Equivalents;

               (ii)  Permitted Holdings;

               (iii) Investments in Subsidiaries and Investment Affiliates owned
as of the Closing Date;

               (iv)  Investments permitted pursuant to Section 7.01(e)(v);

               (v)   Controlled Partnership Interests which do not constitute
Non-Manufactured Home Community Property; and

               (vi) mortgage loans which do not constitute Non-Manufactured Home
Community Property and which are either eliminated in the consolidation of the
REIT, Borrower and the Subsidiaries or are accounted for as investments in real
estate under GAAP.



                                       52
<PAGE>   57
          (d) Distributions and Dividends. Neither Borrower nor the REIT shall
declare or make any dividend or other distribution on account of partnership
interests in excess of ninety-five percent (95%) of Funds From Operations in any
Fiscal Year; provided, however, that if an Event of Default under Section 9.01
(a) shall have occurred, neither Borrower nor the REIT shall declare or make any
dividend or other distribution on account of partnership interests in excess of
what is required for the REIT to maintain its status as a real estate investment
trust as defined in Section 856 of the Internal Revenue Code.

          (e) Restrictions on Fundamental Changes.

               (i) Borrower shall not, and shall not permit any of its
     Subsidiaries to, enter into any merger, consolidation, reorganization or
     recapitalization or liquidate, wind-up or dissolve (or suffer any
     liquidation or dissolution), or discontinue its business.

               (ii) Borrower shall remain a limited partnership with the REIT as
     its sole general partner.

               (iii) Borrower shall not change its Fiscal Year.

               (iv) Except for Permitted Holdings and other Investments
     permitted under Section 7.01(c), Borrower shall not engage in any line of
     business other than ownership, operation and development of manufactured
     home communities and the provision of services incidental thereto and the
     brokerage, purchase, and sale of manufactured home units, whether directly
     or through its Subsidiaries and Investment Affiliates.

               (v) Borrower shall not acquire by purchase or otherwise all or
     substantially all of the business, property or assets of, or stock or other
     evidence of beneficial ownership of, any Person, unless after giving effect
     thereto, Borrower is in pro forma compliance with this Agreement.

          (f) ERISA. Neither Borrower nor the REIT shall, and neither shall
permit any Material Subsidiary or any of their ERISA Affiliates to, do any of
the following to the extent that such act or failure to act would result in the
aggregate, after taking into account any other such acts or failure to act, in a
Material Adverse Effect:

               (i) Engage, or knowingly permit a Subsidiary or an ERISA
     Affiliate to engage, in any prohibited transaction described in Section 406
     of ERISA or Section 4975 of the Internal Revenue Code which is not exempt
     under Section 407 or 408 of ERISA or Section 4975(d) of the Internal
     Revenue Code for which a class exemption is not available or a private
     exemption has not been previously obtained from the DOL;

               (ii) Permit to exist any accumulated funding deficiency (as
     defined in Section 302 of ERISA and Section 412 of the Internal Revenue
     Code), whether or not

                                       53
<PAGE>   58




               (iii) Fail, or permit a Material Subsidiary or an ERISA Affiliate
     of the REIT. Borrower or any Material Subsidiary to fail, to pay timely
     required contributions or annual installments due with respect to any
     waived funding deficiency to any Plan if such failure could result in the
     imposition of a Lien or otherwise would have a Material Adverse Effect;

               (iv) Terminate, or permit an ERISA Affiliate of the REIT,
     Borrower or any Material Subsidiary to terminate, any Benefit Plan which
     would result in any liability of Borrower or a Material Subsidiary or an
     ERISA Affiliate of the REIT, Borrower or any, Material Subsidiary under
     Title IV of ERISA; or

               (v) Fail, or permit any Subsidiary or ERISA Affiliate to fail to
     pay any required installment under section (m) of Section 412 of the
     Internal Revenue Code or any other payment required under Section 412 of
     the Internal Revenue Code on or before the due date for such installment or
     other payment, if such failure could result in the imposition of a Lien or
     otherwise would have a Material Adverse Effect; or

               (vi) Permit to exist any Termination Event;

               (vii) Make, or permit a Material Subsidiary or an ERISA Affiliate
     of the REIT, Borrower or any Material Subsidiary to make, a complete or
     partial withdrawal (within the meaning of ERISA Section 4201) from any
     Multiemployer Plan so as to result in liability to Borrower, a Material
     Subsidiary or any ERISA Affiliate of the REIT, Borrower or any Material
     Subsidiary which would have a Material Adverse Effect; or

               (viii) Permit the total Unfunded Pension Liabilities (using the
     actuarial assumptions utilized by the PBGC) for all Benefit Plans (other
     than Benefit Plans which have no Unfunded Pension Liabilities) to have a
     Material Adverse Effect.

          None of the REIT, Borrower nor any Agreement Party shall use any
"assets" (within the meaning of ERISA or Section 4975 of the Internal Revenue
Code, including but not limited to 29 C.F.R. ss. 2510.3-101 or any successor
regulation thereto) of an "employee benefit plan" within the meaning of Section
3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code to repay or secure the Obligations if the use of such
assets may result in a prohibited transaction under ERISA or the Internal
Revenue Code (which is not exempt from the restrictions of Section 406 of ERISA
and Section 4975 of the Internal Revenue Code and the taxes and penalties
imposed by Section 4975 of the Internal Revenue Code and Section 502(i) of
ERISA) or in a Lender, Agent or the Lenders being deemed in violation of Section
404 or 406 of ERISA or Section 4975 of the Internal Revenue Code or otherwise by
itself results in or will result in a Lender, Agent or the Lenders being a
fiduciary or party in interest under ERISA or a "disqualified person" as defined
in Section 4975 (e)(2) of the Internal Revenue Code with respect to an
"employee benefit plan" within the meaning of Section 3(3) of ERISA or a "plan"
within the meaning of Section 4975(e)(1) of the Internal Revenue Code. Without
limitation of any other provision of this Agreement, none of the REIT. Borrower

                                       54
<PAGE>   59




or any Agreement Party shall assign, sell, pledge, encumber, transfer,
hypothecate or otherwise dispose of their respective interests or rights (direct
or indirect) in any Loan Document, or attempt to do any of the foregoing or
suffer any of the foregoing, or permit any party with a direct or indirect
interest or right in any Loan Document to do any of the foregoing, nor shall
REIT or Borrower assign, sell, pledge, encumber, transfer, hypothecate or
otherwise dispose of any of their respective rights or interests (direct or
indirect) in any Agreement Party. Borrower or REIT, as applicable, or attempt
to do any of the foregoing or suffer any of the foregoing, if such action would
cause the Obligations, or the exercise of any of the Agent's or Lenders' rights
in connection therewith, to constitute a prohibited transaction under ERISA or
the Internal Revenue Code (unless Borrower furnishes to Agent a legal opinion
reasonably satisfactory to Agent that the transaction is exempt from the
prohibited transaction provisions of ERISA and the Internal Revenue Code (for
this purpose, the Agent and Lenders agree to supply Borrower all relevant
non-confidential factual information reasonably necessary to such legal opinion
and reasonably requested by Borrower)) or otherwise results in a Lender, the
Agent or the Lenders being deemed in violation of Sections 404 or 406 of ERISA
or Section 4975 of the Internal Revenue Code or otherwise by itself would result
in a Lender, the Agent or the Lenders being a fiduciary or party in interest
under ERISA or a "disqualified person" as defined in Section 4975(e)(2) of the
Internal Revenue Code with respect to an "employee benefit plan" within the
meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section
4975(e)(1) of the Internal Revenue Code.

          (g) Environmental Liabilities. Borrower shall not, and shall not
permit any of its Subsidiaries to, become subject to any Liabilities and Costs
which will have a Material Adverse Effect arising out of or related to (i) the
Release or threatened Release of any Contaminant into the environment, or any
Remedial Action in response thereto, or (ii) any violation of any Environmental
Laws. Notwithstanding the foregoing provision, Borrower and its Subsidiaries
shall have the right to contest in good faith any claim of violation of an
Environmental Law by appropriate legal proceedings and shall be entitled to
postpone compliance with the obligation being contested as long as (i) no Event
of Default shall have occurred and be continuing, (ii) Borrower shall have given
Agent prior written notice of the commencement of such contest, (iii)
noncompliance with such Environmental Law shall not subject Borrower or such
Subsidiary to any criminal penalty or subject Agent to pay any civil penalty or
to prosecution for a crime, and (iv) no portion of any Property material to
Borrower or its condition or prospects shall be in imminent danger of being
sold, forfeited or lost, by reason of such contest or the continued existence of
the matter being contested.

          (h) Amendment of Constituent Documents. Borrower shall not permit any
amendment of its limited partnership agreements, certificate of limited
partnership or by-laws, if any, which would materially and adversely affect
Agent or Lenders or their respective rights and remedies under the Loan
Documents.

          (i) Disposal of Interests. Borrower will not directly or indirectly
convey, sell, transfer, assign, pledge or otherwise encumber or dispose of any
material portion of its

                                       55
<PAGE>   60




partnership interests, stock or other ownership interests in any Subsidiary or
other Person in which it has an interest unless Borrower has delivered to Agent
a Compliance Certificate showing on a pro forma basis (calculated in a manner
reasonably acceptable to Agent) that there would be no breach of any of the
financial covenants contained in Articles VII and VIII after giving effect to
such conveyance, sale, transfer, assignment, pledge, or other encumbrance or
disposition.

          (j) Margin Regulations. No portion of the proceeds of any credit
extended under this Agreement shall be used in any manner which might cause the
extension of credit or the application of such proceeds to violate Regulation G,
Regulation U or Regulation X or any other regulation of the Federal Reserve
Board or to violate the Securities Exchange Act or the Securities Act, in each
case as in effect on the Closing Date and the date of such use of proceeds.

          (k) Transactions with Affiliates. Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into, any transaction or series of
related transactions with any Affiliate of Borrower, other than transactions in
the ordinary course of business which are on terms and conditions substantially
as favorable to Borrower or such Subsidiary as would be obtainable by Borrower
or such Subsidiary in an arms-length transaction with a Person other than an
Affiliate.

          7.02 With respect to the REIT:

          (a) Indebtedness. The REIT shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:

               (i) the Obligations; and

               (ii) Indebtedness which, after giving effect thereto, may be
     incurred or may remain outstanding without giving rise to an Event of
     Default or Unmatured Event of Default under any provision of Articles VII
     and VIII.

          (b) Liens. The REIT shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to
exist any Lien on or with respect to any of its Property, except:

               (i) Permitted Liens, and

               (ii) Liens securing Indebtedness permitted to be incurred and
     remain outstanding pursuant to Section 7.02(a)(ii).

                                       56
<PAGE>   61


          (c) Restriction on Fundamental Changes.

               (i) The REIT shall not enter into any merger, consolidation,
     reorganization or recapitalization or liquidate, wind-up or dissolve (or
     suffer any liquidation or dissolution) or discontinue its business.

               (ii) The REIT shall not change its Fiscal Year.

               (iii) The REIT shall not engage in any line of business other
     than owning partnership interests in Borrower and the interests identified
     on Schedule 4.01(v) as being owned by the REIT and any other ownership
     interests in Subsidiaries and Investment Affiliates which are permitted
     under the terms of Borrower's partnership agreement.

               (iv) The REIT shall not have an Investment in any Person other
     than Borrower and the interests identified on Schedule 4.01(v) as being
     owned by the REIT and any other ownership interests in Subsidiaries and
     Investment Affiliates which are permitted under the terms of Borrower's
     partnership agreement.

               (v) The REIT shall not acquire an interest in any Property other
     than Securities issued by Borrower and the interests identified on Schedule
     4.01 (v) and any other ownership interests in Subsidiaries and Investment
     Affiliates which are permitted under the terms of Borrower's partnership
     agreement.

          (d) Environmental Liabilities. The REIT shall not, and shall not
permit any of its Subsidiaries to, become subject to any Liabilities and Costs
which will have a Material Adverse Effect arising out of or related to (i) the
Release or threatened Release of any Contaminant into the environment, or any
Remedial Action in response thereto, or (ii) any violation of any Environmental
Laws. Notwithstanding the foregoing provision, the REIT and its Subsidiaries
shall have the right to contest in good faith any claim of violation of an
Environmental Law by appropriate legal proceedings and shall be entitled to
postpone compliance with the obligation being contested as long as (i) no Event
of Default shall have occurred and be continuing, (ii) the REIT shall have given
Agent prior written notice of the commencement of such contest, (iii)
noncompliance with such Environmental Law shall not subject the REIT or such
Subsidiary to any criminal penalty or subject Agent to pay any civil penalty or
to prosecution for a crime, and (iv) no portion of any Property material to
Borrower or its condition or prospects shall be in imminent danger of being
sold, forfeited or lost, by reason of such contest or the continued existence of
the matter being contested.

          (e) Amendment of Charter or By-Laws. The REIT shall not permit any
amendment of its charter documents or by-laws, which would materially and
adversely affect Agent or Lenders or their respective rights and remedies under
the Loan Documents.


                                       57
<PAGE>   62
          (f) Disposal of Partnership Interests. The REIT will not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise encumber or
dispose of any of its partnership interests in Borrower.

          (g) Maximum Ownership Interests. No Person or group of Persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act) (other than
Samuel Zell) shall beneficially acquire ownership (within the meaning of Rule
l3d-3 promulgated by the Commission under such Act), directly or indirectly, of
more than fifteen percent (15%) of the Securities which have the right to elect
the board of directors of the REIT under ordinary circumstances on a combined
basis, after giving effect to the conversion of any Convertible Securities in
the REIT and Borrower.

                                  ARTICLE VIII

                               FINANCIAL COVENANTS

          Borrower covenants and agrees that, on and after the date of this
Agreement and until payment in full of all the Obligations, the expiration of
all Commitments and the termination of this Agreement:

          8.01 Total Liabilities to Gross Asset Value. Borrower shall not permit
the ratio of Total Liabilities to the sum of Gross Asset Values for Borrower and
each of its Subsidiaries to exceed 0.6:1.

          8.02 Secured Debt to Gross Asset Value. Borrower shall not permit the
ratio of Secured Debt to the sum of Gross Asset Values for Borrower and each of
its Subsidiaries to exceed 0.4:1.

          8.03 EBITDA to Interest Expense Ratio. Borrower shall not permit the
ratio of EBITDA for any Fiscal Quarter to Interest Expense for such Fiscal
Quarter to be less than 2.0:1.

          8.04 EBITDA to Fixed Charges Ratio. Borrower shall not permit the
ratio of EBITDA for any Fiscal Quarter to Fixed Charges for such Fiscal Quarter
to be less than 1.75:1.

          8.05 Unencumbered Net Operating Income to Unsecured Interest Expense.
Borrower shall not permit the ratio of Unencumbered Net Operating Income for any
Fiscal Quarter to Unsecured Interest Expense for such Fiscal Quarter to be less
than 1.80:1.

          8.06 Unencumbered Pool. Borrower shall not permit the ratio of (a) the
sum of (i) the Unencumbered Asset Value and (ii) the fair market value of cash
and Cash Equivalents owned by Borrower and subject to no Lien in excess of
$10,000,000 to (b) outstanding Unsecured Debt to be less than 1.80:1.


                                       58

<PAGE>   63

          8.07 Minimum Net Worth. Borrower will maintain a Net Worth of not less
than Two Hundred Fifty-Eight Million Three Hundred Seventeen Thousand One
Hundred Dollars ($258,317,100) plus ninety percent (90%) of all Net Offering
Proceeds received by the REIT or Borrower after September 30, 1996.

          8.08 Permitted Holdings. Borrower's primary business will be the
ownership, operation and development of manufactured home communities and any
other business activities of Borrower and its Subsidiaries will remain
incidental thereto. Notwithstanding the foregoing, Borrower and its Subsidiaries
may acquire, maintain or engage in the following "Permitted Holdings" if and so
long as (i) the aggregate value of such Permitted Holdings, whether held
directly or indirectly by Borrower and its Subsidiaries, does not exceed, at any
time, twenty percent (20%) of Gross Asset Value for Borrower as a whole and (ii)
the value of each such Permitted Holding, whether held directly or indirectly by
Borrower and its Subsidiaries, does not exceed, at any time, the following
percentages of Borrower's Gross Asset Value:

<TABLE>
<CAPTION>
                                                                             Maximum Percentage of
Permitted Holdings                                                             Gross Asset Value
- ------------------                                                             -----------------
<S>                                                                             <C>
Non-Manufactured Home Community
Property (other than cash or Cash Equivalents)                                     10%

Land                                                                                5%

Securities issued by real estate investment
trusts primarily engaged in the development,
ownership and management of manufactured
home communities                                                                    5%

Manufactured Home Community Mortgages
other than mortgage indebtedness which is
either eliminated in the consolidation of the
REIT, Borrower and the Subsidiaries or
accounted for as investments in real estate
under GAAP                                                                         10%

Manufacturing Home Community Partnership
Interests other than Controlled Partnership
Interests                                                                          10%

Development Activity                                                               10%
</TABLE>

For purposes of calculating the foregoing percentages the value of each category
shall be calculated in the manner that Gross Asset Value is determined;
provided, however, that the Gross Asset Value for Land and Securities shall be
equal to the lesser of (a) acquisition cost thereof


                                       59

<PAGE>   64
or (b) the current market value thereof (such market value to be determined in a
manner reasonably acceptable to Agent); provided, further, that the Gross Asset
Value of Development Activity shall be determined in accordance with GAAP.

          8.09 Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter, but
shall be satisfied at all times.

                                   ARTICLE IX

                     EVENTS OF DEFAULT; RIGHTS AND REMEDIES

          9.01 Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:

          (a) Failure to Make Payments When Due. (i) The failure to pay in full
any amount due on the Termination Date; (ii) the failure to pay in full any
principal when due; (iii) the failure to pay in full any interest owing
hereunder or under any of the other Loan Documents within ten (10) days after
the due date thereof and, unless Agent has previously delivered two (2) or more
notices of payment default to Borrower during the term of this Agreement (in
which event the following notice shall not be required), Agent shall have given
Borrower written notice that Agent has not received such payment on or before
the date such payment was required to be made and Borrower shall have failed to
make such payment within five (5) days after receipt of such notice; or (iv) the
failure to pay in full any other payment required hereunder or under any of the
other Loan Documents, whether such payment is required to be made to Agent or to
some other Person, within ten (10) days after Agent gives Borrower written
notice that such payment is due and unpaid.

          (b) Dividends. Borrower or the REIT shall breach the covenant set
forth in Section 7.01 (d).

          (c) Breach of Financial Covenants. Borrower shall fail to satisfy any
covenant set forth in Article VIII and such failure shall continue for forty
(40) days after Borrower's knowledge thereof.

          (d) Other Defaults. Borrower, the REIT or any Agreement Party shall
fail duly and punctually to perform or observe any agreement, covenant or
obligation binding on Borrower, the REIT or any Agreement Party under this
Agreement or under any of the other Loan Documents (other than as described in
Section 6.01(e) or Sections 9.01(a), (b), (c), (e), or (p)), and such
failure shall continue for thirty (30) days after written notice from Agent to
Borrower, the REIT or any Agreement Party (or (i) such lesser period of time as
is mandated by applicable Requirements of Law or (ii) such longer period of time
(but in no case more than ninety (90) days) as is reasonably required to cure
such failure if Borrower, the REIT, or such Agreement Party commences such cure
within such thirty (30) days and diligently pursues the completion thereof).

                                       60


<PAGE>   65




          (e) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by Borrower, the REIT or any Agreement Party to
Agent or any Lender herein or in any of the other Loan Documents or in any
statement, certificate or financial statements at any time given by Borrower
pursuant to any of the Loan Documents shall be false or misleading in any
material respect on the date as of which made and, with respect to such
representations or warranties not known by Borrower at the time made or deemed
made to be false or misleading, the defect causing such representation or
warranty to be false or misleading is not removed within thirty (30) days after
the written notice thereof from Agent to Borrower.

          (f) Default as to Other Indebtedness. Borrower, the REIT, any
Subsidiary or any Investment Affiliate shall have defaulted under any Other
Indebtedness of such party (other than Non-Recourse Indebtedness) and as a
result thereof the holders of such Other Indebtedness shall have accelerated
such Other Indebtedness (other than Non-Recourse Indebtedness), if the aggregate
amount of such accelerated Other Indebtedness (to the extent of any recourse to
Borrower, the REIT or any Material Subsidiary), together with the aggregate
amount of any Other Indebtedness (other than Non-Recourse Indebtedness) of
Borrower, the REIT, any Subsidiary or any Investment Affiliate which has
theretofore been accelerated (to the extent of any recourse to Borrower, the
REIT or any Material Subsidiary) is $10,000,000 or more.

          (g) Involuntary Bankruptcy; Appointment of Receiver, etc.

               (i) An involuntary case or other proceeding shall be commenced
     against the REIT, Borrower, any Subsidiary, or any Agreement Party and the
     petition shall not be dismissed within sixty (60) days after commencement
     of the case, or a court having jurisdiction shall enter a decree or order
     for relief in respect of the REIT, Borrower, any Subsidiary, or any
     Agreement Party, as the case may be, in an involuntary case or other
     proceeding, under any applicable bankruptcy, insolvency or other similar
     law now or hereinafter in effect; or any other similar relief shall be
     granted under any applicable federal, state or foreign law; or

               (ii) A decree or order of a court having jurisdiction in the
     premises for the appointment of a receiver, liquidator, sequestrator,
     trustee, custodian or other officer having similar powers over Borrower,
     the REIT, any Subsidiary, or any Agreement Party, or over all or a
     substantial part of the property of the REIT, Borrower, any Subsidiary, or
     any Agreement Party shall be entered, or an interim receiver, trustee or
     other custodian of the REIT, Borrower, any Subsidiary, or any Agreement
     Party, or of all or a substantial part of the property of the REIT,
     Borrower, any Subsidiary, or any Agreement Party shall be appointed or a
     warrant of attachment, execution or similar process against any substantial
     part of the property of the REIT, Borrower, any Subsidiary, or any
     Agreement Party shall be issued and any such event shall not be stayed,
     vacated, dismissed, bonded or discharged within sixty (60) days of entry,
     appointment or issuance.

                                       61


<PAGE>   66




          (h) Voluntary Bankruptcy, Appointment of Receiver, Etc. The REIT,
Borrower, any Subsidiary, or any Agreement Party shall have an order for relief
entered with respect to it or commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking of possession by a receiver,
trustee or other custodian for all or a substantial part of its property; the
REIT, Borrower, any Subsidiary, or any Agreement Party shall make any assignment
for the benefit of creditors or shall be unable or fail, or admit in writing its
inability, to pay its debts as such debts become due; or the general partner(s)
or Board of Directors (or any committee thereof), as applicable, of the REIT,
Borrower, any Subsidiary, or any Agreement Party adopts any resolution or
otherwise authorizes any action to approve any of the foregoing.

          (i) Judgments and Attachments. (i) Any money judgments (other than a
money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writs or warrants of attachment,
or similar processes involving an aggregate amount in excess of $5,000,000 shall
be entered or filed against the REIT, Borrower, any Subsidiary, or any Agreement
Party or their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days, or (ii) any judgment or
order of any court or administrative agency awarding material damages shall be
entered against the REIT, Borrower, any Subsidiary, or any Agreement Party in
any action under the Federal securities laws seeking rescission of the purchase
or sale of, or for damages arising from the purchase or sale of, any Securities,
such judgment or order shall have become final after exhaustion of all available
appellate remedies and such judgment or order would have a Material Adverse
Effect.

          (j) Dissolution. Any order, judgment or decree shall be entered
against the REIT, Borrower, or any Agreement Party decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of thirty (30) days; or the REIT, Borrower, or any
Agreement Party shall otherwise dissolve or cease to exist.

          (k) Loan Documents. Any Loan Document shall cease to be in full force
and effect for any reason or any guarantor under any guaranty of all or any
portion of the Obligations shall at any time disavow or deny liability under
such guaranty in writing.

          (l) ERISA Plan Assets. Any assets of Borrower, the REIT or any
Agreement Party shall constitute "assets" (within the meaning of 29 C.F.R. ss.
2510.3-101 or any successor regulation thereto) of an "employee benefit plan"
within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of
Section 4975(e)(1) of the Internal Revenue Code or Borrower, the REIT or any
Agreement Party shall be an "employee benefit plan" as defined in Section 3(3)
of ERISA, a "multiemployer plan" as defined in Sections 4001(a)(3) or 3(37)
of ERISA, or a "plan" as defined in Section 4975(e)(1) of the Internal Revenue
Code.

                                       62




<PAGE>   67




          (m) ERISA Prohibited Transaction. The Obligations, any of the Loan
Documents or the exercise of any of the Agent's or Lenders' rights in connection
therewith shall constitute a prohibited transaction under ERISA and/or the
Internal Revenue Code (which is not exempt from the restrictions of Section 406
of ERISA or Section 4975 of the Internal Revenue Code and the taxes and
penalties imposed by Section 4975 of the Internal Revenue Code and Section
502(i) of ERISA).

          (n) ERISA Liabilities. (i) Any Termination Event occurs which will or
is reasonably likely to subject Borrower, the REIT, any Material Subsidiary, any
Agreement Party, any ERISA Affiliate thereof or any of them to a liability
which Agent reasonably determines will have a Material Adverse Effect, (ii) the
plan administrator of any Benefit Plan applies for approval under Section 412(d)
of the Internal Revenue Code for a waiver of the minimum funding standards of
Section 412(a) of the Internal Revenue Code and Agent reasonably determines that
the business hardship upon which the Section 412(d) waiver request was based
will or would reasonably be anticipated to subject Borrower, the REIT, any
Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any
of them to a liability which Agent reasonably determines will have a Material
Adverse Effect; (iii) any Benefit Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue Code or Section
302 of ERISA) for which a waiver shall not have been obtained in accordance with
the applicable provisions of the Internal Revenue Code or ERISA which
"accumulated funding deficiency" will or would reasonably be anticipated to
subject Borrower, the REIT, any Material Subsidiary, any Agreement Party, or
any ERISA Affiliate thereof or any of them to a liability which the Agent
reasonably determines will have a Material Adverse Effect; (iv) Borrower, the
REIT, any Material Subsidiary, any Agreement Party, or any ERISA Affiliate
thereof or any of them shall have engaged in a transaction which is prohibited
under Section 4975 of the Internal Revenue Code or Section 406 of ERISA which
will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Material Subsidiary, any Agreement Party,
or any ERISA Affiliate thereof or any of them which the Agent reasonably
determines will have a Material Adverse Effect; (v) Borrower, the REIT, any
Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or any
of them shall fail to pay when due an amount which it shall have become liable
to pay to the PBGC, a Plan or a trust established under Title IV of ERISA which
failure will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Material Subsidiary, any Agreement Party,
or any ERISA Affiliate thereof or any of them which the Agent reasonably
determines will have a Material Adverse Effect; (vi) a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
a Benefit Plan must be terminated or have a trustee appointed to administer such
Plan which condition will or would reasonably be anticipated to result in the
imposition of a liability on Borrower, the REIT, any Material Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them which the Agent
reasonably determines will have a Material Adverse Effect; (vii) a Lien shall be
imposed on any assets of Borrower, the REIT, any Material Subsidiary, any
Agreement Party, or any ERISA Affiliate thereof or any of them in favor of the
PBGC or a Plan which the Agent reasonably determines will have a Material
Adverse Effect; (viii) Borrower, the REIT, any Material Subsidiary, any

                                       63


<PAGE>   68




Agreement Party, or any ERISA Affiliate thereof or any of them shall
suffer a partial or complete withdrawal from a Multiemployer Plan or shall be in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from a complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA) from such Multiemployer Plan which
will or would reasonably be anticipated to result in the imposition of a
liability on Borrower, the REIT, any Material Subsidiary, any Agreement Party,
or any ERISA Affiliate thereof or any of them which the Agent reasonably
determines will have a Material Adverse Effect; or (ix) a proceeding shall be
instituted by a fiduciary of any Multiemployer Plan against Borrower, the REIT,
any Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or
any of them to enforce Section 515 of ERISA which will or would reasonably be
anticipated to result in the imposition of a liability on Borrower, the REIT,
any Material Subsidiary, any Agreement Party, or any ERISA Affiliate thereof or
any of them which the Agent reasonably determines will have a Material Adverse
Effect.

          (o) Solvency. Borrower, any Agreement Party or the REIT shall cease to
be Solvent.

          (p) Board of Directors. During any 12-month period, individuals who
were directors of the REIT on the first day of such period shall not constitute
a majority of the board of directors of the REIT.

          (q) Revolving Credit Agreement. An "Event of Default" shall have
occurred under the Revolving Credit Agreement.

          An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with Section 11.05.

          9.02 Rights and Remedies.

          (a) Acceleration. Upon the occurrence of any Event of Default with
respect to Borrower described in the foregoing Section 9.01(g) or 9.01(h), the
unpaid principal amount of and any and all accrued interest on the Loan and all
of the other Obligations shall automatically become immediately due and payable,
with all additional interest from time to time accrued thereon and without
presentment, demand or protest or other requirements of any kind (including
without limitation diligence, presentment, notice of intent to demand or
accelerate or notice of acceleration), all of which are hereby expressly waived
by Borrower, and the obligations of Lenders to make, continue or convert any
Loan hereunder shall thereupon terminate; and upon the occurrence and during the
continuance of any other Event of Default, Agent shall, at the request of, or
may, with the consent of, Requisite Lenders, by written notice to Borrower,
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loan and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation diligence, presentment,
notice of intent to demand or accelerate and of acceleration), all of which are
hereby expressly

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<PAGE>   69




waived by Borrower. Upon the occurrence of and during the continuance of an
Event of Default, no Agreement Party shall be permitted to make any
distributions or dividends without the prior written consent of Agent. Upon the
occurrence of an Event of Default or an acceleration of the Obligations, Agent
and Lenders may exercise all or any portion of the rights and remedies set forth
in the Loan Documents.

          (b) Access to Information. Notwithstanding anything to the contrary
contained in the Loan Documents, upon the occurrence of and during the
continuance of an Event of Default, Agent shall be entitled to request and
receive, by or through Borrower or appropriate legal process, any and all
information concerning the REIT, Borrower, any Subsidiary of Borrower, any
Investment Affiliate, any Agreement Party, or any property of any of them, which
is reasonably available to or obtainable by Borrower.

          (c) Waiver of Demand. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower.

          (d) Waivers, Amendments and Remedies. No delay or omission of Agent or
Lenders to exercise any right under any Loan Document shall impair such right or
be construed to be a waiver of any Event of Default or an acquiescence therein,
and any single or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in a writing signed by Agent after
obtaining written approval thereof or the signature thereon of those Lenders
required to approve such waiver, amendment or other variation, and then only to
the extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to Agent and Lenders until the Obligations have been paid in full, the
Commitments have expired or terminated and this Agreement has been terminated.

          9.03 Rescission. If at any time after acceleration of the maturity of
the Loan, Borrower shall pay all arrears of interest and all payments on account
of principal of the Loan which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Unmatured Events of Default (other than nonpayment of principal of
and accrued interest on the Loan due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 11.05, then by
written notice to Borrower, Requisite Lenders may elect, in the sole discretion
of Requisite Lenders to rescind and annul the acceleration and its consequences;
but such action shall not affect any subsequent Event of Default or Unmatured
Event of Default or impair any right or remedy in connection therewith. The
provisions of the preceding sentence are intended merely to bind Lenders to a
decision which may be made at the election of Requisite Lenders; they are not
intended to benefit Borrower and do not give Borrower the right to require
Lenders to rescind or annul any acceleration hereunder, even if the conditions
set forth herein are met.

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<PAGE>   70
                                   ARTICLE X

                               AGENCY PROVISIONS

         10.01 Appointment.

         (a)   Each Lender hereby designates and appoints Wells Fargo as Agent
of such Lender under this Agreement and the Loan Documents, and each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Loan Documents and to exercise such powers
as are set forth herein or therein, together with such other powers as are
reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Article X.

         (b)   The provisions of this Article X are solely for the benefit of
Agent and Lenders, and Borrower shall not have any rights to rely on or enforce
any of the provisions hereof.  In performing its functions and duties under this
Agreement, Agent shall act solely as Agent of Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower.


         10.02 Nature of Duties.  Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents.  The duties of Agent shall be administrative in nature.  Subject
to the provisions of Sections 10.05 and 10.07, Agent shall administer the Loan
in the same manner as it administers its own loan.  Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Loan Documents, expressed or implied, is
intended or shall be construed to impose upon Agent any obligation in respect of
this Agreement or any of the Loan Documents except as expressly set forth herein
or therein.  Each Lender shall make its own independent investigation of the
financial condition and affairs of the REIT, Borrower, the Subsidiaries, the
Investment Affiliates, and each Agreement Party in connection with the making
and the continuance of the Loan hereunder and shall make its own assessment of
the creditworthiness of the REIT, Borrower, the Subsidiaries, the Investment
Affiliates, and each Agreement Party, and except as specifically provided
herein, Agent shall not have any duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter.

         10.03 Loan Continuation/Conversion.

         (a)   Promptly after receipt of a Notice of Continuation/Conversion,
but in no event later than two (2) Business Days prior to the proposed
Continuation/Conversion Date for the continuation of a LIBOR Loan or the
conversion of a Base Rate Loan into a LIBOR Loan, Agent shall notify by
telecopy, each Lender of the proposed continuation or conversion and the
Continuation/Conversion Date set forth therein.  Each Lender shall make
available to Agent (or the funding bank or entity designated by Agent), the
amount of such Lender's Pro Rata Share of



                                       66
<PAGE>   71
the Loan Increase in immediately available funds not later the time designated
in Section 10.03(b).  Unless Agent shall have been notified by any Lender prior
to such time for funding in respect of the Loan Increase that such Lender does
not intend to make available to Agent such Lender's Pro Rata Share of the Loan
Increase, Agent may assume that such Lender had made such amount available to
Agent and Agent, in its sole discretion, may, but shall not be obligated to,
make available to Borrower a corresponding amount.  If such corresponding
amount is not in fact made available to Agent by such Lender on or prior to the
Closing Date, such lender agrees to pay to Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to Borrower until the date such amount is paid or
repaid to Agent, at the Federal Funds Rate.  If such Lender shall pay to Agent
such corresponding amount, such amount so paid shall constitute such Lender's
Pro Rata Share of the Loan Increase.  If such Lender shall not pay to Agent such
corresponding amount after reasonable attempts are made by Agent to collect such
amounts from such Lender, Borrower agrees to repay to Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to Borrower until the date such amount is
repaid to Agent, at the interest rate applicable thereto.

         (b)   Each Lender shall make the amount of its Pro Rata Share of the
Loan Increase available to Agent in Dollars and in immediately available funds,
to such bank and account, in El Segundo, California as Agent may designate, not
later than 9:00 A.M. (California time) on the Closing Date.  Nothing in this
Section 10.03(b) shall be deemed to relieve any Lender of its obligation
hereunder to deliver its Pro Rata Share of the Loan Increase on the Closing
Date, nor shall any Lender be responsible for the failure of any other Lender to
perform its obligations to deliver its Pro Rata Share of the Loan Increase
hereunder, and the Commitment of any Lender shall not be increased or decreased
as a result of the failure by any other Lender to perform its obligation to
deliver Pro Rata Share of the Loan Increase are required by this Section 10.03.

         10.04 Distribution and Apportionment of Payments.  Payments actually
received by Agent for the account of Lenders shall be paid to them promptly
after receipt thereof by Agent, but in any event prior to 3:00 P.M. (California
time) on the day of receipt (if received by 11:00 A.M. (California time) on such
day), or within one (1) Business Day thereafter (if received after 11:00 A.M.
(California time) on the day of receipt), provided that Agent shall pay to such
Lenders interest thereon at the Federal Funds Rate from the Business Day on
which such funds are required to be paid to Lenders by Agent until such funds
are actually paid in immediately available funds to such Lenders.  All payments
of principal and interest in respect of the outstanding Loan, all payments of
the fees described in this Agreement (other than agency and arrangement fees
described in Section 2.04(b)), and all payments in respect of any other
Obligations shall be allocated among such of Lenders as are entitled thereto, in
proportion to their respective Pro Rata Shares or otherwise as provided herein.
Agent shall promptly, but in any event within two (2) Business Days (with
interest thereon, if required pursuant to this Section 11.04(a)), distribute to
each Lender at its primary address set forth on the appropriate counterpart
signature page hereof or on the Assignment and Assumption, or at such other
address as a Lender may request in writing, such funds as it may be entitled to
receive, provided that



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<PAGE>   72
Agent shall in any event not be bound to inquire into or determine the validity,
scope or priority of any interest or entitlement of any Lender and may suspend
all payments and seek appropriate relief (including without limitation
instructions from Requisite Lenders, or all Lenders, as applicable, or an action
in the nature of interpleader) in the event of any doubt or dispute as to any
apportionment or distribution contemplated hereby.  The order of priority herein
is set forth solely to determine the rights and priorities of Lenders as among
themselves and may at any time or from time to time be changed by Lenders as
they may elect, in writing in accordance with Section 11.05, without necessity
of notice to or consent of or approval by Borrower or any other Person.

         10.05 Rights, Exculpation, Etc.  Neither agent, any Affiliate of Agent,
nor any of their respective officers, directors, employees, agents, attorneys or
consultants, shall be liable to any Lender for any action taken or omitted by
them hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that Agent shall be liable for its gross negligence or willful
misconduct in the performance of its express obligations hereunder.  In the
absence of gross negligence or willful misconduct, Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith pursuant
to Section 10.04, and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Person to whom
payment was due, but not made, shall be to recover from the recipients of such
payments any payment in excess of the amount to which they are determined to
have been entitled.  Agent shall not be responsible to any Lender for any
recitals, statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement, or any of the other Loan Documents, or any of the
transactions contemplated hereby and thereby; or for the financial condition of
the REIT, Borrower, any Subsidiary, any Investment Affiliate, or any Agreement
Party.  Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any of the Loan Documents or the financial condition of the REIT,
Borrower, any Subsidiary, any Investment Affiliate, or any Agreement Party, or
the existence or possible existence of any Unmatured Event of Default or Event
of Default.  Agent may at any time request instructions from Lenders with
respect to any actions or approvals which, by the terms of this Agreement or of
any of the Loan Documents, Agent is permitted or required to take or to grant
without instructions from any Lenders, and if such instructions are promptly
requested, Agent shall be absolutely entitled to refrain from taking any action
or to withhold any approval and shall not be under any liability whatsoever to
any Person for refraining from taking any action or withholding any approval
under any of the Loan Documents until it shall have received such instructions
from Requisite Lenders or Supermajority Lenders, as the case may be.  Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against Agent as a result of Agent acting or refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders, Supermajority Lenders or, where applicable, all Lenders.
Agent shall promptly notify each Lender at any time that the Requisite Lenders
or Supermajority Lenders, as the case may be, have instructed Agent to act or
refrain from acting pursuant hereto.



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<PAGE>   73
         10.06 Reliance.  Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents, telecopies or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person and with respect to all
matters pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountant and other experts selected by it.

         10.07 Indemnification.  To the extent that Agent is not reimbursed and
indemnified by Borrower, Lenders will reimburse, within ten (10) days after
notice from Agent, and indemnify Agent for and against any and all Liabilities
and Costs which may be imposed on, incurred by, or asserted against Agent (in
its capacity as Agent) in any way relating to or arising out of this Agreement
or any of the other Loan Documents or any action taken or omitted by Agent(in
its capacity as Agent) under this Agreement or any of the other Loan Documents,
in proportion to each Lender's Pro Rata Share, provided that no Lender shall be
liable for any portion of such Liabilities and Costs resulting from Agent's
gross negligence or willful misconduct, bad faith or fraud.  The obligations of
Lenders under this Section 10.07 shall survive the payment in full of all
Obligations and the termination of this Agreement.  In the event that after
payment and distribution of any amount by Agent to Lenders, any Lender or third
party, including Borrower, any creditor of Borrower or a trustee in bankruptcy,
recovers from Agent any amount found to have been wrongfully paid to Agent or
disbursed by Agent to Lenders, then Lenders, in proportion to their respective
Pro Rata Shares, shall reimburse Agent for all such amounts.  Notwithstanding
the foregoing, Agent shall not be obligated to advance Liabilities and Costs and
may require the deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or made
payable.

         10.08 Agent Individually.  With respect to its Pro Rata Share of the
Commitments hereunder and its Pro Rata share of the Loan, Agent shall have and
may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender.  The terms "Lenders", "Requisite Lenders", "Supermajority Lenders", or
any similar terms may include Agent in its individual capacity as a Lender, one
of the Requisite Lenders or one of the Supermajority Lenders, but Requisite
Lenders and Supermajority Lenders shall not include Agent solely in its capacity
as Agent and need not necessarily include Agent in its capacity as a Lender.
Agent and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with Borrower or any of
its Subsidiaries or Affiliates as if it were not acting as Agent pursuant
hereto.

         10.09 Successor Agent; Resignation of Agent; Removal of Agent.

         (a)   Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) Business Days prior
written notice to Lenders and Borrower.  For good cause, by a determination of
all the Lenders (excluding for such determination the Agent in its capacity as a
Lender), the Agent may be removed at any time by



                                       69
<PAGE>   74

giving at least thirty (30) Business Days prior written notice to Agent and
Borrower. Such resignation or removal shall take effect upon the acceptance by a
successor Agent of appointment pursuant to clauses (b) and (c) below or as
otherwise provided below.

              (b) Upon any such notice of resignation by or removal of Agent.
Requisite Lenders shall appoint a successor Agent with the consent of Borrower,
which shall not be unreasonably withheld or delayed (and which approval from
Borrower shall not be required upon the occurrence and during the continuance of
an Event of Default). Any successor Agent must be a bank (i) the senior debt
obligations of which (or such Bank's parent's senior debt obligations) are rated
not less than Baa-1 by Moody's or a comparable rating by a rating agency
acceptable to Requisite Lenders, (ii) which has total assets in excess of Ten
Billion Dollars ($10,000,000,000) and (iii) which is a Lender as of the date of
such succession holding a Commitment without participants equal to at least ten
percent (10%) of the Facility. Agent hereby agrees to remit to any successor
Agent, a pro rata portion of any annual agent's fee received by Agent, in
advance, for the one-year period covered by such agent's fee based upon the
portion of such year then remaining.

              (c) If a successor Agent shall not have been so appointed within
said thirty (30) Business Day period, the retiring or removed Agent, with the
consent of Borrower, which may not be unreasonably withheld or delayed (and
which approval from Borrower shall not be required upon the occurrence and
during the continuance of an Event of Default), shall then appoint a successor
Agent who shall meet the requirements described in subsection (b) above and who
shall serve as Agent until such time, if any, as Requisite Lenders, with the
consent of Borrower, which may not be unreasonably withheld or delayed (and
which approval from Borrower shall not be required upon the occurrence and
during the continuance of an Event of Default), appoint a successor Agent as
provided above.

              10.10 Consents and Approvals.

              (a) Each Lender authorizes and directs Agent to enter into the
Loan Documents other than this Agreement for the benefit of Lenders. Each Lender
agrees that any action taken by Agent at the direction or with the consent of
Requisite Lenders or the Supermajority Lenders and any action taken by Agent not
requiring consent by Requisite Lenders, Supermajority Lenders, or all Lenders in
accordance with the provisions of this Agreement or any Loan Document, and the
exercise by Agent at the direction or with the consent of Requisite Lenders or
the Supermajority Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all Lenders, except for actions specifically requiring the
approval of all Lenders. All communications from Agent to Lenders requesting
Lenders determination, consent, approval or disapproval (i) shall be given in
the form of a written notice to each Lender, (ii) shall be accompanied by a
description of the matter or item as to which such determination, approval,
consent or disapproval is requested. or shall advise each Lender where such
matter or item may be inspected, or shall otherwise describe the matter or issue
to be resolved. (iii) shall include, if reasonably requested by a Lender



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<PAGE>   75


and to the extent not previously provided to such Lender, written materials and
a summary of all oral information provided to Agent by Borrower in respect of
the matter or issue to be resolved, and (iv) shall include Agent's recommended
course of action or determination in respect thereof. Each Lender shall reply
promptly, but in any event within fifteen (15) Business Days after receipt of
the request therefor from Agent (the "Lender Reply Period"). Unless a Lender
shall give written notice to Agent that it objects to the recommendation or
determination of Agent (together with a written explanation of the reasons
behind such objection) within the Lender Reply Period, such Lender shall be
deemed to have approved of or consented to such recommendation or determination.
With respect to decisions requiring the approval of Requisite Lenders,
Supermajority Lenders or all Lenders, Agent shall submit its recommendation or
determination for approval of or consent to such recommendation or determination
to all Lenders and upon receiving the required approval or consent shall follow
the course of action or determination recommended to Lenders by Agent or such
other course of action recommended by Requisite Lenders or Supermajority
Lenders, as the case may be, and each non-responding Lender shall be deemed to
have concurred with such recommended course of action. The following amendments,
modifications or waivers shall require the consent of the Requisite Lenders:

                   (i) Waiver of Sections 7.01(h) or 7.02(e),

                   (ii) Acceleration following an Event of Default pursuant to
Section 9.02(a) (except for any Event of Default pursuant to Sections 9.01(g)
or 9.01(h) or rescission of such acceleration pursuant to Section 9.03;

                   (iii) Approval of the exercise of remedies requiring the
consent of the Requisite Lenders under Section 9.02(a);

                   (iv) Appointment of a successor Agent in accordance with
Sections 10.09(b) and (c); or

                   (v) Disapproval of any Property as a Qualifying Unencumbered
Property.

              (b) The consent of the Supermajority Lenders shall be required to
amend or modify Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.06, 8.07 or 9.01(a) or
to waive any requirement thereof or to amend or modify this Section 10.10(b).

              (c) In addition to the required consents or approvals referred to
in Section 11.05, Agent may at any time request instructions from Requisite
Lenders with respect to any actions or approvals which, by the terms of this
Agreement or of any of the Loan Documents, Agent is permitted or required to
take or to grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from Requisite Lenders. Without




                                       71



<PAGE>   76


limiting the foregoing, no Lender shall have any right of action whatsoever
against Agent as a result of Agent acting or refraining from acting under this
Agreement, any of the other Loan Documents in accordance with the instructions
of Requisite Lenders or, where applicable, Supermajority Lenders or all Lenders.
Agent shall promptly notify each Lender at any time that the Requisite Lenders
or Supermajority Lenders have instructed Agent to act or refrain from acting
pursuant hereto.

              10.11 Assignments and Participations.

              (a) Subject to the provisions of Section 10.11(j) after first
obtaining the approval of Agent and Borrower, which approval will not be
unreasonably withheld (and which approval from Borrower shall not be required
upon the occurrence and during the continuance of an Event of Default), each
Lender may assign to one or more banks, finance companies, insurance or other
financial institutions all or a portion of its rights and obligations under this
Agreement in accordance with the provisions of this Section (including without
limitation all or a portion of its Commitment and the portion of the Loan owing
to it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of the assigning Lender's rights and obligations
under this Agreement and the assignment shall cover the same percentage of such
Lender's Commitment and the portion of the Loan owing to it, (ii) unless Agent
and Borrower otherwise consent (which consent of Borrower shall not be required
upon the occurrence and during the continuance of an Event of Default), the
aggregate amount of the Commitment of the assigning Lender being assigned to a
Person that is not already a Lender hereunder pursuant to each such assignment
(determined as of the date of the Assignment and Assumption with respect to such
assignment) shall in no event be less than Ten Million Dollars ($10,000,000) and
shall be an integral multiple of One Million Dollars ($1,000,000), (iii) the
parties to each such assignment shall execute and deliver to Agent, for its
approval and acceptance, an Assignment and Assumption and (iv) Agent shall
receive from the assignor or assignors for its sole account a processing fee of
Three Thousand Dollars ($3,000). Without restricting the right of agent or
Borrower to reasonably object to any bank, finance company, insurance or other
financial institution becoming an assignee of an interest of a Lender hereunder,
each proposed assignee must be an existing Lender or a bank, finance company,
insurance or other financial institution which (i) has (or, in the case of a
bank which is a subsidiary, such bank's parent has) a rating of its senior debt
obligations of not less than Baa-1 by Moody's or a comparable rating by a
rating agency acceptable to Agent and (ii) has total assets in excess of Ten
Billion Dollars ($10,000,000,000). Upon such execution, delivery, approval and
acceptance, and upon the effective date specified in the applicable Assignment
and Assumption. (A) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been validly and
effectively assigned to it pursuant to such Assignment and Assumption, have the
rights and obligations of a Lender hereunder and (B) the Lender-assignor
thereunder shall, to the extent that rights and obligations hereunder have
been validly and effectively assigned by it pursuant to such Assignment and
Assumption, relinquish its rights and be released from its obligations under
this Agreement.




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<PAGE>   77


              (b) By executing and delivering an Assignment and Assumption, the
Lender-assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Assumption, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT, Borrower,
any Subsidiary, any Investment Affiliate, or any Agreement Party or the
performance or observance by the REIT, Borrower, any Subsidiary, any Investment
Affiliate, or any Agreement Party of any of their respective obligations under
any Loan Document or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Article V or
delivered pursuant to Article V to the date of such assignment and such other
Loan Documents and other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Assumption; (iv) such assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes Agent to take such action as Agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.

              (c) Agent shall maintain at its address referred to on the
counterpart signature pages hereof a copy of each Assignment and Assumption
delivered to and accepted by it and shall record the names and addresses of
each lender and the Commitment of, and principal amount of the Loan owing to,
such Lender from time to time. Borrower, Agent and Lenders may treat each Person
whose name is so recorded as a Lender hereunder for all purposes of this
Agreement.

              (d) Upon its receipt of an Assignment and Assumption executed by
an assigning Lender and an assignee, Agent shall, if such Assignment and
Assumption has been properly completed and is in substantially the form of
Exhibit A, (i) accept such Assignment and Assumption, (ii) record the
information contained therein and (iii) give prompt notice thereof to Borrower.
Upon request, Borrower will execute and deliver to Agent an appropriate
replacement promissory note or replacement promissory notes in favor of each
assignee (and assignor, if such assignor is retaining a portion of its
Commitment and the Loan) reflecting such assignee's (and assignor is retaining a
portion of its Commitment and the Loan) reflecting such assignee's (and
assignor's) Pro Rata Share(s) of the Facility. Upon execution and delivery of
such replacement




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<PAGE>   78


promissory notes, the original promissory note or notes evidencing all or a
portion of the Commitment and the Loan being assigned shall be canceled and
returned to Borrower.

              (e) Subject to the provisions of Section 10.11(j), each Lender may
sell participations to one or more banks, finance companies, insurance or other
financial institutions in or to all or a portion of its rights and obligations
under this Agreement (including without limitation all or a portion of its
Commitment and the portion of the Loan owing to it); provided, however, that (i)
such Lender's obligations under this Agreement (including without limitation its
Commitment to Borrower hereunder) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) Borrower, Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
that such Participant may have the contractual right in the applicable
participation agreement to prevent (A) increases in the Facility, (B) extensions
of the Termination Date and (C) decreases in the interest rates described in
this Agreement.

              (f) Borrower will use reasonable efforts to cooperate with Agent
and Lenders in connection with the assignment of interests under this Agreement
or the sale of participations herein.

              (g) Anything in this Agreement to the contrary notwithstanding,
and without the need to comply with any of the formal or procedural requirements
of this Agreement, including Section 10.11, any Lender may at any time and from
time to time pledge and assign all or any portion of its rights under all or any
of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from its obligations thereunder. To
facilitate any such pledge or assignment, Agent shall, at the request of such
Lender, enter into a letter agreement with the Federal Reserve Bank in, or
substantially in, the form of the exhibit to Appendix C to the Federal Reserve
Bank of New York Operating Circular No 12.

              (h) Anything in this Agreement to the contrary notwithstanding,
any Lender may assign all or any portion of its rights and obligations under
this Agreement to a Lender Affiliate of such Lender without first obtaining the
approval of Agent and Borrower, provided that (i) such assigning Lender is not
released from any obligations hereunder unless the assignee has total assets in
excess of Ten Billion Dollars ($10,000,000,000), (ii) such Lender gives Agent
and Borrower at least fifteen (15) days prior written notice of any such
assignment; (iii) the parties to each such assignment execute and deliver to
Agent an Assignment and Assumption, and (iv) Agent receives from assignor for
its sole account a processing fee of Three Thousand Dollars ($3,000).

              (i) No Lender shall be permitted to assign or sell all or any
of its rights and obligations under this Agreement to Borrower or any portion
Affiliate of Borrower.




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<PAGE>   79


              (j) Anything in this Agreement to the contrary notwithstanding, so
long as no Event of Default shall have occurred and be continuing, no Lender
shall be permitted to enter into an assignment of, or sell a participation
interest in, its rights and obligations hereunder which would result in such
Lender holding a Commitment without participants of less than Ten Million
Dollars ($10,000,000). In the event Agent ceases to hold a Commitment without
participants of less than ten percent (10%) of the Facility, Agent shall resign
from the performance of all of its functions and duties hereunder; provided,
however, that no such resignation shall be required during the continuance of an
Event of Default.

              (k) By its execution of this Agreement, each of the Lenders hereby
assigns and sells to the other Lenders accepting the same as set forth below,
without recourse, representation or warranty (except as expressly provided
herein), that portion of its Existing Pro Rata Share of the Existing Loan which
is in excess of its Pro Rata Share of the Existing Loan (collectively, the
"Excess Loan Amount"). By execution of this Agreement, each Lender whose Pro
Rata Share of the Existing Loan exceeds its Existing Pro Rata Share of the
Existing Loan hereby accepts the portion of the Excess Loan Amount which is
equal to the amount of such excess. Each assigning Lender hereby represents and
warrants that it is the legal and beneficial owner of the interests being
assigned by it in accordance with this Section 10.11 (k) and that such
interests are free and clear of any adverse claim.

              10.12 Ratable Sharing. Subject to Sections 10.03 and 10.04,
Lenders agree among themselves that (i) with respect to all amounts received by
them which are applicable to the payment of the Obligations, equitable
adjustment will be made so that, in effect, all such amounts will be shared
among them ratably in accordance with their Pro Rata Shares, whether received by
voluntary payment, by the exercise of the right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations, (ii) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim, set-off, banker's lien or otherwise, receive
payment of a proportion of the aggregate amount of the Obligations held by it
which is greater than its Pro Rata Share of the payments on account of the
Obligations, the one receiving such excess payment shall purchase, without
recourse or warranty, an undivided interest and participation (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in such
Obligations owed to the others so that all such recoveries with respect to such
Obligations shall be applied ratably in accordance with their Pro Rata Shares;
provided, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to that party
to the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 10.12 may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
subject to Section 11.04, the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.




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<PAGE>   80


              10.13 Delivery of Documents. Agent shall as soon as reasonably
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary set forth on the Closing Checklist
attached hereto as Exhibit B and (ii) all documents of which Agent receives
copies from Borrower for distribution to Lenders pursuant to Sections 5.01 and
11.07. In addition, within ten (10) Business Days after receipt of a request in
writing from a Lender for written information or documents provided by or
prepared by Borrower, the REIT or any Agreement Party, Agent shall deliver such
written information or documents to such requesting Lender if Agent has
possession of such written information or documents in its capacity as Agent or
as a Lender.

              10.14 Notice of Events of Default. Except as expressly provided
in this Section 10.14, Agent shall not be deemed to have knowledge or notice of
the occurrence of any Unmatured Event of Default or Event of Default (other than
nonpayment of principal of or interest on the Loan) unless Agent has received
notice in writing from a Lender or Borrower referring to this Agreement or the
other Loan Documents, describing such event or condition and expressly stating
that such notice is a notice of an Unmatured Event of Default or Event of
Default. Should Agent receive such notice of the occurrence of an Unmatured
Event of Default or Event of Default, or should Agent send Borrower a notice of
Unmatured Event of Default or Event of Default, Agent shall promptly give
notice thereof to each Lender.

                                   ARTICLE XI

                                  MISCELLANEOUS

              11.01 Expenses.

              (a) Generally. Borrower agrees, within thirty (30) days after
receipt of a written notice from the Agent, to pay or reimburse Agent for all
of Agent's reasonable costs and expenses incurred by Agent at any time (whether
prior to, on or after the date of this Agreement) in connection with: (A) the
negotiation, preparation and execution of this Agreement and the other Loan
Documents and any amendments or waivers with respect hereto requested by
Borrower, including, without limitation, the reasonable fees, expenses and
disbursements of Agent's outside counsel incurred in connection therewith; (B)
the making of the Loan Increase and (C) the collection or enforcement by Agent
of any of the Obligations, including, without limitation, reasonable attorneys'
fees and costs incurred in connection therewith.

              (b) After Event of Default. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable costs and expenses, including
without limitation reasonable attorneys' fees and disbursements incurred by
Agent or Lenders after the occurrence of an Event of Default (i) in enforcing
any Obligation or exercising or enforcing any other right or remedy available by
reason of such Event of Default; (ii) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a




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<PAGE>   81


"work-out" or in any insolvency or bankruptcy proceeding; (iii) in commencing,
defending or intervening in any litigation or in filing a petition, complaint,
answer, motion or other pleadings in any legal proceeding relating to Borrower,
the REIT or any Agreement Party and related to or arising out of the
transactions contemplated hereby; (iv) in taking any other action in or with
respect to any suit or proceeding (whether in bankruptcy or otherwise); or (v)
attempting to enforce or enforcing any rights under the Loan Documents;
provided, however, that the attorneys' fees and disbursements for which Borrower
is obligated under this subsection (b) shall be limited to the reasonable
non-duplicative fees and disbursements of counsel for Agent and counsel for all
Lenders as a group. For purposes of this Section 11.01(b), (i) counsel for
Agent shall mean a single outside law firm representing Agent plus any
additional law firms providing special local law representation in connection
with the enforcement of the Loan Documents, and (ii) counsel for all Lenders as
a group shall mean a single outside law firm representing such Lenders as a
group.

              11.02 Indemnity.

              (a) Generally. Borrower shall indemnify and defend Agent and each
Lender and their respective affiliates, participants, officers, directors,
employees and agents (each an "Indemnitee") against, and shall hold each such
Indemnitee harmless from, any and all losses, damages (whether general, punitive
or otherwise), liabilities, claims, causes of action (whether legal, equitable
or administrative), judgments, court costs and legal or other expenses
(including reasonable attorneys' fees) which such Indemnitee may suffer or
incur: (i) in connection with claims made by third parties against such
Indemnitee for losses or damages suffered by such third party as a result of (A)
such Indemnitee's performance of this Agreement or any of the other Loan
Documents, including without limitation such Indemnitee's exercise or failure to
exercise any rights, remedies or powers in connection with this Agreement or any
of the other Loan Documents or (B) the failure by Borrower, the REIT or any
Agreement Party to perform any of their respective obligations under this
Agreement or any of the other Loan Documents as and when required hereby or
thereby, including without limitation any failure of any representation or
warranty of Borrower, the REIT or any Agreement Party to be true and correct;
(ii) in connection with any claim or cause of action of any kind by any Person
to the effect that such Indemnitee is in any way responsible or liable for any
act or omission by Borrower, the REIT or any Agreement Party, whether on account
of any theory of derivative liability or otherwise, (iii) in connection with the
past, present or future environmental condition of any Property owned by
Borrower, the REIT, Subsidiary or any Agreement Party, the presence of
asbestos-containing materials at any such Property, the presence of Contaminants
in groundwater at any such Property, or the Release or threatened Release of any
Contaminant into the environment from any such Property; or (iv) in connection
with any claim or cause of action of any kind by any Person which would have the
effect of denying such Indemnitee the full benefit or protection of any
provision of this Agreement or any of the other Loan Documents.

              (b) ERISA. Without limitation of the provisions of subsection (a)
above, Borrower shall indemnify and hold each Indemnitee free and harmless from
and against all loss.




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<PAGE>   82


costs (including reasonable attorneys' fees and expenses), expenses, taxes, and
damages (including consequential damages) such Indemnitee may suffer or incur by
reason of the investigation, defense and settlement of claims and in obtaining
any prohibited transaction exemption under ERISA or the Internal Revenue Code
necessary in such Indemnitee's reasonable judgment by reason of the inaccuracy
of the representations and warranties set forth in the first paragraph of
Section 4.01(s) or a breach of the provisions set forth in the last paragraph of
Section 7.01(f)

              (c) Exceptions; Limitations. Notwithstanding anything to the
contrary set forth in this Section 11.02, Borrower shall have no obligation to
any Indemnitee hereunder with respect to (i) any intentional tort, fraud or act
of gross negligence or bad faith which any Indemnitee is personally determined
by the judgment of a court of competent jurisdiction (sustained on appeal, if
any) to have committed, (ii) any liability of such Indemnitee to any third part
based upon contractual obligations of such Indemnitee owing to such third party
which are not expressly set forth in the Loan Documents or (iii) violations of
Environmental Laws relating to a Property which are caused by the act or
omission of such Indemnitee after such Indemnitee takes possession of such
Property and which would not have occurred if such Indemnitee had exercised
reasonable care under the circumstances. In addition, the indemnification set
forth in this Section 11.02 in favor of any officer, director, partner, employee
or agent of Agent or any Lender shall be solely in their respective capacities
as such officer, director, partner, employee or agent. Such indemnification in
favor of any affiliate of Agent or any Lender shall be solely in its capacity as
the provider of services to Agent or such Lender in connection with this
Agreement, and such indemnification in favor of any participant of Agent or any
Lender shall be solely in its capacity as a participant in the Commitments and
the Loan.

              (d) Payment: Survival. Borrower shall pay any amount owing under
this Section 11.02 within thirty (30) days after written demand therefor by the
applicable Indemnitee together with reasonable supporting documentation
therefor. The indemnity set forth in this Section 11.02 shall survive the
payment of all amounts payable pursuant to, and secured by, this Agreement and
the other Loan Documents. Payment by any Indemnitee shall not be a condition
precedent to the obligations of Borrower under this Section 11.02. To the extent
that any indemnification obligation set forth in this Section 11.02 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of the applicable
indemnified matter.

              11.03 Change in Accounting Principles. Except as otherwise
provided herein, if any changes in accounting principles from those used in the
preparation of the most recent financial statements delivered to Agent pursuant
to the terms hereof are hereinafter required or permitted by the rules,
regulations, pronouncements and opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and are adopted by the REIT.
Borrower, any Subsidiary, any Investment Affiliate, or any Agreement Party with
the agreement of its independent certified




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<PAGE>   83


public accountants and such changes result in a change in the method of
calculation of any of the financial covenants, standards or terms found herein,
the parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating the financial condition of the REIT, on a
consolidated basis, shall be the same after such changes as if such changes had
not been made: provided however, that no change in GAAP that would affect the
method of calculation of an), of the financial covenants, standards or terms
shall be given effect in such calculations until such provisions are amended, in
a manner satisfactory to Agent and all Lenders, to so reflect such change in
accounting principles.

              11.04 Setoff. In addition to any Liens granted to Agent and any
rights now or hereafter granted under applicable law and not by way of
limitation of any such Lien or rights, upon the occurrence and during the
continuance of any Event of Default, Agent and each Lender are hereby authorized
by Borrower at any time or from time to time, with concurrent notice to
Borrower, or to any other Person (any such notice being hereby expressly waived)
to set off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured but not including trust accounts) and
any other indebtedness at any time held or owing by Agent or such Lender solely
to or for the credit or the account of Borrower against and on account of the
Obligations of Borrower to Agent or such Lender including but not limited to the
Loan and all claims of any nature or description arising out of or connected
with this Agreement or any of the other Loan Documents, irrespective of whether
or not (a) Agent or such Lender shall have made any demand hereunder or (b)
Agent shall have declared the principal of and interest on the Loan and other
amounts due hereunder to be due and payable as permitted by Article X and
although said obligations and liabilities, or any of them, may be contingent or
unmatured.

              11.05 Amendments and Waivers. No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) as provided in Section 10.10(a)
and Borrower (provided that the agreement of Requisite Lenders shall not be
required for amendments or modifications that are purely of a clerical nature or
that correct a manifest error), and no termination or waiver of any such
provision of this Agreement (including without limitation any waiver of an Event
of Default which does not specifically require the consent of all Lenders), or
consent to any departure by Borrower therefrom, shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders) as provided in Section 10.10(a), which Requisite Lenders shall have
the right to grant or withhold at their sole discretion, except that the
amendments, modifications or waivers specified in Section 10.10(b) shall require
the consent of the Supermajority Lenders and the following amendments,
modifications or waivers shall require the consent of all Lenders (other than
Section 11.05(i) which shall require the consent of all Lenders other than
Agent):

              (a) Increasing the Facility:




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<PAGE>   84


              (b) Changing the principal amount or final maturity of the Loan;

              (c) Reducing or increasing the interest rates applicable to the
Loan:

              (d) Reducing the rates on which fees payable pursuant hereto are
determined:

              (e) Forgiving or delaying any amount payable under Article II
(other than late fees);

              (f) Changing the definition of "Requisite Lenders," "Supermajority
Lenders," or "Pro Rata Shares";

              (g) Changing any provision contained in Section 11.05;

              (h) Releasing any obligor under any Loan Document, unless such
release is otherwise required by the terms of this Agreement or any other Loan
Document;

              (i) Removal of Agent for good cause in accordance with Section
10.09(a); and

              (j) Modifying or waiving any other provision herein which
specifically requires the consent of all Lenders.

Notwithstanding anything to the contrary contained in this Agreement, Borrower
shall have no right to consent to any amendment, modification, termination or
waiver of any provision of Article X hereof; provided, however, that no
amendment, modification, termination or waiver of Section 10.09(b), 10.09(c),
10.10(a), or 10.11 (except subsection (i) thereof) which has an adverse effect
on Borrower or Borrower's rights hereunder shall be effective without the
written concurrence of Borrower. Agent and Lenders further acknowledge and agree
that the remaining provisions of Article X are intended to and shall continue to
address only the rights and obligations of Agent and Lenders amongst each other
and do not and shall not impose obligations or restrictions upon Borrower or
result in any way in the loss of any rights, claims or defenses of borrower. No
amendment, modification, termination or waiver of any provision of Article X
hereof or any other provision referring to any Agent shall be effective without
the written concurrence of the Agent. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section shall be binding on each assignee, transferee or recipient of
Agent's powers, functions or duties or any Lender's Commitment under this
Agreement or the Loan at the time outstanding.

              11.06 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the




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<PAGE>   85


limitations of another covenant shall not avoid the occurrence of an Event of
Default or Unmatured Event of Default if such action is taken or condition
exists.

              11.07 Notices and Delivery. Unless otherwise specifically provided
herein, any consent, notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied or sent
by courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or if
deposited in the United States mail (registered or certified, with postage
prepaid and properly addressed) upon receipt or refusal to accept delivery.
Notices to Agent shall not be effective until received by Agent. For the
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 11.07) shall be as set forth
below each party's name on the signature pages hereof, or, as to each party, at
such other address as may be designated by such party in a written notice to all
of the other parties. All deliveries to be made to Agent for distribution to the
Lenders shall be made to Agent at the addresses specified for notice on the
signature page hereto and, in addition. a sufficient number of copies of each
such delivery shall be delivered to Agent for delivery to each Lender at the
address specified for deliveries on the signature page hereto or such other
address as may be designated by Agent or Lenders in a written notice.

              11.08 Survival of Warranties, Indemnities and Agreements. All
agreements, representations, warranties and indemnities made or given herein or
pursuant hereto shall survive the execution and delivery of this Agreement and
the other Loan Documents and the making and repayment of the Loan hereunder and
such indemnities shall survive termination hereof.

              11.09 Failure or Indulgence Not Waiver; Remedies Cumulative.
Except as otherwise expressly provided in this Agreement or any other Loan
Document, no failure or delay on the part of Agent or any Lender in the exercise
of any power, right or privilege under any of the Loan Documents shall impair
such power, right or privilege or be construed to be a waiver of any default or
acquiescence therein nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing under the Loan
Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.

              11.10 Marshaling; Recourse to Security; Payments Set Aside.
Neither any Lender nor Agent shall be under any obligation to marshall any
assets in favor of Borrower or any other party or against or in payment of any
or all of the Obligations. Recourse to security shall not be required at any
time. To the extent that Borrower makes a payment or payments to Agent or the
Lenders or Agent or the Lenders exercise their rights of set off, and such
payment or payments or the proceeds of such enforcement or set off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery the Obligations or part thereof originally
intended to be satisfied, and all rights and remedies therefor, shall be revived
and continued in




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full force and effect as if such payment had not been made or such enforcement
or set off had not occurred.

              11.11 Severability. In case any provision in or obligation under
this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

              11.12 Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

              11.13 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

              11.14 Limitation of Liability. To the extent permitted by
applicable law, no claim may be made by Borrower, the REIT, any Lender or any
other Person against Agent or any Lender, or the affiliates, directors,
officers, employees, attorneys or agents of any of them, for any punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith; and
Borrower, the REIT and each Lender hereby waive, release and agree not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.

              11.15 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of Agent and Lenders. The terms
and provisions of this Agreement shall inure to the benefit of any permitted
assignee or transferee of the Loan and the Commitments of Lenders under this
Agreement, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Agent and Lenders shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Borrower's rights or any interest therein hereunder, and
Borrower's duties and obligations hereunder, shall not be assigned (whether
directly, indirectly, by operation of law or otherwise) without the consent of
all Lenders.

              11.16 Usury Limitation. Each Loan Document is expressly limited
so that in no contingency or event whatsoever, whether by reason of error of
fact or law, payment, prepayment or advancement of the proceeds of Loan,
acceleration of maturity of the unpaid principal balance of the Loan, or
otherwise, shall the amount paid or agreed to be paid to Lenders for the use,
forbearance, or retention of money, including any fees or charges collected or
made in connection with the Loan which may be treated as interest under
applicable law, if any, exceed




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<PAGE>   87


the maximum legal limit (if any such limit is applicable) under United States
federal laws or state laws (to the extent not preempted by federal law, if any),
now or hereafter governing the interest payable under such Loan Documents. If,
from any circumstances whatsoever, fulfillment of any provision hereof or any of
the other Loan Documents at the time performance of such provision shall be due,
shall involve transcending the limit of validity (if any) prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any circumstances Lenders shall ever receive as interest
an amount which would exceed the maximum legal limit (if any, such limit is
applicable), such amount which would be excessive interest shall be applied to
the reduction of the unpaid principal balance due under the Loan Documents and
not to the payment of interest or, if necessary, to Borrower. Notwithstanding
any other provision of this Agreement or any of the other Loan Documents, this
provision shall control every other provision of all Loan Documents.

              11.17 Confidentiality. Agent and Lenders shall use reasonable
efforts to assure that any information about Borrower, the REIT, Subsidiaries
and Investment Affiliates (and their respective Properties) not generally
disclosed to the public which is furnished to Agent or Lenders pursuant to the
provisions of this Agreement or any of the other Loan Documents is used only for
the purposes of this Agreement and the other Loan Documents and shall not be
divulged to any other Person other than Agent, Lenders and their respective
affiliates, officers, directors, employees and agents who are actively and
directly participating in the evaluation, administration or enforcement of the
Obligations; provided, however, that nothing herein shall affect the disclosure
of any such information (i) to the extent required by statute, rule, regulation
or judicial process, (ii) to counsel for Agent or Lenders or to their
accountants, (iii) to bank examiners and auditors, (iv) to any transferee or
participant or prospective transferee or participant hereunder who agrees to be
bound by this provision, (v) in connection with the enforcement of the rights of
Agent and Lenders under this Agreement and the other Loan Documents, or (vi) in
connection with any litigation to which Agent or any Lender is a party so long
as Agent or such Lender provides Borrower with prior written notice of the need
for such disclosure and exercises reasonable efforts to obtain a protective
order with respect to such information from the court or other tribunal before
which such litigation is pending.

              11.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS, WAIVER OF
JURY TRIAL, WAIVER OF PERMISSIVE COUNTERCLAIMS. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST BORROWER OR THE REIT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE AND ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER OR THE REIT
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING SITUS WITHIN THE
BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE NORTHERN DISTRICT OF ILLINOIS,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER AND THE REIT ACCEPT.
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE





                                       83




<PAGE>   88


JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER AND THE REIT HEREBY DESIGNATE AND APPOINT ELLEN KELLEHER,
ESQ., MANUFACTURED HOME COMMUNITIES, INC., TWO NORTH RIVERSIDE PLAZA, SUITE 800,
CHICAGO, ILLINOIS 60606, TO RECEIVE ON THEIR BEHALF SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
BY SUCH PERSON TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. SUCH
APPOINTMENT SHALL BE REVOCABLE ONLY WITH AGENT'S PRIOR WRITTEN APPROVAL.
BORROWER AND THE REIT IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS
RESPECTIVE NOTICE ADDRESS SPECIFIED ON THE SIGNATURE PAGES HEREOF. SUCH SERVICE
TO BECOME EFFECTIVE UPON RECEIPT. BORROWER, THE REIT, AGENT AND LENDERS
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (B) ANY OBJECTION (INCLUDING
WITHOUT LIMITATION ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION. BORROWER AND THE REIT AGREE THAT THEY WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIM IN ANY PROCEEDING BROUGHT BY LENDER WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

              11.19 Counterparts; Effectiveness; Inconsistencies. This Agreement
and any amendments, waivers, consents or supplements may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective when Borrower, the
initial Lenders and Agent have duly executed and delivered counterpart execution
pages of this Agreement to each other (delivery by Borrower and the REIT to
Lenders and by any Lender to Borrower, the REIT and any other Lender being
deemed to have been made by delivery to Agent). This Agreement and each of the
other Loan Documents shall be construed to the extent reasonable to be
consistent one with the other, but to the extent that the terms and conditions
of this Agreement are actually and directly inconsistent with the terms and
conditions of any other Loan Document, this Agreement shall govern.

              11.20 Construction. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement and that the normal rule of
construction to the-effect




                                       84





<PAGE>   89
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or exhibits
hereto.

          11.21 Entire Agreement.  This Agreement, taken together with all of
the other Loan Documents and all certificates and other documents delivered by
Borrower to Agent in connection herewith, embodies the entire agreement and
supersede all prior agreements, written and oral, relating to the subject
matter hereof.

          11.22 Agent's Action for Its Own Protection Only.  The authority
herein conferred upon Agent, and any action taken by Agent, to inspect any
Property will be exercised and taken by Agent for its own protection only and
may not be relied upon by Borrower for any purposes whatsoever, and Agent shall
not be deemed to have assumed any responsibility to Borrower with respect to
any such action herein authorized or taken by Agent.  Any review, investigation
or inspection conducted by Agent, any consultants retained by Agent or any
agent or representative of Agent in order to verify independently Borrower's
satisfaction of any conditions precedent to Loan, Borrower's performance of any
of the covenants, agreements and obligations of Borrower under this Agreement,
or the validity of any representations and warranties made by Borrower
hereunder (regardless of whether or not the party conducting such review,
investigation or inspection should have discovered that any of such conditions
precedent were not satisfied or that any such covenants, agreements or
obligations were not performed or that any such representations or warranties
were not true), shall not affect (or constitute a waiver by Agent or Lenders
of) (i) any of Borrower's representations and warranties under this Agreement
or Agent's or Lenders' reliance thereon or (ii) Agent's or Lenders' reliance
upon any certifications of Borrower required under this Agreement or any other
facts, information or reports furnished to Agent and Lenders by Borrower
hereunder.

          11.23 Lenders' ERISA Covenant.  Each Lender, by its signature hereto
or on the applicable Assignment and Assumption, hereby agrees (a) that on the
date any Loan is disbursed hereunder no portion of such Lender's Pro Rata Share
of such Loan will constitute "assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an "employee benefit plan" within the meaning of Section 3(3) of
ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Internal
Revenue Code, and (b) that following such date such Lender shall not allocate
such Lender's Pro Rata Share of any Loan to an account of such Lender if such
allocation (i) by itself would cause such Pro Rata Share of such Loan to then
constitute "assets" (within the meaning of 29 C.F.R. ss. 2510.3-101 or any
successor regulation thereto) of an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Internal Revenue Code and (ii) by itself would cause such Loan to
constitute a prohibited transaction under ERISA or the Internal Revenue Code
(which is not exempt from the restrictions of Section 406 of ERISA and Section
4975 of the Internal Revenue Code and the taxes and penalties imposed by
Section 4975 of the Internal Revenue Code and Section 502(i) of ERISA) or any
Agent or Lender being deemed in violation of Section 404 of ERISA.

                                       85
<PAGE>   90


        11.24. Documentation Agent and Syndication Agent. Each of the parties to
this Agreement acknowledges and agrees that the obligations of Documentation
Agent and Syndication Agent hereunder shall be limited to those obligations that
are expressly set forth herein, if any, and Documentation Agent and Syndication
Agent shall not be required to take any action or assume any liability except as
may be required in their respective capacities as a Lender hereunder. Each of
the parties to this Agreement agrees that, for purposes of the indemnifications
set forth herein, the term "Agent" shall be deemed to include Documentation
Agent and Syndication Agent.

                            [SIGNATURE PAGES FOLLOW]




                                       86




<PAGE>   91





        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                                   "Borrower"

                                        MHC OPERATING LIMITED PARTNERSHIP, an
                                        Illinois limited partnership

                                        By: MANUFACTURED HOME
                                        COMMUNITIES, INC., a Maryland
                                        corporation as General Partner

                                             By: /s/ Ellen Kelleher
                                                -------------------------------
                                             Name: Ellen Kelleher
                                                  -----------------------------
                                             Title: Executive VP/General Counsel
                                                   ----------------------------

                                        Address:
                                        Two North Riverside Plaza, Suite 800
                                        Chicago, Illinois 60606
                                        Telecopy: 312/474-0205

                                     "REIT"


                                        MANUFACTURED HOME COMMUNITIES,
                                        INC., a Maryland corporation

                                            By: /s/ Ellen Kelleher
                                                -------------------------------
                                             Name: Ellen Kelleher
                                                  -----------------------------
                                             Title: Executive VP/General Counsel
                                                   ----------------------------


                                        Address:
                                        Two North Riverside Plaza, Suite 800
                                        Chicago, Illinois 60606
                                        Telecopy: 312/474-0205


                                       S-1

<PAGE>   92


                              "Agent and "Lenders"

                                        WELLS FARGO BANK, N.A., as Agent and as
                                        a Lender


                                        By: /s/ Steven R Lowery
                                           ------------------------------------
                                        Name: Steven R. Lowery
                                             ----------------------------------
                                        Title: Vice President
                                             ----------------------------------


                                        Address:
                                        225 West Wacker Drive,
                                        Suite 2550
                                        Chicago, Illinois 60606
                                        Attn.: Senior Loan Officer
                                        Telecopy: 312/782-0969

                                        with a copy to:

                                        Wells Fargo & Co.
                                        Real Estate Group
                                        420 Montgomery Street, Floor 6
                                        San Francisco, Calif. 94163
                                        Attn.: Chief Credit Officer
                                        Telecopy: 415/391-2971

                                        with a copy to (for Financial Statements
                                        and Reporting Information Only):

                                        Wells Fargo Bank
                                        2030 Main Street
                                        Suite 800
                                        Irvine, California 92714
                                        Attn: Debra Autry
                                        Telecopy: 714/851-9442

                                        Loan Commitment: $40,000,000
                                                          40%

                                      S-2




<PAGE>   93


                                     COMMERZBANK AKTIENGESELLSCHAFT,
                                     Chicago Branch, as a Lender


                                     By:    James J. Henry    E. Marcus Perry
                                       ----------------------------------------
                                     Name: JAMES J. HENRY    E. MARCUS PERRY
                                          -------------------------------------
                                     Title:  SENIOR VICE        ASSISTANT
                                              PRESIDENT         TREASURER



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



                                     Address:
                                     Two World Financial Center
                                     New York, NY 10281-1050
                                     Attn: Douglas P. Traynor
                                     Telecopy: 212/266-7569

                                     Loan Commitment:    $20,000,000
                                                          20%



                                      S-3
<PAGE>   94
                                     MORGAN GUARANTY TRUST COMPANY OF
                                     NEW YORK, as a Lender

                                     By:     Timothy V. O'Donovan
                                        ----------------------------------
                                     Name: TIMOTHY V. O'DONOVAN
                                          --------------------------------
                                     Title: VICE PRESIDENT
                                           -------------------------------

                                     Address:
                                     60 Wall Street, 22nd Floor
                                     New York, NY 10260-0060
                                     Attn.: Timothy O'Donovan
                                     Telecopy: 212/648-8111

                                     Loan Commitment: $20,000,000
                                                       20%



                                      S-4
<PAGE>   95
                                   BANK OF AMERICA NATIONAL TRUST AND
                                   SAVINGS ASSOCIATION, as Syndication Agent
                                   and as a Lender

                                   By:        Megan McBride
                                        -------------------------------
                                   Name:      Megan Mcbride
                                        -------------------------------
                                   Title:     Vice President
                                        -------------------------------

                                   Address:
                                   231 S. LaSalle Street, 15th Floor
                                   Chicago, IL  60697
                                   Attn.: Megan McBride
                                   Telecopy: 312/974-4970

                                   Loan Commitment:  $20,000,000
                                                      20%



                                   S-5


<PAGE>   96
                                    EXHIBIT A
                            ASSIGNMENT AND ASSUMPTION

         THIS ASSIGNMENT AND ASSUMPTION (the "Agreement") is dated this______
day of______________, ______, by and between ____________________________
("Assigning Lender") and ________________________________ ("Assignee Lender").

         WHEREAS, Assigning Lender is the holder of that certain promissory note
(the "Note") in the principal amount of $______________________, dated ________,
____, and executed by MHC Operating Limited Partnership, an Illinois limited
partnership ("Borrower"), for the benefit of Assigning Lender. The Note
evidences Assigning Lender's "Pro Rata Share" of the "Loan" made or to be made
under that certain Amended and Restated Credit Agreement, dated as of
April _, 1998 (as amended, supplemented or restated from time to time, the
"Credit Agreement"). Capitalized terms used herein without definition have the
meanings provided in the Credit Agreement.

         1. Assignment

         (a) For value received, the Assigning Lender hereby sells, assigns,
conveys and delivers to Assignee Lender, and Assignee Lender hereby purchases
from Assigning Lender, a ________% interest in the Loan and the Facility
(collectively, the "Assigned Rights and Obligations"). After giving effect
hereto, the Assignee Lender will have a Commitment of $___________, a Pro Rata
Share of_______%.

         (b) Agent shall pay to Assignee Lender all interest and other amounts
that are paid by or on behalf of Borrower pursuant to the Loan Documents and are
attributable to the Assigned Rights and Obligations ("Borrower Amounts"), that
accrue on and after the date hereof. If Assigning Lender receives or collects
any such Borrower Amounts, Assigning Lender shall promptly pay them to Assignee
Lender.

         2. Representations and Warranties

         (a) Each of Assigning Lender and Assignee Lender represents and
warrants to the other and to Agent as follows:

         (i) It has full power and authority, and has taken all action
    necessary, to execute and deliver this Agreement and to fulfill its
    obligations under, and to consummate the transactions contemplated
    by, this Agreement;

         (ii) The making and performance of this Agreement and all documents
    required to be executed and delivered by it hereunder do not and
    will not violate any law or regulation applicable to it;







<PAGE>   97




         (iii) This Agreement has been duly executed and delivered by it and
    constitutes its legal, valid and binding obligation enforceable in
    accordance with its terms; and

         (iv) All approvals, authorizations or other actions by, or filing with,
    any governmental authority necessary for the validity or enforceability of
    its obligations under this Agreement have been made or obtained.

    (b)  Assigning Lender represents and warrants to Assignee Lender that
    Assigning Lender owns the Assigned Rights and Obligations free and clear of
    any lien or other encumbrance and that the assignment contemplated hereby
    complies with the provisions of the first sentence of Section 10.11(a) of
    the Credit Agreement.

    (c)  Assignee Lender represents and warrants to Assigning Lender as follows:

         (i) Assignee Lender has made and shall continue to make its own
    independent investigation of the financial condition, affairs and
    creditworthiness of Borrower and any other person or entity obligated under
    the Loan Documents (collectively, "Credit Parties," and the value of any
    collateral now or hereafter securing any of the obligations);

         (ii) Assignee Lender has received copies of the Loan Documents and such
    other documents, financial statements and information as it has deemed
    appropriate to make its own credit analysis and decision to enter into this
    Agreement; and

         (iii) The assignment contemplated hereby complies with the provisions
    of the second sentence of Section 10.11(a) of the Credit Agreement.

    3.   No Assigning Lender Responsibility. Assigning Lender makes no
representation or warranty regarding, and assumes no responsibility to Assignee
Lender for:

    (a)  The execution (by any party other than Assigning Lender),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of the Loan Documents or any representations, warranties, recitals
or statements made in the Loan Documents or in any financial or other written or
oral statement, instrument, report, certificate or any other document made or
furnished or made available by Assigning Lender to Assignee Lender or by or on
behalf of any Credit Party to Assigning Lender or Assignee Lender in connection
with the Loan Documents and the transactions contemplated thereby;

    (b)  The performance or observance of any of the terms, covenants or
agreements contained in any of the Loan Documents or as to the existence or
possible existence of any Unmatured Event of Default or Event of Default under
the Loan Documents;



2




<PAGE>   98




    (c)  The accuracy or completeness of any information provided to Assignee
Lender, whether by Assigning Lender or by or on behalf of any Credit Party; or

    (d)  Any investigation of the financial condition, affairs or
creditworthiness of any of the Borrower or the REIT, or the value of any
collateral, in connection with the assignment of the Assigned Rights and
Obligations or to provide Assignee Lender with any credit or other information
with respect thereto, whether coming into its possession before the date hereof
or at any time or times thereafter.

    4.   Assignee Lender Bound By Credit Agreement. Effective on the date
hereof, Assignee Lender (a) shall be deemed to be a party to the Credit
Agreement, (b) agrees to be bound by the Credit Agreement to the same extent as
it would have been if it had been an original Lender thereunder, and (c) agrees
to perform in accordance with their respective terms all of the obligations
which are required under the Loan Documents to be performed by it as a Lender.
Assignee Lender appoints and authorizes Agent to take such actions as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to Agent by the terms thereof, together with such powers as are reasonably
incidental thereto.

    5.   Assigning Lender Released From Credit Agreement. Effective on the date
hereof, and to the extent of the Assigned Rights and Obligations, Assigning
Lender shall relinquish its rights and be released from its obligations under
the Credit Agreement and the other Loan Documents; provided, however, that
Assigning Lender shall retain all of its rights to indemnification under the
Credit Agreement and the other Loan Documents for any events, acts or omissions
occurring before the date hereof.

    6.   General

    (a)  No term or provision of this Agreement may be amended, waived or
terminated orally, but only by an instrument signed by the parties hereto.

    (b)  If Assigning Lender has not assigned its entire remaining Commitment
and Loan to Assignee Lender, Assigning Lender may at any time and from time to
time grant to others, subject to applicable provisions in the Credit Agreement,
assignments of or participations in all of Assigning Lender's remaining Loan or
Commitment.

    (c)  All payments to Assigning Lender or Assignee Lender hereunder shall,
unless otherwise specified by the party entitled thereto, be made in Dollars, in
immediately available funds, and to the address or account specified on the
signature pages of this Agreement. The address of Assignee Lender for notice
purposes under the Credit Agreement shall be as specified on the signature pages
of this Agreement.

    (d)  This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.


3





<PAGE>   99


    (e)  This Agreement is executed to be effective as of the date set forth
above.

                            [SIGNATURE PAGE FOLLOWS]























4





<PAGE>   100


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                                                              ,as
                                    --------------------------
                                    Assigning Lender

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


                                    Pro Rata Share (after giving effect to this
                                    Agreement):       %
                                               -------
                                    Commitment (after giving effect to this
                                    Agreement):$
                                                -----------------------
                                    Assigning Lender's Payment Instructions:

                                    -----------------------------------
                                    ABA No.:
                                            ---------------------------
                                    Account No.:
                                                -----------------------
                                    Ref.:
                                          -----------------------------
ASSUMPTION:

         The undersigned Assignee Lender hereby accepts the above sale and
assignment and agrees to be bound by the obligations of the Credit Agreement and
the Loan Documents and hereby assumes the obligations of a Lender thereunder.

                                                                    ,as Assignee
                                     -------------------------------
                                     Lender

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

                                     Pro Rata Share (after giving effect to this
                                     Agreement):      %
                                               -------
                                     Commitment (after giving effect to this
                                     Agreement): $
                                                  ---------------------

                                     Address for Notice and Delivery:


5






<PAGE>   101


                                     ----------------------------------
                                     ----------------------------------
                                     ----------------------------------
                                     Attention:
                                     Telephone: (   )     -
                                                 ---  ----  ----
                                     Telecopy: (   )      -
                                                ---  ----  ----

                                     Assignee Lender's Payment Instructions:

                                     ----------------------------------
                                     ABA No.:
                                             --------------------------
                                     Account No.:
                                                 ----------------------
                                     Ref.:
                                          -----------------------------





















6





<PAGE>   102




ACKNOWLEDGED AND AGREED:


WELLS FARGO BANK, N.A., as Agent


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


MHC OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership, as Borrower

By:      MANUFACTURED HOME COMMUNITIES,
         INC., a Maryland corporation, as General Partner

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


ACKNOWLEDGED:

MANUFACTURED HOME COMMUNITIES, INC., a
Maryland corporation, as Guarantor


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















7



<PAGE>   103
                                    EXHIBIT B

                            AMENDMENT AND RESTATEMENT
                            OF $100,000,000 TERM LOAN
                              CREDIT AGREEMENT FOR
                        MHC OPERATING LIMITED PARTNERSHIP


                                CLOSING CHECKLIST

1.  Loan Documents

    -------   1.01     Amended and Restated Revolving Credit Agreement

    -------   1.02     Amended and Restated Notes for each Bank

                               a.    Wells Fargo Bank, National Association
                       ------
                       ------  b.    Bank of America National Trust and Savings
                                     Association
                       ------
                               C.    Morgan Guaranty Trust Company of New York
                       ------
                               d.    Commerzbank Aktiengesellschaft

    -------   1.03     Agent's form of Funds Transfer Agreement and signature
                       authorization form

    -------   1.04     The REIT Guaranty

    -------   1.05     Solvency Certificate of Borrower

    -------   1.06     Solvency Certificate of the REIT

    -------   1.07     Compliance Certificate (referencing Section 3.01 (i))

    -------   1.08     Notice of Borrowing

11..Evidence of Existence and Authorization

    -------   2.01     Opinion of Borrower's counsel

    -------   2.02     Certified copy of Borrower's Limited Partnership
                       Agreement and Certificate of Limited Partnership (and all
                       amendments thereto)

    -------   2.03     Certificate of Existence for Borrower from Secretary of
                       State of Illinois

    -------   2.04     Intentionally omitted

    -------   2.05     Certified copy of the REIT's Certificate of Incorporation
                       and Bylaws


<PAGE>   104


                       (and all amendments thereto)

    -------   2.06     Certificate of Good Standing for the REIT from the
                       Secretary of State Maryland

    -------   2.07     Certificate of the REIT's Secretary with respect to (i)
                       authorization. (ii) incumbancy, (iii) bylaws and (iv)
                       resolutions

III. Miscellaneous

    -------   3.01     Exisiting Notes (marked canceled for return to Borrower)

                       ----  a.    Wells Fargo Bank, National Association
                       ----  b.    Bank of America Illinois
                       ----  C.    Morgan Guaranty Trust Company of New York
                       ----  d.    Commerzbank Aktiengesellschaft

    -------   3.02     Forms 4224 from Banks (as appropriate)

    -------   3.03     Agent's Fee Letter

    -------   3.04     Authorizations from Banks and Borrower to release
                       signature pages

    -------   3.05     Payment of fees and expenses


<PAGE>   105


                             EXHIBIT C TO TERM LOAN

                             COMPLIANCE CERTIFICATE

         This Compliance Certificate is delivered pursuant to the Amended and
Restated Credit Agreement dated as of April 28, 1998, (as amended, supplemented
and restated from time to time, the "Credit Agreement"), among MHC Operating
Limited Partnership, the Lenders (as defined therein or made party thereto), and
Wells Fargo Bank, N.A., as Agent. All capitalized defined terms used herein
shall have the meaning ascribed to such terms in the Credit Agreement.

        1.    The undersigned hereby certifies that the undersigned has reviewed
the terms of the Credit Agreement and other Loan Documents and has made a review
in reasonable detail of the transactions consummated by and financial condition
of the REIT, the Borrower, the Subsidiaries and the Agreement Parties during the
accounting period covered by the financial statements being delivered to Lender
along with this Compliance Certificate and

       (a)    Such review has not disclosed the existence during or at the end
of such accounting period, and the undersigned does not have knowledge of the
existence as of the date hereof, of any condition or event which constitutes an
Unmatured Event of Default or an Event of Default (except as set forth in
paragraph (b) hereof).

       (b)    The financial statements being delivered to Agent along with this
Compliance Certificate have been prepared in accordance with the books and
records of the REIT, on a consolidated basis, and fairly present the financial
condition of the REIT, on a consolidated basis, at the date thereof (if
applicable, subject to normal year-end adjustments) and the results of
operations and cash flows, on a consolidated basis, for the period then ended.

       (c)    The nature and period of existence of the condition(s) or event(s)
which constitute an Unmatured Event(s) of Default or an Event(s) of Default is
(are) as follows: None.

       (d)    Borrower (is taking) (is planning to take) the following action
with respect to the condition(s) or event(s) set forth in paragraph (b) above:
N/A

        2.    As of the end of the most recently ended accounting period:

       (a)    Total Liabilities to Gross Asset Value. Total Liabilities:

$________________ Gross Asset Value: $_____________________.  Ratio:
(Ratio not to exceed 0.6:1).

       (b)    Secured Debt to Gross Asset Value.      Secured Debt:

$________________ Gross Asset Value: $_____________________.  Ratio:
_________(Ratio not to exceed 0.41).







<PAGE>   106




       (c)    EBITDA    to   Interest   Expense   Ratio.          EBITDA:
$________________. Interest Expense: $_____________________.  Ratio: ____
(Ratio not to be less than 2.0:1).

       (d)    EBITDA    to   Fixed    Charges     Ratio.          EBITDA:
$________________. Fixed Charges: $________________________.  Ratio: ____
 (Ratio not to be less than 1.75:1).

       (e)    Unencumbered  Net  Operating  Income to  Unsecured   Interest
Expense. Unencumbered  Net  Operating Income:  $___________________________
Unsecured Interest Expense: $___________________. Ratio: ________ (Ratio not
to be less than 1.80:1).

       (f)    Unencumbered Pool. Borrower shall not permit the ratio of (a) the
sum of (i) Unencumbered Asset Value: $_________________________; (ii) Cash
and Cash Equivalents owned by Borrower subject to no Lien in excess of $10MM:
$________________ to    (b) outstanding   Unsecured   Debt:
$________________ Ratio: __________ (Ratio not to be less than 1.80:1).

       (g)    Minimum Net Worth.  Borrower  will maintain Net Worth of not less
than $258,317,100  plus 90% of all Net Offering Proceeds received by the REIT or
Borrower after September 30, 1996. Net Worth: $_____________________________.

       (h)    Permitted Holdings. Borrower and its Subsidiaries may acquire or
maintain the following Permitted Holdings so long as (i) the aggregate value
whether held directly or indirectly by Borrower and its Subsidiaries does not
exceed, at any time, 20% of Gross Asset Value for the Borrower as a whole and
(ii) the value of each Permitted Holding does not exceed, at any time the
following percentages of Borrower's Gross Asset Value:
                                                                  % OF GROSS
                  PERMITTED HOLDINGS               MAXIMUM        ASSET VALUE
      -   NON MANUFACTURED home community property    10%              %
          (other than cash or Cash Equivalents)                    -----

      -   Land                                         5%              %
                                                                   -----

      -   Securities (issued by REITs primarily        5%              %
          engaged in the development, ownership and                -----
          management of Manufactured Home
          communities)

      -   Manufactured Home Community Mortgage        10%              %
          other than mortgage indebtedness which is                -----
          either eliminated in the consolidation of
          the REIT, Borrower and the Subsidiaries or
          accounted for as investments in real estate



<PAGE>   107


          UNDER GAAP

    -     manufactured home community partnership     10%              %
          interest other than controlled partnership               -----
          interests

    -     development activity                        10%              %
                                                                   -----


        3.    All representations and warranties contained in the
above-referenced Credit Agreement remain true and correct in all material
respects. No Event of Default described in section 9.01 (g) or section 9.01
(h) has occurred and no other Event of Default or Unmatured Event of Default has
occurred and is continuing. There has been no Material Adverse Effect to the
Borrower or the REIT.

        4.    As of the end of the Fiscal Quarter covered by the financial
statements being delivered to Agent along with this Compliance Certificate, the
weighted average occupancy rate of the Properties listed On Exhibit F to the
Credit Agreement together with those designated by Borrower is at least
eight-five percent (85%)

DATE:
      ------------------              -----------------------------------------
                                      Mr. Thomas P. Heneghan
                                      Chief Financial Officer of the REIT








<PAGE>   108


                                   EXHIBIT D

                                 TERM LOAN NOTE

                                                              April _____ , 1998
$_______________________

              FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership (" Borrower"), HEREBY PROMISES TO PAY to the order of
_______________________ ("Lender") at c/o Wells Fargo Bank, N.A., 2120 E.
Park Place, Suite 100. El Segundo, California, 90245, the principal sum
of ____________________ Dollars ($___________________) together
with interest on the unpaid principal balance hereof at the rates provided below
from the date such principal is advanced until payment in full thereof.

              This Note is one of the Loan Notes referred to in and governed by
that certain Amended and Restated Credit Agreement, dated as of the date hereof,
as amended, supplemented or restated from time to time (the "Credit Agreement"),
among Borrower, Manufactured Home Communities, Inc., the Lenders named therein
and Wells Fargo Bank, as Agent for the said Lenders ("Agent"), which Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and payment of certain additional sums to Lender upon the
happening of certain stated events. Any capitalized term used herein, unless
otherwise defined herein, shall have the meaning ascribed to such term in the
Credit Agreement.

              The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement. Borrower may make voluntary prepayments of all or a portion of
the Loan, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

              Interest on the Loan is payable on the terms and at the rates set
forth in the Credit Agreement. In addition to the interest charges described in
the Credit Agreement, the Credit Agreement provides for the payment by Borrower
of various other charges and fees as set forth more fully in the Credit
Agreement.

              Upon the occurrence of an Event of Default described in
Section 9.01 (g) or Section 9.01 (h) of the Credit Agreement, this Note shall,
without demand, notice or legal process of any kind, automatically become
immediately due and payable. Upon and after the occurrence and continuance of
any other Event of Default, this Note may, at the option or with the consent of
Requisite Lenders, and without demand, notice or legal process of any kind
(except as specifically set forth in the Credit Agreement), be declared, and
immediately shall become, due and payable, unless such Event of Default is
waived or such acceleration is rescinded as provided in the Credit Agreement.

              Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are



                                      S-1






<PAGE>   109




hereby waived by Borrower, except to the extent specifically provided for in the
Credit Agreement. Subject to the terms of the Credit Agreement, Agent on behalf
of the Lenders may extend the time of payment of this Note, postpone the
enforcement hereof, grant any indulgences, release any party or primarily or
secondarily liable hereon or agree to any substitution. subordination, exchange
or release of any security without affecting or diminishing Lender's right of
recourse against Borrower, which right is hereby expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                                         MHC OPERATING LIMITED PARTNERSHIP, an
                                         Illinois limited partnership

                                         By:  MANUFACTURED HOME COMMUNITIES,
                                              INC., a Maryland corporation,
                                              as General Partner

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

















                                      S-2




<PAGE>   110


                                  EXHIBIT E-1

                               NOTICE OF BORROWING

Re:       Amended and Restated Credit Agreement dated as of April _____ , 1998,
          as amended, supplemented and restated from time to time among MHC
          Operating Limited Partnership, Manufactured Home Communities, Inc.,
          the Lenders thereunder and Wells Fargo Bank N.A., as agent for said
          Lenders ("Agent") (the "Credit Agreement")


Wells Fargo Disbursement Center
2120 East Park Place
Suite 100
El Segundo, California 90245

          This notice represents the Borrower's request for a Loan Increase
pursuant to Section 2.01 of the Credit Agreement on April ____, 1998 (the
"Closing Date") in the principal amount of $ ________ on the terms set forth on
the attached schedule. All capitalized terms used herein and not defined herein
shall have the meanings ascribed to them in the Credit Agreement.

          Borrower hereby certifies that (a) all conditions set forth in Article
III of the Credit Agreement to the disbursement of the Loan Increase hereby
requested will be satisfied on the Closing Date, (b) the proposed Loan Increase
complies with the terms of the Credit Agreement, and (c) no Event of Default
or Unmatured Event of Default has occurred and is continuing either before or
after giving effect to such Loan Increase.

Dated: April_____, 1998

                                       MHC Operating Limited Partnership,
                                       an Illinois limited partnership

                                       By:  Manufactured Home Communities,
                                            Inc., a Maryland corporation, as its
                                            General Partner

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


cc:       Wells Fargo Bank, N.A.
          225 W. Wacker Drive
          Suite 2550
          Chicago, Illinois 60606
          Attn: Account Officer








<PAGE>   111


                                  Schedule I to
                               NOTICE OF BORROWING

PROPOSED LOAN FUNDING

1         Proposed Funding Date:     _____________________________

2.        Amount of Proposed Loan:  $_____________________________

                         Yes      No

3.        Base Rate:

4.        Libor Rate:              ($ 100,000 or integral multiples of $100,000)
                (INDICATE WITH AN "X")

5.        Specify Interest Period for LIBOR Loan (if applicable), indicate with
          "x."

            < 30 days   30 days   60 days    90 days    180 days 360 days
          ---------------------------------------------------------------------

          ---------------------------------------------------------------------
CONDITIONS

(i)       An Interest Period having a duration of less than one (1) month is
          available with the reasonable approval of Agent (unless any Lender has
          previously advised Agent and Borrower that it is unable to enter into
          LIBOR contracts for an Interest Period of such duration).


















<PAGE>   112



                                Schedule 4.01 (r)

                         Environmental Compliance Issues

ASBESTOS. Limited quantities of asbestos containing materials ("ACMs") are
present in various building materials such as floor coverings, acoustical tiles
and decorative treatments located at certain Properties. The ACMs present at
these Properties are generally in good condition, and possess low probabilities
for disturbance. Borrower has implemented comprehensive operations and
maintenance plans for Properties where ACMs are present or reasonably suspected.
Property managers are being trained to deal effectively with the in-place
maintenance of ACMs. ACMs will be properly removed by Borrower in the ordinary
course of renovation and construction and all damaged ACMs will be replaced
immediately; however, in certain circumstances, Borrower may determine to
encapsulate rather than remove damaged ACMs.

STORAGE TANKS. A number of above ground fuel tanks ("ASTs") and underground
storage tanks ("USTs") are located on the Properties. Four of the manufactured
housing communities, Camelot Meadows. McNicol, Nassau and Mariner's Cove, have
several active and/or inactive USTs (approximately 225 USTs between the four
Properties) used for the storage of residential heating fuel. A June 1994 site
assessment (conducted prior to the Borrower's ownership of the Properties)
conducted by ATEC Environmental Consultants at Camelot Meadows and McNicol
identified six potential leaking underground storage tanks ("LUSTs"). The LUSTs
were removed by Ogden Environmental in March 1998. A Site Investigation Work
Plan has been submitted to Delaware Department of Natural Resources. The
Borrower does not believe that any future remediation that may be required of
the LUST's will have a Material Adverse Effect.

WASTE WATER TREATMENT PLANTS ("WWTPS"). WWTPs are operated at several of the
Properties. Two WWTPs, those at Oak Tree Village and Bums Harbor Estates, are
currently under an Order Pursuant to the Clean Water Act to implement various
corrective actions to conform to National Pollution Discharge Elimination System
permit requirements and conditions. United States Environmental Protection
Agency ("USEPA") and Indiana Department of Environmental Management ("IDEM")
may assess certain penalties for past non-compliance. Borrower has implemented
most of the corrective actions proposed to it by USEPA/IDEM and Borrower intends
to complete the remaining corrective actions in due course.

<PAGE>   113

================================================================================
                                  EXHIBIT E-2
                       NOTICE OF CONTINUATION/CONVERSION

TODAY'S DATE:
              ---------------

TO:      WELLS FARGO BANK, N.A.
         DISBURSEMENT AND OPERATIONS CENTER
         FAX #(310) 615-1014 OR (310) 615-1016
         ATTENTION: RATE OPTION DESK

================================================================================
                     BORROWER INTEREST RATE OPTION REQUEST
                         Rate Quote Line (310) 335-9472

LOAN#                  BORROWER NAME:
      ---------------                --------------------

RATE SET DATE:             INTEREST PERIOD COMMENCEMENT DATE:             (1350)
               -----------                                   -------------

INTEREST PERIOD (TERM):                  (i.e. 1,2,3,6 months,etc.as allowed per
                       ------------------  the Credit Agreement)

INDEX:             RATE          % +                   =                % (1350)
      ------------      ---------    -----------------   ---------------
      (i.e. Libor)                   Spread              Applicable Rate

LIBOR LOAN EXPIRING ON             (Date):        $
                       ------------                --------------------
<TABLE>
<S>                                 <C>                 <C>        <C>    <C>      <C>
1)  AMOUNT ROLLING OVER             $                   FROM OBLGN#
                                     ------------------             -----
2)  ADD:  AMT TRANSFERRED FROM
      BASE RATE LOAN                $                   FROM OBLGN#       TO OBLGN:
                                     ------------------             -----          -----
                                                                    (5522)         (5022)

3)  ADD: AMT TRANSFERRED FROM
      OTHER LIBOR LOAN              $                   FROM OBLGN#       TO OBLGN:
                                     ------------------             -----          -----
                                                                    (5522)         (5022)

    ADD: AMT TRANSFERRED FROM       $                   FROM OBLGN#       TO OBLGN:
      OTHER LIBOR LOAN               ------------------             -----          -----
                                                                    (5522)         (5022)

4)  LESS: AMT TRANSFERRED TO        $                   FROM OBLGN#       TO OBLGN:
      BASE RATE LOAN                 ------------------             -----          -----
                                                                    (5522)         (5022)

TOTAL LIBOR LOAN:                   $
                                     ------------------
</TABLE>

Borrower confirms, represents and warrants to Lender(a) that this Notice of
Continuation/Conversion is subject to the terms and conditions of that certain
Amended and Restated Credit Agreement dated as of _______, 1998, by and among
Borrower, Manufactured Home Communities, Inc. the "Lenders" thereunder and Wells
Fargo Bank, N.A., as Agent for the said Lenders (the"Credit Agreement"). (b)that
terms, words and phrases used but not defined in this Notice of Continuation/
Conversion have the meanings attributed thereto in the Credit Agreement, and
(c) that no Event of Default or Unmatured Event of Default has occurred and is
continuing.

REQUESTED BY (as allowed per documents):              TELEPHONE# (  )
                                        -------------             --  ----------
PRINT NAME:                                           FAX# (  )
           ------------------------------------------       --  ----------------

================================================================================
          WELLS FARGO BANK ACKNOWLEDGEMENT OF RECEIPT AND CONFIRMATION

FIXED EXPIRATION DATE:                         (2301)  DATE:
                      -------------------------              -------------------
REQUEST VERIFIED BY:                                   DATE:
                      -------------------------              -------------------
REQUEST APPROVED BY:                                   DATE:
                      -------------------------              -------------------
CONFIRMATION FAXED TO CUSTOMER BY:                     DATE:        TIME:
                                  -------------              -------     -------

================================================================================
                      WELLS FARGO BANK OPERATIONS USE ONLY

TRACKING#         LOAN AU:          LOAN SU:          OBLIGOR#
         --------         ----------        ---------         ------------------

CHARGE CODE: 100   BASIS:           EARN TYPE:  0     BAL TYPE   000      (1350)
            ------       ----------           ------          -----------

SPECIAL PRODUCT TYPE CODE: (If change required)                           (2305)
                                               ------------------------

TDR: NO   YES   (Fax to loan acctg)            UPDATE BILLING: NO   YES   (1370)
       ---   ---                                                 ---   ---

- --------------------------------------------------------------------------------
DATA ENTRY COMPLETED BY:            DATE:                  BATCH ID:
                        -----------      -----------------          ------------
DATA ENTRY AUDITED BY:                                     DATE:
                      ------------------------------------       ---------------
<PAGE>   114
                             EXHIBIT F TO TERM LOAN

                       QUALIFYING UNENCUMBERED PROPERTIES
                              AS OF MARCH 31, 1998


Apollo Village                          Sweetbriar
Aspen Meadow                            The Heritage
Bear Creek                              The Mark
Bonner Springs                          Waterford Estates
Brook Gardens                           Woodland Hills
Burns Harbor Estate                     Independence Hill
Cabana                                  Northstar
Camelot Meadows                         Dellwood
Carefree Manor                          Briarwood
Carriage Cove                           Pheasant Ridge
Carriage Park                           Quivira
Colony Park                             Holiday Village-IA
Country Meadows                         Rockwood
Countryside North                       Falconwood
Creekside                               All Seasons
Del Rey                                 Coralwood
Desert Skies                            Four Seasons
Em Ja Ha                                Quail Hollow
Fairview Manor                          Royal Oaks
Five Seasons                            San Jose 1-4
Flamingo West                           Sea Oaks
Fun N Sun                               Shadowbrook
Golf Vista Estates Consolidated         Sunshadow
Heritage Village                        Westwood Village
Hillcrest                               Quail Meadows
Holiday Ranch                           Arrowhead Village
Lake Fairways                           Mariners Cove
Lakewood Village                        Landings
McNicol                                 Meadows of Chantilly
Oak Bend                                Nassau Park
Sunrise Heights                         Pine Lakes
<PAGE>   115
                         SCHEDULE 4.01(c) TO TERM LOAN

                          General Partners of Borrower


     Manufactured Home Communities, Inc. owns approximately an 80% general
                             partnership interest.
<PAGE>   116
                         SCHEDULE 4.01 (v) TO TERM LOAN

                     Subsidiaries and Investment Affiliates


Manufactured Home Communities, Inc. ("MHC") owns 100% of the stock of:

     MHC-QRS Bay Indies, Inc.           MHC-QRS Western, Inc.
     MHC Lending QRS, Inc.              MHC-QRS Two, Inc.
     MHC-QRS, Inc.                      MHC-QRS Blue Ribbon Communities, Inc.
     MHC-QRS DeAnza, Inc.               QRS Gold Medal Communities, Inc.

MHC owns an approximately an 80% general partner interest in MHC Operating
Limited Partnership ("MHC OP").

MHC-QRS DeAnza, Inc. is the 1% general partner of

     MHC-DeAnza Financing Limited Partnership (owns the beneficial interest in
                                               six manufactured home communities
                                               purchased from affiliates of
                                               DeAnza Group, Inc.)

MHC-QRS Bay Indies, Inc. is the 1% general partner of

     MHC-Bay Indies Financing Limited Partnership (owns the beneficial interest
                                                   in Bay Indies manufactured
                                                   home community)

MHC Lending QRS, Inc. is the 1% general partner of

     MHC Lending Limited Partnership (owns certain loans)

MHC-QRS, Inc. is the 1% general partner of

     MHC Financing Limited Partnership (owns the beneficial interest in 29
                                        manufactured home communities)

MHC-QRS Two, Inc. is the 1% general partner of MHC Financing Limited
                                 Partnership Two (owns some or all of the
                                 beneficial interest in 26 manufactured
                                 home communities or recreational vehicle parks)

MHC-QRS Blue Ribbon Communities, Inc. is the 1% general partner of Blue Ribbon
                                 Communities Limited Partnership (currently an
                                 inactive "shelf" entity)

QRS Gold Medal Communities, Inc. is the 1% general partner of Gold Medal
                                 Communities Limited Partnership (currently an
                                 inactive "shelf" entity)

MHC OP is the 99% limited partner of:

     MHC Financing Limited Partnership
     MHC Lending Limited Partnership
     MHC-Bay Indies Financing Limited Partnership
     MHC-DeAnza Financing Limited Partnership
     MHC Financing Limited Partnership Two

<PAGE>   117
         Blue Ribbon Communities Limited Partnership
         Gold Medal Communities Limited Partnership

MHC OP owns the amount set forth below of the limited partnership interests in
the following entities:

<TABLE>
<CAPTION>
<S>                                                   <C>
         ELL-CAP XX-Mon Dak                             4.88%
         ELL-CAP/Diversified 75-Naples Estates           100%
         ELL-CAP/Diversified 80-Rehobeth Beach         87.13%
         ELL-CAP/Diversified 80 Associates             91.75%
         ELL-CAP 97 Laguna Lake Associates             15.69%
</TABLE>

MHC OP is a 49% member of Trails Associates LLC and a 49% member of Plantation
Company LLC

MHC OP owns the beneficial interest in the manufactured home communities not
beneficially owned by a financing partnership.

MHC OP is the 1% general partner of:

         MHC Management Limited Partnership
         MHC DAG Management Limited Partnership

MHC OP owns 100% of the non-voting preferred stock of:

         LP Management Corporation
         DeAnza Group, Inc.

LP Management Corp. is the 99% limited partner of MHC Management Limited
Partnership.

DeAnza Group, Inc. is the 99% limited partner of MHC DAG Management Limited
Partnership.

MHC OP owns 100% of the non-voting preferred stock of Realty Systems, Inc.
("RSI").

         Equity Group Investments, Inc. owns 100% of the non-voting common
         stock of RSI.

         Equity-RSI Limited Partnership owns 100% of the voting common stock
         of RSI.

MHC Management Limited Partnership owns 100% of the stock of MHC Systems, Inc.

RSI owns 100% of the stock of Realty Systems Nevada, Inc.

<PAGE>   118
                                 TERM LOAN NOTE

$40,000,000                                                       April 28, 1998

          FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Wells
Fargo Bank, N.A. ("Lender") at c/o Wells Fargo Bank, N.A., 2120 E. Park Place,
Suite 100, El Segundo, California, 90245, the principal sum of Forty Million
Dollars ($40,000,000) together with interest on the unpaid principal balance
hereof at the rates provided below from the date such principal is advanced
until payment in full thereof.

          This Note is one of the Loan Notes referred to in and governed by
that certain Amended and Restated Credit Agreement, dated as of the date
hereof, as amended, supplemented or restated from time to time (the "Credit
Agreement"), among Borrower, Manufactured Home Communities, Inc., the Lenders
named therein and Wells Fargo Bank, as Agent for the said Lenders ("Agent"),
which Credit Agreement, among other things, contains provisions for
acceleration of the maturity hereof and payment of certain additional sums to
Lender upon the happening of certain stated events.  Any capitalized term used
herein, unless otherwise defined herein, shall have the meaning ascribed to
such term in the Credit Agreement.

          The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement.  Borrower may make voluntary prepayments of all or a portion
of the Loan, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

          Interest on the Loan is payable on the terms and at the rates set
forth in the Credit Agreement.  In addition to the interest charges described
in the Credit Agreement, the Credit Agreement provides for the payment by
Borrower of various other charges and fees as set forth more fully in the
Credit Agreement.

          Upon the occurrence of an Event of Default described in Section 9.01
(g) or Section 9.01(h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable.  Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.

          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are


                                      S-1
<PAGE>   119
hereby waived by Borrower, except to the extent specifically provided for in
the Credit Agreement.  Subject to the terms of the Credit Agreement, Agent on
behalf of the Lenders may extend the time of payment of this Note, postpone the
enforcement hereof, grant any indulgences, release any party primarily or
secondarily liable hereon or agree to any substitution, subordination, exchange
or release of any security without affecting or diminishing Lender's right of
recourse against Borrower, which right is hereby expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                           MHC OPERATING LIMITED PARTNERSHIP, an
                           Illinois limited partnership

                           By:  MANUFACTURED HOME COMMUNITIES,
                                INC., a Maryland corporation, as General Partner

                                By:  /s/ Thomas P. Heneghan
                                    -----------------------------
                                Name:    Thomas P. Heneghan
                                     ----------------------------
                                Title:  EVP & CFO
                                      ---------------------------



                                      S-2
<PAGE>   120
                                 TERM LOAN NOTE

$20,000,000                                                       April 28, 1998

     FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois limited
partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Bank of
America National Trust and Savings Association ("Lender") at c/o Wells Fargo
Bank, N.A., 2120 E. Park Place, Suite 100, El Segundo, California, 90245, the
principal sum of Twenty Million Dollars ($20,000,000) together with interest on
the unpaid principal balance hereof at the rates provided below from the date
such principal is advanced until payment in full thereof.

     This Note is one of the Loan Notes referred to in an governed by that
certain Amended and Restated Credit Agreement, dated as of the date hereof, as
amended, supplemented or restated from time to time (the "Credit Agreement"),
among Borrower, Manufactured Home Communities, Inc., the Lenders named therein
and Wells Fargo Bank, as Agent for the said Lenders ("Agent"), which Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and payment of certain additional sums to Lender upon the
happening of certain stated events. Any capitalized term used herein, unless
otherwise defined herein, shall have the meaning ascribed to such term in the
Credit Agreement.

     The principal amount of this Note will be due and payable, if not sooner
paid, on the Maturity Date, subject to extension as provided in the Credit
Agreement. Borrower may make voluntary prepayments of all or a portion of the
Loan, upon not less than three (3) Business Days prior written notice, pursuant
to the provisions of Section 2.05 of the Credit Agreement.

     Interest on the Loan is payable on the terms and at the rates set forth in
the Credit Agreement. In addition to the interest charges described in the
Credit Agreement, the Credit Agreement provides for the payment by Borrower of
various other charges and fees as set forth more fully in the Credit Agreement.

     Upon the occurrence of an Event of Default described in Section 9.01(g) or
Section 9.01(h) of the Credit Agreement, this Note shall, without demand,
notice or legal process of any kind, automatically become immediately due and
payable. Upon and after the occurrence and continuance of any other Event of
Default, this Note may, at the option or with the consent of Requisite Lenders,
and without demand, notice or legal process of any kind (except as specifically
set forth in the Credit Agreement), be declared, and immediately shall become,
due and payable, unless such Event of Default is waived or such acceleration is
rescinded as provided in the Credit Agreement.

     Demand, presentment, protest and notice of nonpayment and protest, notice
of intention to accelerate maturity, notice of acceleration of maturity and
notice of dishonor are

                                      S-1
<PAGE>   121
hereby waived by Borrower, except to the extent specifically provided for in
the Credit Agreement. Subject to the terms of the Credit Agreement, Agent on
behalf of the Lenders may extend the time of payment of this Note, postpone the
enforcement hereof, grant any indulgences, release any party primarily or
secondarily liable hereon or agree to any substitution, subordination, exchange
or release of any security without affecting or diminishing Lender's right of
recourse against Borrower, which right is hereby expressly reserved.

     This Note has been delivered and accepted at Chicago, Illinois and shall
be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

     Whenever possible each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Note.

                         MHC OPERATING LIMITED PARTNERSHIP, an
                         Illinois limited partnership

                         By:  MANUFACTURED HOME COMMUNITIES,
                              INC., a Maryland corporation, as General Partner

                              By: Thomas P. Heneghan
                                 -----------------------------------------------
                              Name: Thomas P. Heneghan
                                   ---------------------------------------------
                              Title: EVP & CFO
                                    --------------------------------------------


                                      S-2
<PAGE>   122
                                 TERM LOAN NOTE


$20,000,000                                                       April 28, 1998

          FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of
Commerzbank Aktiengesellschaft ("Lender"), at c/o Wells Fargo Bank, N.A., 2120
E. Park Place, Suite 100, El Segundo, California, 90245, the principal sum of
Twenty Million Dollars ($20,000,000) together with interest on the unpaid
principal balance hereof at the rates provided below from the date such
principal balance hereof at the rates provided below from the date such
principal is advanced until payment in full thereof.

          This Note is one of the Loan Notes referred to in and governed by that
certain Amended and Restated at Credit Agreement, dated as of the date hereof,
as amended, supplemented or restated from time to time (the "Credit Agreement"),
among Borrower, Manufactured Home Communities, Inc., the Lenders named therein
and Wells Fargo Bank, as Agent for the said Lenders ("Agent"), which Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and payment of certain additional sums to Lender upon the
happening of certain stated events.  Any capitalized term used herein, unless
otherwise defined herein, shall have the meaning ascribed to such term in the
Credit Agreement.

          The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement.  Borrower may make voluntary prepayments of all or a portion
of the Loan, upon not less three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 of the Credit Agreement.

          Interest on the Loan is payable on the terms and at the rates set
forth in the Credit Agreement.  In addition to the interest charges described in
the Credit Agreement, the Credit Agreement provides for the payment by Borrower
of various other charges and fees as set forth more fully in the Credit
Agreement.

          Upon the occurrence of an Event of Default described in Section
9.01(g) or Section 9.01(h) of the Credit Agreement, this Note shall, without
demand, notice or legal process of any kind, automatically become immediately
due and payable.  Upon and after the occurrence and continuance of any other
Event of Default, this Note may, at the option or with the consent of Requisite
Lenders, and without demand, notice or legal process of any kind (except as
specifically set forth in the Credit Agreement), be declared, and immediately
shall become, due and payable, unless such Event of Default is waived or such
acceleration is rescinded as provided in the Credit Agreement.

          Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration of maturity
and notice of dishonor are

                                      S-1

<PAGE>   123
hereby waived by Borrower, except to the extent specifically provided for in
the Credit Agreement.  Subject to the terms of the Credit Agreement, Agent on
behalf of the Lenders may extended the time of payment of this Note, postpone
the enforcement hereof, grant any indulgences, release any party primarily of
secondarily liable hereon or agree to any substitution, subordination, exchange
or release of any security without affecting or diminishing Lender's right of
recourse against Borrower, which right is hereby expressly reserved.

          This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities, and the rights and
liabilities of the parties hereto determined, in accordance with, and governed
by the laws of the State of Illinois.

          Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the reminder of such provision or the remaining
provisions of this Note.

                                MHC OPERATING LIMITED PARTNERSHIP, an
                                Illinois limited partnership

                                By:  MANUFACTURED HOME COMMUNITIES,
                                INC., a Maryland corporation, as General Partner

                                By: /s/ Thomas P. Heneghan
                                ------------------------------------------------
                                Name: Thomas P. Heneghan
                                ------------------------------------------------
                                Title: EVP & CFO
                                ------------------------------------------------


                                      S-2
<PAGE>   124
                                 TERM LOAN NOTE


$20,000,000                                                       April 28, 1998


         FOR VALUE RECEIVED, MHC Operating Limited Partnership, an Illinois
limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order of Morgan
Guaranty Trust Company ("Lender") at c/o Wells Fargo Bank, N.A., 2120 E. Park
Place, Suite 100, El Segundo, California, 90245, the principal sum of Twenty
Million Dollars ($20,000,000) together with interest on the unpaid principal
balance hereof tat the rates provided below from the date such principal is
advanced until payment in full thereof.

         This Note is one of the Loan Notes referred to in and governed by that
certain Amended and Restated Credit Agreement, dated as of the date hereof, as
amended, supplemented or restated from time to time (the "Credit Agreement"),
among Borrower, Manufactured Home Communities, Inc., the Lenders named therein
and Wells Fargo Bank, as Agent for the said Lenders ("Agent"), which Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof and payment of certain additional sums to Lender upon the
happening of certain stated events.  Any capitalized term used herein, unless
otherwise defined herein, shall have the meaning ascribed to such term in the
Credit Agreement.

         The principal amount of this Note will be due and payable, if not
sooner paid, on the Maturity Date, subject to extension as provided in the
Credit Agreement. Borrower may make voluntary prepayments of all or a portion of
the Loan, upon not less than three (3) Business Days prior written notice,
pursuant to the provisions of Section 2.05 if the Credit Agreement.

         Interest on the Loan is payable on the terms and at the rates set forth
in the Credit Agreement. In addition to the interest charges described in the
Credit Agreement, the Credit Agreement provides for the payment by Borrower of
various other charges and fees as set forth more fully in the Credit Agreement.

         Upon the occurrence of an Event of Default described in Section 9.01(g)
or Section 9.01(h) of the Credit Agreement, this Note shall, without demand,
notice or legal process of any kind, automatically become immediately due and
payable. Upon and after the occurrence and continuance of any other Event of
Default, this Note may, at the option or with the consent of Requisite Lenders,
and without demand, notice or legal process of any kind (except as specifically
set forth in the Credit Agreement), be declared, and immediately shall become,
due and payable, unless such Event of Default is waived or such acceleration is
rescinded as provided in the Credit Agreement.

         Demand, presentment, protest and notice of nonpayment and protest,
notice of intention to accelerate maturity, notice of acceleration maturity of
and notice of dishonor are




                                      S-1



<PAGE>   125

hereby waived by Borrower, except to the extent specifically provided for in
the Credit Agreement. Subject to the terms of the Credit Agreement, Agent on
behalf of the Lenders may extend the time of payment of this Note, postpone the
enforcement hereof, grant any indulgences, release any party primarily or
secondarily liable hereon or agree to any substitution, subordination, exchange
or release of any security without affecting or diminishing Lender's right of
recourse against Borrower, which right is hereby expressly reserved.

         This Note has been delivered and accepted at Chicago, Illinois and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with, and governed by the laws of the State of
Illinois.

         Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

                           MHC OPERATING LIMITED PARTNERSHIP, an
                           Illinois limited partnership

                           By: MANUFACTURED HOME COMMUNITIES,
                               INC., a Maryland corporation, as General Partner

                               By: Thomas P. Heneghan
                                  ----------------------------------------------
                               Name: Thomas P. Heneghan
                                    --------------------------------------------
                               Title: EVP & CFO
                                     -------------------------------------------


                                      S-2
<PAGE>   126
                       AMENDED AND RESTATED REIT GUARANTY
                      (MANUFACTURED HOME COMMUNITIES, INC.)

         This REIT Guaranty (this "Guaranty") is made as of April 28, 1998 by
Manufactured Home Communities, Inc., a Maryland corporation ("Guarantor"), in
favor of the Lenders (as defined in the "Credit Agreement" described below) and
Wells Fargo Bank, N.A. ("Agent"), in its capacity as agent for the Lenders and
as a Lender.

                                    Recitals

         Concurrently with the execution and delivery of this Guaranty, MHC
Operating Limited Partnership, an Illinois limited partnership ("Borrower"),
Guarantor, Agent and Lenders are entering into a certain Amended and Restated
Credit Agreement of even date herewith (the "Credit Agreement") pursuant to
which Lenders are agreeing to provide a term credit facility to Borrower. This
Guaranty is executed and delivered in order to induce Agent and Lenders to enter
into the Credit Agreement. Unless otherwise specified herein, the capitalized
defined terms used herein shall have the meanings ascribed to such terms in the
Credit Agreement.

                                    Guaranty

         1. For valuable consideration, receipt of which is hereby acknowledged,
Guarantor hereby unconditionally guaranties the full and prompt payment when due
and performance of all of the Obligations. The Guarantor agrees that this
Guaranty is a guaranty of payment and performance and not of collection. Nothing
herein shall be construed as requiring Agent or Lenders to exhaust its remedies
against Borrower, or to foreclose any security interest that may in the future
be granted to Agent in any collateral or to exercise any other remedies
available to it, as a condition to proceeding against Guarantor hereunder.

                        Additional Agreements and Waivers

         2. Guarantor hereby agrees that its obligations under this Guaranty
shall be unconditional, irrespective of (i) the validity or enforceability of
the Obligations or any part thereof, or of any other Loan Document, (ii) the
absence of any attempt to collect the Obligations from Borrower or any other
guarantor or other action to enforce the same, (iii) the waiver or consent by
Agent or Lenders with respect to any provision of any Loan Document or any other
agreement now or hereafter executed by Borrower and delivered to Agent and
Lenders, (iv) the failure by Agent to take any steps to perfect and maintain any
Liens that may in the future be granted to Agent against any collateral, (v)
Agent's election, in any proceeding instituted under Chapter 11 of Title 11 of
the United States Code (11 U.S.C. Section 101 et seq.), as amended (the
"Bankruptcy Code") of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code, (vii) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Agent's or Lenders' claim(s) for repayment of the Obligations, or (viii)








<PAGE>   127


any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of Borrower or a guarantor.

         3. Effective until the repayment in full of the Obligations, no payment
made by or for the account or benefit of Guarantor (including, without
limitation, (i) a payment made by Guarantor in respect of the Obligations, (ii)
a payment made by any Person under any other guaranty of the Obligations or
(iii) a payment made by means of set-off or other application of funds by Agent
or any of the Lenders) pursuant to this Guaranty shall entitle Guarantor, by
subrogation or otherwise, to any payment by Borrower or from or out of any
property of Borrower, and Guarantor shall not exercise any right or remedy
against Borrower or any property of Borrower including, without limitation, any
right of contribution or reimbursement by reason of any performance by Guarantor
under this Guaranty. Without limitation of any of the foregoing, any
Indebtedness (including, without limitation, interest obligations) of Borrower
to Guarantor now or hereafter existing shall be, and such Indebtedness hereby
is, deferred, postponed and subordinated to the repayment in full of the
Obligations. The provisions of this paragraph shall survive the termination of
this Guaranty or the release or discharge of Guarantor from liability hereunder.
Guarantor and Agent hereby agree that Borrower is and shall be a third party
beneficiary of the provisions of this paragraph.

         4. To the extent permitted by law, Guarantor further waives all notices
to which Guarantor might otherwise be entitled, except as otherwise expressly
provided for herein, in the Credit Agreement or in any other agreement or
document executed in connection with the transactions contemplated by the Credit
Agreement. Without limitation of the foregoing, Guarantor, to the extent
permitted by applicable law, hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of receivership or
bankruptcy of the Borrower, protest or notice with respect to the Obligations,
all setoffs and counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor and
notices of acceptance of this Guaranty, the benefits of all statutes of
limitation, and all other demands whatsoever (and shall not require that the
same be made on the Borrower as a condition precedent to Guarantor's obligations
hereunder). Guarantor further waives all notices of the existence, creation or
incurring of new or additional indebtedness, arising either from additional
loans extended to the Borrower or otherwise, and also waives, to the extent
permitted by law, all notices that the principal amount, or any portion thereof,
and/or any interest on any instrument or document evidencing all or any part of
the Obligations is due, notices of any and all proceedings to collect from the
maker, any endorser or any guarantor of all or any part of the Obligations or
from any other party, and, to the extent permitted by law, notices of exchange,
sale, surrender or other handling of any security given to the Lenders and the
Agent to secure payment of all or any part of the Obligations.

         5. Guarantor covenants that this guaranty will not be discharged
except by complete and irrevocable payment and performance of the obligations
and liabilities guaranteed herein. No notice to Guarantor or any other party
shall be required for Agent or Lenders to make



                                        2




<PAGE>   128




demand hereunder. Such demand shall constitute a mature and liquidated claim
against Guarantor. Upon the occurrence of an Event of Default described in
Section 9.01(g) or Section 9.01(h) or upon the occurrence and continuance of any
other Event of Default, Agent may, at its sole election, proceed directly and at
once, without notice, against Guarantor to collect and recover the full amount
or any portion of the Obligations, without first proceeding against Borrower,
any other Person or any other collateral. Agent and Lenders shall have the
exclusive right to determine the application of payments and credits, if any,
from Guarantor, Borrower or from any other person, firm or corporation, on
account of the Obligations.

         6. To the extent permitted by applicable law, Agent is hereby
authorized, without notice or demand to Guarantor (but without limiting any
requirements of notice and demand to Borrower) and without affecting the
liability of Guarantor hereunder or under any of the other Loan Documents
executed by Guarantor, from time to time, (i) to renew, extend, accelerate or
otherwise change the time for payment of, or other terms relating to, all or any
part of the Obligations, or to otherwise modify, amend or change the terms of
any of the Loan Documents; (ii) to accept partial payments on all or any part of
the Obligations; (iii) to take and hold security or collateral for the payment
of all or any part of the Obligations, or any guaranties of all or any part of
the Obligations or other liabilities of Borrower, (iv) to exchange, enforce,
waive and release any such security or collateral; (v) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (vi) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of the Obligations, any
guaranty of all or any part of the Obligations and any security or collateral
for the Obligations or for any such guaranty. Guarantor agrees, to the extent
permitted by applicable law, that any of the foregoing may be done in any
manner, without affecting or impairing the obligations of Guarantor hereunder or
under any of the other Loan Documents executed by Guarantor.

         7. At any time after maturity of the Obligations, Agent may, in its
sole discretion, with notice (solely as may be provided for in the Credit
Agreement) to Guarantor and regardless of the acceptance of any collateral for
the payment hereof, appropriate and apply toward payment of the Obligations (i)
any Indebtedness due or to become due from Agent or any of Lenders to Guarantor
and (ii) any moneys, credits or other property belonging to Guarantor at any
time held by or coming into the possession of Agent or any of Lenders or any
affiliates thereof, whether for deposit or otherwise. Agent and Lenders shall
appropriate and apply towards payment of the Obligations only moneys, credits or
other property of Guarantor and of Guarantor's direct and indirect wholly-owned
subsidiaries.

         8. Notwithstanding any provision of this Guaranty to the contrary, it
is NOT INTENDED THAT THIS GUARANTY CONSTITUTE A "FRAUDULENT CONVEYANCE" (as
defined below). CONSEQUENTLY, GUARANTOR AGREES THAT IF THE GUARANTY WOULD, BUT
FOR THE APPLICATION of this sentence, constitute a Fraudulent Conveyance, this
Guaranty shall be valid and enforceable only to the maximum extent that would
not cause this Guaranty to constitute a Fraudulent




                                       3





<PAGE>   129


Conveyance, and this Guaranty shall automatically be deemed to have been amended
accordingly at all relevant times. For purposes hereof, a "Fraudulent
Conveyance" means a fraudulent conveyance under Section 548 of the Bankruptcy
Code (or any successor section) or a fraudulent conveyance or fraudulent
transfer under the provisions of any applicable fraudulent conveyance or
fraudulent transfer law or similar law of any state, nation or other
governmental unit, as in effect from time to time.

         9. The obligations of Guarantor under this Guaranty shall not be
altered, limited or affected by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Borrower or by any defense which Borrower may have by reason
of the order, decree or decision of any court or administrative body resulting
from any such proceeding. Guarantor acknowledges and agrees that any interest on
the Obligations which accrues after the commencement of any such proceeding (or,
if interest on any portion of the Obligations ceases to accrue by operation of
law by reason of the commencement of said proceeding, such interest as would
have accrued on any such portion of the Obligations if said proceedings had not
been commenced) shall be included in the Obligations, since it is the intention
of the parties that the amount of the Obligations which is guaranteed by
Guarantor pursuant to this Guaranty should be determined without regard to any
rule of law or order which may relieve Borrower of any portion of such
Obligations. Guarantor will permit, to the extent permitted by law, any trustee
in bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Agent for the benefit of the Lenders, or
allow the claim of Agent in respect of, any such interest accruing after the
date on which such proceeding is commenced.

         10. Guarantor consents and agrees that neither Agent nor any Lender
shall be under any obligation to marshal any assets in favor of Guarantor or
against or in payment of any or all of the Obligations. Guarantor further agrees
that, to the extent that Borrower makes a payment or payments to Agent or
Lenders, or Agent receives any proceeds of any collateral, for its benefit and
the ratable benefit of Lenders, which payment or payments or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to Borrower, its estate, trustee, receiver or any
other party, including without limitation Guarantor, under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Obligations or the part thereof which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction
occurred, and this Guaranty shall continue to be in existence and in full force
and effect, irrespective of whether any evidence of indebtedness has been
surrendered or cancelled.

         11. No delay on the part of agent or lenders in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Agent or Lenders of any right or remedy shall preclude any further
exercise thereof, nor shall any modification or waiver of any of the provisions
of this Guaranty be binding upon Agent or Lenders, except as




                                       4






<PAGE>   130


expressly set forth in a writing duly signed and delivered on Agent's behalf by
an authorized officer or agent of Agent. Agent's or Lenders' failure at any time
or times hereafter to require strict performance by Borrower or Guarantor of any
of the provisions, warranties, terms and conditions contained in any Loan
Document, agreement, guaranty instrument or document now or at any time or times
executed by Borrower, Guarantor or any other Person obligated under the Loan
Documents shall not constitute a waiver of or affect or diminish any right of
Agent and Lenders at any time or times hereafter to demand strict performance
thereof and such right shall not be deemed to have been waived by any act or
knowledge of Agent or Lenders, or their respective agents, officers or
employees, unless such waiver is contained in an instrument in writing signed by
an officer or agent of Agent and directed to Borrower, Guarantor or such other
Person, as applicable, specifying such waiver. No waiver by Agent or Lenders of
any default shall operate as a waiver of any other default or the same default
on a future occasion, and no action by Agent or Lenders permitted hereunder
shall in any way affect or impair Agent's or Lenders' rights or the obligations
of Guarantor under this Guaranty. Any determination by a court of competent
jurisdiction of an amount owing by Borrower to Agent or Lenders, or both, shall
be conclusive and binding on Guarantor irrespective of whether Guarantor was a
party to the suit or action in which such determination was made.

         12. Guarantor will file all claims against Borrower in any bankruptcy
or other proceeding in which the filing of claims is required or permitted by
law upon any indebtedness of Borrower to Guarantor or claim against Borrower by
Guarantor and will assign to Agent for the benefit of the Lenders all rights of
Guarantor thereunder. If Guarantor does not file any such claim, Agent, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of
Guarantor or, in Agent's discretion, to assign the claim and to cause proof of
claim to be filed in the name of Agent's nominee. Agent or its nominee shall
have the sole right to accept or reject any plan proposed in such proceeding and
to take any other action which a party filing a claim is entitled to take. In
all such cases, whether in administration, bankruptcy or otherwise, the person
or persons authorized to pay such claim shall pay to Agent the full amount
payable on such claims, and, to the full extent necessary for that purpose,
Guarantor hereby assigns to Agent for the benefit of the Lenders all of
Guarantor's rights to any such payments or distributions to which Guarantor
would otherwise be entitled; provided, however, that Guarantor's obligations
hereunder shall not be satisfied except to the extent that Agent receives cash
by reason of any such payment or distribution. If Agent receives anything
hereunder other than cash, the same shall be held as collateral for amounts due
under this Agreement.

         13. This Guaranty shall be binding upon Guarantor and upon the
successor and permitted assigns of Guarantor and shall inure to the benefit of
Agent's and Lenders' respective successors and assigns. All references herein to
borrower shall be deemed to include its successors, transferees and permitted
assigns and all references herein to Agent or Lenders shall be deemed to include
their successors, transferees and assigns. Borrower's successors and permitted
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of




                                       5






<PAGE>   131


or for Borrower. All references to the singular shall be deemed to include the
plural, and vice versa, where the context so requires.

         14. Guarantor is fully aware of the financial condition of Borrower and
is executing and delivering this Guaranty based solely upon Guarantor's own
independent investigation of all matters pertinent hereto and is not relying in
any manner upon any representation or statement of Agent. Guarantor represents
and warrants that Guarantor is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Agent to
furnish to Guarantor any information now or hereafter in Agent's possession
concerning the same or any other matter. By executing this Guaranty, Guarantor
knowingly accepts the full range of risks encompassed within a contract of this
type, which risks Guarantor acknowledges. Guarantor shall have no right to
require Agent to obtain or disclose any information with respect to the
Obligations, the financial condition or character of Borrower or Borrower's
ability to perform the Obligations, the existence or nonexistence of any other
guaranties of all or any part of the Obligations, any action or nonaction on the
part of Agent, Borrower, or any other person, or any other matter, fact or
occurrence whatsoever.

         15. Guarantor understands and agrees that, in accordance with the terms
of the Credit Agreement, any Lender may elect, at any time, to sell, assign, or
participate all or any part of such Lender's interest in the Loan and the
Facility, and that any such sale, assignment or participation may be to one or
more Persons as provided in Section 10.11 of the Credit Agreement. Subject to
Section 11.17 of the Credit Agreement, Guarantor further agrees that Agent or
any Lender may disseminate to any such potential purchaser(s), assignee(s) or
participant(s) all documents and information (including without limitation all
financial information) which has been or is hereafter provided to or known to
Agent or any Lender with respect to: (a) the Property owned or leased by
Guarantor and its operation; (b) any party connected with the Loans (including,
without limitation, Guarantor, Borrower, any partner of Borrower or Guarantor or
any other guarantor); and/or (c) any lending relationship other than the
Facility which Agent or any Lender may have with any party connected with the
Facility.

         16. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST GUARANTOR WITH RESPECT TO
THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE AND ALL JUDICIAL PROCEEDINGS
BROUGHT BY GUARANTOR WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING
SITUS WITHIN THE BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE NORTHERN
DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, GUARANTOR
ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY FINAL JUDGMENT




                                        6






<PAGE>   132


RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. GUARANTOR
HEREBY DESIGNATES AND APPOINTS ELLEN KELLEHER, ESQ., MANUFACTURED HOME
COMMUNITIES, INC., TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS
60606, TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS
IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. SUCH APPOINTMENT SHALL BE
REVOCABLE ONLY WITH AGENT'S PRIOR WRITTEN APPROVAL. GUARANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED ON THE
SIGNATURE PAGES HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.
GUARANTOR, AGENT AND LENDERS IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION
OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, AND (B)
ANY OBJECTION (INCLUDING WITHOUT LIMITATION ANY OBJECTION OF THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. GUARANTOR AGREES THAT IT WILL
NOT ASSERT ANY PERMISSIVE COUNTERCLAIM IN ANY PROCEEDING BROUGHT BY AGENT OR ANY
LENDER WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT.

         17. This Guaranty shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of Illinois without regard to
conflict of law principles.

         18. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.

         19. This Guaranty amends and restates in its entirety that certain REIT
Guaranty dated as of April 3, 1997 executed by Guarantor in connection with the
Existing Credit Agreement, as such REIT Guaranty has been heretofore amended,
modified and confirmed.

                            [SIGNATURE PAGE FOLLOWS]



                                       7





<PAGE>   133


         IN WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor
as of this 28th day of April 1998.

                                        GUARANTOR:

                                        MANUFACTURED HOME COMMUNITIES, INC.
                                        a Maryland corporation

                                        By:    Ellen Kelleher
                                           --------------------------------
                                        Name:  Ellen Kelleher
                                              -----------------------------
                                        Title: Executive VP/General Counsel
                                              -----------------------------

                                        Address: Two North Riverside Plaza,
                                        Suite 800
                                        Chicago, Illinois 60606
























                                      S-1




<PAGE>   134


                              SOLVENCY CERTIFICATE

                       (MHC OPERATING LIMITED PARTNERSHIP)

         1, Thomas P. Heneghan, the Chief Financial Officer of Manufactured Home
Communities, Inc., a Maryland corporation (the "REIT"), which is the general
partner of MHC Operating Limited Partnership, an Illinois limited partnership
(the "Borrower"), in my capacity as Chief Financial Officer of the REIT, hereby
certify to Wells Fargo Bank, N.A. as agent for the lenders (the "Lenders")
under the Amended and Restated Credit Agreement of even date herewith (as
amended, supplemented or restated from time to time, the "Credit Agreement) by
and among the Borrower, the REIT, Agent and the Lenders, and to the Lenders
that:

         1. I am the duly elected, qualified and acting Chief Financial Officer
of the REIT, which is the general partner of the Borrower, and I am familiar
with the business and financial matters hereinafter described.

         2. This Certificate is made and delivered to Wells Fargo Bank, N.A., as
Agent on behalf of the Lenders, for the purpose of inducing the Lenders to
advance the Loan Increase (as defined in the Credit Agreement) to Borrower,
pursuant to the Credit Agreement. Each capitalized term used herein without
definition shall have the meaning ascribed to such term in the Credit Agreement.

         3. Immediately following the execution of the Loan Documents to which
it is a party, including without limitation, the Credit Agreement, the Borrower
will be able to pay its debts as they mature, will have capital sufficient to
carry on its business and all businesses in which it presently intends to engage
and will have assets which will have a present fair salable value and a fair
valuation greater than the amount of its liabilities, whether direct or
contingent.

         4. The Borrower does not intend to incur debts beyond its ability to
pay them as they mature.

         5. The Borrower does not contemplate filing a petition in bankruptcy or
for an arrangement or reorganization under Federal bankruptcy law, nor to its
knowledge are there any threatened bankruptcy or insolvency proceedings against
the Borrower.

                            [SIGNATURE PAGE FOLLOWS]













                                       1




<PAGE>   135


Dated: April 28, 1998

                                        MHC OPERATING LIMITED PARTNERSHIP, an
                                        Illinois limited partnership

                                        By: MANUFACTURED HOME
                                        COMMUNITIES, INC., a Maryland
                                        corporation as
                                        General Partner

                                        By:   Thomas P. Heneghan
                                           ------------------------
                                        Name: Thomas P. Heneghan
                                             ----------------------
                                        Title: EUP & CFO
                                              ---------------------


Signature page to Solvency Certificate of MHC Operating Limited Partnership
(Term).























                                      S-1
<PAGE>   136
                              SOLVENCY CERTIFICATE
                      (MANUFACTURED HOME COMMUNITIES, INC.)

         I, Thomas P. Heneghan, the Chief Financial Officer of Manufactured Home
Communities, Inc., a Maryland corporation (the "REIT"), which is the general
partner of MHC Operating Limited Partnership, an Illinois limited partnership
(the "Borrower"), in my capacity as Chief Financial Officer of the REIT, hereby
certify to Wells Fargo Bank, N.A. as agent for the lenders (the "Lenders") under
the Amended and Restated Credit Agreement of even date herewith (as amended,
supplemented or restated from time to time, the "Credit Agreement) by and among
the Borrower, the REIT, Agent and the Lenders, and to the Lenders that:

         1. I am the duly elected, qualified and acting Chief Financial Officer
of the REIT, which is the general partner of the Borrower, and I am familiar
with the business and financial matters hereinafter described.

         2. This Certificate is made and delivered to Wells Fargo Bank, N.A., as
Agent on behalf of the Lenders, for the purpose of inducing the Lenders to
advance the Loan Increase (as defined in the Credit Agreement) to Borrower,
pursuant to the Credit Agreement. Each capitalized term used herein without
definition shall have the meaning ascribed to such term in the Credit Agreement.

         3. Immediately following the execution of the Loan Documents to which
it is a party, including without limitation, the REIT Guarantee, the REIT will
be able to pay its debts as they mature, will have capital sufficient to carry
on its business and all businesses in which it presently intends to engage and
will have assets which will have a present fair salable value and a fair
valuation greater than the amount of its liabilities, whether direct or
contingent.

         4. The REIT does not intend to incur debts beyond its ability to pay
them as they mature.

         5. The REIT does not contemplate filing a petition in bankruptcy or for
an arrangement or reorganization under Federal bankruptcy law, nor to its
knowledge are there any threatened bankruptcy or insolvency proceedings against
the REIT.

                            [SIGNATURE PAGE FOLLOWS]

                                       1
<PAGE>   137

Dated: April 28, 1998

                           MANUFACTURED HOME COMMUNITIES,
                           INC., a Maryland corporation, as General Partner

                           By: Thomas P. Heneghan
                              ----------------------------------------------
                           Name: Thomas P. Heneghan
                                --------------------------------------------
                           Title: EVP & CFO
                                 -------------------------------------------


Signature page to Solvency Certificate of MHC Operating Limited Partnership
(Term).



                                      S-1
<PAGE>   138


                             COMPLIANCE CERTIFICATE

         This Compliance Certificate is delivered pursuant to the Amended and
Restated Credit Agreement dated as of April 28, 1998 (as amended, supplemented
and restated from time to time, the "Credit Agreement"), among MHC Operating
Limited Partnership, the Lenders (as defined therein or made party thereto), and
Wells Fargo Bank, N.A., as Agent. All capitalized defined terms used herein
shall have the meaning ascribed to such terms in the Credit Agreement.

         1.  The undersigned hereby certifies that the undersigned has reviewed
the terms of the Credit Agreement and other Loan Documents and has made a review
in reasonable detail of the transactions consummated by and financial condition
of the REIT, the Borrower, the Subsidiaries and the Agreement Parties during the
accounting period covered by the financial statements being delivered to Lender
along with this Compliance Certificate and

         (a) Such review has not disclosed the existence during or at the end of
         such accounting period, and the undersigned does not have knowledge of
         the existence as of the date hereof, of any condition or event which
         constitutes an Unmatured Event of Default or an Event of Default
         (except as set forth in paragraph (b) hereof).

         (b) The financial statements being delivered to Agent along with this
         Compliance Certificate have been prepared in accordance with the books
         and records of the REIT, on a consolidated basis, and fairly present
         the financial condition of the REIT, on a consolidated basis, at the
         date thereof (if applicable, subject to normal year-end adjustments)
         and the results of operations and cash flows, on a consolidated basis,
         for the period then ended.

         (c) The nature and period of existence of the condition(s) or event(s)
         which constitute an Unmatured Event(s) of Default or an Event(s) of
         Default is (are) as follows: None.

         (d) Borrower (is taking) (is planning to take) the following action
         with respect to the condition(s) or event(s) set forth in paragraph (b)
         above: N/A

        2.   As of the end of the most recently ended accounting period
(March 31, 1998):

         (a) Total Liabilities to Gross Asset Value. Total Liabilities:
         $589,989,000.00 Gross Asset Value: $1,183,980,000.00. Ratio: 0.49:1
         (Ratio not to exceed 0.6: 1).

         (b) Secured Debt to Gross Asset Value. Secured Debt: $409,500,000.00.
         GROSS ASSET Value: $1,183,980,000.00. Ratio: 0.35:1 (Ratio not to
         exceed 0.4:1).

         (c) EBITDA to Interest Expense EBITDA: $25,824,000.00. Interest
         Expense: $10,019,000.00. Ratio: 2.61 (Ratio not to be less than 2.01)

         (d) EBITDA to Fixed Charges Ratio. EBITDA: $25,824,000-00. Fixed
         Charges: $11,954,000.00. Ratio: 2.2:1 (Ratio not to be less than
         1.75:1).

                                       1
<PAGE>   139
    (e)       Unencumbered Net Operating Income to Unsecured Interest Expense.
Unencumbered Net Operating Income: $11,336,000.00. Unsecured Interest Expense:
$2,360,000.00. Ratio: 4.8:1 (Ratio not to be less than 1.80:1).


    (f)       Unencumbered Pool. Borrower shall not permit the ratio of (a) the
sum of (i) Unencumbered Asset value: $518,236,000.00; (ii) Cash and Cash
Equivalents owned by Borrower subject to no Lien in excess of $10MM: $0 to (b)
outstanding Unsecured Debt: $150,488,000.00. Ratio: 3.4:1 (Ratio not to be less
than 1.80:1).

    (g)       Minimum Net Worth. Borrower will maintain Net Worth of not less
than $258,317,100 plus 90% of all Net Offering Proceeds received by the REIT or
Borrower after September 30, 1996. Net Worth: $386,878,000.00.

    (h)       Permitted Holdings. Borrower and its Subsidiaries may acquire or
maintain the following Permitted Holdings so long as (i) the aggregate value
whether held directly or indirectly by Borrower and its Subsidiaries does not
exceed, at any time, 20% of Gross Asset Value for the Borrower as a whole and
(ii) the value of each Permitted Holding does not exceed, at any time the
following percentages of Borrower's Gross Asset Value:


<TABLE>
<CAPTION>
             PERMITTED HOLDINGS           MAXIMUM           % OF GROSS
                                                             ASSET VALUE
- -------------------------------------- ------------------- ----------------
<S>                                              <C>                <C>
  -   Non manufactured home community             10%                0.6%
      property (other than cash or Cash
      Equivalents

  -   Land                                         5%                0%

  -   Securities (issued by REITs primarily        5%                0%
      engaged in the development, ownership
      and management of Manufactured Home
      communities

  -   Manufactured Home community Mortgage        10%                1.1%
      other than mortgage indebtedness which
      is either eliminated in the consolidation
      of the REIT, Borrower and the Subsidiaries
      or accounted for as investments in real
      estate under GAAP

  -   Manufactured Home Community Partnership     10%                0.5%
      Interest other than Controlled Partnership
      Interest

  -   Development Activity                        10%                0.5%
</TABLE>

3.       All representations and warranties contained in the above-referenced
Credit Agreement remain true and correct in all material respects. No Event
of Default described in Section 9.01(g) or Section 9.01(h) has occurred and no
other Event of Default or Unmatured



                                       2
<PAGE>   140

Event of Default has occurred and is continuing. There has been no Material
Adverse Effect to the Borrower or the REIT.

         4.   As of the end of the Fiscal Quarter covered by the financial
statements being delivered to Agent along with this Compliance Certificate, the
weighted average occupancy rate of the Properties listed on Exhibit F to the
Credit Agreement together with those designated by Borrower is at least
eight-five percent (85%)



                                          Thomas P. Heneghan
Date:  April 28, 1998                     --------------------------------------
                                          Mr. Thomas P. Heneghan
                                          Chief Financial Officer of the REIT



                                       3
<PAGE>   141


                        MHC OPERATING LIMITED PARTNERSHIP
                      Two North Riverside Plaza, Suite 800
                             Chicago, Illinois 60606
                                  312/474-0205


                                   Fee Letter

                                 April 28, 11998

Wells Fargo Bank, N.A.
225 West Wacker, Suite 2550
Chicago, Illinois 60606

Attention: Steve Lowery

          Re: Arrangement and Administrative Fees

Dear Steve:

         Reference is made to that certain Amended and Restated Credit Agreement
of even date herewith (the "Credit Agreement"), among MHC Operating Limited
Partnership ("Borrower"), Manufactured Home Communities, Inc. (the "REIT"), the
financial institutions named therein (the "Lenders") and Wells Fargo Bank,
N.A., as Agent ("Agent"). In consideration for the execution and delivery of the
Credit Agreement by Agent and Lenders, Borrower hereby agrees to pay the
following fees not described in the Credit Agreement:

          1. Arrangement Fee. Borrower shall pay Agent an arrangement fee of
Fifty Thousand Dollars ($50,000) on the date hereof.

          2. Administrative Fee. Borrower shall also pay Agent an administrative
fee of Ten Thousand Dollars ($10,000) per year throughout the entire term of the
Credit Agreement, payable for the first year in advance on the date hereof and
for each year thereafter in advance on each anniversary of the date hereof.


<PAGE>   142


Well Fargo Bank,N.A.
April 28, 1998
Page 2

          All fees described herein shall be fully earned when paid and shall
not be refundable for any reason, including early termination of the Credit
Agreement.

          The fees, indemnities and other amounts payable pursuant to the Credit
Agreement shall be in addition to the fees provided herein.

                                        Very truly yours,

                                        MHC OPERATING LIMITED PARTNERSHIP,
                                        an Illinois corporation,

                                        By: MANUFACTURED HOME COMMUNITIES, INC.,
                                             a Maryland corporation, its general
                                             partner

                                        By:  Ellen Kelleher
                                           -------------------------------------
                                        Name: Ellen Kelleher
                                             -----------------------------------
                                        Title: Executive BP/General Counsel
                                              ----------------------------------

Accepted and agreed as of
April 28, 1998


WELLS FARGO BANK, N.A.

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


<PAGE>   143




Well Fargo Bank, N.A.
April 28, 1998
Page 2

          All fees described herein shall be fully earned when paid and shall
not be refundable for any reason, including early termination of the Credit
Agreement.

          The fees, indemnities and other amounts payable pursuant to the Credit
Agreement shall be in addition to the fees provided herein.

                                        Very truly yours,

                                        MHC OPERATING LIMITED PARTNERSHIP,
                                        an Illinois corporation,

                                        By: MANUFACTURED HOME COMMUNITIES, INC.,
                                            a Maryland corporation, its general
                                            partner

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

Accepted and agreed as of
April 28, 1998

WELLS FARGO BANK, N.A.

By: Steven R. Lowery
  -------------------------------------
Name: Steven R. Lowery
     ----------------------------------
Title: Vice President
      ---------------------------------


<PAGE>   1
                                                                  EXHIBIT 10.5


[BANK OF AMERICA LOGO]


TO:       Manufactured Home Communities, Inc. ("Counterparty")
          Attn: Mr. Tom Heneghan
          Rapidfax: (312) 474-0205

FROM:     Bank of America National Trust and Savings Association ("BofA")
          185 Berry Street
          San Francisco, CA  94107
          Derivative Products Operations
          Phone No.: (415) 624-1111
          Rapidfax No.: (415) 624-1101

DATE:     July 11, 1995

RE:       USD  100,000,000.00 Swap Transaction

Dear Sir/Madam:

     The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between us on the Trade Date
specified below (the "Swap Transaction").  This letter agreement constitutes a
"Confirmation" as referred to in the Agreement specified below.

     The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation.  In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.

     1.   The parties agree that the Swap Transaction described in this
Confirmation constitutes their binding obligations.  Except as set forth in
this Confirmation, the Swap Transaction shall be subject to all the terms and
conditions of the form of the master agreement entitled "Master Agreement"
("Multicurrency-Cross Border" version) as published in 1992 by the International
Swaps and Derivatives Association, Inc., (and herein called the "ISDA
Agreement"), excluding the "Schedule" thereto.  Counterparty and BofA shall
negotiate a Schedule and upon agreement shall sign the ISDA Agreement including
the Schedule so negotiated and agreed upon (hereinafter called the
"Agreement"), whereupon this Confirmation shall be deemed automatically,
without further action of any party, to be a Confirmation under the Agreement;
provided, however, that, unless and until Counterparty and BofA agree upon and
sign the Agreement, the preceding sentence shall have full force and effect.

     THIS FACSIMILE TRANSMISSION WILL BE THE ONLY WRITTEN COMMUNICATION
REGARDING THIS SWAP TRANSACTION.  Pursuant to ISDA
<PAGE>   2
July 11, 1995
Page 2


guidelines, this facsimile transmission will be sufficient for all purposes to
evidence a binding supplement to the Agreement.  However, should you have an
internal requirement for confirmations with an original signature, we request
that you sign and return this Confirmation by facsimile, whereupon, we will add
an original signature to the fully executed Confirmation, and forward it to you
by mail.

     2.   The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:

<TABLE>
<S>                                      <C>
Notional Amount:                          USD  100,000,000.00
Trade Date:                               July 7, 1995
Effective Date:                           March 10, 1998
Termination Date:                         March 10, 2003, subject to adjustment in
                                          accordance with the Modified Following
                                          Business Day Convention

Fixed Amounts:

     Fixed Rate Payer:                    Counterparty

     Fixed Rate Payer Payment Dates:      The 10th of every month, beginning with April
                                          14, 1998 and ending on and including the
                                          Termination Date

     Fixed Amount:                        Calculation x Fixed x Fixed Rate Day
                                          Amount        Rate    Count Fraction

     Fixed Rate:                          6.39500%

     Fixed Rate Day Count Fraction:       Actual/360

Floating Amounts:

     Floating Rate Payer:                 BofA

     Floating Rate Payer
     Payment Dates:                       Same as Fixed Rate Payer Payment Dates

     Floating Rate for Initial
     Calculation Period:                  To be determined

     Floating Rate Option:                USD-LIBOR-BBA

     Designated Maturity:                 One (1) Month

</TABLE>
<PAGE>   3
July 11, 1995
Page 3

<TABLE>

<S>                                      <C>
     Spread:                              None

     Floating Rate Day Count Fraction:    Actual/360

     Reset Dates:                         First day of each Calculation Period

     Compounding:                         Inapplicable

Business Day:                             New York and London

Business Day Convention:                  Modified Following

Calculation Agent:                        BofA

3.   Account Details

     Payments to BofA:                    Debit Manufactured Home Communities, Inc.
                                          Acct. No. 7501943 with Bank of America,
                                          Illinois

     Payments to Counterparty:            Credit Manufactured Home Communities, Inc.
                                          Acct. No. 7501943 with Bank of America,
                                          Illinois

4.   Offices:

     Office of BofA:                      The San Francisco Head Office

     Office of Counterparty:              Chicago


Other Provisions Applicable to BofA

Specified Entities of BofA:               None

Credit Support Document(s)
Relating to BofA:                         None

Credit Support Provider Relating
to BofA:                                  None

Agreements of BofA:                       As per Section 4 of the ISDA Agreement.

</TABLE>
<PAGE>   4
July 11, 1995
Page 4

<TABLE>

<S>                                      <C>
Representations of BofA:                  As per Section 3 of the ISDA Agreement.


Other Provisions Applicable to Counterparty

Specified Entities of Counterparty:       As may be indicated in the Agreement, if at
                                          all.

Credit Support Document(s)
  Relating to Counterparty:               As may be indicated in the Agreement, if at
                                          all.

Credit Support Provider Relating
  to Counterparty:                        As may be indicated in the Agreement, if at
                                          all.

Agreements of Counterparty:               As per Section 4 of the ISDA Agreement.

Representations of Counterparty:          As per Section 3 of the ISDA Agreement.


Other Provisions (General)

(A)  Other Agreements:                    Corporate Resolution, Specimen Signature
                                          Certificate and other documentation as
                                          indicated in the Agreement, if at all.

(B)  Events of Default:                   As per Section 5 of the ISDA Agreement and
                                          Cross Default as indicated in the Agreement, if
                                          at all.

(C)  Termination Events:                  All the Termination Events specified in Section
                                          5(b) of the ISDA Agreement will apply
                                          (including Credit Event Upon Merger).

(D)  Early Termination:                   As per Section 6 of the ISDA Agreement, it
                                          being the parties' intent that Section 6 apply to
                                          all outstanding Swap Transactions before (as
                                          well as after) execution of the Agreement.
</TABLE>
<PAGE>   5
July 11, 1995
Page 5

<TABLE>
<S>                                      <C>
(E) Tax Representations:                  Counterparty and BofA make the Payer
                                          Representations contained in Part 2 of the
                                          Schedule to the ISDA Agreement.  Payee
                                          Representations may be indicated in Part 2 of
                                          the Schedule to the Agreement, if applicable

(F) Tax Agreements of BofA
      and Counterparty:                   As may be indicated in the Agreement if at all.

(G) Variations to the ISDA
      Agreement:                          BofA has made certain amendments to the
                                          ISDA Agreement which it believes are of a
                                          noncontentious nature.  These amendments will
                                          be specified in the draft Agreement to be sent
                                          by BofA to Counterparty.

(H) Documentation:                        This Confirmation will constitute a binding
                                          agreement with respect to the Swap
                                          Transaction described herein.  Without
                                          prejudice to the preceding sentence,
                                          Counterparty and BofA will negotiate in good
                                          faith to enter into the Agreement as soon as
                                          practicable after the date of this Confirmation.
</TABLE>

     Please confirm your agreement to be bound by the terms stated herein by
executing the copy of this Confirmation enclosed for that purpose and returning
it to us or by sending to us a telex of letter within 24 hours of receipt of
this Confirmation to Bank of America NT & SA San Francisco Telex No. 249839
Answer Back OPRST UR or Rapidfax No. 415-624-1101 Attention: Derivative
Products Operations, substantially in the form below:

Quote

     We acknowledge receipt of your rapidfax dated July 11, 1995 with respect
to the Swap Transaction entered into on July 7, 1995 between Manufactured Home
Communities, Inc. and Bank of America National Trust and Savings Association
with a Notional Amount of USD  100,000,000.00 and a Termination Date of March
10, 2003, and confirm our agreement to be bound by the terms specified in such
rapidfax.

Unquote
<PAGE>   6
July 11, 1995
Page 6


     This Confirmation shall be conclusively deemed accurate and complete by
Counterparty if not objected to within two (2) Business Days from the date of
receipt.


                                          Yours sincerely,

                                          For and on behalf of:
                                          BANK OF AMERICA NATIONAL
                                          TRUST AND SAVINGS ASSOCIATION



                                          By:   /s/ Walter J. Ebner
                                                -------------------
                                          Name: Walter J. Ebner
                                                -------------------
                                          Title: Vice President
                                                -------------------
Confirmed as of the
date first above written:
MANUFACTURED HOME COMMUNITIES, INC.


By:  /s/ Thomas P. Heneghan        By:  /s/ Ellen Kelleher
     ----------------------             -------------------------
Name: Thomas P. Heneghan           Name: Ellen Kelleher
     ----------------------             -------------------------
Title: VP & CFO                    Title: SVP and General Counsel
     ----------------------             -------------------------
<PAGE>   7
[LOGO}  MANUFACTURED HOME COMMUNITIES, INC.
        Two North Riverside Plaza
        Chicago, IL  60606         Phone: 312/474-1122   Fax:312/474-0437





                              FACSIMILE
                       CONFIDENTIAL INFORMATION


            PLEASE DELIVER AS SOON AS POSSIBLE.  THANK YOU.



DATE:          July 11, 1995
               -------------------------------------

TO:            Walter Ebner
               -------------------------------------

FROM:          Ellen Kelleher
               -------------------------------------

FAX NUMBER:    828-2229
               -------------------------------------

FIRM NUMBER:
               -------------------------------------

NO. OF PAGES:
(including cover page)     2
               -------------------------------------

COMMENTS:      -------------------------------------

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

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

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


PLEASE NOTIFY SENDER IMMEDIATELY IF PAGES DO NOT TRANSMIT PROPERLY.
<PAGE>   8
BANK OF AMERICA [LOGO]



December 13, 1995

Manufactured Home Communities, Inc.
Two North Riverside Plaza
Chicago, IL  60606

Attention:  David W. Fell, Associate General Counsel

Re:  Master Agreement 11/22/95 ("Agreement")

Dear David:

Enclosed please find a fully executed copy of the above-referenced Agreement
between MHC OPERATING LTD PARTNERSHIP and Bank of America National Trust and
Savings Association ("Bank").  This Agreement will govern all future
transactions between us.

I have also included the Bank's Corporate Resolution and Specimen Signature
Certificate to complete your files.

It has been a pleasure working with you to complete this documentation.  We
look forward to future transactions.

Very truly yours,

Bank of America National Trust and Savings Association


/s/ Carolyn V. Evans
Carolyn V. Evans
Trading Documentation Negotiator
Telephone No.: 415-953-3628
Facsimile No.: 415-953-7997

Enclosures

cc: John Suhs, V.P., Unit #6943 (w/enclosure)

<PAGE>   1
                                                                    EXHIBIT 23.3




                        Consent of Independent Auditors





We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Manufactured Home
Communities, Inc. for the registration of 2,000,000 shares of its common stock
and to the incorporation by reference therein of our report dated January 28,
1999, except for Note 17, as to which the date is February 18, 1999, with
respect to the consolidated financial statements and schedules of Manufactured
Home Communities, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.



/s/ Ernst & Young LLP


Chicago, Illinois
November 10, 1999


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