<PAGE>
                                                                         10.45.1

                                  MASTER LEASE

                                     BETWEEN

                     JER/NHP SENIOR LIVING ACQUISITION, LLC,
                      A DELAWARE LIMITED LIABILITY COMPANY

                                  AS "LANDLORD"

                                       AND

                               ALS LEASING, INC.,
                             A DELAWARE CORPORATION

                                   AS "TENANT"

                             DATED: OCTOBER 7, 2002

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
1.   Term.................................................................    2

2.   Rent.................................................................    2

     2.1  Initial Term Minimum Rent.......................................    3

     2.2  Landlord's Investment; Rent Adjustments.........................    3

     2.3  Renewal Term Minimum Rent.......................................    3

     2.4  Rent Caps and Floors............................................    4

     2.5  Payment Terms...................................................    4

     2.6  Absolute Net Lease..............................................    4

3.   Late Charges.........................................................    4

4.   Security Deposit; Collateral for Lease Obligations...................    5

5.   Taxes and Other Charges..............................................    6

     5.1  Tenant's Obligation.............................................    6

     5.2  Protests........................................................    6

     5.3  Tax Impound and Escrow..........................................    7

6.   Insurance............................................................    7

     6.1  Requirements....................................................    7

     6.2  Exceptions to Insurance Requirements............................    9

     6.3  Reimbursement of Landlord's Insurance Costs.....................    9

     6.4  Determination of Commercial Reasonableness......................   10

7.   Use, Regulatory Compliance and Preservation of Business..............   10

     7.1  Permitted Use; Qualified Care...................................   10

     7.2  Regulatory Compliance...........................................   11

     7.3  Preservation of Business........................................   11

     7.4  Coverage Ratio..................................................   12

8.   Acceptance, Maintenance, Upgrade, Alteration and Environmental.......   12

     8.1  Acceptance "AS IS"; No Liens....................................   12

     8.2  Tenant's Maintenance Obligations................................   12

     8.3  Upgrade Expenditures............................................   13

     8.4  Alterations by Tenant...........................................   13

     8.5  Hazardous Materials.............................................   14
</TABLE>

                                      -i-

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
                                                                            Page
<S>                                                                         <C>
9.   Tenant Property and Security Interest; Landlord Personal Property....   15

     9.1  Tenant Property.................................................   15

     9.2  Landlord's Security Interest and Financing Statements...........   15

     9.3  Landlord Personal Property......................................   16

10.  Financial, Management and Regulatory Reports.........................   16

11.  Representations and Warranties.......................................   16

     11.1  By Landlord....................................................   16

     11.2  By Tenant......................................................   17

12.  Events of Default....................................................   19

13.  Remedies.............................................................   20

     13.1  General........................................................   21

     13.2  Tenant Repurchase/Receivership.................................   21

     13.3  Remedies Cumulative; No Waiver.................................   22

     13.4  Performance of Tenant's Obligations............................   22

14.  Provisions on Termination............................................   22

     14.1  Surrender of Possession........................................   22

     14.2  Removal of Tenant Personal Property............................   23

     14.3  Management of Premises.........................................   23

     14.4  Holding Over...................................................   24

     14.5  Survival.......................................................   24

15.  Certain Landlord Rights..............................................   24

     15.1  Entry and Examination of Records...............................   24

     15.2  Grant Liens; Change in Zoning..................................   24

     15.3  Subordination, Attornment and Nondisturbance...................   24

     15.4  Estoppel Certificates..........................................   24

     15.5  Conveyance Release.............................................   25

16.  Assignment and Subletting............................................   25

17.  Damage by Fire or Other Casualty.....................................   26

18.  Condemnation.........................................................   26

19.  Indemnification......................................................   26
</TABLE>

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
                                                                            Page
<S>                                                                         <C>
20.  Attorneys Fees; Disputes.............................................   27

21.  Notices..............................................................   27

22.  Miscellaneous........................................................   28

23.  Premises Purchase Option.............................................   29

     23.1  Exercise of Option; Closing....................................   29

     23.2  Termination....................................................   30

24.  Quiet Enjoyment......................................................   30

25.  Landlord Maintenance Obligation......................................   30

     25.1  Maintenance Contractors........................................   30

     25.2  Request for Service............................................   30

     25.3  Costs and Expenses.............................................   31

     25.4  Report on Activities...........................................   31

     25.5  Transition.....................................................   31

EXHIBITS AND SCHEDULES:

EXHIBIT A     LEGAL DESCRIPTIONS

EXHIBIT B     LANDLORD PERSONAL PROPERTY

EXHIBIT C     FAIR MARKET VALUE

EXHIBIT D     PERMITTED EXCEPTIONS

EXHIBIT E     CERTAIN DEFINITIONS

EXHIBIT F     FINANCIAL, MANAGEMENT AND REGULATORY REPORTS

SCHEDULE 1    FACILITY INFORMATION: BUSINESS, BEDS, TRADENAMES, ETC.

SCHEDULE 2    EXCEPTIONS TO INSURANCE REQUIREMENTS

SCHEDULE 3    EXISTING FACILITIES EXEMPT FROM RADIUS RESTRICTION

SCHEDULE 4    EXCEPTIONS TO TENANT'S REPRESENTATIONS AND WARRANTIES
</TABLE>

                                     -iii-

<PAGE>

            An extra section break has been inserted above this paragraph. Do
not delete this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>

                                  MASTER LEASE
                                (ALTERRA POOL 2)

      This "MASTER LEASE" is entered into effective as of October 7, 2002 (the
"EFFECTIVE DATE") among the JER/NHP SENIOR LIVING ACQUISITION, LLC, a Delaware
limited liability company ("LANDLORD"), and ALS LEASING, INC., a Delaware
corporation ("Tenant"), for the real properties and improvements thereon
(collectively, the "FACILITIES") as set forth on Schedule 1 and as legally
described on Exhibit A and the "LANDLORD PERSONAL PROPERTY" associated therewith
as described in Exhibit B or as may be acquired after the Effective Date
(collectively, the "PREMISES"), each used as a licensed healthcare facility of
the type described on Schedule 1 (individually as so utilized, and collectively,
the "BUSINESS"). Landlord and Tenant have also concurrently entered into a
LETTER OF CREDIT AGREEMENT (the "LC AGREEMENT") pursuant to which Tenant shall
provide certain collateral to Landlord for the performance of its obligations
under this Master Lease. Pursuant to its concurrent GUARANTY OF LEASE AND LETTER
OF CREDIT AGREEMENT (the "GUARANTY"), Alterra Healthcare Corporation, a Delaware
corporation ("GUARANTOR"), has guaranteed, inter alia, Tenant's obligations
hereunder. In consideration of the mutual covenants, conditions and agreements
set forth herein, Landlord hereby leases the Premises to Tenant for the Term
upon the terms and conditions provided below. Certain capitalized terms used in
this Master Lease are defined on Exhibit E.

                    RECOGNITION OF INDIVISIBLE MASTER LEASE;
                      IRREVOCABLE WAIVER OF CERTAIN RIGHTS

      Tenant and Guarantor each acknowledge and agree that this Master Lease
constitutes a single, indivisible lease of the entire Premises, and the Premises
constitutes a single economic unit. The Minimum Rent, other Rent payable
hereunder and all other provisions contained herein have been negotiated and
agreed upon based on the intent to lease the entirety of the Premises as a
single and inseparable transaction, and such Minimum Rent, other Rent and other
provisions would have been materially different had the parties intended to
enter into separate leases or a divisible lease. Any Event of Default under this
Master Lease shall constitute an Event of Default as to the entire Premises.

      Tenant and Guarantor each further acknowledge and agree that Landlord is
entering into this Master Lease as an accommodation to Tenant and Guarantor.
Each of the entities comprising Tenant and Guarantor, in order to induce
Landlord to enter into this Master Lease, to the extent permitted by law:

      A. Agrees, acknowledges and is forever estopped from asserting to the
contrary that the statements set forth in the preceding paragraphs of this
Section are true, correct and complete;

      B. Agrees, acknowledges and is forever estopped from asserting to the
contrary that this Master Lease is a new and de novo lease, separate and
distinct from any other lease between any of the entities comprising Tenant and
any of the entities comprising Landlord that may have existed prior to the date
hereof;

                                      -1-

<PAGE>

      C. Agrees, acknowledges and is forever estopped from asserting to the
contrary that this Master Lease is a single lease pursuant to which the
collective Premises are demised as a whole to Tenant;

      D. Agrees, acknowledges and is forever estopped from asserting to the
contrary that if, notwithstanding the provisions of this Section, this Master
Lease were to be determined or found to be in any proceeding, action or
arbitration under state or federal bankruptcy, insolvency, debtor-relief or
other applicable laws to constitute multiple leases demising multiple
properties, such multiple leases could not, by the debtor, trustee, or any other
party, be selectively or individually assumed, rejected or assigned;

      E. Forever knowingly waives and relinquishes any and all rights under or
benefits of the provisions of the Federal Bankruptcy Code Section 365 (11 U.S.C.
Section. 365), or any successor or replacement thereof or any analogous state
law, to selectively or individually assume, reject or assign the multiple leases
comprising this Master Lease following a determination or finding in the nature
of that described in the foregoing Section D.

      1. TERM. The "TERM" of this Master Lease is the Initial Term plus all
Renewal Terms, and a "LEASE YEAR" is the twelve (12) month period commencing on
January 1st of each year of the Term, provided that the period from the
Effective Date to December 31, 2002 shall be considered a portion of a Lease
Year, and the "FIRST (1ST) LEASE YEAR" shall commence January 1, 2003. The
"INITIAL TERM" commences on the Effective Date and ends on December 31, 2020,
and may be extended for two (2) separate "RENEWAL TERMS" of ten (10) years each
if: (A) not more than thirty (30) days before or after the date that is fifteen
(15) months prior to the end of the then current Term, Tenant delivers to
Landlord written notice (a "RENT DETERMINATION NOTICE") that Tenant desires to
determine the applicable Minimum Rent for a subsequent Renewal Term pursuant to
the provisions of Section 2.3 below for the purpose of evaluating whether Tenant
desires to exercise its right to extend the then current Term for one (1)
Renewal Term, (B) on or prior to the date that is twelve (12) months prior to
the end of the then current Term, Tenant delivers to Landlord written notice (a
"RENEWAL NOTICE"), which shall be irrevocable by Tenant, stating that it desires
to exercise its right to extend this Master Lease for one (1) Renewal Term; (C)
there is no Event of Default on the date Landlord receives the Rent
Determination Notice (the "EXERCISE DATE"), the date Landlord receives the
Renewal Notice or on the last day of the then current Term; (D) the Minimum Rent
for the Renewal Term is determined pursuant to Section 2.3 on or before the date
that is twelve (12) months prior to the end of the then current Term; and (E)
concurrently with delivery of the Renewal Notice by Tenant to Landlord,
Companion Tenant shall have delivered to Companion Landlord the "Renewal Notice"
as defined in the Companion Master Lease.

      2. RENT. During the Term, Tenant shall pay Landlord "RENT" consisting of
"MINIMUM RENT" determined as provided in this Section 2 and such other sums as
may be described in this Master Lease as Rent. The monthly Minimum Rent for any
month that begins or ends on other than the first or last day of a calendar
month, and the annual Minimum Rent for any Lease Year that begins on other than
the first day of a Lease Year, shall be prorated based on actual days elapsed.

                                      -2-

<PAGE>

            2.1 INITIAL TERM MINIMUM RENT. During the Initial Term, "MINIMUM
RENT" per Lease Year is equal to Landlord's Investment (as defined below)
multiplied by the Initial Term Applicable Rate. The "INITIAL TERM APPLICABLE
RATE" for each Lease Year (or portion thereof) shall be (A) the Initial Term
Base Rate (as defined below) for the portion of the Lease Year from the
Effective Date to December 31, 2002, (B) the Initial Term Base Rate plus the CPI
Increase (as defined below), not to exceed 30/100ths of one percent (.30%), for
the first (1st) Lease Year, (C) the Initial Term Applicable Rate in effect in
the immediately preceding Lease Year plus the CPI Increase, not to exceed
30/100ths of one percent (.30%), for the second (2nd) through the fourth (4th)
Lease Years, and (D) the Initial Term Applicable Rate in effect in the
immediately preceding Lease Year plus the CPI Increase, not to exceed 25/100ths
of one percent (.25%), for the fifth (5th) Lease Year and each Lease Year
thereafter during the Initial Term. The "INITIAL TERM BASE RATE" shall be equal
to eleven and one-half percent (11.5%). The "CPI INCREASE" shall be calculated
annually by comparing the CPI (as defined below) in effect on the first calendar
day of the immediately preceding Lease Year (or calendar year with respect to
the first (1st) Lease Year) to the first calendar day of the then current Lease
Year and multiplying by three (3). The "CPI" shall mean the Consumer Price Index
for All Urban Wage Earners and Clerical Workers, United States Average, Subgroup
"All Items" (1982 - 1984 = 100), as published by the United States Department of
Labor, Bureau of Labor Statistics, or similar index if the same becomes
unavailable.

            2.2 LANDLORD'S INVESTMENT; RENT ADJUSTMENTS.

            (a) "LANDLORD'S INVESTMENT" in the Premises, shall mean TWENTY EIGHT
MILLION EIGHT HUNDRED TWENTY-SIX THOUSAND TWO HUNDRED FORTY-SIX DOLLARS AND
61/100 DOLLARS ($28,826,246.61), which includes the amount of SEVEN HUNDRED
FIFTY THOUSAND DOLLARS ($750,000) representing the Initial Security Deposit and
Collateral Funding (as defined in Section 4.1), plus any amount for Alterations
advanced by Landlord pursuant to Section 8.4, plus any amount elected to be
added by Landlord pursuant to Section 13.4, plus any other amount that, in
accordance with any other term of provision of this Master Lease, is to be added
to Landlord's Investment, and minus the amount of the Initial Security Deposit
and Collateral Funding upon the full and complete payment thereof by Tenant
pursuant to Section 4.1, minus any net award paid to Landlord for a Partial
Taking pursuant to Section 18, minus any other net capital proceeds received by
Landlord for any portion of the Premises sold or conveyed, including any portion
of the Premises as to which Tenant acquires title pursuant to the operation of
the Put set forth in Section 13.2 or otherwise, as to any portion of the
Premises for which this Master Lease is terminated during the Term in accordance
with its terms, and minus any other amount that, in accordance with any other
term of provision of this Master Lease, is to be subtracted from Landlord's
Investment.

            (b) Concurrently with any increase or decrease in Landlord's
Investment during the Term as described in Section 2.2(a), the Minimum Rent then
due and payable for the balance of the applicable Lease Year and Term shall be
recalculated and reset based on the adjusted Landlord's Investment.

            2.3 RENEWAL TERM MINIMUM RENT. To establish a fair market Minimum
Rent for the Premises during the Renewal Terms, the Minimum Rent for each
Renewal Term shall be reset and expressed as an annual amount equal to the
product of: (a) Landlord's

                                      -3-

<PAGE>

Investment in the Premises on the Exercise Date for such Renewal Term (provided
that, if the "FAIR MARKET VALUE" of the Premises on such Exercise Date as
established pursuant to Exhibit C, is greater than the then Landlord's
Investment, such Landlord's Investment shall be adjusted for purposes of this
Master Lease to be equal to such Fair Market Value), and (B) the Renewal Term
Applicable Rate. The "RENEWAL TERM APPLICABLE RATE" for each Lease Year shall be
(I) the Renewal Term Base Rate for the first (1st) Lease Year of each Renewal
Term, and (II) the Renewal Term Applicable Rate in effect in the immediately
preceding Lease Year plus the CPI Increase, not to exceed 25/100ths of one
percent (.25%), for the second (2nd) Lease Year and each other Lease Year of
each Renewal Term. The "RENEWAL TERM BASE RATE" in each Renewal Term shall be a
percentage equal to SEVEN HUNDRED EIGHTY-EIGHT (788) basis points over the
10-Year U.S. Treasury Rate in effect on the applicable Exercise Date.

            2.4 RENT CAPS AND FLOORS.

            (a) Notwithstanding any of the other terms of this Master Lease, in
no event shall the Minimum Rent in the first (1st) Lease Year of any Renewal
Term exceed ONE HUNDRED TWENTY-FIVE PERCENT (125%) of the Minimum Rent due for
the last Lease Year of the Initial Term or preceding Renewal Term, as
applicable.

            (b) Notwithstanding any of the other terms of this Master Lease, in
no event shall the Minimum Rent in the first (1st) Lease Year of any Renewal
Term be less than ONE HUNDRED PERCENT (100%) of the Minimum Rent due for the
last Lease Year of the Initial Term or preceding Renewal Term, as applicable.

            2.5 PAYMENT TERMS. All Rent and other payments to Landlord shall be
paid by WIRE TRANSFER ONLY. Minimum Rent and all amounts to be paid concurrently
therewith shall be paid in advance in equal monthly installments on or before
the first (1st) business day of each calendar month (or, with respect to the
first such payment due hereunder, on the Effective Date).

            2.6 ABSOLUTE NET LEASE. All Rent payments shall be absolutely net to
Landlord, free of any and all Taxes, Other Charges, and operating or other
expenses of any kind whatsoever, all of which shall be paid by Tenant. Tenant
shall continue to perform its obligations under this Master Lease even if Tenant
claims that it has been damaged by Landlord. Thus, Tenant shall at all times
remain obligated under this Master Lease without any right of set-off,
counterclaim, abatement, deduction, reduction or defense of any kind; provided,
however, that the foregoing shall not preclude Tenant from bringing a separate
action against Landlord for breach of its obligations under Section 24. Tenant's
sole right to recover damages against Landlord under this Master Lease shall be
to prove such damages in a separate action.

      3. LATE CHARGES. The late payment of Rent or other amounts due will cause
Landlord to lose the use of such money and incur administrative and other
expenses not contemplated under this Master Lease. While the exact amount of the
foregoing is extremely difficult to ascertain, the parties agree that as a
reasonable estimate of fair compensation to Landlord, if any Rent or other
amount is not paid (a) on the due date for such payment (without consideration
of any grace period that may be applicable in connection therewith), then Tenant
shall thereafter pay to Landlord on demand a LATE CHARGE equal to FIVE PERCENT
(5%) of such delinquent amounts, and (b) within ten (10) days after the due date
for such payment, such

                                      -4-

<PAGE>

unpaid amount shall ACCRUE INTEREST from such date at the "AGREED RATE" of FIVE
PERCENT (5%) PLUS THE PRIME RATE of interest then charged by Wells Fargo Bank,
N.A., San Francisco, CA.

      4. SECURITY DEPOSIT; COLLATERAL FOR LEASE OBLIGATIONS.

            4.1 Tenant shall maintain with Landlord cash securing Tenant's
faithful performance of its obligations under this Master Lease (the "SECURITY
DEPOSIT"), Letters of Credit (as defined in the LC Agreement) as partial
collateral for the Master Lease obligations or a combination thereof
(collectively, the "SECURITY DEPOSIT AND COLLATERAL"). Each Letter of Credit
shall be in the form set forth in, and shall otherwise be in compliance with the
terms of, the LC Agreement. Neither Letters of Credit, nor any proceeds from any
draw on any Letter of Credit, shall constitute a security deposit or any part of
the Security Deposit hereunder. The amount of the Security Deposit and the
aggregate undrawn face amounts of all Letters of Credit comprising the Security
Deposit and Collateral shall at all times during the Term be equal to, in the
aggregate, SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000), as may be increased
from time to time pursuant to Section 7.1(c) or any other provision of this
Master Lease, (the "SECURITY DEPOSIT AND COLLATERAL AMOUNT"). Landlord shall
hold the Security Deposit in a separate, interest-bearing account and all
interest earned thereon shall be added to and become a part of the CapEx Reserve
(as defined below). Tenant may fund the Security Deposit and Collateral in the
amount of SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000) (the "INITIAL SECURITY
DEPOSIT AND COLLATERAL FUNDING") at such times and in such installments as
Tenant may determine until fully funded. Subject to the provisions of Section
4.3, the payments for the Initial Security Deposit and Collateral may be in
cash. At such time as the Initial Security Deposit and Collateral Funding has
been fully funded in accordance with the foregoing, the amount of the Initial
Security Deposit and Collateral Funding shall be subtracted from Landlord's
Investment, and Minimum Rent shall be recalculated in accordance with Section
2.2(b).

            4.2 Landlord may apply the Security Deposit and Collateral (cash
from the Security Deposit and proceeds of any draw on a Letter of Credit), in
whole or in part, against any Event of Default and/or "Event of Default" as
defined in the Companion Master Lease, as otherwise permitted in any Letter of
Credit or may use such amounts for any other purpose allowed under applicable
law. If Landlord so applies all or any portion of the Security Deposit and
Collateral, Tenant shall, subject to the provisions of Section 4.3, within five
(5) days of such application by Landlord and without the requirement of notice
or demand by Landlord, deposit cash or post additional Letters of Credit such
that the total amount of cash and undrawn face amounts of Letters of Credit
comprising the Security Deposit and Collateral is equal to the Security Deposit
and Collateral Amount.

            4.3 On or before the date (the "REPLACEMENT DATE"), as reasonably
determined by Landlord and Tenant, that Letters of Credit become available to
Tenant on commercially reasonable terms, Tenant shall have replaced the Security
Deposit with Letters of Credit such that, on and after the Replacement Date, the
Security Deposit and Collateral shall be represented entirely by Letters of
Credit. Upon Landlord's receipt of any Letter of Credit provided by Tenant in
exchange for a portion of the Security Deposit pursuant to this Section 4.3,
Landlord shall promptly return to Tenant cash from the Security Deposit in the
amount of the undrawn face amount of the such Letter of Credit. In the absence
of Landlord's

                                      -5-

<PAGE>

prior written approval, which may be granted, withheld or conditioned in
Landlord's sole and absolute discretion, the portion of the Security Deposit and
Collateral represented by Letters of Credit prior to the Replacement Date shall
not be decreased.

            4.4 As additional collateral for the faithful performance by Tenant
of this Master Lease and the Companion Master Lease, Guarantor has executed and
delivered that certain Stock Pledge Agreement (the "STOCK PLEDGE") dated as of
the Effective Date pursuant to which Guarantor has pledged the capital stock of
Tenant to Landlord. The value of, and dividends or other amounts paid on or in
connection with the capital stock held by Landlord pursuant to the Stock Pledge,
shall not be a part of Security Deposit and Collateral, nor considered in the
calculation of the Security Deposit and Collateral Amount.

      5. TAXES AND OTHER CHARGES.

            5.1 TENANT'S OBLIGATION. At the end of the Term, all Taxes and Other
Charges shall be prorated. Landlord shall promptly forward to Tenant copies of
all bills and payment receipts for Taxes or Other Charges received by it.
Subject to Landlord's obligations to make payments from the Tax Escrow to the
extent provided in Section 5.3(a), Tenant shall be responsible for paying and
discharging (including the filing of all required returns), not later than
fourteen (14) days prior to delinquency or imposition of any fine, penalty,
interest or other cost ("PENALTY"), (A) "TAXES", consisting of any property
(real and personal) and other taxes and assessments levied or assessed with
respect to this Master Lease or any portion of the Premises with respect to any
period during or prior to the Term or any amounts due under payment in lieu of
taxes or impact fee agreements or similar arrangements (excluding any income tax
of Landlord and any intangible, mortgage or transfer tax or stamps for its
transfer of any interest in any portion of the Premises to any Person other than
Tenant or any of its Affiliates), and (B) "OTHER CHARGES", consisting of any
utilities and other costs and expenses of the Business or any portion of the
Premises and all other charges, obligations or deposits assessed against any
portion of the Premises during or prior to the Term. Unless paid from the Tax
Escrow (as defined below) pursuant to Section 5.3, Tenant may pay the foregoing
in permitted installments (whether or not interest accrues on the unpaid
balance) not later than fourteen (14) days prior to the date when due and before
any Penalty. If Tenant fails to pay as and when due any Tax or Other Charge, or
any Penalty that may be assessed notwithstanding the foregoing provisions of
this Section 5.1, and if thereafter Landlord (in its sole and absolute
discretion) pays such Tax, Other Charge or Penalty with funds other than those
in the Tax Escrow, then, upon its receipt of Landlord's written notice of
payment, Tenant shall pay Landlord an amount equal to any such Tax, Other Charge
or Penalty for which Tenant is liable under this Master Lease. Tenant shall,
prior to the Effective Date, pay all Taxes and Other Charges that are delinquent
as of the day immediately prior to the Effective Date. Notwithstanding the
foregoing provisions of this Section 5.1, Landlord shall remain named as the
landowner and Tax payor on all real property Tax records concerning the
Premises.

            5.2 PROTESTS. Each party has the right, but not the obligation, in
good faith to protest or contest (a "PROTEST") in whole or in part (a) the
amount or payment of any Taxes or Other Charges and (b) the existence, amount or
validity of any Lien (as defined in Section 8.1) by appropriate proceedings
sufficient to prevent its collection or other realization and the sale,
forfeiture or loss of any portion of the Premises or Rent to satisfy it (so long
as it provides

                                      -6-

<PAGE>

Landlord with reasonable security to assure the foregoing). If Tenant elects to
pursue a Protest, Tenant shall diligently prosecute such Protest at its sole
cost and expense and pay such Taxes, Other Charges or Lien before the imposition
of any Penalty. Landlord will cooperate fully in any Protest that involves an
amount assessed against it.

            5.3 TAX IMPOUND AND ESCROW.

            (a) Commencing with the first (1st) business day of the first (1st)
full calendar month after the Effective Date, Tenant shall include with each
Minimum Rent payment a deposit of ONE-TWELFTH (1/12TH) of the amount required to
discharge the annual amount of real property Taxes secured by a Lien encumbering
any portion of the Premises as and when they become due. The deposits shall be
held in escrow (the "TAX ESCROW") in a separate, interest-bearing account, which
interest shall be added to and become a part of the Tax Escrow. The deposits in
the Tax Escrow shall not be held by Landlord in trust or as an agent of Tenant,
and Tenant acknowledges that the impounding of such funds in the Tax Escrow
shall constitute a true escrow, and that Tenant has no, and hereby waives any,
interest in or right or title to any funds escrowed pursuant to this Section
5.3, whether legal, equitable, beneficial or otherwise. Provided that the Tax
Escrow then contains sufficient funds for payment of the applicable obligations,
the amounts in the Tax Escrow shall be applied by Landlord directly to the
payment of the related obligations in a timely fashion and prior to the
imposition of any Penalty. If any Penalty results from Landlord's failure to
timely make any such payment, such Penalty shall be borne by Landlord. Without
limitation upon Landlord's rights under Section 13.4, if at any time within
thirty (30) days prior to the due date of the applicable Taxes the deposits
shall be insufficient for the payment of such Taxes in full, Tenant shall within
ten (10) days after demand by Landlord deposit the deficiency with Landlord. If
deposits are in excess of the actual obligation, the required monthly deposits
for the ensuing Lease Year shall be reduced proportionately and any such excess
at the end of the final Lease Year shall be refunded to Tenant within thirty
calendar (30) days. Tenant shall forward to Landlord or its designee all Tax
bills, bond and assessment statements as soon as they are received. If Landlord
transfers this Master Lease, it shall transfer all such deposits to the
transferee, and Landlord shall thereafter have no liability of any kind with
respect thereto.

            (b) On or before the Effective Date, Tenant shall deposit the amount
of ONE HUNDRED THREE THOUSAND TWENTY-TWO DOLLARS ($103,022) into the Tax Escrow,
representing the amount of accrued but unpaid Taxes secured by a Lien
encumbering the Premises through the Effective Date.

      6. INSURANCE.

            6.1 REQUIREMENTS. All insurance provided for in this Master Lease
shall (i) be maintained under valid and enforceable policies issued by insurers
licensed and approved to do business in the state(s) where the applicable
Facility or portion of the Premises is located and having general policyholders
and financial ratings of not less than "A-" and "X", respectively, in the then
current Best's Insurance Report, and a claims paying ability rating from S&P of
at least AA and the equivalent rating of at least one other rating agency,
unless in either case Landlord agrees in the exercise of its reasonable judgment
that the required insurance would not be available to Tenant on commercially
reasonable terms from insurers with such ratings,

                                      -7-

<PAGE>

(ii) name Landlord as an additional insured and, for the casualty policy
referenced in this Section 6.1, as the owner and loss payable beneficiary, (iii)
be on an "occurrence" basis, or, to the extent such insurance is not available
at commercially reasonable rates in Landlord's reasonable judgment, on a
"claims-made" basis, (IV) cover all of Tenant's operations at the applicable
Facility or portion of the Premises, (V) provide that the policy may not be
canceled except upon not less than thirty (30) days prior written notice to
Landlord, unless Landlord shall agree, in its reasonable judgment, that
insurance is not available to Tenant on such terms at commercially reasonable
rates, and (VI) be primary and provide that any insurance with respect to any
portion of the Premises maintained by Landlord is excess and noncontributing
with Tenant's insurance. The parties hereby waive as to each other all rights of
subrogation which any insurance carrier, or either of them, may have by reason
of any provision in any policy issued to them, provided such waiver does not
thereby invalidate such policy. Original policies or satisfactory insurer
certificates evidencing the existence of the insurance required by this Master
Lease and showing the interest of Landlord shall be provided to it prior to the
commencement of the Term or, for a renewal policy, not less than ten (10) days
prior to the expiration date of the policy being renewed. If Landlord is
provided with a certificate, it may demand that Tenant provide a complete copy
of the related policy within ten (10) days. Landlord shall review each such
policy or certificate and, within a reasonable time following its receipt
thereof, notify Tenant in writing whether the insurance evidenced by such policy
or certificate complies with the requirements of this Master Lease. During the
Term, Tenant shall maintain the following insurance and any claims thereunder
shall be adjudicated by and at the expense of it or its insurance carrier:

            FIRE AND EXTENDED COVERAGE with respect to each Facility against
loss or damage from all causes under standard "all risk" property insurance
coverage with an agreed amount endorsement (such that the insurance carrier has
accepted the amount of coverage and has agreed that there will be no
co-insurance penalty), without exclusion for fire, lightning, windstorm,
explosion, smoke damage, vehicle damage, sprinkler leakage, flood, vandalism,
earthquake, malicious mischief or any other risks normally covered under an
extended coverage endorsement, in amounts that are not less than the actual
replacement value of such Facility and all Tenant Personal Property associated
therewith (including the cost of compliance with changes in zoning and building
codes and other laws and regulations, demolition and debris removal and
increased cost of construction);

            COMMERCIAL GENERAL PUBLIC LIABILITY COVERAGE with respect to each
Facility (including products liability and broad form coverage) against claims
for bodily injury, death or property damage occurring on, in or about such
Facility, affording the parties protection of not less than Five Million Dollars
($5,000,000) for bodily injury or death to any one person, not less than Ten
Million Dollars ($10,000,000) for any one accident, and not less than One
Million Dollars ($1,000,000) for property damage;

            PROFESSIONAL LIABILITY COVERAGE with respect to each Facility for
damages for injury, death, loss of service or otherwise on account of
professional services rendered or which should have been rendered, in a minimum
amount of Five Million Dollars ($5,000,000) per claim and Ten Million Dollars
($10,000,000) in the aggregate;

                                      -8-

<PAGE>

            WORKER'S COMPENSATION COVERAGE with respect to each Facility for
injuries sustained by Tenant's employees in the course of their employment and
otherwise consistent with all applicable legal requirements;

            BOILER AND PRESSURE VESSEL COVERAGE with respect to each Facility on
any fixtures or equipment which are capable of bursting or exploding, in an
amount not less than Five Million Dollars ($5,000,000) for resulting damage to
property, bodily injury or death and with an endorsement for boiler business
interruption insurance;

            BUSINESS INTERRUPTION AND EXTRA EXPENSE COVERAGE with respect to
each Facility for loss of rental value for a period not less than one (1) year,
provided that, so long as Tenant continues to pay all Rent and other amounts due
hereunder and no other Event of Default exists, Tenant shall be entitled to
receive all proceeds of such business interruption insurance; and

            DEDUCTIBLES/SELF-INSURED RETENTIONS for the above policies shall not
be greater than Fifty Thousand Dollars ($50,000), and Landlord shall have the
right at any time to require a lower such amount or set higher policy limits, to
the extent commercially available and reasonable and customary for similar
properties. At such times and only so long as policies of insurance with
deductibles or self-insured retentions not greater than FIFTY THOUSAND DOLLARS
($50,000) are generally not available to operators of assisted living facilities
owned by institutional landlords and similar to the Facilities at commercially
reasonable rates, as jointly determined by Landlord and Tenant in their
respective reasonable judgment, the deductibles or self-insured retentions on
the policies of insurance required hereunder may be in such greater amount, as
jointly determined by Landlord and Tenant in their respective reasonable
judgment, that would result in the applicable policies being available at
commercially reasonable rates, not to exceed TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000).

            6.2 EXCEPTIONS TO INSURANCE REQUIREMENTS. Tenant has advised
Landlord that, to the extent described on Schedule 2, it is not in compliance as
of the Effective Date with the requirements set forth in Section 6.1. Tenant
nonetheless represents and warrants to Landlord that the policies of insurance
(including the deductible or self-insured retention provisions thereof) and risk
management programs that Tenant has in effect as of the Effective Date are, and
as may be in effect at any time during the Term will be, consistent with custom,
practice and prudent management standards in the business and industry in which
Tenant is engaged. As and when insurance meeting the requirements set forth in
Section 6.1 becomes generally available to operators of assisted living
facilities owned by institutional landlords and similar to the Facilities at
commercially reasonable rates, as jointly determined by Landlord and Tenant in
their respective reasonable judgment, Tenant shall purchase and maintain such
insurance. Tenant's non-compliance with the requirements of Section 6.1 shall
not give rise to an Event of Default so long as (I) no other Event of Default
then exists, (II) such non-compliance is limited to the matters described on
Schedule 2, (III) the representations and warranties set forth in this Section
6.2 remain true, correct and complete in all respects, and (IV) Tenant is in
compliance with the other covenants contained in this Section 6.2 and Section
6.3.

            6.3 REIMBURSEMENT OF LANDLORD'S INSURANCE COSTS. During any Lease
Year or portion thereof in which Tenant is not in compliance with the provisions
of Section 6.1

                                      -9-

<PAGE>

(without consideration of the effect of Section 6.2), Tenant shall reimburse
Landlord, within ten (10) days of Landlord's demand therefor, for the costs of
the premiums of the general liability and environmental insurance policies
maintained by Landlord, or contributions to self-insurance in lieu thereof, in
connection with the Premises, which amount shall not exceed in any Lease Year
the amount of TEN THOUSAND DOLLARS ($10,000) (as adjusted at the end of each
Lease Year for increases since the Effective Date in the CPI). Tenant shall have
no right to receive any proceeds or other benefits from any such insurance. For
purposes of this Section 6.3, Tenant shall not be in compliance with Section 6.1
(without consideration of the effect of Section 6.2) at any such time that any
insurance required hereunder is provided to Tenant by or through the "captive"
insurance company described on Schedule 2, or any other similar captive
insurance company.

            6.4 DETERMINATION OF COMMERCIAL REASONABLENESS. In the event that
Landlord and Tenant are unable to agree on any matter in this Section 6
requiring a determination of commercial reasonableness, such determination shall
be made by a reputable insurance company, consultant or expert (an "INSURANCE
ARBITRATOR") with experience in the assisted living insurance industry as
identified by Landlord in the exercise of its reasonable judgment. As a
condition to a determination of commercial reasonableness with respect to any
particular matter, the Insurance Arbitrator shall be capable of providing,
procuring or identifying particular policies or coverages that would be
available to Tenant and would satisfy the requirement in issue. The
determinations made by any such experts shall be binding on Landlord and Tenant
for purposes of this Section 6, and the costs, fees and expenses of the same
shall be borne by Tenant.

      7. USE, REGULATORY COMPLIANCE AND PRESERVATION OF BUSINESS.

            7.1 PERMITTED USE; QUALIFIED CARE.

            (a) Tenant shall continuously use and occupy each Facility during
the Term as a licensed facility engaged in the respective Business described on
Schedule 1 with not less than the applicable number of beds shown on Schedule 1
(with respect to each Facility, the "REQUIRED BED COUNT"), and for ancillary
services relating thereto, but for no other purpose. Notwithstanding the
foregoing, Tenant may permit at any one time the number of beds at no more that
five (5) individual Facilities to be one (1) bed less than the Required Bed
Count in such Facility.

            (b) Tenant shall not allow the average occupancy for any trailing
three (3) month period (i) to be less than forty percent (40%) of the applicable
number of beds shown on Schedule 1, for any two (2) individual Facilities at any
time that the Coverage Ratio for the immediately preceding calendar quarter was
less than 1.4:1.0, or (ii) to be less than sixty-five percent (65%) of the
applicable number of beds shown on Schedule 1, for all Facilities on an
aggregate basis.

            (c) Provided that the Coverage Ratio for the immediately preceding
calendar quarter was at least 1.00:1.00, in the event that of any non-compliance
with the requirements of Section 7.1(b)(i), or in the event of any Loss of
Licensure (as defined below) affecting any Facility, no Event of Default shall
arise if, within five (5) days of Landlord's receipt of notice of

                                      -10-

<PAGE>

such non-compliance or Loss of Licensure, as applicable, Tenant increases the
Security Deposit and Collateral then held by Landlord by an amount equal to TWO
HUNDRED THOUSAND DOLLARS ($200,000) for each additional Facility with
non-complying average occupancy and for each Facility subject to a Loss of
Licensure, as applicable, which amounts shall be held by Landlord pursuant to
Section 4 until Tenant has achieved compliance with the requirements of Section
7.1(b)(i) for two (2) consecutive trailing three (3) month periods or has
completely remedied the Loss of Licensure, as applicable. Tenant's right under
this Section 7.1(c) to cure or prevent any Event of Default from arising for
non-compliance with the requirements of Section 7.1(b)(i) or for any Loss of
Licensure shall terminate at such time as Tenant has exercised such right with
respect to Facilities containing in the aggregate fifty-six (56) or more beds.

            7.2 REGULATORY COMPLIANCE . Tenant, each Facility and the other
portions of the Premises shall comply in all material respects with all
licensing and other laws and all CC&R's and other use or maintenance
requirements applicable to the Business conducted thereon and, to the extent
Tenant elects to participate in the same or as may be required by law to serve
its resident population, all Medicare, Medicaid and other third-party payor
certification requirements, including timely filing properly completed cost and
other required reports, timely paying all expenses shown thereon, and ensuring
that, to the extent Tenant has elected to participate in the same or as required
by law to serve its respective resident population, each Facility continues to
be fully certified for participation in Medicare and Medicaid throughout the
Term and when each such Facility is returned to Landlord, all without any
suspension, revocation, decertification or other material limitation other than
those suspensions, revocations, decertifications or other material limitations
under which Tenant was operating immediately prior to the end of the Term.
Further, Tenant shall not commit any act or omission that would in any way
violate any certificate of occupancy affecting the any Facility, result in
closure of the Business conducted at any Facility or result in the sale or
transfer of all or any portion of any related certificate of need, bed rights or
other similar certificate or license. During the Term, all inspection fees,
costs and charges associated with a change of such licensure or certification
("CHANGE OF LICENSURE COSTS") shall be borne solely by Tenant. Notwithstanding
the foregoing, except in the event that the Term has been terminated as a result
of an Event of Default, Tenant shall not be responsible for any Change of
Licensure Costs that would be ordinarily incurred by a new operator of any
Facility under usual custom and practice in the applicable Business (e.g.,
application fees for licensure, costs of training personnel, legal costs in
connection with the same), provided, however, that Tenant shall be required to
effect any repairs to or modifications or Alterations of any Facility as may be
necessary for a prospective new operator to obtain such licenses as may be
required to operate the same consistent with Tenant's prior operation and
otherwise in material compliance with all applicable laws. In all events, Tenant
shall cooperate in good faith, at no out-of-pocket expense to itself, with the
efforts of any prospective new operator of any Facility to obtain licensure.

            7.3 PRESERVATION OF BUSINESS. Tenant acknowledges that a fair return
to Landlord on and protection of its investment in the Premises is dependent, in
part, on Tenant's dedication to the Business and the concentration on each
Facility of similar businesses of Tenant and its Affiliates in the geographical
area of such Facility. Tenant further acknowledges that the diversion of
residents or patient care activities from any Facility to other facilities owned
or operated by Tenant or its Affiliates at any time during the Term will have a
material adverse

                                      -11-

<PAGE>

affect on the value and utility of such Facility. Therefore, Tenant agrees that
during the Term and for a period of one (1) year thereafter, neither Tenant nor
any of its Affiliates shall, without the prior written consent of Landlord: (i)
operate, own, participate in or otherwise receive revenues from any other
business providing services similar to those of the Business of any Facility
within an eight (8) mile radius of such Facility, provided, however, that Tenant
and its Affiliates may continue to operate, own, manage, participate in or
otherwise receive revenues from any of the facilities listed on Schedule 3 (each
an "EXEMPT FACILITY") so long as, after the date hereof, no aspects of the
operations or management of any Exempt Facility are changed in any manner that
results in such Exempt Facility becoming more competitive with any Facility,
provided, however that routine maintenance and capital expenditures in the
ordinary course of business and minor variations in the number of beds or living
units, as applicable, in such other facilities shall not be deemed to violate
the foregoing, (ii) except as is necessary to provide residents or patients with
an alternative level of care, recommend or solicit the removal or transfer of
any resident or patient from any Facility to any other nursing, health care,
senior housing or retirement housing facility or divert actual or potential
residents, patients or care activities of the Business conducted at any Facility
to any other facilities owned or operated by Tenant or its Affiliates or from
which they receive any type of referral fees or other compensation for
transfers, or (iii) employ for other businesses any management or supervisory
personnel working on or in connection with any portion of the Business or any
Facility.

            7.4 COVERAGE RATIO. Tenant shall not permit the ratio (the "COVERAGE
RATIO") of (i) Portfolio EBITDARM to (ii) Portfolio Rent Expense to be less that
1.2:1.0 for any fiscal quarter, commencing with the fiscal quarter ending March
31, 2003.

      8. ACCEPTANCE, MAINTENANCE, UPGRADE, ALTERATION AND ENVIRONMENTAL.

            8.1 ACCEPTANCE "AS IS"; NO LIENS. Tenant acknowledges it has leased
or occupied and conducted or managed operations at each Facility prior to the
Effective Date, that it is presently engaged in operations like the Business
conducted at each Facility in the state where such Facility is located and has
expertise in such industry and, in deciding to enter into this Master Lease, has
not relied on any representations or warranties, express or implied, of any kind
from Landlord. Tenant has examined the condition of title to and thoroughly
investigated the Premises, has selected the Premises to its own specifications,
has concluded that no improvements or modifications to them are required in
order to conduct the Business, and accepts them on an "AS IS" basis and assumes
all responsibility and cost for the correction of any observed or unobserved
deficiencies or violations. Notwithstanding its right to Protest set forth in
Section 5.2, Tenant shall not cause or permit any lien, encumbrance, levy or
attachment (a "Lien"), except a Permitted Tenant Property Lien (as defined
below) and except as otherwise may be expressly permitted under this Master
Lease, to be placed or assessed against any portion of the Premises or the
operation thereof for any reason.

            8.2 TENANT'S MAINTENANCE OBLIGATIONS. Tenant shall (a) keep and
maintain the Premises in good appearance, repair and condition and maintain
proper housekeeping, (b) promptly make all repairs (interior and exterior,
structural and nonstructural, ordinary and extraordinary, foreseen and
unforeseen) necessary to keep each Facility in good and lawful order and
condition and in substantial compliance with all applicable requirements and
laws relating to the Business conducted thereon, including if Tenant has elected
to participate therein of if

                                      -12-

<PAGE>

otherwise applicable certification for participation in Medicare and Medicaid,
and (C) keep and maintain all Landlord and Tenant Personal Property in good
condition, ordinary wear and tear excepted, and repair and replace such property
consistent with prudent industry practice.

            8.3 UPGRADE EXPENDITURES. Tenant shall include with each Minimum
Rent payment, starting with the first (1st) full month of the Term, a deposit to
be added to a reserve (the "CAPEX RESERVE") equal to one-twelfth (1/12th) of the
amount equal to (i) TWO HUNDRED FIFTY DOLLARS ($250) (as adjusted at the end of
each Lease Year for increases since the Effective Date in the CPI, the "CAPEX
AMOUNT"), multiplied by (ii) the aggregate number of beds in all of the
Facilities on the date such payment is due. This reserve shall bear interest,
which shall be added to and become a part thereof. Landlord shall not be deemed
to hold the same in trust or as an agent for Tenant. Tenant acknowledges that
the impounding of such funds in the CapEx Reserve shall constitute a true
escrow, and that Tenant has no, and hereby waives any, interest in or right or
title to any funds escrowed pursuant to this Section 8.3, whether legal,
equitable, beneficial or otherwise. From time to time, but not more often than
once in any calendar month and provided that no Event of Default is then
continuing, Landlord will pay to Tenant amounts from the CapEx Reserve to
reimburse Tenant for Upgrade Expenditures made by Tenant during the prior
rolling thirty-six (36) month period during the Term (or portion thereof), as
reasonably determined by Landlord based on evidence of such expenditures
submitted by Tenant (which shall be in substantially the same form utilized by
Nationwide Health Properties and Tenant (or their respective affiliates) for
such purposes); provided that such amount shall not exceed with respect to any
individual Facility in any rolling thirty-six (36) month period during the Term,
three (3) times the CapEx Amount multiplied by the average number of beds in
such Facility over such period. Landlord shall make the reimbursements to Tenant
required hereunder within twenty-one (21) days after satisfaction of all
conditions to such reimbursement. Upon reasonable advance request, Landlord may
require Tenant to procure mechanic's lien waivers, in form and substance
reasonably satisfactory to Landlord, in connection with any Upgrade Expenditures
in excess of ONE THOUSAND DOLLARS ($1,000). "UPGRADE EXPENDITURES" means
expenditures in commercially reasonable amounts to Persons not affiliated with
Tenant for (I) upgrades or improvements to each Facility that have the effect of
maintaining or improving its competitive position in its respective marketplace,
including new or replacement wallpaper, tiles, window coverings, lighting
fixtures, painting, upgraded landscaping, carpeting, architectural adornments,
common area amenities and the like, but excluding capital improvements or
repairs (including repairs or replacements of the roof, structural elements of
the walls, parking area or the electrical, plumbing, HVAC or other mechanical or
structural systems), and (II) other improvements to each Facility as reasonably
approved by Landlord, which shall include those matters, if any, that Landlord
has approved in writing as of the Effective Date based on descriptions and
budgets that Tenant has provided prior thereto. Any amount remaining in the
CapEx Reserve at the expiration of the Term or earlier termination of this
Master Lease shall be retained by Landlord as additional or supplemental Rent
hereunder.

            8.4 ALTERATIONS BY TENANT. Tenant may alter, improve, exchange,
replace, modify or expand (collectively, including any work performed in
connection with any Upgrade Expenditure, "ALTERATIONS") the Facilities,
equipment or appliances in the Premises from time to time as it may determine is
desirable for the continuing and proper use and maintenance of the Premises;
provided, that any Alterations (except for the Initial CapEx Items) in excess of
SEVEN HUNDRED FIFTY DOLLARS ($750) per bed or living unit, as applicable, with
respect to any

                                      -13-

<PAGE>

individual Facility in any rolling twelve (12) month period shall require
Landlord's prior written consent; provided further, that any Alterations to the
Premises must satisfy the requirements set forth in Sections 4(4).02 and .03 of
Revenue Procedure 2001-28, 2001-19 I.R.B. 1156. All Alterations shall
immediately become a part of the Premises and the property of Landlord subject
to this Master Lease, and except to the extent that Landlord in its sole and
absolute discretion agrees to fund them following Tenant's written request
therefor, the cost of all Alterations or other purchases, whether undertaken as
an on-going licensing, Medicare, Medicaid or other regulatory requirement, or
otherwise shall be borne solely by Tenant. Any amounts so funded by Landlord
shall (i) concurrently with such funding be added to Landlord's Investment, and
(ii) shall not, unless expressly agreed by Landlord to the contrary, in its sole
and absolute discretion, constitute Upgrade Expenditures. All Alterations shall
be done in a good and workmanlike manner in compliance with all applicable laws
and the insurance required under this Master Lease. Notwithstanding the
foregoing, any equipment acquired by Tenant at Tenant's sole cost and expense
that expands the services provided to the residents of any Facility, rather than
replaces existing equipment at such Facility, or replaces existing Tenant
Personal Property, or is otherwise permitted under Section 9.2, and that does
not constitute a fixture (under the real property law of the State in which such
Facility is located), shall constitute Tenant Personal Property subject to the
security interest granted to Landlord in Section 9.2. So long as there is no
continuing Event of Default, Tenant may remove at any time and dispose of the
equipment described in the preceding sentence free and clear of an security
interest of Landlord. Tenant further agrees to (x) periodically, but not less
than once per fiscal quarter, provide Landlord with information regarding all
Alterations and general maintenance activities that Tenant has engaged in or
intends to engage in during the succeeding fiscal quarter with respect to the
Premises, and (y) make appropriate officers available periodically for
consultation with representatives of Landlord with respect to matters relating
to ongoing Alterations to, and the general maintenance of, the Premises.

            8.5 HAZARDOUS MATERIALS. Tenant's use of the Premises (i) shall
comply with all Hazardous Materials Laws, (ii) shall not result in any Hazardous
Materials Claims and (iii) shall not involve any Environmental Activities. If
(x) any Environmental Activities occur, (y) if Landlord or Tenant receive any
notice of any Hazardous Materials Claims, or (z) if Tenant's use of any portion
of the Premises results in any violation of any Hazardous Materials Law, or
Landlord has a reasonable belief that any of the foregoing has occurred, then
Tenant shall promptly obtain all permits and approvals necessary to remedy any
such actual or suspected problem through the removal of Hazardous Materials or
otherwise, and upon Landlord's approval of the remediation plan, remedy any such
problem to the satisfaction of Landlord and all applicable governmental
authorities, in accordance with all Hazardous Materials Laws and good business
practices. Tenant shall immediately advise Landlord in writing of (a) any
Environmental Activities, (b) any violation of any Hazardous Materials Laws; (c)
any Hazardous Materials Claims against Tenant or any portion of the Premises;
(d) any remedial action taken by Tenant in response to any Hazardous Materials
Claims or any Hazardous Materials on, under or about any portion of the Premises
in violation of any Hazardous Materials Laws; (e) Tenant's discovery of any
occurrence or condition on or in the vicinity of any portion of the Premises
that materially increase the risk that any portion of the Premises is or will be
exposed to Hazardous Materials; and (f) all communications to or from Tenant,
any governmental authority or any other Person relating to Hazardous Materials
Laws or Hazardous Materials Claims with respect to any portion of the Premises,
including copies thereof. Notwithstanding any other provision of

                                      -14-

<PAGE>

this Master Lease, if any Hazardous Materials are discovered on, under or about
any portion of the Premises, or any violation of any Hazardous Materials Law or
any Hazardous Materials Claim occurs, the Term shall be automatically extended
and this Master Lease shall remain in full force and effect until the earlier to
occur of the completion of all remedial action or monitoring, as approved by
Landlord, in accordance with all Hazardous Materials Laws, or the date specified
in a written notice from Landlord to Tenant terminating this Master Lease (which
date may be subsequent to the date upon which the Term was to have expired).
Landlord shall have the right, at Tenant's sole cost and expense (including,
without limitation, Landlord's reasonable attorneys' fees and costs) and with
counsel chosen by Landlord, to join, participate in and direct, as a party if it
so elects, any legal proceedings or actions initiated in connection with any
Hazardous Materials Claims.

      9. TENANT PROPERTY AND SECURITY INTEREST; LANDLORD PERSONAL PROPERTY.

            9.1 TENANT PROPERTY. Tenant shall obtain, install, maintain and
update all items of furniture, fixtures, supplies and equipment not included as
Landlord Personal Property as shall be necessary or reasonably appropriate to
operate each Facility in compliance with this Master Lease "TENANT PERSONAL
PROPERTY" and with "TENANT INTANGIBLE PROPERTY", "TENANT PROPERTY"). "TENANT
INTANGIBLE PROPERTY" means all the following at any time owned by Tenant in
connection with its use of any portion of the Premises: Medicare, Medicaid and
other accounts and proceeds thereof; rents, profits, income or revenue derived
from such operation or use; all documents, chattel paper, instruments, contract
rights (including contracts with residents, employees and third-party payors),
deposit accounts, general intangibles and choses in action; refunds of any Taxes
or Other Charges; licenses and permits necessary or desirable for Tenant's use
of any portion of the Premises, including any applicable certificate of need or
other similar certificate, and the exclusive right to transfer, move or apply
for the foregoing and manage the Business conducted at any portion of the
Premises (including the right to apply for permission to reduce the licensed bed
complement, take any of the licensed beds out of service or move the beds to a
different location); and the right to use, at no cost, expense or royalty, for
up to three (3) years following the termination of this Master Lease for any
reason other than the expiration of the then Term or the default by Landlord,
the names "Clare Bridge," Clare Bridge Cottage" and "Sterling House" and all
reasonable variations and replacements or substitutions thereof.

            9.2 LANDLORD'S SECURITY INTEREST AND FINANCING STATEMENTS.

(a) The parties intend that if Tenant defaults under this Master Lease, Landlord
will control the Tenant Personal Property and the Tenant Intangible Property (to
the extent assignable in accordance with applicable law and with the applicable
terms and provisions thereof) so that Landlord or its designee can operate or
re-let each Facility and associated personal property intact for use as a
licensed facility engaged in the applicable Business. Therefore, to implement
the intention of the parties, and for the purpose of securing the payment and
performance of Tenant's obligations under this Master Lease, Tenant, as debtor,
hereby grants to Landlord, as secured party, a security interest in and an
express contractual Lien upon, all of Tenant's right, title and interest in and
to the Tenant Personal Property and the Tenant Intangible Property (to the
extent assignable in accordance with applicable law and with the applicable
terms and provisions thereof) and any and all products and proceeds thereof, in
which Tenant now owns or leases or hereafter acquires an interest or right, but
expressly excluding

                                      -15-

<PAGE>

Excluded Tenant Property except to the extent provided to the contrary in
Section 9.2(b). This Master Lease constitutes a security agreement covering all
such Tenant Personal Property and Tenant Intangible Property (to the extent
assignable in accordance with applicable law), and Tenant shall keep such Tenant
Property free and clear of all Liens other than Liens in favor of Landlord and,
with respect to Excluded Tenant Property (as defined below) only, Permitted
Tenant Property Liens (as defined below). This security interest and agreement
shall survive the termination of this Master Lease resulting from an Event of
Default. Tenant shall pay all filing and reasonable record search fees and other
costs for such additional security agreements, financing statements, fixture
filings and other documents as Landlord may reasonably require to perfect or
continue the perfection of its security interest.

            (b) Subject to the other provisions of this Section 9.2, Tenant may
obtain, install and maintain and update Excluded Tenant Property, and may grant
security interests and other Liens ("PERMITTED TENANT PROPERTY LIENS") in any
Excluded Tenant Property to Persons other than Landlord. "EXCLUDED TENANT
PROPERTY" shall mean personal property for each Facility the aggregate value of
which does not exceed the lesser of ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS
($125,000) or THREE THOUSAND DOLLARS ($3,000) per bed or living unit, as
applicable, in such Facility, and which shall be strictly limited to: buses,
vans and other vehicles; photocopy machines, fax machines and personal
computers; and employee cell phones and pagers.

            9.3 LANDLORD PERSONAL PROPERTY. Landlord and Tenant acknowledge
that, as of the Effective Date, the Premises does not include any Landlord
Personal Property. In the event that Landlord, in its sole and absolute
discretion, funds the acquisition of any personal property by Tenant after the
Effective Date, all such personal property shall be considered Landlord Personal
Property.

      10. FINANCIAL, MANAGEMENT AND REGULATORY REPORTS. Tenant shall provide
Landlord (and, upon Landlord's prior request, to any lender of Landlord) with
the reports listed in Exhibit F at the time described therein and such other
information about it or the operations of the Premises and Business as Landlord
may reasonably request from time to time. All financial information provided
shall be prepared in accordance with generally accepted accounting principles
consistently applied. If Tenant or any Guarantor becomes subject to any
reporting requirements of the Securities and Exchange Commission during the
Term, it shall concurrently deliver to Landlord such reports as are delivered
pursuant to applicable securities laws. Tenant acknowledges that the failure to
furnish Landlord with any of the statements required by this Section 10 will
cause Landlord to incur costs and expenses not contemplated under this Master
Lease; therefore, if Tenant fails to furnish Landlord with any of the materials
as and when required under this Section 10, Tenant shall pay to Landlord upon
demand the sum of Five Hundred Dollars ($500.00) for each such failure.

      11. REPRESENTATIONS AND WARRANTIES.

      11.1 BY LANDLORD. Landlord represents and warrants to Tenant that:

      (a) this Master Lease and all other documents executed or to be executed
by Landlord in connection herewith have been duly authorized and shall be
binding upon Landlord;

                                      -16-

<PAGE>

            (b) Landlord is duly formed, validly existing and in good standing
under the laws of the State of its formation and is duly authorized and
qualified to perform this Master Lease within the state(s) where any portion of
the Premises is located; and

            (c) neither this Master Lease nor any other document executed or to
be executed in connection herewith violates the terms of any other agreement of
Landlord.

            11.2 BY TENANT. Tenant represents and warrants to Landlord that:

            (a) this Master Lease and all other documents executed or to be
executed by Tenant in connection herewith have been duly authorized and shall be
binding upon Tenant;

            (b) Tenant is duly formed, validly existing and in good standing
under the laws of the State of its formation and one or both of such entities is
duly authorized and qualified to perform this Master Lease within the State(s)
where any portion of the Premises is located;

            (c) neither this Master Lease nor any other document executed or to
be executed by Tenant or Guarantor in connection herewith violates the terms of
any other agreement of Tenant;

            (d) all documents, plans, surveys and other data or information,
including financial data and information, prepared by or on behalf of Tenant and
provided by or on behalf of Tenant to Landlord in connection with the
transactions contemplated in this Master Lease, including Schedule 1, are true,
correct and complete in all material respects and disclose all material facts
with no material omissions with respect thereto;

            (e) Tenant holds good and marketable title to, and the entire right,
title, and interest in, the Tenant Property, free and clear of any and all
leases, Liens, encumbrances, or other liabilities, except, with respect to the
Excluded Tenant Property only, the Permitted Tenant Property Liens and as
otherwise permitted under Section 9.2;

            (f) there are no Liens encumbering title to any of the Facilities
arising by, through or under Tenant;

            (g) each Facility has available to its boundaries adequate
utilities, including without limitation, adequate water supply, storm and
sanitary sewage facilities, telephone, gas, electricity and fire protection, as
is required for the operation of such Facility as contemplated under this Master
Lease;

            (h) except to the extent set forth to the contrary on Schedule 4, to
the best of Tenant's knowledge, the improvements at each Facility and each
portion thereof (i) have been constructed in a good and workmanlike manner, free
from material defects and in material compliance with all applicable laws, and
(ii) are in good condition and repair, free from material defects and in
material compliance with all applicable laws and CC&R's;

            (i) except to the extent set forth to the contrary on Schedule 4, to
the best of Tenant's knowledge, each Facility is properly zoned for its current
use and intended use hereunder, and the real property comprising each Facility
and the operation and use thereof,

                                      -17-

<PAGE>

including all boundary line adjustments to such real property, materially comply
with all applicable laws including laws concerning the subdivision of real
property;

            (j) except to the extent set forth to the contrary on Schedule 4, to
the best of Tenant's knowledge, there are not now, and have not been during
Tenant's occupancy or management of the Premises prior to the Effective Date,
(i) any Hazardous Materials installed or stored in or otherwise present or
existing at, on, in or under any Facility, (ii) any Environmental Activities,
(iii) any Hazardous Materials Claims, and (iv) any violation of any Hazardous
Materials Law affecting any Facility;

            (k) except to the extent set forth to the contrary on Schedule 4, to
the best of Tenant's knowledge, there are no soil conditions adversely affecting
any Facility;

            (l) except to the extent set forth to the contrary on Schedule 4,
Tenant has received no notice and to the best of its knowledge has no knowledge
that (i) any government agency or any employee or official thereof considers
that the conduct of the Business at any Facility, or the operation or use of any
Facility for its current use, has failed or will fail to materially comply with
any applicable law, (ii) any investigation has been commenced or is contemplated
respecting any such possible or actual failure of the Business conducted at any
Facility, or the operation or use of any Facility for its current use, to
materially comply with any applicable law, other than routine deficiencies noted
in connection with licensing surveys and inspections, each of which is or shall
promptly be addressed in an appropriate plan of correction in accordance with
applicable law, and (iii) there are any unsatisfied requests for repairs,
restorations or alterations with regard to the any Facility from any person,
entity or authority, including, any lender, insurance carrier or governmental
authority, other than routine deficiencies noted in connection with licensing
surveys and inspections, each of which is or shall promptly be addressed in an
appropriate plan of correction in accordance with applicable law;

            (m) except to the extent set forth to the contrary on Schedule 4,
there are no material actions, suits or proceedings pending or threatened before
or by any judicial, administrative or union body, any arbiter or any
governmental authority, against or affecting Tenant, or any Facility or any
portion thereof or the transactions contemplated by, or the enforceability of,
this Master Lease, and there are no existing or, to the best of Tenant's
knowledge, proposed or threatened eminent domain or similar proceedings which
would affect title or access to any Facility in any manner whatsoever;

            (n) Tenant or Guarantor has obtained and holds all consents,
approvals, licenses, permits and other permissions related to leasing the
Facilities from Landlord, operating the Facilities as contemplated under this
Master Lease and conducting the Business thereon and the other the matters and
transactions contemplated herein as are required of Tenant or Guarantor under
any applicable law; and

            (o) Prior to the Effective Date, Tenant has been managing and
operating each of the Facilities pursuant to management or operating agreements
or leases with one of the entities comprising Seller.

                                      -18-

<PAGE>

      12. EVENTS OF DEFAULT. The occurrence of any of the following events will
constitute an "EVENT OF DEFAULT" on the part of Tenant, and there shall be no
cure period therefor except as otherwise expressly provided:

            (a) Tenant's failure to pay at or before 3:00 p.m. (California time)
on the second (2nd) business day after the date when due any Rent, Taxes, Other
Charges or other payments required under this Master Lease;

            (b) (i) Subject to the provisions of Section 7.1(c), at any time
that the Coverage Ratio for the immediately preceding calendar quarter was less
than 1.4:1.0, the revocation, suspension or material limitation of any license
required for the operation of any portion of the Business or any portion of the
Premises or, if Tenant has elected to participate therein or if otherwise
required by applicable law, the certification of any portion of the Premises for
provider status under Medicare or Medicaid (together with the events described
in Section 12(c), each a "LOSS OF LICENSURE"); (ii) the closure of any portion
of the Business; (iii) the sale or transfer of all or any portion of any
certificate of need, bed rights or other similar certificate or license relating
to any portion of the Business or any portion of the Premises; and (IV) the use
of any portion of the Premises other than for a licensed facility engaged in the
applicable Business and for ancillary services relating thereto, (each a
"CATASTROPHIC EVENT OF DEFAULT");

            (c) Subject to the provisions of Section 7.1(c), at any time that
the Coverage Ratio for the immediately preceding calendar quarter was less than
1.4:1.0, any other material suspension, termination or restriction (other than
restrictions of general applicability imposed on the Business or under licenses
necessary to conduct the Business) placed upon Tenant, any portion of the
Premises, any portion of the Business or the ability to admit residents or
patients (e.g., an admissions ban or non-payment for new admissions by Medicare
or Medicaid (provided Tenant has elected to participate therein or the same is
otherwise required by law) resulting from an inspection survey), and such
suspension, termination or restriction continues for more than sixty days (60)
after imposition thereof;

            (d) (i) The occurrence of an "Event of Default" (as defined in the
Companion Master Lease) or any default by "Seller" (as defined in the Purchase
Agreement) under the Purchase Agreement prior to the Closing (as defined in the
Purchase Agreement), or (ii) material default by Tenant or any Guarantor or any
Affiliate of either under (a) the Guaranty, the LC Agreement, the Stock Pledge,
(b) any other lease, agreement or obligation between it and Landlord or any of
its Affiliates, including the Purchase Agreement with respect to any default by
"Seller" (as defined in the Purchase Agreement) after the Closing (as defined in
the Purchase Agreement), which is not cured within any applicable cure period
specified therein, (c) any other lease agreement or obligation between it and
Nationwide Health Properties, Inc. ("NHP") or any of its Affiliates, provided
that NHP is then a member of JER/NHP Senior Housing, LLC, or (d) under any other
obligation in excess of ONE MILLION DOLLARS ($1,000,000) under any other lease
or financing agreement with any other party and with respect to which such party
has accelerated such obligation or has otherwise exercised any material remedy
as a result of such material default, which material default has not been waived
or cured in accordance with the applicable agreement;

                                      -19-

<PAGE>

            (e) (i) Any material misstatement or omission of fact in any written
report, notice or communication from Tenant or any Guarantor to Landlord with
respect to Tenant, any Guarantor, the Premises or the Business, or (ii) any
representation or warranty made by Tenant in this Master Lease, proves to have
been false, incorrect, misleading or incomplete when made;

            (f) The failure to perform or comply with (i) the provisions of
Section 6, or (II) the provisions of Section 16;

            (g) (i) Tenant or any Guarantor shall generally not pay its debts as
they become due, or shall admit in writing its inability to pay its debts
generally, or shall make an assignment of all or substantially all of its
property for the benefit of creditors; (ii) a receiver, trustee or liquidator
shall be appointed for either of them or any of their property, if within three
(3) business days of such appointment Tenant does not inform Landlord in writing
that they intend to cause such appointment to be discharged or such discharge is
not diligently prosecuted to completion within sixty (60) days after the date of
such appointment; (iii) the filing by either of them of a voluntary petition
under any federal bankruptcy or state law to be adjudicated as bankrupt or for
any arrangement or other debtor's relief; or (iv) the involuntary filing of such
a petition against either of them by any other party, unless Tenant within three
(3) business days of such filing informs Landlord in writing of their intent to
cause such petition to be dismissed, such dismissal is diligently prosecuted and
such petition is dismissed within ninety (90) days after filing; or

            (h) The failure to perform or comply with any other provision of
this Master Lease not requiring the payment of money and not set forth in
Sections 12(b)-(g) above unless (i) within three (3) business days of Tenant's
receipt of a notice of default from Landlord, Tenant gives Landlord notice of
its intent to cure such default; and (ii) Tenant cures it either (x) within
thirty (30) days after such notice from Landlord or (y) if such default cannot
with due diligence be so cured because of the nature of the default or delays
beyond the control of Tenant and cure after such period will not have a
materially adverse effect upon any portion of the Premises or any portion of the
Business, then such default shall not constitute an Event of Default if Tenant
uses its best efforts to cure such default by promptly commencing and diligently
pursuing such cure to the completion thereof and cures it within one hundred
twenty (120) days after such notice from Landlord.

            (i) Notwithstanding anything to the contrary contain herein or in
the Companion Master Lease, an Event of Default by Tenant arising solely under
Section 7.1 or Section 7.4 shall not constitute an "Event of Default" under the
Companion Lease.

      13. REMEDIES. Upon the occurrence of an Event of Default, Landlord may
exercise all rights and remedies under this Master Lease and the laws of the
state(s) where the Premises are located that are available to a lessor of real
and personal property in the event of a default by its lessee, and as to the
Tenant Property, all remedies granted under the laws of such state(s) to a
secured party under its Uniform Commercial Code. Landlord shall have no duty to
mitigate damages unless required by applicable law and shall not be responsible
or liable for any failure to relet any of the Premises or to collect any rent
due upon any such reletting. Tenant shall pay Landlord, immediately upon demand,
all expenses incurred by it in obtaining possession and

                                      -20-

<PAGE>

reletting any of the Premises, including fees, commissions and costs of
attorneys, architects, agents and brokers.

            13.1 GENERAL. Without limiting the foregoing, Landlord shall have
the right (but not the obligation) to do any of the following upon an Event of
Default: (a) sue for the specific performance of any covenant of Tenant as to
which it is in breach; (b) enter upon any portion of the Premises, terminate
this Master Lease, dispossess Tenant from the Premises and/or collect money
damages by reason of Tenant's breach, including the acceleration of all Rent
which would have accrued after such termination and all obligations and
liabilities of Tenant under this Master Lease which survive the termination of
the Term; (c) elect to leave this Master Lease in place and sue for Rent and
other money damages as the same come due; (d) (before or after repossession of
the Premises pursuant to clause (b) above and whether or not this Master Lease
has been terminated) relet any portion of the Premises to such tenant(s), for
such term(s) (which may be greater or less than the remaining balance of the
Term), rent, conditions (which may include concessions or free rent) and uses as
it may determine in its sole discretion and collect and receive any rents
payable by reason of such reletting; and (e) sell any Tenant Property in a
non-judicial foreclosure sale.

            13.2 TENANT REPURCHASE/RECEIVERSHIP. Tenant acknowledges that a
Catastrophic Event of Default will materially and irreparably impair the value
of Landlord's investment in the Premises. Therefore, in addition to its other
rights and remedies, upon a Catastrophic Event of Default Landlord shall have
the right to put the applicable Facility and associated Landlord Personal
Property, if any, to Tenant (the "PUT") and/or, as permitted and provided by
applicable law, petition any appropriate court for the appointment of a receiver
to take possession of the Premises or applicable Facility, to manage the
operation of the Premises or applicable Facility, to collect and disburse all
rents, issues, profits and income generated thereby and to the extent applicable
and possible, to preserve or replace any affected license or provider
certification for the Premises or applicable Facility or to otherwise substitute
the licensee or provider thereof (the "RECEIVERSHIP"). If Landlord exercises the
Put, Tenant shall purchase the applicable portion of the Premises from Landlord
for a cash price equal to the greater of, as attributable to the applicable
portion of the Premises (a) Landlord's Investment plus the product of Landlord's
Investment multiplied by the Initial Term Applicable Rate or Renewal Term
Applicable Rate then in effect, or (b) Fair Market Value on the date of
Landlord's notice of exercise (the "PUT EXERCISE DATE") as established pursuant
to Exhibit C but assuming that such Catastrophic Event of Default did not then
exist, plus all of Landlord's attorneys' fees, costs and expenses incurred in
connection with the Put and the attendant Catastrophic Event. Such purchase
shall be consummated at Tenant's expense within one hundred twenty (120) days of
the Put Exercise Date through an escrow at a national title company selected by
Landlord using the title company's standard sale escrow instructions, without
representations or warranties, any due diligence or other contingencies in favor
of the buyer, and providing that Landlord shall deliver to Tenant title to the
applicable portion of the Premises subject only to the applicable title
exceptions shown in Exhibit D (the "PERMITTED EXCEPTIONS"). If Landlord
commences the Receivership, the receiver shall be paid a reasonable fee for its
services and all such fees and other expenses of the Receivership shall be paid
in addition to, and not in limitation of, the Rent otherwise due to Landlord
hereunder. Tenant irrevocably consents to the Receivership upon a Catastrophic
Event of Default and thus stipulates to and agrees not to contest the
appointment of a receiver under such circumstances and for such purposes.
Landlord's right and remedy to

                                      -21-

<PAGE>

obtain a Receivership pursuant to this Section 13.2 shall not prevent, limit or
otherwise impair Landlord from seeking or obtaining the appointment of a
receiver upon any Event of Default other than a Catastrophic Event of Default
with respect to all or any portion of the Premises in accordance with applicable
law.

            13.3 REMEDIES CUMULATIVE; NO WAIVER. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. Any notice or cure period provided herein shall
run concurrently with any provided by applicable law. No failure of Landlord to
insist at any time upon the strict performance of any provision of this Master
Lease or to exercise any option, right, power or remedy contained herein shall
be construed as a waiver, modification or relinquishment thereof as to any
similar or different breach (future or otherwise) by Tenant. Landlord's receipt
of any rent or other sum due hereunder (including any late charge) with
knowledge of any breach shall not be deemed a waiver of such breach, and no
waiver by Landlord of any provision of this Master Lease shall be effective
unless expressed in a writing signed by it.

            13.4 PERFORMANCE OF TENANT'S OBLIGATIONS. If Tenant at any time
shall fail to make any payment or perform any act on its part required to be
made or performed under this Master Lease, after expiration of applicable notice
or cure periods as expressly provided herein, if any, then Landlord may, without
waiving or releasing Tenant from any obligations or default hereunder, make such
payment or perform such act for the account and at the expense of Tenant, and
enter upon any portion of the Premises for the purpose of taking all such action
as may be reasonably necessary. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all necessary and incidental costs and
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the performance of any such act by it, together with interest at
the Agreed Rate from the date of the making of such payment or the incurring of
such costs and expenses, shall at Landlord's option, which may be exercised in
Landlord's sole and absolute discretion, either be payable by Tenant to Landlord
on demand or added to Landlord's Investment.

      14. PROVISIONS ON TERMINATION.

            14.1 SURRENDER OF POSSESSION. On the expiration of the Term or
earlier termination or cancellation of this Master Lease (the "TERMINATION
DATE"), Tenant shall deliver to Landlord or its designee possession of (a) each
Facility and associated Landlord Personal Property, if any, in a neat and clean
condition and in as good a condition as existed at the date of their possession
and occupancy pursuant to this Master Lease, ordinary wear and tear excepted,
(b) a fully operational Business at each Facility including, at Tenant's sole
cost except to the extent provided to the contrary in Section 7.2, any
Alterations necessitated by, or imposed in connection with, a change of
ownership inspection survey for the transfer of operation of any portion of the
Premises to Landlord or its designee, and (c) provided that Landlord or its
designee executes an agreement, in form and substance reasonably acceptable to
such party, confirming its obligation to maintain such records for a period
equal to the longer of (i) the applicable statute of limitations, or (ii) the
period required by applicable law, all patient charts and resident records along
with appropriate resident consents if necessary and copies of all its

                                      -22-

<PAGE>

books and records relating to the Business and the Premises. Accordingly, Tenant
shall not at any time during or after the Term seek to transfer, surrender,
allow to lapse, or grant any security interest or any other interest in and to
the licenses, permits or certifications relating to any portion of the Business
or any portion of the Premises, nor shall Tenant commit or omit any act that
would jeopardize any portion of the Business or any licensure or certification
of any portion of the Premises. Tenant shall cooperate fully with Landlord or
its designee in transferring or obtaining all necessary licenses and
certifications for Landlord or its designee, and Tenant shall comply with all
requests for an orderly transfer of the Business, Facility licenses, and
Medicare and Medicaid certifications and possession at the time of its surrender
of the Premises to Landlord or its designee. Subject to all applicable laws and
to the applicable limitations set forth in Section 14.3, Tenant hereby assigns,
effective upon the Termination Date, all rights to operate the facility to
Landlord or its designee including all required licenses and permits and all
rights to apply for or otherwise obtain them, and all other nonproprietary
Tenant Intangible Property relating to any portion of the Premises.

            14.2 REMOVAL OF TENANT PERSONAL PROPERTY. Provided that no Event of
Default then exists, in connection with the surrender of the Premises, Tenant
may upon at least five (5) business days prior notice to Landlord remove from
the Premises in a workmanlike manner all Tenant Personal Property, leaving the
Premises in good and presentable condition and appearance, including repair of
any damage caused by such removal; provided that Landlord shall have the right
and option, subject to the approval of any lienholder permitted under Section
9.2, to purchase the Tenant Personal Property (other than the Excluded Tenant
Property) for its then net book value during such five (5) business day notice
period, in which case Tenant shall so convey the Tenant Personal Property (other
than the Excluded Tenant Property) to Landlord by executing a bill of sale in a
form reasonably required by Landlord. If there is any Event of Default then
existing, Tenant will not remove any Tenant Personal Property (including the
Excluded Tenant Personal Property) from the Premises and instead will, on demand
from Landlord, convey it to Landlord for no additional consideration by
executing a bill of sale in a form reasonably required by Landlord. Title to any
Tenant Personal Property which is not removed by Tenant as permitted above upon
the expiration of the Term shall, at Landlord's election, vest in Landlord;
provided, however, that Landlord may remove and store or dispose at Tenant's
expense any or all of such Tenant Personal Property which is not so removed by
Tenant without obligation or accounting to Tenant.

            14.3 MANAGEMENT OF PREMISES. Commencing on the Termination Date,
Landlord or its designee, upon written notice to Tenant, may elect to assume the
responsibilities and obligations for the management and operation of the
Business and Tenant agrees to cooperate fully to accomplish the transfer of such
management and operation without interrupting the operation of the Business.
Tenant agrees that Landlord or its designee may operate the Business under
Tenant's licenses and certifications to the extent allowed under applicable law
pending the issuance of new licenses and certifications to Landlord or its
designee. Tenant shall not commit any act or be remiss in the undertaking of any
act that would jeopardize any licensure or certification of any portion of the
Premises, and Tenant shall comply with all requests for an orderly transfer of
any and all facility and other licenses, Medicare and Medicaid certifications to
the extent that Tenant is participating therein and possession of the Premises
at the time of any such surrender.

                                      -23-

<PAGE>

            14.4 HOLDING OVER. If Tenant shall for any reason remain in
possession of any portion of the Premises after the Termination Date, such
possession shall be a month-to-month tenancy during which time Tenant shall pay
as rental on the first (1st) business day of each month ONE AND ONE-HALF (1-1/2)
TIMES the total of the monthly Minimum Rent payable with respect to the last
Lease Year plus all additional charges accruing during the month and all other
sums, if any, payable by Tenant pursuant to this Master Lease. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the Termination Date, nor shall anything contained
herein be deemed to limit Landlord's remedies.

            14.5 SURVIVAL. All representations, warranties, covenants and other
obligations of Tenant under this Master Lease shall survive the Termination
Date.

      15. CERTAIN LANDLORD RIGHTS.

            15.1 ENTRY AND EXAMINATION OF RECORDS. Landlord and its
representatives may enter any portion of the Premises at any reasonable time
after reasonable notice to Tenant to inspect the Premises for compliance, to
exhibit the Premises for sale, lease or mortgaging, or for any other reason;
provided that no such notice shall be required in the event of an emergency,
upon an Event of Default or to post notices of non-responsibility under any
mechanic's or materialman's lien law. No such entry shall unreasonably interfere
with residents, patients, patient care or the Business. During normal business
hours, Tenant will permit Landlord and its representatives, inspectors and
consultants to examine all contracts, books and financial and other records
(wherever kept) relating to Tenant's operations at any portion of the Premises.

            15.2 GRANT LIENS; CHANGE IN ZONING. Without the consent of Tenant,
Landlord may from time to time, directly or indirectly, create or otherwise
cause to exist any Lien, title retention agreement, or other encumbrance upon
the Premises, or any portion thereof or interest therein (including this Master
Lease), whether to secure any borrowing or other means of financing or
refinancing or otherwise. Without the consent of Tenant, Landlord may from time
to time directly or indirectly, create or otherwise cause to exist any
restrictive covenant or easement upon the Premises, or accede to a change in the
zoning of any portion of the Premises, so long as such covenant, easement or
change would not have a material adverse effect on the Business or other
activities of Tenant conducted thereon pursuant to the terms of this Master
Lease.

            15.3 SUBORDINATION, ATTORNMENT AND NONDISTURBANCE. Upon the request
of Landlord, Tenant shall subordinate this Master Lease to the Lien of any
encumbrance consented to by Landlord pursuant to Section 15.2. Any such
encumbrance, or an ancillary agreement in connection therewith, shall provide,
subject to customary limitations and exceptions (a) that so long as no Event of
Default shall exist, (i) it is subject to the rights of Tenant under this Master
Lease, and (ii) that Tenant's occupancy hereunder, including Tenant's right of
quiet enjoyment provided herein, shall not be disturbed if any Person (a
"FORECLOSURE PURCHASER") takes possession of the applicable portion of the
Premises through foreclosure proceeding or otherwise, and (b) that Tenant shall
attorn to any Foreclosure Purchaser.

            15.4 ESTOPPEL CERTIFICATES. Tenant and Landlord shall, at any time
upon not less than five (5) days prior written request by the other party, have
an authorized representative

                                      -24-

<PAGE>

execute, acknowledge and deliver to the requesting party or its designee a
written statement certifying (b) that this Master Lease, together with any
specified modifications, is in full force and effect, (b) the dates to which
Rent and additional charges have been paid, (c) that no default by either party
exists or specifying any such default and (d) as to such other matters as the
requesting may reasonably request.

            15.5 CONVEYANCE RELEASE. Landlord or any successor owner may sell or
transfer all or any portion of the Premises or assign in whole or in part this
Master Lease in its sole and absolute discretion, which shall in each case
include an assignment and delivery to the purchaser or assignee of all funds
then held in escrow pursuant to this Master Lease (or the allocable portion
thereof), and upon any such sale or transfer, they shall thereupon be released
from all future liabilities and obligations under this Master Lease arising or
accruing from and after the date of such conveyance or other transfer, which
instead shall thereupon be binding upon the new owner.

      16. ASSIGNMENT AND SUBLETTING. Without the prior written consent of
Landlord, which may be withheld or conditioned at its sole discretion, this
Master Lease shall not, nor shall any interest of Tenant herein, be assigned or
encumbered by operation of law, nor shall Tenant voluntarily or involuntarily
assign, mortgage, encumber or hypothecate any interest in this Master Lease or
sublet any portion of the Premises except (i) in the ordinary course of Tenant's
business to residents or occupants of such Facility or their immediate family
members using Tenant's standard form occupancy lease for the State in which the
applicable Facility is located (in the form approved by the regulatory agency
having jurisdiction thereover), and (ii) for incidental subleases and occupancy
agreements to providers of incidental services to residents (such as physical
therapists or beauty shops) which (a) do not exceed in the aggregate for any
single Facility more than one hundred (100) square feet within such Facility,
and (b) with respect to any individual sublease or occupancy agreement, does not
exceed one (1) year in duration (including any available renewal or extension
terms). Any of the foregoing acts without such consent shall be void and shall,
at Landlord's sole option, constitute an Event of Default giving rise to
Landlord's right, among other things, to terminate this Master Lease. An
assignment of this Master Lease by Tenant shall be deemed to include: (a)
entering into a management or similar agreement relating to the operation or
control of any portion of the Premises with a Person that is not an Affiliate of
Tenant; (b) any change (voluntary or involuntary, by operation of law or
otherwise, including the transfer, assignment, sale, hypothecation or other
disposition of any equity interest in Tenant) in the Person that ultimately
exert effective Control over the management of the affairs of Tenant as of the
date hereof; provided that an initial public offering of Tenant or a change in
the ownership of Guarantor shall not be deemed to be an assignment of the Master
Lease so long as thereafter less than TWENTY-FIVE PERCENT (25%) of the voting
stock of Tenant or Guarantor, respectively, is held by any Person or related
group that did not have such ownership prior thereto; or (c) the sale or other
transfer of all or any portion of any certificate of need, bed rights or other
similar certificate or license relating to any portion of the Business or any
portion of the Premises. Notwithstanding the foregoing, Tenant may, without
Landlord's prior written consent, assign this Master Lease or sublet the
Premises or any portion thereof to an Affiliate of Tenant or any Guarantor if
all of the following are first satisfied: (w) such Affiliate fully assumes
Tenant's obligations hereunder; (x) Tenant remains fully liable hereunder and
any Guarantor remains fully liable under its guaranty; (y) the use of the
applicable portion of the Premises remains unchanged; and (z) Landlord in its

                                      -25-

<PAGE>

reasonable discretion shall have approved the form and content of all documents
for such assignment or sublease and received an executed counterpart thereof. In
no event shall Tenant sublet any portion of the Premises on any basis such that
the rental to be paid by the sublessee would be based, in whole or in part, on
either the income or profits derived by the business activities of the
sublessee, or any other formula, such that any portion of the sublease rental
received by Landlord would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the U.S. Internal Revenue Code, or any similar
or successor provision thereto.

      17. DAMAGE BY FIRE OR OTHER CASUALTY. Tenant shall promptly notify
Landlord of any damage or destruction of any portion of the Premises and
diligently repair or reconstruct such portion of the Premises to a like or
better condition than existed prior to such damage or destruction. Any net
insurance proceeds payable with respect to the casualty shall be used for the
repair or reconstruction of the applicable portion of the Premises pursuant to
reasonable disbursement controls in favor of Landlord. If such proceeds are
insufficient, Tenant shall provide the required additional funds; if they are
more than sufficient, the surplus shall belong and be paid to Tenant. Tenant
shall not have any right under this Master Lease, and hereby waives all rights
under applicable law, to abate, reduce or offset rent by reason of any damage or
destruction of any portion of the Premises by reason of an insured or uninsured
casualty.

      18. CONDEMNATION. Except as provided to the contrary in this Section 18,
this Master Lease shall not terminate and shall remain in full force and effect
in the event of a taking or condemnation of the Premises, or any portion
thereof, and Tenant hereby waives all rights under applicable law to abate,
reduce or offset rent by reason of such taking. If during the Term all or
substantially all (a "COMPLETE TAKING") or a smaller portion (a "PARTIAL
TAKING") of any Facility is permanently taken or condemned by any competent
public or quasi-public authority, then (a) in the case of a permanent Complete
Taking, Tenant may at its election made within thirty (30) days of the effective
date of such Taking, terminate this Master Lease with respect to such Facility
and the current Rent shall be prorated as of the effective date of such
termination, or (b) in the case of a permanent Partial Taking, the Rent shall be
abated to the same extent as the resulting diminution in Fair Market Value of
the portion of the Premises taken. The award payable upon a Complete Taking
shall be allocated (i) as provided by the taking authority, (ii) in the absence
thereof, as agreed by the parties, or (iii) failing such agreement within
thirty(30) days after the effective date of such Taking, pursuant to the
appraisal procedure described in Exhibit C. The resulting diminution in Fair
Market Value on the effective date of a Partial Taking shall be as established
pursuant to Exhibit C. Landlord alone shall be entitled to prosecute, litigate,
compromise and settle any condemnation claim, any Complete Taking or any Partial
Taking, and to receive and retain any award for a Partial Taking.

      19. INDEMNIFICATION. Tenant agrees to protect, indemnify, defend and save
harmless Landlord, its directors, officers, shareholders, agents and employees
from and against any and all foreseeable or unforeseeable liability, expense,
loss, cost, deficiency, fine, penalty or damage (including consequential or
punitive damages) of any kind or nature, including reasonable attorneys' fees,
from any suits, claims or demands, on account of any matter or thing, action or
failure to act arising out of or in connection with this Master Lease, the
Premises or the operations of Tenant on any portion of the Premises, including
(a) the breach by Tenant of any of its representations, warranties, covenants or
other obligations hereunder, (b) any Protest, (c) all known and unknown
Environmental Activities on any portion of the Premises, Hazardous

                                      -26-

<PAGE>

Materials Claims or violations by Tenant of a Hazardous Materials Law with
respect to any portion of the Premises, and (d) upon or following the
Termination Date, the correction of all deficiencies of a physical nature
identified by, and any liability assessed or asserted by, any governmental
agency or Medicare or Medicaid providers (but only to the extent Tenant was, or
was required pursuant to applicable law to be, participating in the same as of
the termination date) as a result of or arising out of or in connection with
this Master Lease or the related change of ownership inspection and audit
(including any overpayment to any Medicare, Medicaid or other third-party
payor), except to the extent that Tenant is not responsible therefor pursuant to
Section 7.2. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Landlord believes is covered by this indemnity, it shall give
Tenant notice of the matter. If Landlord does not elect to defend the matter
with its own counsel at Tenant's expense, Tenant shall then defend Landlord at
Tenant's expense (including Landlord's reasonable attorneys' fees and costs)
with legal counsel satisfactory to Landlord

      20. ATTORNEYS FEES; DISPUTES. If any party brings any action to interpret
or enforce this Master Lease, or for damages for any alleged breach, the
prevailing party shall be entitled to reasonable attorneys' fees and costs as
awarded by the court in addition to all other recovery, damages and costs. EACH
PARTY HEREBY WAIVES ANY RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER IN CONNECTION WITH ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS MASTER LEASE,
INCLUDING RELATIONSHIP OF THE PARTIES, TENANT'S USE AND OCCUPANCY OF ANY PORTION
OF THE PREMISES, OR ANY CLAIM OF INJURY OR DAMAGE RELATING TO THE FOREGOING OR
THE ENFORCEMENT OF ANY REMEDY. All disputes arising under or relating to this
Master Lease shall be brought and litigated in the state and/or federal courts
in Orange County, California and all related appellate courts, and Landlord and
Tenant hereby consent to the jurisdiction of such courts.

      21. NOTICES. All notices and demands, certificates, requests, consents,
approvals and other similar instruments under this Master Lease shall be in
writing and sent by personal delivery, U. S. certified or registered mail
(return receipt requested, postage prepaid) or FedEx or similar generally
recognized overnight carrier regularly providing proof of delivery, addressed as
follows:

If to Tenant:        c/o Alterra Healthcare Corporation
                     10000 Innovation Drive
                     Milwaukee, Wisconsin 53226
                     Attention: Mark W. Ohlendorf
                     Fax No. (414) 918-5055

With a copy to:      Rogers & Hardin LLP
                     2700 International Tower
                     229 Peachtree Street, N.E.
                     Atlanta, Georgia 30303-1601
                     Attention: Miriam J. Dent
                     Fax No. (404) 525-2224

                                      -27-

<PAGE>

If to Landlord:      Nationwide Health Properties, Inc.
                     610 Newport Center Drive, Suite 1150
                     Newport Beach, California 92660-6429
                     Attention:  President and General Counsel
                     Fax No. (949) 759-6876

And:                 JER Partners

                     1650 Tysons Boulevard, Suite 1600
                     McLean, Virginia 22101
                     Attention: Paul A. Froning
                     Facsimile: (703) 714-8060 and
                     Attention: Daniel T. Ward, Esq.
                     Facsimile: (703) 714-8102

With a copy to:      O'Melveny & Myers LLP
                     610 Newport Center Drive, Suite 1700
                     Newport Beach, California 92660-6429
                     Attention:  Steven L. Edwards
                     Fax No. (949) 823-6994

And:                 Pircher, Nichols & Meeks
                     1925 Century Park East, Suite 1700
                     Los Angeles, California 90067
                     Attention: Stevens A. Carey, Esq.
                     Facsimile: (310) 201-8922

A party may designate a different address by notice as provided above. Any
notice or other instrument so delivered (whether accepted or refused) shall be
deemed to have been given and received on the date of delivery established by
U.S. Post Office return receipt or the carrier's proof of delivery or, if not so
delivered, on the day received (provided that such notice or instrument shall be
deemed received on the next succeeding business day if received after 5:00 p.m.
(local time)). Delivery to any officer, general partner or principal of a party
shall be deemed delivery to such party.

      22. MISCELLANEOUS. Since each party has been represented by counsel and
this Master Lease has been freely and fairly negotiated, all provisions shall be
interpreted according to their fair meaning and shall not be strictly construed
against any party. While nothing contained in this Master Lease should be deemed
or construed to constitute an extension of credit by Landlord to Tenant, if a
portion of any payment made to Landlord is deemed to violate any applicable laws
regarding usury, such portion shall be held by Landlord to pay the future
obligations of Tenant as such obligations arise and if Tenant discharges and
performs all obligations hereunder, such funds will be reimbursed (without
interest) to Tenant on the Termination Date. If any part of this Master Lease
shall be determined to be invalid or unenforceable, the remainder shall
nevertheless continue in full force and effect. Time is of the essence, and
whenever action must be taken (including the giving of notice or the delivery of
documents) hereunder during a certain period of time or by a particular date
that ends or occurs on a Saturday, Sunday or federal holiday, then such period
or date shall be extended until the immediately following business day.

                                      -28-

<PAGE>

Whenever the words "including", "include" or "includes" are used in this Master
Lease, they shall be interpreted in a non-exclusive manner as though the words
"without limitation" immediately followed. Whenever the words day or days are
used in this Master Lease, they shall mean "calendar day" or "calendar days"
unless expressly provided to the contrary. The titles and headings in this
Master Lease are for convenience of reference only and shall not in any way
affect the meaning or construction of any provision. Unless otherwise expressly
provided, references to any "Section" mean a section of this Master Lease
(including all subsections), to any "Exhibit" or "Schedule" mean an exhibit or
schedule attached hereto, and references to "Medicare" or "Medicaid" include any
successor program. If more than one Person is Tenant hereunder, their liability
and obligations hereunder shall be joint and several. Promptly upon the request
of either party and at its expense, the parties shall prepare, enter into and
record a suitable short form memorandum of this Master Lease. This Master Lease
(a) together with the LC Agreement, the Guaranty, the Stock Pledge, the
Memorandum of Understanding and all other documents or instruments executed as
of the Effective Date in connection therewith, contains the entire agreement of
the parties as to the subject matter hereof and supersedes all prior or
contemporaneous verbal or written agreements or understandings, (b) may be
executed in several counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same document, (c) may only be amended
by a writing executed by the parties, (d) shall inure to the benefit of and be
binding upon the successors and permitted assigns of the parties, (e) shall be
governed by and construed and enforced in accordance with the internal laws of
the State of California, without regard to the conflict of laws rules thereof,
provided that the law of the State in which each Facility is located (each a
"SITUS STATE") shall govern procedures for enforcing, in the respective Situs
State, provisional and other remedies directly related to such Facility and
related personal property as may be required pursuant to the law of such Situs
State, including without limitation the appointment of a receiver; and, further
provided that the law of the Situs State also applies to the extent, but only to
the extent, necessary to create, perfect and foreclose the security interests
and liens created under this Master Lease, and (f) incorporates by this
reference any Exhibits and Schedules attached hereto.

      23. PREMISES PURCHASE OPTION.

            23.1 EXERCISE OF OPTION; CLOSING. Provided no Event of Default
exists on the Call Exercise Date or the Closing Date, Tenant [AND GUARANTOR
JOINTLY (COLLECTIVELY,] ("OPTIONEE") shall have the option to purchase all, but
not less than all, of the Premises on an aggregate basis by giving Landlord
written notice thereof (the "CALL EXERCISE NOTICE") on a date (the "CALL
EXERCISE DATE") that is at least thirty (30) days but no more than sixty (60)
days prior to the tenth (10th) anniversary of the Effective Date. The purchase
price (the "PURCHASE PRICE") shall be equal to the product of (x) the amount of
Landlord's Investment on the Closing Date multiplied by (y) the Initial Term
Applicable Rate to be in effect for the eleventh (11th) Lease Year, divided by
(z) nine percent (.09). Within ten (10) days of Optionee's delivery of the Call
Exercise Notice, the parties shall sign the standard sale escrow instructions
(the "SALE INSTRUCTIONS") of a national title company (selected by Landlord)
that are in form and substance reasonably satisfactory to Landlord, which Sale
Instructions shall provide (i) for no representations or warranties, due
diligence or other contingencies in favor of Optionee; (ii) that Optionee shall
deposit FIVE PERCENT (5%) of the Purchase Price with the title company, which
may be retained by Landlord as liquidated damages solely for any breach by
Optionee of the terms of this Section 23.1 or the Sale Instructions (and which
in no way shall liquidate or limit

                                      -29-

<PAGE>

Landlord's damages by reason of any other breach of this Master Lease); (iii)
that the escrow shall close on the date that is forty-five (45) days after the
Call Exercise Date, or such earlier date as may be mutually agreeable to
Landlord and Optionee (the "CLOSING DATE"), at which time Optionee shall pay the
Purchase Price in cash and Landlord shall deliver title to Premises, subject
only to the applicable Permitted Exceptions; (iv) that Optionee shall pay all
transaction costs; (v) that Optionee may elect to cause the conveyance of the
Premises to be made by Landlord to an Affiliate of Optionee. If Optionee fails
to close the escrow for the purchase of the Premises for any reason other than a
breach by Landlord, then no Event of Default shall arise solely as a result of
such failure, but the rights granted to Optionee with respect to the purchase
option granted under this Section 23.1 shall automatically terminate and be of
no further force or effect, and any out-of-pocket liability, expense, loss,
cost, deficiency, fine, penalty or damage suffered by Landlord as a result of or
arising from any such failure by Optionee shall be, at Landlord's sole and
absolute election, payable by Optionee to Landlord on demand as supplemental
Rent or added to Landlord's Investment.

            23.2 TERMINATION. The purchase option granted to Tenant pursuant to
Section 23.1 shall automatically terminate and be of no further force or effect
in the event that Tenant fails to duly deliver the Call Exercise Notice on a
date that is at least thirty (30) days but no more than sixty (60) days prior to
the tenth (10th) anniversary of the Effective Date.

      24. QUIET ENJOYMENT. So long as no Event of Default exists, Landlord
covenants and agrees that Tenant shall peaceably and quietly have, hold and
enjoy the Premises for the Term free from claims by, through or under Landlord,
subject to all of the provisions of this Master Lease.

      25. LANDLORD MAINTENANCE OBLIGATION. Effective as of the Effective Date,
and continuing until thirty (30) days after the date Landlord delivers notice to
Tenant of the termination of Landlord's obligations under this Section 25, which
notice may be given at any time in Landlord's sole and absolute discretion,
Landlord shall be responsible for performing, at the expense of Tenant as
described below, the maintenance and repair of the Exterior Portion of each of
the Facilities.

            25.1 MAINTENANCE CONTRACTORS. Landlord shall retain such third party
vendors and contractors (each a "MAINTENANCE Contractor") as Landlord shall from
time to time deem necessary to perform Landlord's maintenance obligations under
this Section 25. Such Maintenance Contractors shall be identified by Landlord
from a list (each a "MAINTENANCE CONTRACTOR LIST") of proposed vendors and
contractors for each Facility to be mutually agreed upon from time to time by
Landlord and Tenant, which agreement shall not be unreasonably withheld,
conditioned or delayed by Tenant. Landlord shall be free from time to time to
terminate any such Maintenance Contractor and retain a replacement therefor as
identified from the applicable Maintenance Contractor List. Any written contract
to be entered into with respect to the maintenance of the Exterior Portion of
any Facility shall be entered into by and between Landlord and the applicable
Maintenance Contractor.

            25.2 REQUEST FOR SERVICE. Subject to the other terms and provisions
of this Section 25 and other applicable Sections of this Master Lease, Tenant
may contact any Maintenance Contractor

                                      -30-

<PAGE>

to request the service to be performed by such Maintenance Contractor and shall
otherwise be free to deal with each Maintenance Contractor in connection with
the use and operation of the Facilities and the Business conducted thereon.

            25.3 COSTS AND EXPENSES. All costs, expenses and fees of each
Maintenance Contractor shall be the responsibility of Tenant. Tenant shall use
its best efforts to cause each invoice, statement or other request for payment
from any Maintenance Contractor to be billed in the name of, and sent to,
Landlord with a copy to Tenant for direct payment by Tenant to the applicable
Maintenance Contractor, and Tenant shall provide Landlord with such evidence of
such payment as Landlord may reasonably request.

            25.4 REPORT ON ACTIVITIES. Each quarterly Facility condition report
submitted to Landlord pursuant to Section 10 and Exhibit F of this Master Lease
shall include a reasonably detailed report on the activities of all Maintenance
Contractors at the applicable Facility during the applicable quarter.

            25.5 TRANSITION. Landlord and Tenant shall mutually cooperate with
each other to effect an orderly transition of Landlord's obligations under this
Section 25 from Landlord to Tenant upon any election of Landlord to terminate
such obligations.

                                      -31-

<PAGE>

IN WITNESS WHEREOF, this Master Lease has been executed by Landlord and Tenant
as of the Effective Date.

"TENANT"

ALS LEASING, INC.,
a Delaware corporation

By: /s/ Kristin A. Ferge
    --------------------------------

Name:    Kristin A. Ferge
Title:   Vice President

Witness: /s/ J.C. Hansen                    Witness: /s/ Marilyn Jang
         ---------------------------                 --------------------------

                                      S-1

<PAGE>

"LANDLORD"

JER/NHP SENIOR LIVING ACQUISITION, LLC,
a Delaware limited liability company

By:   JER/NHP SENIOR HOUSING, LLC,
      a Delaware limited liability company,
      its sole member

      By:   NATIONWIDE HEALTH PROPERTIES, INC.,
            a Maryland corporation,
            its managing member

                  By: /s/ Donald D. Bradley
                      -------------------------------
                  Name:  Donald D. Bradley
                  Title: Senior Vice President & General Counsel

Witness: /s/ Illegible                        Witness: /s/ Denise Munoz
         ------------------------                      ------------------------

                                      S-2

<PAGE>

                                    EXHIBIT A

                               LEGAL DESCRIPTIONS

                                  See attached;

        includes all improvements thereon and all appurtenances thereto.

                                      A-1

<PAGE>

ALTERRA STERLING HOUSE OF MICHIGAN CITY
1400 EAST COOLSPRING AVENUE, MICHIGAN CITY, IN 46360

ALTERRA CLARE BRIDGE COTTAGE OF MICHIGAN CITY
1300 EAST COOLSPRING AVENUE, MICHIGAN CITY, IN 46360

Alterra Sterling House of Michigan City

Parcel 1

      Lots 1 and 2 in Edgewood Forest Section One, as shown on Plat Book 21,
Pages 39 and 41 in the Office of the Recorder of LaPorte County, Indiana.

Parcel 2

      Part of the Southeast -1/4 of the Southeast -1/4 of Section 33, Township
38 North, Range 4 West of the 2nd Principal Meridian, LaPorte County, Indiana,
being more particularly described as follows: Commencing at the Southeast corner
of said Section 33, which corner is marked by a cast iron monument buried 0.25
feet; thence North 89 degrees 02 minutes 42 seconds West along the South line of
said -1/4 -1/4 Section 33, a distance of 70 feet; thence North 00 degrees 57
minutes 18 seconds East, a distance of 35.00 feet to the Northerly right-of-way
line of Coolspring Avenue; thence North 89 degrees 02 minutes 42 seconds West
along the North right-of-way line of said Coolspring Avenue, a distance of
364.48 feet; thence North 00 degrees 57 minutes 18 seconds East, a distance of
225.00 feet to the Place of Beginning; thence continuing North 00 degrees 57
minutes 18 seconds East, a distance of 54.50 feet; thence South 89 degrees 02
minutes 42 seconds East, a distance of 260.84 feet; thence South 39 degrees 53
minutes 21 seconds East (per deed), (South 39 degrees 53 minutes 21 seconds East
per survey), a distance of 72.04 feet; thence North 89 degrees 02 minutes 42
seconds West, a distance of 307.96 feet to the Place of Beginning.

Alterra Clare Bridge Cottage of Michigan City

      Lots 3, 4 and 5 in Edgewood Forest Section One, as shown on Plat Book 21,
Pages 39 and 41 in the Office of the Recorder of LaPorte County, Indiana.

                                      A-2

<PAGE>

ALTERRA CLARE BRIDGE COTTAGE OF LEESBURG
710 SOUTH LAKE STREET, LEESBURG, FL 34748-7316

THE SOUTH 300 FEET OF THE NORTH 1250.00 FEET OF THE WEST 435.60 FEET OF THAT
PART OF GOVERNMENT LOT 4, IN SECTION 25, TOWNSHIP 19 SOUTH, RANGE 24 EAST, IN
THE CITY OF LEESBURG, LAKE COUNTY, FLORIDA, LYING SOUTH OF THE SOUTH LINE OF THE
RIGHT-OF-WAY OF DIXIE AVENUE AND EAST OF THE EAST LINE OF THE RIGHT-OF-WAY OF
LAKE STREET AS SAID STREETS EXISTED ON JANUARY 2, 1974.

WHICH LAND IS MORE PARTICULARLY DESCRIBED AS FOLLOWS:

THAT PART OF GOVERNMENT LOT 4 IN SECTION 25, TOWNSHIP 19 SOUTH, RANGE 24 EAST IN
THE CITY OF LEESBURG, FLORIDA, LAKE COUNTY, FLORIDA DESCRIBED AS FOLLOWS:
COMMENCE AT THE INTERSECTION OF THE SOUTH RIGHT-OF-WAY LINE OF DIXIE AVENUE WITH
THE EAST RIGHT-OF-WAY LINE OF LAKE STREET; THENCE RUNS SOUTH 00 DEGREES 22
MINUTES 04 SECONDS EAST ALONG THE EAST RIGHT-OF-WAY OF LAKE STREET TO A POINT ON
A LINE, SAID LINE BEING 650.00 FEET SOUTH OF (BY PERPENDICULAR MEASURE) THE
ABOVE SAID SOUTH RIGHT-OF-WAY LINE OF DIXIE AVENUE; THENCE DEPARTING SAID EAST
RIGHT-OF-WAY LINE RUN NORTH 89 DEGREES 59 MINUTES 32 SECONDS EAST PARALLEL WITH
THE SOUTH RIGHT-OF-WAY LINE OF DIXIE AVENUE A DISTANCE OF 435.61 FEET; THENCE
RUN SOUTH 00 DEGREES 22 MINUTES 04 SECONDS EAST PARALLEL WITH THE ABOVE SAID
EAST RIGHT-OF-WAY LINE OF LAKE STREET A DISTANCE OF 300.01 FEET TO THE POINT OF
BEGINNING, SAID POINT BEING 950.00 FEET SOUTH OF (BY PERPENDICULAR MEASURE) THE
ABOVE SAID RIGHT-OF-WAY LINE OF DIXIE AVENUE; THENCE RUN SOUTH 89 DEGREES 59
MINUTES 32 SECONDS WEST ALONG SAID LINE A DISTANCE OF 435.61 FEET TO THE
ABOVE-MENTIONED EAST RIGHT-OF-WAY, LINE OF LAKE STREET; THENCE SOUTH 00 MINUTES
22 MINUTES 04 SECONDS EAST 300.01 FEET ALONG SAID RIGHT-OF-WAY TO A POINT THAT
IS 1250.00 FEET SOUTH OF (BY PERPENDICULAR MEASURE), THE ABOVE SAID SOUTH
RIGHT-OF-WAY LINE OF DIXIE AVENUE; THENCE RUN NORTH 89 DEGREES 59 MINUTES 32
SECONDS EAST 435.61 FEET THENCE NORTH 00 DEGREES 22 MINUTES 04 SECONDS WEST
300.01 FEET TO THE POINT OF BEGINNING.

                                      A-3

<PAGE>

WHICH LAND IS ALSO MORE PARTICULARLY DESCRIBED AS FOLLOWS:

THE SOUTH 300.00 FEET OF THE NORTH 1250.00 FEET OF THE WEST 435.60 FEET OF THAT
PART OF GOVERNMENT LOT 4, SECTION 25 TOWNSHIP 19 SOUTH, RANGE 24 EAST, LAKE
COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: FOR A POINT OF
REFERENCE, COMMENCE AT THE INTERSECTION OF THE SOUTHERLY RIGHT-OF-WAY LINE OF
DIXIE AVENUE (A 100 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED) WITH THE EASTERLY
RIGHT-OF-WAY LINE OF LAKE STREET (A 60 FOOT RIGHT-OF-WAY AS NOW ESTABLISHED);
THENCE SOUTH 00 DEGREES 22 MINUTES 04 SECONDS EAST, ALONG SAID EASTERLY
RIGHT-OF-WAY LINE, A DISTANCE OF 950.01 FEET TO THE POINT OF BEGINNING; THENCE
NORTH 89 DEGREES 59 MINUTES 32 SECONDS EAST, DEPARTING SAID EASTERLY
RIGHT-OF-WAY LINE A DISTANCE OF 435.61 FEET; THENCE SOUTH 00 DEGREES 22 MINUTES
04 SECONDS EAST, A DISTANCE OF 300.01 FEET; THENCE SOUTH 89 DEGREES 59 MINUTES
32 SECONDS WEST, A DISTANCE OF 435.61 FEET TO THE EASTERLY RIGHT-OF-WAY LINE OF
THE AFOREMENTIONED LAKE STREET; THENCE NORTH 00 DEGREES 22 MINUTES 04 SECONDS
WEST, ALONG SAID EASTERLY RIGHT-OF-WAY LINE, A DISTANCE OF 300.01 FEET TO THE
POINT OF BEGINNING.

TOGETHER WITH AN EASEMENT FOR INGRESS/EGRESS AS SET FORTH IN AND CREATED BY
INGRESS/EGRESS AND LIGHTING EASEMENT EXECUTED BY MEDITRUST COMPANY, LLC IN FAVOR
OF ALS-CLARE BRIDGE, INC., RECORDED AT VOLUME 1667, PAGE 1607, PUBLIC RECORDS OF
LAKE COUNTY, FLORIDA.

                                      A-4

<PAGE>

ALTERRA CLARE BRIDGE COTTAGE OF DUBLIN

160 ELEPHANT ROAD, DUBLIN, PA 18917-2202

ALL THAT CERTAIN lot or piece of land, with the buildings and improvements
thereon erected, situate in the Borough of Dublin, in the County of Bucks and
Commonwealth of Pennsylvania, bounded and described according to an "ALTA/ACSM
Land Title Survey prepared for ALS-Wovenhearts", made by Mid-Atlantic Surveying
Associates, L.L.C., dated April 12, 1999, to wit:

BEGINNING at a point in the Westerly line of SR 4003, also known as Elephant
Road, said point being distant 30.00 feet as measured at a right angle to the
centerline thereof, said beginning point also being in the Southerly line of
lands now or late of Donald A. and Donna M. Stewart (TMP 10-02-14), said point
also being 830 feet more or less South of the intersection of said center line
of Elephant Road and the extended center line of Forest Road and running; thence
(1) South 1 degree 55 minutes 00 seconds East, along the said Westerly line of
SR 4003, a distance of 110.91 feet to a point in the Northerly line of lands
remaining to Sarah L. Blichasz; thence (2) South 88 degrees 02 minutes 00
seconds West, along said lands remaining, a distance of 107.42 feet to a point;
thence (3) South 17 degrees 15 minutes 17 seconds West, still along same, a
distance of 38.32 feet to a point, thence (4) South 1 degree 55 minutes 00
seconds East, still along same, a distance of 118.84 feet to a point in the
Northerly line of lands now or late of Grace Y. Fretz (TMP 10-02-13); thence (5)
South 88 degrees 02 minutes 00 seconds West, along said Fretz and lands now or
late of William and Frances Goldstein (TMP 10-02-39-1), a distance of 272.49
feet to a point; (6) North 14 degrees 20 minutes 00 seconds West, along said
Goldstein and lands now or late of Clifford V. and Marie Moyer (TMP 10-02-33), a
distance of 376.92 feet to a point; thence (7) North 34 degrees 56 minutes 00
seconds West, along said Moyer, a distance of 158.40 feet to a point corner to
lands now or late of Dublin Mews, Inc. (TMP 10-05-01-01); thence (8) North 59
degrees 05 minutes 00 seconds East, along same, a distance of 331.40 feet to a
point corner to lands now or late of William Vare, Jr. and J. Smith (TMP
10-02-14-4); thence (9) South 1 degree 55 minutes 00 seconds East, along same
and lands now or late Patricia Vanderleeuw (TMP 10-02-14-3), Jeffrey L. and
George Mitchell (TMP 10-02-14-2), and Donald A. and Donna M. Stewart (TMP
10-02-14), a distance of 395.31 feet to a point; thence (10) North 88 degrees 05
minutes 00 seconds East, along said Stewart, a distance of 270.00 feet to the
point and place of beginning.

Tax Parcel No. 10-2-14-6

                                      A-5

<PAGE>

ALTERRA STERLING HOUSE OF OWATONNA
334 CEDARDALE DR. SE, OWATONNA, MN 55060-4467

AND

ALTERRA CLARE BRIDGE COTTAGE OF OWATONNA
364 CEDARDALE DR. SE, OWATONNA, MN 55060-4467

            Lots 9, 10, 11, Block 1, Cedardale Addition No. 3, Owatonna,
Minnesota, according to the recorded plat thereof, recorded in Book 12 of Plats,
Page 15, as Instrument No. 171181, of the Steele County, Minnesota Recorder.

                                      A-6

<PAGE>

ALTERRA CLARE BRIDGE OF BEAVERTON
16655 NW WALKER ROAD, BEAVERTON, OR 97006-4163

A tract of land in the Southeast one-quarter of Section 31, Township 1 North,
Range 1 West, of the Willamette Meridian, and the Northeast one-quarter of
Section 6, Township 1 South, Range 1 West of the Willamette Meridan, in the City
of Beaverton, County of Washington and State of Oregon, to-wit:

Beginning at the most Westerly corner of Lot 81, STONEGATE AT WATERHOUSE, a duly
recorded plat in Washington County, recorded April 24, 1991, Book 77, Pages 17
through 22, Plat Records; thence North 36(degree)47'26" East along the Westerly
line of said Lot 81, a distance of 36.11 feet to the Southerly line of Tract
"B", said STONEGATE AT WATERHOUSE; thence tracing said Southerly line along the
following courses and distances: South 55(degree)24'11" East, a distance of
28.67 feet; North 74(degree)24'10" East, a distance of 57.87 feet; North
89(degree)45'54" East, a distance of 72.47 feet; North 60(degree)00'00" East, a
distance of 35.84 feet; North 84(degree)39'57" East, a distance of 166.16 feet;
North 02(degree)20'47" East, a distance of 58.02 feet; and North
83(degree)58'50" East, a distance of 216.94 feet; thence leaving said Southerly
line South 02(degree)21'33" West, a distance of 117.00 feet; thence South
32(degree)02'00" East, a distance of 79.67 feet; thence South 02(degree)21'33"
West, a distance of 305.44 feet to the Northerly right-of-way line of N.W.
Walker Road (90.00 feet wide), County Road No. 215; thence tracing said
Northerly right-of-way line along the following courses and distances: North
62(degree)46'22" West, a distance of 444.51 feet to the point of curve right of
a 1101.00 foot radius curve along the arc of said curve right through a central
angle of 09(degree)34'10", a distance of 183.89 feet (chord bears North
57(degree)59'17" West, 183.67 feet); and North 53(degree)12'12" West, a distance
of 77.30 feet to the point of beginning.

                                      A-7
<PAGE>

ALTERRA CLARE BRIDGE OF TROUTDALE
1201 N.E. CHERRY PARK ROAD, TROUTDALE, OR 97701

Parcel 2, PARTITION PLAT 1999-9, recorded January 28, 1999, Recorder's Fee No.
99019121, Multnomah County Deed Records, located in the City of Troutdale,
County of Multnomah and State of Oregon, more particularly described as follows:

Situated in the Northwest quarter of the Northeast quarter of Section 35,
Township 1 North, Range 3 East, Williamette Meridian, in the City of Troutdale,
in the County of Multnomah and State of Oregon and being described as follows:

BEGINNING at a point on the Northerly right-of-way line of N.E. Cherry Park Road
(County Road No. 4849) being located South 89(degree)57'47" East, a distance of
721.41 feet and North 00(degree)03'31" West, a distance of 30.00 feet from the
Southwest corner of the Northwest quarter of the Northeast quarter of said
Section 35 and being the Southwest corner of Parcel 2, Partition Plat No. 1999-9
said County and running thence North 00(degree)03'31" West on the West line of
said Parcel 2, a distance of 320.27 feet; thence North 67(degree)05'43" East on
the Northerly line of said Parcel 2, a distance of 175.03 feet; thence South
89(degree)58'48" East, a distance of 176.58 feet to the Westerly right-of-way of
N.E. 257th Drive (County Road No. 4931); thence South 00(degree)01'12" West on
the said Westerly right-of-way line, a distance of 363.54 feet to the beginning
of a tangent 25.00 foot radius curve to the right; thence on said curve through
a central angle of 90(degree)01'01" (the long chord of which bears South
45(degree)01'42" West, a distance of 35.36 feet) an arc distance of 39.28 feet
to the Northerly right-of-way line of said N.E. Cherry Park Road; thence North
89(degree)57'47" West on the said Northerly right-of-way line, a distance of
312.34 feet to the point of beginning

                                      A-8

<PAGE>

ALTERRA CLARE BRIDGE OF BEND

1099 NE WATT WAY, BEND, OR 97701

A parcel of land located in the Southeast One-Quarter of the Northeast
One-Quarter (SE -1/4 NE -1/4) of Section Thirty-Four (34), Township Seventeen
(17) South, Range Twelve (12) East of the Willamette Meridian, City of Bend,
Deschutes County, Oregon, being more particularly described as follows:

Beginning at the Northwest corner of Parcel 1 of Partition Plat No. 1999-37, as
per plat recorded in Deschutes County Surveyor's records CS-13748, said corner
also being the Northeast 1/16th corner of said Section 34; thence South
00(degree)09'16" East, along the West boundary of said Parcel 1, 138.51 feet to
the Northeast corner of Lot 15 of Williamson Park, as per plat recorded in
Deschutes County Surveyor records as CS-10825; thence leaving said West
boundary, North 90(degree)00'00" East 1.50 feet; thence South 00(degree)09'16"
East parallel with said West boundary of said Parcel 1, 258.49 feet; thence
North 89(degree)53'10" East 475.53 feet to a point on the West line of Watt Way
as described in Dedication Warranty Deed to the City of Bend, recorded in Book
503, pages 0037-0039, Official Records of Deschutes County, said point being on
a curve concave to the Northeast having a radius of 330.00 feet, a radial
bearing through said point bears North 70(degree)53'28" East; thence Northerly
110.06 feet along said curve and said West line of Watt Way through a central
angle of 19(degree)06'32"; thence North 00(degree)00'00" East, 290.83 feet along
said West line of Watt Way to the North line of said Parcel 1 of Partition Plat
No. 1999-37; thence South 89(degree)53'10" West 459.90 feet along said North
line of Parcel 1 to the Point of Beginning.

                                      A-9

<PAGE>

                                    EXHIBIT B

                           LANDLORD PERSONAL PROPERTY

                            None as of Effective Date

                                       B-1

<PAGE>

                                    EXHIBIT C

                                FAIR MARKET VALUE

            "FAIR MARKET VALUE" means the fair market value of the Premises or
applicable portion thereof on a specified date as agreed to by the parties, or
failing such agreement within ten (10) days of such date, as established
pursuant the following appraisal process. Each party shall within ten (10) days
after written demand by the other select one MAI Appraiser to participate in the
determination of Fair Market Value. For all purposes under this Master Lease,
the Fair Market Value shall be the fair market value of the Premises or
applicable portion thereof unencumbered by this Master Lease. Within ten (10)
days of such selection, the MAI Appraisers so selected by the parties shall
select a third (3rd) MAI Appraiser. The three (3) selected MAI Appraisers shall
each determine the Fair Market Value of the Premises or applicable portion
thereof within thirty days of the selection of the third appraiser. To the
extent consistent with sound appraisal practices as then existing at the time of
any such appraisal, and if requested by Landlord, such appraisal shall be made
on a basis consistent with the basis on which the Premises or applicable portion
thereof were appraised at the time of their acquisition by Landlord. Tenant
shall pay the fees and expenses of any MAI Appraiser retained pursuant to this
Exhibit.

            If either party fails to select a MAI Appraiser within the time
period set forth in the foregoing paragraph, the MAI Appraiser selected by the
other party shall alone determine the fair market value of the Premises or
applicable portion thereof in accordance with the provisions of this Exhibit and
the Fair Market Value so determined shall be binding upon the parties. If the
MAI Appraisers selected by the parties are unable to agree upon a third (3rd)
MAI Appraiser within the time period set forth in the foregoing paragraph,
either party shall have the right to apply at Tenant's expense to the presiding
judge of the court of original trial jurisdiction in the county in which the
Premises or applicable portion thereof are located to name the third (3rd) MAI
Appraiser.

            Within five(5) days after completion of the third (3rd) MAI
Appraiser's appraisal, all three (3) MAI Appraisers shall meet and a majority of
the MAI Appraisers shall attempt to determine the fair market value of the
Premises or applicable portion thereof. If a majority are unable to determine
the fair market value at such meeting, the three (3) appraisals shall be added
together and their total divided by three (3). The resulting quotient shall be
the Fair Market Value. If, however, either or both of the low appraisal or the
high appraisal are more than TEN PERCENT (10%) lower or higher than the middle
appraisal, any such lower or higher appraisal shall be disregarded. If only one
(1) appraisal is disregarded, the remaining two (2) appraisals shall be added
together and their total divided by two (2), and the resulting quotient shall be
such Fair Market Value. If both the lower appraisal and higher appraisal are
disregarded as provided herein, the middle appraisal shall be such Fair Market
Value. In any event, the result of the foregoing appraisal process shall be
final and binding.

                                       C-1

<PAGE>

            "MAI APPRAISER" shall mean an appraiser licensed or otherwise
qualified to do business in the state(s) where the Premises or applicable
portion thereof are located and who has substantial experience in performing
appraisals of facilities similar to the Premises or applicable portion thereof
and is certified as a member of the American Institute of Real Estate Appraisers
or certified as a SRPA by the Society of Real Estate Appraisers, or, if such
organizations no longer exist or certify appraisers, such successor organization
or such other organization as is approved by Landlord.

                                       C-2

<PAGE>

                                    EXHIBIT D

                              PERMITTED EXCEPTIONS

1.    The standard printed exceptions, conditions and exclusions from coverage
      contained in the standard coverage owner's title policy then prevailing in
      use at the title company that consummates the sale transaction.

2.    Any matters which an accurate survey of the Premises may show.

3.    Real property taxes and assessments.

4.    Any matters shown as title exceptions in the ALTA Owner's Policy of Title
      Insurance obtained by Landlord in connection with its acquisition of the
      Premises.

5.    Such other matters burdening the Premises which were created with the
      consent or knowledge of Tenant or arising out of Tenant's acts or
      omissions.

                                       D-1

<PAGE>

                                    EXHIBIT E

                               CERTAIN DEFINITIONS

For purposes of this Master Lease, the following terms and words shall have the
specified meanings:

ENVIRONMENTAL DEFINITIONS

      "ENVIRONMENTAL ACTIVITIES" shall mean the use, generation, transportation,
handling, discharge, production, treatment, storage, release or disposal of any
Hazardous Materials at any time to or from any portion of the Premises or
located on or present on or under any portion of the Premises.

      "HAZARDOUS MATERIALS" shall mean (A) any petroleum products and/or
by-products (including any fraction thereof), flammable substances, explosives,
radioactive materials, hazardous or toxic wastes, substances or materials, known
carcinogens or any other materials, contaminants or pollutants which pose a
hazard to any portion of the Premises or to Persons on or about any portion of
the Premises or cause any portion of the Premises to be in violation of any
Hazardous Materials Laws; (B) asbestos in any form which is friable; (C) urea
formaldehyde in foam insulation or any other form; (D) transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty (50) parts per million or any other more
restrictive standard then prevailing; (E) medical wastes and biohazards; (F)
radon gas; and (G) any other chemical, material or substance, including mold,
fungus and other fungal matter, exposure to which is prohibited, limited or
regulated by any governmental authority or may or could pose a hazard to the
health and safety of the occupants of any portion of the Premises or the owners
and/or occupants of property adjacent to or surrounding any portion of the
Premises, including, without limitation, any materials or substances that are
listed in the United States Department of Transportation Hazardous Materials
Table (49 CFR 172.101) as amended from time to time.

      "HAZARDOUS MATERIALS CLAIMS" shall mean any and all enforcement, clean-up,
removal or other governmental or regulatory actions or orders threatened,
instituted or completed pursuant to any Hazardous Material Laws, together with
all claims made or threatened by any third party against any portion of the
Premises, Landlord or Tenant relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.

      "HAZARDOUS MATERIALS LAWS" shall mean any laws, ordinances, regulations,
rules, orders, guidelines or policies relating to the environment, health and
safety, Environmental Activities, Hazardous Materials, air and water quality,
waste disposal and other environmental matters.

                                       E-1

<PAGE>

OTHER DEFINITIONS

      "AFFILIATE" shall mean with respect to any Person, any other Person which
Controls, is Controlled by or is under common Control with the first Person.

      "CC&R'S" shall mean covenants, conditions and restrictions or similar use,
maintenance or ownership obligations encumbering or binding upon the real
property comprising any Facility.

      "COMPANION LANDLORD" shall mean, collectively, JER/NHP Senior Living
Acquisition, LLC, a Delaware limited liability company, JER/NHP Senior Living
Texas, L.P., a Texas limited partnership, JER/NHP Senior Living Wisconsin, LLC,
a Delaware limited liability company, JER/NHP Senior Living Kansas, Inc., a
Kansas corporation (f/k/a Meditrust of Kansas, Inc. a Kansas corporation), and
each successor or assign of the foregoing of any interest under the Companion
Master Lease.

      "COMPANION MASTER LEASE" shall mean that certain Master Lease dated as of
April 9, 2002 by and between Companion Landlord and Companion Tenant, as
amended, modified or revised from time to time.

      "COMPANION TENANT" shall mean, collectively, ALS Leasing, Inc., a Delaware
corporation, Assisted Living Properties, Inc., a Kansas corporation, and each
successor or assign of the foregoing of any interest under the Companion Master
Lease.

      "CONTROL" shall mean, as applied to any Person, the possession, directly
or indirectly, of the power to direct the management and policies of that
Person, whether through ownership, voting control, by contract or otherwise.

      "EXTERIOR PORTION" shall mean, with respect to any Facility, the exterior
structure and roof, parking areas, hardscape and other exterior areas and
landscaping.

      "PERSON" shall mean any individual, partnership, association, corporation,
limited liability company or other entity.

      "PORTFOLIO EBITDARM" shall mean, for any applicable fiscal quarter, the
net income of Tenant for such quarter to the extent derived from the operation
of the Premises, adjusted to add thereto, to the extent allocable to the
Premises, without duplication, (I) interest expense, (II) income tax expense,
(III) depreciation and amortization expense, (IV) rental expense, and (V)
management fee expenses, in each case determined in conformity with generally
accepted accounting principles, consistently applied.

      "PORTFOLIO RENT EXPENSE" means, for any applicable fiscal quarter, the
amount of Minimum Rent payable under this Master Lease in such quarter.

      "PURCHASE AGREEMENT" shall mean that certain Purchase and Sale Agreement
dated October 4, 2002 by and between Landlord, as buyer, and Seller, as seller.

      "SELLER" shall mean, collectively, ALS Holdings, Inc., a Delaware
corporation, and ALS National, Inc., a Delaware corporation.

                                       E-2

<PAGE>

                                    EXHIBIT F

                  FINANCIAL, MANAGEMENT AND REGULATORY REPORTS

<TABLE>
<CAPTION>
                                REPORT                                                               DUE DATE
--------------------------------------------------------------------------------      ---------------------------------------
<S>                                                                                   <C>
MONTHLY FINANCIAL REPORTS CONCERNING THE BUSINESS AT EACH FACILITY
consisting of:

(1) a balance sheet;                                                                  Thirty (30) days after the end of each
(2) a reasonably detailed income statement;                                           calendar month
(3) total patient days;
(4) occupancy; and
(5) payor mix.

QUARTERLY FACILITY CONDITION REPORTS

for each Facility in the form attached as Schedule 1 to this Exhibit F together       Thirty (30) days after the end of each
with a rent roll for such Facility in the form attached as Schedule 2 to this         fiscal quarter of Guarantor
Exhibit F.

QUARTERLY CONSOLIDATED OR COMBINED FINANCIAL STATEMENTS                               Forty-Five (45) days after the end of
                                                                                      each of the first three quarters of the
of Guarantor, which shall include calculations demonstrating Tenant's compliance      fiscal year of Guarantor
with Section 7.4 as of the end of the applicable quarter.

ANNUAL CONSOLIDATED OR COMBINED FINANCIAL STATEMENTS

of Guarantor audited by a reputable certified public accounting firm, which           Ninety (90) days after the fiscal year
shall include calculations demonstrating Tenant's compliance with Section 7.4 as      end of Guarantor
of the end of the fourth quarter.

REGULATORY REPORTS WITH RESPECT TO EACH FACILITY, as follows:

(1) all federal, state and local licensing and reimbursement certification
    surveys, inspection and other reports received by Tenant as to any                Five (5) business days after receipt
    portion of the Premises and any portion of the Business, including
    state department of health licensing surveys;

(2) Medicare and Medicaid certification surveys; and

(3) life safety code reports.

REPORTS OF REGULATORY VIOLATIONS,
by written notice of the following:

(1) any violation of any federal, state or local licensing or reimbursement
    certification statute or regulation, including Medicare or Medicaid;

(2) any suspension, termination or restriction placed upon Tenant or any
    portion of the Premises, the operation of any portion of the Business             Two (2) business days after  receipt
    or the ability to admit residents or patients; or

(3) any violation of any other permit, approval or certification in
    connection with any portion of the Premises or any portion of the
    Business, by any federal, state or local authority, including Medicare
    or Medicaid.

ANNUAL OPERATING BUDGET

covering the operations of each Facility and the Business conducted thereon for       Thirty (30) days after the beginning of
the forthcoming fiscal year.                                                          each fiscal year
</TABLE>

                                      F-1

<PAGE>

                             SCHEDULE 1 TO EXHIBIT F

                   FORM OF QUARTERLY FACILITY CONDITION REPORT

                     JER/NHP Senior Living Acquisition, LLC
                       Quarterly Property Condition Report

Property Name:  _________________________  Unit Capacity: ______________________

Location:       _________________________  Occupancy(1):  ______________________

Quarter Ended:  _________________________  EBITDAR(2):    ______________________

This document will provide a quarterly report to Landlord of any Alterations and
general maintenance activities at the above property for both the most recently
completed quarter and planned activities for subsequent quarter. In addition to
the written response, Tenant personnel may be called upon for additional
information.

<TABLE>
<CAPTION>
                    Routine Maint        Major Work         Planned Major Work
                     Performed(3)       Performed(4)        For Next Quarter(5)
                    -------------  ----------------------  ---------------------
<S>                 <C>            <C>                     <C>
Lawns                   Y / N      ______________________  _____________________

Flower Beds             Y / N      ______________________  _____________________

Side Walks              Y / N      ______________________  _____________________

Parking Lots            Y / N      ______________________  _____________________

Curbing                 Y / N      ______________________  _____________________

Roof                    Y / N      ______________________  _____________________

Exterior Walls          Y / N      ______________________  _____________________

Windows                 Y / N      ______________________  _____________________

HVAC units              Y / N      ______________________  _____________________

Back Up Generators      Y / N      ______________________  _____________________

Signage                 Y / N      ______________________  _____________________

Other Exterior -1       Y / N      ______________________  _____________________

Other Exterior -2       Y / N      ______________________  _____________________

Other Exterior -3       Y / N      ______________________  _____________________
</TABLE>

In addition to the above, describe any "Alterations" as defined in Section 8 of
the lease that were preformed in the quarter being reported upon or which are
planned for the subsequent quarter.

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

-----------
(1) Average for the quarter ended

(2) Average for the quarter ended

(3) This work is performed by Landlord approved contactors.

(4) Attach additional pages as may be necessary to fully describe the work.

(5) Attach additional pages as may be necessary to fully describe the work.

                             Schedule 1 to Exhibit F
                                    Page -1-

<PAGE>

                             SCHEDULE 2 TO EXHIBIT F

                      FORM OF QUARTERLY FACILITY RENT ROLL

                                   (ATTACHED)

                             Schedule 2 to Exhibit F
                                    Page -1-

<PAGE>

                                   SCHEDULE 1

                   FACILITY INFORMATION: BUSINESS, BEDS, ETC.

<TABLE>
<CAPTION>
                                                                                                  NUMBER
                                                                                                    OF      NUMBER
FACILITY  ALTERRA                                                                  BUSINESS/       LIVING     Of
 NUMBER    CODE             FACILITY                FACILITY LOCATION            FACILITY TYPE     UNITS     BEDS
--------  -------   ------------------------  -------------------------------    -------------    -------   ------
<S>       <C>       <C>                       <C>                                <C>              <C>       <C>
   1        0745    Alterra Clare Bridge of   1201 SW Cherry Park Rd.,            Assisted           46       52
                    Troutdale                 Troutdale, OR  97701                Living /
                                                                                  Memory Care

   2        0795    Alterra Clare Bridge of   16655 NW Walker Rd., Beaverton,     Assisted           46       52
                    Beaverton                 OR  97006-4163                      Living /
                                                                                  Memory Care

   3        1230    Alterra Clare Bridge of   1099 NE Watt Way                    Assisted           46       52
                    Bend                      Bend, OR  97701                     Living /
                                                                                  Memory Care

   4        0145    Alterra Clare Bridge      1300 East Coolspring Ave.           Assisted           32       36
                    Cottage of Michigan City  Michigan City, IN  46360            Living /
                                                                                  Memory Care

   5        0121    Alterra Sterling House    1400 East Coolspring Ave.           Assisted           42       42
                    of Michigan City          Michigan City, IN  46360            Living
   6        0485    Alterra Clare Bridge      710 S. Lake Street                  Assisted           32       39
                    Cottage of Leesburg       Leesburg, FL  34748-7316            Living /
                                                                                  Memory Care

   7        0541    Alterra Clare Bridge      160 Elephant Road                   Assisted           24       26
                    Cottage of Dublin         Dublin, PA  18917-2202              Living /
                                                                                  Memory Care

   8        0161    Alterra Clare Bridge      364 Cedardale Dr. SE                Assisted           24       26
                    Cottage of Owatonna       Owatonna, MN  55060-4467            Living /
                                                                                  Memory Care

   9        0834    Alterra Sterling House    334 Cedardale Dr. SE                Assisted           19       20
                    of Owatonna               Owatonna, MN  55060-4467            Living
</TABLE>

                                  SCHEDULE 1-1

<PAGE>

                                   SCHEDULE 2

                      EXCEPTIONS TO INSURANCE REQUIREMENTS

      Through June 30, 2002, Alterra had in place a liability insurance program
through Commonwealth Risk Services, Inc., a risk management organization, to
provide $5 million of aggregate liability coverage. The Commonwealth program was
a claims made insurance policy, including general liability and professional
liability, which was initially issued by Legion Indemnity Company, an A. M. Best
A- insurance company. Legion Indemnity Company utilized the insurance profit
center program offered by Mutual Indemnity (Bermuda) Ltd. (initially A. M. Best
A- rated), which is a risk financing plan designed to control the underwriting,
profit and investment income from a insured's insurance policy. Both ratings
were reduced after the initial formation of the program. The fronting insurance
carrier for the program, Legion Indemnity Company ("Legion"), became subject to
a Conservation Order issued by the Illinois Department of Insurance that limits
Legion's ability to pay claims without court approval. Legion's current credit
rating is "E."

      Pursuant to the insurance profit center program, Legion issued a policy to
Alterra for $5 million of aggregate coverage, subject to a $25,000 per
occurrence deductible and all claims paid by Legion to Alterra will reduce the
aggregate limit accordingly. Alterra paid the premium for the policy and also
posted cash collateral. Pursuant to its re-insurance agreement with Mutual
Indemnity (Bermuda) Ltd., Legion ceded the funds from Alterra to Mutual, which
will invest the funds until losses or other expenses are actually paid.
Favorable claims experience will result in dividends to Alterra. The policy is
an annual policy that expired on July 1, 2002, and the premium has been paid for
the period through July 1, 2002.

      On July 1, 2002, Alterra put in place a general and professional liability
insurance program through American International Specialty Lines Insurance
Company ("AIGS"), an A.M. Best A++ rated insurance company. AIGS is a member
company of American International Group, Inc. ("AIG"). The AIGS program is a
claims made insurance policy and includes both general liability and
professional liability coverage. The policy effective date is July 1, 2002
although the coverage is, in some circumstances, retroactive to July 1, 2001. In
addition, Alterra can choose to extend the period of coverage under the AIGS
program until June 30, 2004. Alterra initially funded $2 million of limits into
the AIGS program, although that amount can be increased at Alterra's election.

      As outlined above and set forth in the policy, this program does not
comply with the following particulars of Section 6 of the Master Lease:

      1.    The policy aggregate limit is $2,000,000 (subject to reductions as
claims occur or mature), not $10,000,000.

      2.    The policy is written on a "claims made" basis as opposed to an
"occurrence" basis.

      The Company's intends to defer implementing a broader general/professional
liability insurance program until the earlier of the expiration of the
Forbearance Period (as defined

                                  SCHEDULE 2-1

<PAGE>

in the Memorandum of Understanding), the filing of a Conforming Bankruptcy
Proceeding (as defined in the Memorandum of Understanding) by the Company or the
conversion of an involuntary petition to a voluntary petition pursuant to
Section 1(a)(iii) of the Memorandum of Understanding (such date, the "Plan
Commencement Date"). Upon the Plan Commencement Date the Company shall have in
effect a general liability insurance program, which complies with the
requirements of Section 6 of the Lease or a rent-a-captive program with a
carrier with an A- or better rating, or a fully funded self-insurance program,
in each case providing $5.0 million of aggregate liability coverage.

      In addition to these matters related to Alterra's general liability/
professional liability insurance program, the following matters may not comply
with the requirements of Section 6 of the Master Lease:

      1.    Certain of the Company's insurance carriers may have financial
ratings below those required.

      2.    The deductible under Alterra's workers' compensation program is
$250,000, which the Company considers to be commercially reasonable for the size
of the program.

      3.    Deductibles for Flood, Windstorm and Quake coverage are typically 2%
of value with a $100,000 minimum. Lower deductibles for these forms of coverage
are generally not available in the market.

      4.    Alterra has consistently inflated its property schedule of values by
2% to 4% per year over initial construction or acquisition costs. These
scheduled amounts are believed generally to be adequate to cover the replacement
cost of an individual property but have not been recently verified as adequate
for every property.

      5.    The Company's current policies and typically practice in the
commercial insurance market generally do not permit delivery of replacement
policies 10 days prior to the expiration of a policy and it is unlikely that it
is feasible to deliver the renewal policy within 10 days of renewal, although
Alterra will use its commercially reasonable efforts to do so as soon thereafter
as is practicable.

                                  SCHEDULE 2-2

<PAGE>

                                   SCHEDULE 3

               EXISTING FACILITIES EXEMPT FROM RADIUS RESTRICTION

                                  SCHEDULE 3-1

<PAGE>

                                   SCHEDULE 4

              EXCEPTIONS TO TENANT'S REPRESENTATIONS AND WARRANTIES

LITIGATION (Section 5.1(L)):

Circuit Court in and for the Fifth Judicial Circuit in and for Lake County,
Florida, Case No. 2001 CA-3002, Terry Nickerl, as next best friend of Mabel
Sanders, Plaintiff v. Alterra Healthcare Corporation, a Delaware corporation
authorized to do business in the State of Florida d/b/a Alterra Clare Bridge
Cottage of Leesburg, Defendant

                                  SCHEDULE 4-1