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                                                                  EXHIBIT 10.13











                                LEASE AGREEMENT


                                    BETWEEN


                        HCRI TENNESSEE PROPERTIES, INC.


                                      AND


                ALTERNATIVE LIVING SERVICES, INC. d/b/a ALTERRA



                                MARCH ___, 1999



                          STERLING HOUSE OF COLUMBIA
                              COLUMBIA, TENNESSEE



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                                LEASE AGREEMENT
                             (COLUMBIA, TENNESSEE)


         This Lease Agreement ("Lease" or "Agreement") is made effective as of
the ___ day of March, 1999 (the "Effective Date") between HCRI TENNESSEE
PROPERTIES, INC., a corporation organized under the laws of the State of
Delaware ("Landlord"), having its principal office located at One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio 43603, and ALTERNATIVE LIVING SERVICES,
INC. d/b/a ALTERRA, a corporation organized under the laws of the State of
Delaware ("Tenant"), having its chief executive office located at 450 N.
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005.

                                R E C I T A L S

         A. As of the date hereof, Landlord acquired the Leased Property
(defined below) and paid the Acquisition Amount (defined below) towards the
purchase price for the Leased Property. The amount paid by Tenant for the
acquisition costs of the Leased Property shall be considered Tenant's
contribution.

         B. Landlord desires to lease the Leased Property to Tenant and Tenant
desires to lease the Leased Property from Landlord upon the terms set forth in
this Lease.

         NOW, THEREFORE, Landlord and Tenant agree as follows:

                ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS

         1.1 Leased Property. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the following property:

             (a) The land described in Exhibit A attached hereto (the "Land").

             (b) All buildings, structures, and other improvements, including
without limitation, sidewalks, alleys, utility pipes, conduits, and lines,
parking areas, and roadways, now or hereafter situated upon the Land (the
"Improvements").

             (c) All easements, rights and other appurtenances relating to the
Land and Improvements (the "Appurtenances").

             (d) All permanently affixed equipment, machinery, fixtures, and
other items of real and personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the Improvements, including without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, and built-in oxygen
and vacuum systems, all of which, to the greatest extent permitted by law, are
hereby deemed by the parties hereto to constitute real estate,



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together with all replacements, modifications, alterations and additions
thereto but specifically excluding all items included within the category of
Personal Property as defined below (collectively the "Fixtures").

             (e) All machinery, equipment, furniture, furnishings, movable
walls or partitions, computers, trade fixtures, consumable inventory and
supplies, and other personal property used or useful in Tenant's business on
the Leased Property, including without limitation, all items of furniture,
furnishings, equipment, supplies and inventory located at the Facility and the
replacements therefor, except items, if any, included within the definition of
Fixtures (collectively the "Personal Property"). The Land, Improvements,
Appurtenances, and Fixtures and Personal Property are hereinafter referred to
as the "Leased Property".

         SUBJECT, HOWEVER, to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof as listed on
Exhibit B attached hereto (the "Permitted Exceptions").

         1.2 Term. The initial term ("Initial Term") of this Lease commences on
the Effective Date and expires at 12:00 Midnight Eastern Time on the fifteenth
anniversary of the Commencement Date (the "Expiration Date"); provided,
however, that Tenant has an option to renew the Lease pursuant to Article 12
and, provided further, the current Term of this Lease shall be deemed
automatically extended from time to time (without any written amendment or
other documentation) to be concurrent with the Term of the Phase IV Lease
having the latest expiration date.

         1.3 Definitions. Except as otherwise expressly provided, [i] the terms
defined in this section have the meanings assigned to them in this section and
include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; and [iii]
the words "herein", "hereof", and "hereunder" and similar words refer to this
Lease as a whole and not to any particular section.

         "Acquisition Amount" means $2,635,620.00.

         "ADA" means the federal statute entitled Americans with Disabilities
Act, 42 U.S.C. Section 12101, et seq.

         "Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Tenant.
"Control" (and the correlative meanings of the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
entity. "Affiliate" includes, without limitation, each Related Tenant.

         "Annual Facility Budget" means Tenant's projection of what the Annual
Facility Financial Statements will be for the next fiscal year.



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         "Annual Financial Statements" means the Tenant's unaudited balance
sheet and statement of income for the most recent fiscal year on an individual
facility and consolidated basis and an unaudited operating statement for the
Facility for the most recent fiscal year.

         "Base Rent" has the meaning set forth in Section 2.1, as increased
from time to time pursuant to Section 2.2.

         "Business Day" means any day other than a Saturday, Sunday, or
national holiday.

         "CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time. The terms "disposal"
and "release" as used in this Agreement shall have the meaning set forth in
CERCLA.

         "Closing" means the closing of the purchase of the Leased Property by
Landlord and the lease of the Leased Property to Tenant.

         "Commencement Date" means the Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following
the Effective Date.

         "Commitment" means the Commitment Letter from Landlord to Sterling
dated as of April 3, 1996, as amended May 14, 1997, as further amended pursuant
to the project approval letter dated February 24, 1999, all as amended from
time to time.

         "Commitment Fee" means an amount equal to 1% of the Acquisition
Amount.

         "Effective Date" is the date hereof as first set forth above.

         "Environmental Laws" means all federal, state, and local ecological,
wetlands, and other environmental laws and regulations, as amended from time to
time, including but not limited to [i] CERCLA; [ii] the Resource Conservation
and Recovery Act; [iii] the Hazardous Materials Transportation Act; [iv] the
Clean Air Act; [v] Clean Water Act; [vi] the Toxic Substances Control Act; and
[vii] the Safe Water Drinking Act.

         "Event of Default" has the meaning set forth in Section 8.1.

         "Expiration Date" has the meaning set forth in Section 1.2.

         "Extended Term" has the meaning set forth in Section 12.3(a).

         "Facility" means the 42 unit/42 bed assisted living facility known as
Sterling House of Columbia and located on the Leased Property.

         "Facility Financial Statement" means the financial statement for the
Facility which shall include the statement of income and expense, occupancy
census data (including



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payor mix to the extent presently provided by Affiliates) and a comparison of
the actual financial data versus the Annual Facility Budget for the applicable
period.

         "Facility Uses" means the uses relating to the operation of the
Facility as a 42 unit/42 bed assisted living facility.

         "Fair Market Value" has the meaning set forth in Section 12.2(d).

         "Financial Statements" means [i] the annual, quarterly and year to
date financial statements of Tenant; and [ii] all operating statements for the
Facility, that were submitted to Landlord prior to the Effective Date.

         "Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required to comply with all Legal Requirements,
including but not limited to, [i] zoning permits, variances, exceptions,
special use permits, conditional use permits, and consents; [ii] to the extent
applicable, the permits, licenses, provider agreements and approvals required
for licensure and operation of an assisted living facility; [iii]
environmental, ecological, coastal, wetlands, air, and water permits, licenses,
and consents; [iv] curb cut, subdivision, land use, and planning permits,
licenses, approvals and consents; [v] building, sign, fire, health, and safety
permits, licenses, approvals, and consents; and [vi] architectural reviews,
approvals, and consents required under restrictive covenants.

         "Hazardous Materials" means any substance [i] the presence of which
poses a hazard to the health or safety of persons on or about the Land
including but not limited to asbestos containing materials; [ii] which requires
removal or remediation under any Environmental Law, including without
limitation any substance which is toxic, explosive, flammable, radioactive, or
otherwise hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic including but not limited to any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.

         "Impositions" has the meaning set forth in Section 3.2.

         "Initial Term" has the meaning set forth in Section 1.2.

         "Landlord Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Landlord. "Control" (and the correlative meanings of the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity. "Landlord Affiliate" includes, without limitation, Health Care
REIT, Inc., HCRI Texas Properties, Ltd., HCRI Pennsylvania Properties, Inc.,
HCRI Nevada Properties, Inc., HCRI Tennessee Properties, Inc. and HCRI
Louisiana Properties, L.P.



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         "Lease Advance" means each advance of funds by Landlord to Tenant
pursuant to the term of this Lease, including the first Lease Advance in the
amount equal to the Acquisition Amount.

         "Lease Advance Amount" means the amount of any Lease Advance.

         "Lease Advance Date" means the date on which Landlord makes a Lease
Advance.

         "Lease Amount" is an aggregate concept and means the sum of the Lease
Advance Amounts outstanding at the applicable time.

         "Lease Payments" means the sum of the Base Rent payments (as increased
from time to time) for the applicable period.

         "Lease Rate" means the annual rate used to determine Base Rent for
each Lease Advance. The Lease Rate is the greater of [i] 950 basis points or
[ii] the sum of the applicable Rate Index plus the applicable Rate Spread,
computed using the 365/360 method.

         "Lease Year" means each consecutive period of 365 or 366 days
throughout the Term. The first Lease Year commences on the Commencement Date
and expires on the day before the first anniversary of the Commencement Date.

         "Legal Requirements" means all laws, regulations, rules, orders,
writs, injunctions, decrees, certificates, requirements, agreements, conditions
of participation and standards of any federal, state, county, municipal or
other governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of each Facility by Tenant, including but
not limited to, [i] zoning, building, fire, health, safety, sign, and
subdivision regulations and codes; [ii] certificate of need laws, if
applicable; [iii] licensure to operate as an assisted living facility; [iv]
Medicare and Medicaid certification requirements, if applicable, and if Tenant
elects to participate in such programs; [v] the ADA; [vi] any Environmental
Laws; and [vii] requirements, conditions and standards for participation in
third-party payor insurance programs.

         "Material Obligation" means [i] any indebtedness secured by a security
interest in or a lien, deed of trust or mortgage on any of the Leased Property
and any agreement relating thereto; [ii] any obligation or agreement that is
material to the operation of the Facility; [iii] any indebtedness or capital
lease of Tenant that has an outstanding principal balance of at least
$1,000,000.00 in any one instance or at least $1,000,000.00 in the aggregate
and any agreement relating thereto; and [iv] any sublease of the Leased
Property.

         "Overdue Rate" has the meaning set forth in Section 8.6.



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         "Periodic Financial Statements" means [i] for Tenant, the unaudited
balance sheet and statement of income of Tenant for the most recent quarter;
and [ii] for the Facility, the unaudited Facility Financial Statement for the
most recent month.

         "Permitted Exceptions" means the exceptions to title set forth on
Exhibit B.

         "Permitted Liens" means [i] liens granted to Landlord; [ii] liens
customarily incurred by Tenant in the ordinary course of business for items not
delinquent including mechanic's liens and deposits and charges under worker's
compensation laws; [iii] liens for taxes and assessments not yet due and
payable; [iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Agreement; [v] the Permitted Exceptions; and [vi]
purchase money financing and capitalized equipment leases for the acquisition
of personal property provided, however, that Landlord obtains a nondisturbance
agreement from the purchase money lender or equipment lessor in form and
substance as may be satisfactory to Landlord if the original cost of the
equipment exceeds $50,000.00.

         "Phase I Lease" means each lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Sterling, or any successor or assign of
Sterling, relating to the 8 assisted living facilities located in Bartlesville,
Oklahoma, Midwest City, Oklahoma, Stillwater, Oklahoma, Enid, Oklahoma, S.W.
Oklahoma City, Oklahoma, Shawnee, Oklahoma, Chickasha, Oklahoma and Ponca City,
Oklahoma, as amended from time to time.

         "Phase I Tenant" means each tenant under any Phase I Lease.

         "Phase II Lease" means each lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Sterling, or any successor or assign of
Sterling, relating to the 9th through 16th assisted living facilities (or other
similar facilities) developed by Sterling in association with Landlord or any
Landlord Affiliate, as amended from time to time.

         "Phase II Tenant" means each tenant under any Phase II Lease.

         "Phase III Lease" means each lease now or hereafter existing, between
Landlord or any Landlord Affiliate and Tenant, Sterling or any Affiliate
relating to the 17th through 23rd assisted living facilities (or other similar
facilities) developed by Tenant, Sterling or any Affiliate in association with
Landlord or any Landlord Affiliate, as amended from time to time.

         "Phase III Tenant" means each tenant under any Phase III Lease.

         "Phase IV Lease" means each lease, including this Lease, now or
hereafter existing, between Landlord or any Landlord Affiliate and Tenant,
Sterling or any Affiliate relating to the 24th through 35th assisted living
facilities (or other similar facilities) developed by Tenant, Sterling or any
Affiliate in association with Landlord or any Landlord Affiliate, as amended
from time to time.

         "Phase IV Tenant" means each tenant under any Phase IV Lease.



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         "Pro Forma Statement" means a financial forecast for the Facility for
the next five year period prepared in accordance with the standards for
forecasts established by the American Institute of Certified Public
Accountants.

         "Rate Determination Date" means the date on which the value for the
Rate Index is established for computing any Lease Rate. For any Lease Advances
made during the Initial Term, the Rate Determination Date is the Lease Advance
Date.

         "Rate Index" means the yield quoted in the Wall Street Journal on the
applicable Rate Determination Date for the most actively traded United States
Treasury Notes having the nearest equivalent maturity date to the Expiration
Date. For any Lease Advance other than the first Lease Advance, the yield shall
be computed based upon the remainder of the Initial Term.

         "Rate Spread" means the rate spread from time to time used to
calculate the Lease Rate applicable to any Lease Advance. The Rate Spread is
330 basis points for the Initial Term.

         "Receivables" means [i] all of Tenant's rights to receive payment for
providing resident care and services at the Facility as set forth in any
accounts, contract rights, and instruments, and [ii] those documents, chattel
paper, inventory proceeds, provider agreements, participation agreements,
ledger sheets, files, records, computer programs, tapes, and agreements
relating to Tenant's rights to receive payment for providing resident care
services at the Facility.

         "Related Lease" means any Phase I Lease, Phase II Lease, Phase III
Lease, Phase IV Lease or any other lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Tenant, Sterling or any Affiliate.

         "Related Tenant" means any Phase I Tenant, Phase II Tenant, Phase III
Tenant, Phase IV Tenant or any other tenant under any Related Lease.

         "Renewal Date" means the date on which the Lease Rate is reset and
will be the first day of the Renewal Term.

         "Renewal Option" has the meaning set forth in Section 12.1.

         "Renewal Rate" means the Lease Rate established on the Renewal Date in
accordance with Section 12.2(c).

         "Renewal Term" has the meaning set forth in Section 12.1.

         "Seller" means Sterling House Corporation.

         "Sterling" means Sterling House Corporation, a corporation organized
under the laws of the State of Kansas.



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         "State" means the State in which the Facility is located.

         "Tenant's Obligations" means all payment and performance obligations
of Tenant under this Lease and all documents executed by Tenant in connection
with this Lease.

         "Term" means the Initial Term and the Renewal Term.

                                ARTICLE 2: RENT

         2.1 Base Rent. Tenant shall pay Landlord base rent ("Base Rent") in
advance in consecutive monthly installments payable on the first day of each
month during the Term commencing on the Commencement Date. If the Effective
Date is not the first day of a month, Tenant shall pay Landlord Base Rent on
the Effective Date for the partial month, i.e., for the period commencing on
the Effective Date and ending on the day before the Commencement Date. The
annual Base Rent for the Initial Term will be equal to the sum of the products
of each Lease Advance times the Lease Rate for each Lease Advance. The Base
Rent will be computed monthly based on the actual number of days elapsed over a
360-day year (365/360 method). The Base Rent for the Renewal Term will be
computed in accordance with Section 12.2. The Acquisition Amount paid by
Landlord to Tenant is the first Lease Advance under this Lease.

         2.2 Increase of Lease Rate and Base Rent. Commencing on the first
anniversary of the Commencement Date and on each anniversary thereafter during
the Term, including any Renewal Term and Extended Term, (each such date shall
be herein defined as "Rent Adjustment Date") the Base Rent shall be increased
so as to equal the lesser of (a) the Maximum Rent Adjustment (defined below),
or (b) an amount determined by multiplying the Base Rent then in effect times a
fraction, the numerator of which shall be the CPI Index on the applicable Rent
Adjustment Date and the denominator of which shall be the CPI Index on the
preceding Rent Adjustment Date (or on the Effective Date in the case of the
first Rent Adjustment Date).

         If, for any Lease Year or any portion thereof, the Base Rent is
adjusted in accordance with clause (b) above, then the difference between the
Base Rent for such Lease Year, and the Base Rent for such Lease Year if
adjusted in accordance with clause (a) above shall be referred to herein as the
"Rent Shortfall." If, for any Lease Year, the Base Rent is adjusted in
accordance with clause (a), then the difference between the Base Rent for such
Lease Year and the Base Rent for such Lease Year if adjusted in accordance with
clause (b), shall be referred to herein as the "Rent Surplus."

         Any Rent Surplus for a Lease Year shall be applied first to payment of
the unpaid balance of any Rent Shortfalls for any previous Lease Years.

         As used herein, the "Maximum Rent Adjustment" shall be the Base Rent
in any applicable year, which would result solely by multiplying, in each year,
on the Rent Adjustment Date, the Base Rent then in effect (as adjusted pursuant
to this Section 2.2 only) by 1.025.

         As used herein, the "CPI Index" shall mean and refer to the Consumer
Price Index for Urban Wage Earners and Clerical Workers, U.S. Cities Average.
All items (1982-84-100) published by the Bureau of Labor Statistics of the U.S.
Department of Labor; provided that if



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compilation of the CPI Index in its present form and calculated on its present
basis is discontinued or transferred to any other governmental department or
bureau, then the index most nearly the same as the CPI Index published by the
Bureau of Labor statistics shall be used. If there is no such similar index, a
substitute index which is then generally recognized as being similar to the CPI
Index shall be used, such substitute index to be reasonably selected by
Landlord. Until the CPI Index is established, Tenant shall pay the Base Rent
calculated in accordance with clause (a) above, and once the CPI Index for the
Rent Adjustment Date of such Lease Year is published, the new Base Rent (as
increased) shall be effective retroactively as of the Rent Adjustment Date with
the remaining payments to be adjusted ratably.

         2.3 Additional Rent. In addition to Base Rent, Tenant shall pay all
other amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease and any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively
the "Additional Rent"). Base Rent and Additional Rent are hereinafter referred
to as "Rent". Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of nonpayment of the Rent.

         2.4 Place of Payment of Rent. Tenant shall make all payments of Base
Rent and any additional Rent required to be paid to Landlord at the Landlord's
address set forth in the first paragraph of this Lease or at such other place
as Landlord may designate from time to time. If delivery is by overnight mail,
the address for Landlord shall be One SeaGate, Suite 1500, Toledo, Ohio 43604.

         2.5 Net Lease. This Lease shall be deemed and construed to be an
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction or set-off.

         2.6 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms. Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. Except
as expressly provided in this Lease, the obligations of Landlord and Tenant
shall not be affected by reason of [i] any damage to, or destruction of, the
Leased Property or any part thereof from whatever cause or any Taking (as
hereinafter defined) of the Leased Property or any part thereof; [ii] the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title (subject to the provisions of Article 10); [iii] any claim
which Tenant has or might have against Landlord or by reason of any default or
breach of any warranty by Landlord under this Lease or any other agreement
between Landlord and Tenant, or to which Landlord and Tenant are parties; [iv]
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceeding affecting Landlord or
any assignee or transferee of Landlord; or [v] any other cause, whether similar
or dissimilar to any of the foregoing, other than a discharge of Tenant from
any such obligations as a matter of law. Except as otherwise specifically
provided in this Lease, Tenant hereby specifically waives all rights, arising
from any



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occurrence whatsoever, which may now or hereafter be conferred upon it by law
[a] to modify, surrender or terminate this Lease or quit or surrender the
Leased Property or any portion thereof; or [b] entitling Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Tenant hereunder. The obligations of Landlord and Tenant hereunder shall be
separate and independent covenants and agreements and the Rent and all other
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Lease or by termination of this Lease other than by
reason of an Event of Default.

         2.7 Computational Method. Landlord and Tenant acknowledge that all
rates under this Lease will be computed based on the actual number of days
elapsed over a 360-day year (365/360 method).

         2.8 Commitment Fee. On the Effective Date, Tenant shall pay to
Landlord the Commitment Fee.

                      ARTICLE 3: IMPOSITIONS AND UTILITIES

         3.1 Payment of Impositions. Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with Section 3.7. Tenant shall deliver to Landlord [i] not more
than five days after the due date of each Imposition, copies of the invoice for
such Imposition and the check delivered for payment thereof; and [ii] not more
than 15 business days after the due date of each Imposition, a copy of the
official receipt evidencing such payment or other proof of payment satisfactory
to Landlord. Tenant's obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof. Tenant, at its expense, shall prepare and file
all tax returns and reports in respect of any Imposition as may be required by
governmental authorities. Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Any refunds retained by
Landlord due to an Event of Default shall be applied as provided in Section
8.8. Landlord and Tenant shall, upon request of the other, provide such data as
is maintained by the party to whom the request is made with respect to the
Leased Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any property covered by
this Lease as personal property, Tenant shall file all personal property tax
returns in such jurisdictions where it may legally so file. Landlord, to the
extent it possesses the same, and Tenant, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Tenant will be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
protest. Tenant may, upon notice to Landlord, at Tenant's option and at
Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at



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Tenant's expense as aforesaid, shall fully cooperate with Tenant in such
protest, appeal, or other action. Tenant shall reimburse Landlord for all
personal property taxes paid by Landlord within 30 days after receipt of
billings accompanied by copies of a bill therefor and payments thereof which
identify the personal property with respect to which such payments are made.
Impositions imposed in respect to the tax-fiscal period during which the Term
terminates shall be adjusted and prorated between Landlord and Tenant, whether
or not such Imposition is imposed before or after such termination, and
Tenant's obligation to pay or Landlord's obligation to refund its prorated
share thereof shall survive such termination.

         3.2 Definition of Impositions. "Impositions" means, collectively, [i]
taxes (including without limitation, all capital stock and franchise taxes of
Landlord imposed by the State or any governmental entity in the State due to
this lease transaction or Landlord's ownership of the Leased Property and the
income arising therefrom, or due to Landlord being considered as doing business
in the State because of Landlord's ownership of the Leased Property or lease
thereof to Tenant), all real estate and personal property ad valorem, sales and
use, business or occupation, single business, gross receipts, transaction
privilege, rent or similar taxes; [ii] assessments (including without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed with the Term); [iii] ground rents, water, sewer or other rents and
charges, excises, tax levies, and fees (including without limitation, license,
permit, inspection, authorization and similar fees); [iv] all taxes imposed on
Tenant's operations of the Leased Property, including without limitation,
employee withholding taxes, income taxes and intangible taxes; [v] all real
property conveyance taxes, transfer fees, deed stamps and similar charges
imposed by the State or any governmental entity in the State with respect to
the conveyance of the Leased Property from Seller to Landlord (if applicable)
and from Landlord to Tenant; and [vi] all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during or in
respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon [a] Landlord or Landlord's interest in the Leased Property or any
part thereof; [b] the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased
Property or any part thereof. Tenant shall not, however, be required to pay any
tax based on net income (whether denominated as a franchise or capital stock or
other tax) imposed on Landlord by any governmental entity other than as
described in clause [i] above.

         3.3 Escrow of Impositions. If an Event of Default occurs and while it
remains uncured, Tenant shall, at Landlord's election, deposit with Landlord on
the first day of each month a sum equal to 1/12th of the Impositions assessed
against the Leased Property for the preceding tax year, which sums shall be
used by Landlord toward prompt payment of such Impositions. Tenant, on demand,
shall pay to Landlord any additional funds necessary to pay and discharge the
obligations of Tenant pursuant to the provisions of this section. The receipt
by Landlord of the payment of such Impositions by and from Tenant shall only be
as an accommodation to Tenant, the mortgagees, and the taxing authorities, and
shall not be construed as rent or income to Landlord, Landlord serving, if at
all, only as a conduit for delivery purposes.



                                      11
<PAGE>   13
         3.4 Utilities. Tenant shall pay, or cause to be paid, as Additional
Rent, all taxes, assessments, charges, deposits, and bills for utilities,
including without limitation charges for water, gas, oil, sanitary and storm
sewer, electricity, telephone service, and trash collection, which may be
charged against the occupant of the Improvements during the Term. If an Event
of Default occurs and while it remains uncured, Tenant shall, at Landlord's
election, deposit with Landlord on the first day of each month a sum equal to
1/12th of the amount of the annual utility expenses for the preceding Lease
Year, which sums shall be used by Landlord to promptly pay such utilities.
Tenant shall, on demand, pay to Landlord any additional amount needed to pay
such utilities. Landlord's receipt of such payments shall only be an
accommodation to Tenant and the utility companies and shall not constitute rent
or income to Landlord. Tenant shall at all times maintain that amount of heat
necessary to ensure against the freezing of water lines. Tenant hereby agrees
to indemnify and hold Landlord harmless from and against any liability or
damages to the utility systems and the Leased Property that may result from
Tenant's failure to maintain sufficient heat in the Improvements unless the
failure arises from Landlord's failure to make prompt payment of utility
expenses to the extent that funds for such expenses have been deposited with
Landlord under this section.

         3.5 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business
for any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant's obligations under this Lease unless
Landlord has failed to make prompt payment of utility expenses to the extent
that funds for such expenses have been deposited with Landlord under Section 3.4
above.

         3.6 Business Expenses. Tenant shall promptly pay all expenses and
costs incurred in connection with the operation of the Facility on the Leased
Property, including without limitation, employee benefits, employee vacation
and sick pay, consulting fees, and expenses for inventory and supplies.

         3.7 Permitted Contests. Tenant, on its own or on Landlord's behalf (or
in Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy,
encumbrance, charge or claim provided that [i] in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Leased Property; [ii] neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; [iii] in
the case of a Legal Requirement, Landlord would not be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings; [iv] in the event that any such contest shall
involve a sum of money or potential loss in excess of $50,000.00, Tenant shall
deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses [i], [ii] and [iii], to the extent applicable; [v]
in the case of a Legal Requirement and/or an Imposition, lien, encumbrance or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and



                                      12
<PAGE>   14
to prevent any sale or forfeiture of the affected Leased Property or the Rent
by reason of such nonpayment or noncompliance; provided, however, the
provisions of this section shall not be construed to permit Tenant to contest
the payment of Rent (except as to contests concerning the method of computation
or the basis of levy of any Imposition or the basis for the assertion of any
other claim) or any other sums payable by Tenant to Landlord hereunder; [vi] in
the case of an insurance requirement, the coverage required by Article 4 shall
be maintained; and [vii] if such contest be finally resolved against Landlord
or Tenant, Tenant shall, as Additional Rent due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties accrued
thereon, or comply with the applicable Legal Requirement or insurance
requirement. Landlord, at Tenant's expense, shall execute and deliver to Tenant
such authorizations and other documents as may be reasonably required in any
such contest, and, if reasonably requested by Tenant or if Landlord so desires,
Landlord shall join as a party therein. Tenant hereby agrees to indemnify and
save Landlord harmless from and against any liability, cost or expense of any
kind that may be imposed upon Landlord in connection with any such contest and
any loss resulting therefrom.

                              ARTICLE 4: INSURANCE

         4.1 Property Insurance. At Tenant's expense, Tenant shall maintain in
full force and effect a property insurance policy or policies insuring the
Leased Property against the following:

             (a) Loss or damage commonly covered by a "Special Form" policy
insuring against physical loss or damage to the Improvements and Personal
Property, including but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2 per the ISO
rating system,) and sinkholes (if usually recommended in the area of the Leased
Property). The policy shall be in the amount of the full replacement value (as
defined in Section 4.5) of the Improvements and Personal Property and shall
contain a deductible amount acceptable to Landlord. Landlord shall be named as
an additional insured. The policy shall include a stipulated value endorsement
or agreed amount endorsement and endorsements for contingent liability for
operations of building laws, demolition costs, and increased cost of
construction.

             (b) If applicable, loss or damage by explosion of steam boilers,
pressure vessels, or similar apparatus, now or hereafter installed on the
Leased Property, in commercially reasonable amounts acceptable to Landlord.

             (c) Consequential loss of rents and income coverage insuring
against all "Special Form" risk of physical loss or damage with limits and
deductible amounts acceptable to Landlord covering risk of loss during the
first 9 months of reconstruction, and containing an endorsement for extended
period of indemnity of at least six months, and shall be written with a
stipulated amount of coverage if available at a reasonable premium.

             (d) If the Leased Property is located, in whole or in part, in a
federally designated 100-year flood plain area, flood insurance for the
Improvements in an amount equal to the lesser of [i] the full replacement value
of the Improvements; or [ii] the maximum amount



                                      13
<PAGE>   15

of insurance available for the Improvements under all federal and private flood
insurance programs.

             (e) Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.

             (f) Loss or damage commonly covered by blanket crime insurance
including employee dishonesty, loss of paper currency, depositor's forgery, and
loss of property of patients accepted by Tenant for safekeeping, in
commercially reasonable amounts acceptable to the Landlord.

         4.2 Liability Insurance. At Tenant's expense, Tenant shall maintain
liability insurance against the following:

             (a) Claims for personal injury or property damage commonly covered
by comprehensive general liability insurance with endorsements for incidental
malpractice, contractual, personal injury, owner's protective liability,
voluntary medical payments, products and completed operations, broad form
property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.

             (b) Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all owned and
non-owned automobiles, with commercially reasonable amounts for bodily injury,
property damage, and for automobile medical payments acceptable to Landlord,
but with a combined single limit of not less than $5,000,000.00 per occurrence.

             (c) Claims for personal injury commonly covered by medical
malpractice insurance in commercially reasonable amounts acceptable to
Landlord.

             (d) Claims commonly covered by worker's compensation insurance for
all persons employed by Tenant on the Leased Property. Such worker's
compensation insurance shall be in accordance with the requirements of all
applicable local, state, and federal law.

         4.3 Builder's Risk Insurance. In connection with any construction,
Tenant shall maintain in full force and effect a builder's completed value risk
policy ("Builder's Risk Policy") of insurance in a nonreporting form insuring
against all "Special Form" risk of physical loss or damage to the Improvements,
including but not limited to, risk of loss from fire and other hazards,
collapse, transit coverage, vandalism, malicious mischief, theft, earthquake
(if Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually
recommended in the area of the Leased Property). The Builder's Risk Policy
shall include endorsements providing coverage for building materials and
supplies and temporary premises. The Builder's Risk Policy shall be in the
amount of the full replacement value of the Improvements and shall contain a
deductible



                                      14
<PAGE>   16

amount acceptable to Landlord. Landlord shall be named as an additional
insured. The Builder's Risk Policy shall include an endorsement permitting
initial occupancy.

         4.4 Insurance Requirements. The following provisions shall apply to
all insurance coverages required hereunder:

             (a) The form and substance of all policies shall be subject to the
approval of Landlord, which approval will not be unreasonably withheld.

             (b) The carriers of all policies shall have a Best's Rating of "A"
or better and a Best's Financial Category of IX or higher and shall be
authorized to do insurance business in the State.

             (c) Tenant shall be the "named insured" and Landlord shall be an
"additional insured" on each liability policy. On all property and casualty
policies, Landlord and Tenant shall be joint loss payees.

             (d) Tenant shall deliver to Landlord certificates or policies
showing the required coverages and endorsements. The policies of insurance
shall provide that the policy may not be cancelled or not renewed, and no
material change or reduction in coverage may be made, without at least 30 days'
prior written notice to Landlord.

             (e) The policies shall contain a severability of interest and/or
cross-liability endorsement, provide that the acts or omissions of Tenant or
Landlord will not invalidate the coverage of the other party, and provide that
Landlord shall not be responsible for payment of premiums.

             (f) All casualty loss adjustment shall require the written consent
of Landlord and Tenant, as their interests may appear.

             (g) At least 30 days prior to the expiration of each policy,
Tenant shall deliver to Landlord a certificate showing renewal of such policy
and payment of the annual premium therefor and a current Certificate of
Compliance (in the form delivered at the time of Closing) completed and signed
by Tenant's insurance agent.

         4.5 Replacement Value. The term "full replacement value" means the
actual replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the
Leased Property, Landlord may have such full replacement value redetermined at
any time after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.

         4.6 Blanket Policy. Notwithstanding anything to the contrary contained
in this section, Tenant may carry the insurance required by this Article under
a blanket policy of



                                      15
<PAGE>   17

insurance, provided that the coverage afforded Tenant will not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all of the requirements of this Lease.

         4.7 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance, by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Lease, and such additional insurance is
not prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional
policy or additional policies.

         4.8 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased
Property, which loss or damage is covered by valid and collectible insurance
policies, to the extent that such loss or damage is recoverable under such
policies. Said mutual waiver shall be in addition to, and not in limitation or
derogation of, any other waiver or release contained in this Lease with respect
to any loss or damage to property of the parties hereto. Inasmuch as the said
waivers will preclude the assignment of any aforesaid claim by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party hereto agrees immediately to give each insurance company which has issued
to it policies of insurance, written notice of the terms of said mutual
waivers, and to have such insurance policies properly endorsed, if necessary,
to prevent the invalidation of said insurance coverage by reason of said
waivers, so long as such endorsement is available at a reasonable cost.

         4.9 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of lender's loss payable clause insuring
the interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance
to such mortgagee; [iii] loss adjustment of claims in excess of $50,000.00
shall require the consent of the mortgagee, which consent shall not be
unreasonably withheld; and [iv] Tenant shall provide such other information and
documents as may be reasonably required by the mortgagee.

         4.10 Escrows. After an Event of Default occurs hereunder and until
such Event of Default is cured, Tenant shall make such periodic payments of
insurance premiums in accordance with Landlord's requirements after receipt of
notice thereof from Landlord.

                              ARTICLE 5: INDEMNITY

         5.1 Tenant's Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors or assigns of Landlord, and Landlord's
and such successor's and assign's directors, officers, employees and agents
from and against any and all demands,



                                      16
<PAGE>   18
claims, causes of action, fines, penalties, damages (including consequential
damages), losses, liabilities (including strict liability), judgments, and
expenses (including, without limitation, reasonable attorneys' fees, court
costs, and the costs set forth in Section 8.7) incurred in connection with or
arising from: [i] the use or occupancy of the Leased Property by Tenant or any
persons claiming under Tenant; [ii] any activity, work, or thing done, or
permitted or suffered by Tenant in or about the Leased Property; [iii] any
acts, omissions, or negligence of Tenant or any person claiming under Tenant,
or the contractors, agents, employees, invitees, or visitors of Tenant or any
such person; [iv] any breach, violation, or nonperformance by Tenant or any
person claiming under Tenant or the employees, agents, contractors, invitees,
or visitors of Tenant or of any such person, of any term, covenant, or
provision of this Lease or any law, ordinance, or governmental requirement of
any kind including, without limitation, any failure to comply with any
applicable requirements under the ADA; [v] any injury or damage to the person,
property or business of Tenant, its employees, agents, contractors, invitees,
visitors, or any other person entering upon the Leased Property; and [vi] any
construction, alterations, changes or demolition of the Facility performed by
or contracted for Tenant or its employees, agents or contractors. Provided,
however, that Tenant shall have no indemnity obligation with respect to
matters, liabilities, obligations, claims, damages, penalties, causes of
actions, costs and expenses caused by Landlord's gross negligence or willful
misconduct. If any action or proceeding is brought against Landlord, its
employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant's expense with counsel reasonably
satisfactory to Landlord. All amounts payable to Landlord under this section
shall be payable on written demand and any such amounts which are not paid
within 10 days after demand therefor by Landlord shall bear interest at the
Overdue Rate. In case any action, suit or proceeding is brought against Tenant
by reason of any such occurrence, Tenant shall use its best efforts to defend
such action, suit or proceeding.

         5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any
claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes or
materially prejudices Tenant's defense of any such action.

         5.1.2 Survival of Covenants. The covenants of Tenant contained in this
section shall remain in full force and effect after the termination of this
Agreement until the expiration of the period stated in the applicable statute
of limitations during which a claim or cause of action may be brought and
payment in full or the satisfaction of such claim or cause of action and of all
expenses and charges incurred by Landlord relating to the enforcement of the
provisions herein specified.

         5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant
hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Agreement.



                                      17
<PAGE>   19


                  5.2 Environmental Indemnity; Audits.

                  5.2.1 Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors to Landlord's interest in this Lease, and
Landlord's and such successors' directors, officers, employees and agents from
and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable attorneys' fees) incurred by Landlord or any other indemnitee or
assessed against the Leased Property by virtue of any claim or lien by any
governmental or quasi-governmental unit, body, or agency, or any third party,
for cleanup costs or other costs pursuant to any Environmental Law. Tenant's
indemnity shall survive the termination of this Lease. Provided, however, Tenant
shall have no indemnity obligation with respect to [i] Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant's occupancy
of the Leased Property shall have fully terminated; or [ii] Hazardous Materials
introduced to the Leased Property by Landlord, its agent, employees, successors
or assigns. If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of the Leased Premises, in
such form, scope and substance as specified by Landlord, at Tenant's expense.
Tenant shall, within 30 days after receipt of an invoice from Landlord,
reimburse Landlord for all costs and expenses incurred in reviewing any
environmental audit, including without limitation, reasonable attorneys' fees
and costs.

                  5.3 Limitation of Landlord's Liability. Landlord, its agents,
and employees, will not be liable for any loss, injury, death, or damage
(including consequential damages) to persons, property, or Tenant's business
occasioned by theft, act of God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, order of governmental body or
authority, fire, explosion, falling objects, steam, water, rain or snow, leak or
flow of water (including water from the elevator system), rain or snow from the
Leased Property or into the Leased Property or from the roof, street, subsurface
or from any other place, or by dampness or from the breakage, leakage,
obstruction, or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, or lighting fixtures of the Leased Property, or from
construction, repair, or alteration of the Leased Property or from any acts or
omissions of any other occupant or visitor of the Leased Property, or from any
other cause beyond Landlord's control. The foregoing limitation does not apply
to loss, injury, death or damage caused by Landlord's gross negligence or
willful misconduct.

                    ARTICLE 6: USE AND ACCEPTANCE OF PREMISES

                  6.1 Use of Leased Property. Tenant shall use and occupy the
Leased Property exclusively for the Facility Uses and for all lawful and
licensed ancillary uses, and for no other purpose without the prior written
consent of the Landlord which consent shall not be unreasonably withheld. Tenant
shall obtain and maintain all approvals, licenses, and consents needed to use
and operate the Leased Property as herein permitted. Tenant shall deliver to
Landlord complete copies of surveys, examinations, certification and licensure
inspections,




                                       18
<PAGE>   20



compliance certificates, and other similar reports issued to Tenant by any
governmental agency within 10 days after Tenant's receipt of each item.

                  6.2 Acceptance of Leased Property. Tenant acknowledges that
[i] Tenant and its agents have had an opportunity to inspect the Leased
Property; [ii] Tenant has found the Leased Property fit for Tenant's use; [iii]
Landlord will deliver the Leased Property to Tenant in "as-is" condition; [iv]
Landlord is not obligated to make any improvements or repairs to the Leased
Property; and [v] the roof, walls, foundation, heating, ventilating, air
conditioning, telephone, sewer, electrical, mechanical, elevator, utility,
plumbing, and other portions of the Leased Property are in good working order.
Tenant waives any claim or action against Landlord with respect to the condition
of the Leased Property. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.

                  6.3 Conditions of Use and Occupancy. Tenant agrees that during
the Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed extra
hazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the Board of Health, or other city,
state or federal authorities, free of all cost to Landlord; not permit any acts
to be done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof and
accompanied by a representative of Tenant to the extent such a representative is
available.

                     ARTICLE 7: REPAIRS AND MECHANICS' LIENS

                  7.1 Maintenance. Tenant shall maintain, repair, and replace
the Leased Property, including without limitation, all structural and
nonstructural repairs and replacements to the roof, foundations, exterior walls,
parking areas, sidewalks, water, sewer, and gas connections, pipes, and mains.
Tenant shall pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall implement all
reasonable suggestions of the Landlord as to the maintenance and replacement of
the Leased Property.

                  7.2 Required Alterations. Tenant shall, at Tenant's sole cost
and expense, make any additions, changes, improvements or alterations to the
Leased Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (if so certified),
whether such changes are required by Tenant's use, changes in the law,
ordinances, or



                                       19
<PAGE>   21



governmental regulations, defects existing as of the date of this Lease, or any
other cause whatever. All such additions, changes, improvements or alterations
shall be deemed to be Permitted Alterations and shall comply with all laws
requiring such alterations and with the provisions of Section 16.4.

                  7.3 Mechanic's Liens. Tenant shall have no authority to permit
or create a lien against Landlord's interest in the Leased Property, and upon
Landlord's request, Tenant shall post notices during construction or file such
documents as may be required to protect Landlord's interest in the Leased
Property against liens. Tenant hereby agrees to defend, indemnify, and hold
Landlord harmless from and against any mechanic's liens against the Leased
Property by reason of work, labor, services or materials supplied or claimed to
have been supplied on or to the Leased Property. Tenant shall remove, bond-off,
or otherwise obtain the release of any mechanic's lien filed against the Leased
Property within 10 days after Tenant receives notice of the filing thereof;
provided, however, that Tenant shall have the right to contest in good faith and
with due diligence the validity of any such lien upon furnishing such security
or indemnity as may be reasonably required by Landlord. Tenant shall pay all
Landlord's expenses in connection therewith, including without limitation,
damages, interest, court costs and reasonable attorneys' fees.

                  7.4 Replacements of Fixtures and Personal Property. Tenant
shall not remove Fixtures and Personal Property from the Leased Property except
to replace the Fixtures and Personal Property by other similar items of equal
quality and value. Items being replaced by Tenant may be removed and shall
become the property of Tenant and items replacing the same shall be and remain
the property of Landlord. Tenant shall execute, upon written request from
Landlord, any and all documents necessary to evidence Landlord's ownership of
the Personal Property and replacements therefor. Tenant may finance replacements
for the Fixtures and Personal Property by equipment lease or by a security
agreement and financing statement and if the original cost of the equipment
exceeds $50,000.00, Tenant must obtain the following: [i] Landlord's consent to
the terms and conditions of the equipment lease or security agreement; and [ii]
a nondisturbance agreement from the equipment lessor or lender upon terms and
conditions reasonably acceptable to Landlord, including without limitation, the
following: [a] Landlord shall have the right (but not the obligation) to assume
such security agreement or equipment lease upon the occurrence of an Event of
Default under this Lease; [b] the equipment lessor or lender shall notify
Landlord of any default by Tenant under the equipment lease or security
agreement and give Landlord a reasonable opportunity to cure such default; and
[c] Landlord shall have the right to assign its rights under the equipment
lease, security agreement, or nondisturbance agreement. Tenant shall, within 30
days after receipt of an invoice from Landlord, reimburse Landlord for all costs
and expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.

                        ARTICLE 8: DEFAULTS AND REMEDIES

                  8.1 Events of Default. The occurrence of any one or more of
the following shall be an event of default ("Event of Default") hereunder:




                                       20
<PAGE>   22

                           (a) Tenant fails to pay in full any installment of
Rent, or any other monetary obligation payable by Tenant under this Lease
within three business days after Tenant is given written notice of such
failure, which written notice shall be given, at Landlord's option, at any time
after the expiration of 10 days from the date such payment is due; provided,
however, that if Tenant receives two notices of default during any one year
period, regardless of any subsequent cure of such default, thereafter Landlord
shall not be obligated to give Tenant written notice of any failure to make any
such payments, and it shall be an Event of Default if Tenant fails to pay any
installment of Rent or any other monetary obligation payable by Tenant under
this Lease within 10 days after such payment is due.

                           (b) [DELETED]

                           (c) Tenant fails to comply with any covenant set
forth in Article 14, Section 15.6 or Section 15.7 of this Lease, to the extent
such covenant is applicable to such entity.

                           (d) Tenant fails to observe and perform any other
covenant, condition or agreement under this Lease to be performed by Tenant and
[i] such failure continues for a period of 30 days after written notice thereof
is given to Tenant by Landlord; or [ii] if, by reason of the nature of such
default, the same cannot be remedied within said 30 days, Tenant fails to
proceed with diligence reasonably satisfactory to Landlord after receipt of the
notice to cure the same or, in any event, fails to cure such default within 90
days after receipt of the notice. The foregoing notice and cure provisions do
not apply to any Event of Default otherwise specifically described in any other
subsection of Section 8.1.

                           (e) Tenant abandons or vacates the Leased Property
or any material part thereof or ceases to do business or ceases to exist for
any reason for any one or more days except as a result of condemnation or
casualty.

                           (f) [i] The filing by Tenant of a petition under 11
U.S.C. or the commencement of a bankruptcy or similar proceeding by Tenant;
[ii] the failure by Tenant within 60 days to dismiss an involuntary bankruptcy
petition or other commencement of a bankruptcy, reorganization or similar
proceeding against Tenant or to lift or stay any execution, garnishment or
attachment of such consequence as will impair its ability to carry on its
operation at the Leased Property; [iii] the entry of an order for relief under
11 U.S.C. in respect of Tenant; [iv] any assignment by Tenant for the benefit
of its creditors; [v] the entry by Tenant into an agreement of composition with
its creditors; [vi] the approval by a court of competent jurisdiction of a
petition applicable to Tenant in any proceeding for its reorganization
instituted under the provisions of any state or federal bankruptcy, insolvency,
or similar laws; [vii] appointment by final order, judgment, or decree of a
court of competent jurisdiction of a receiver of a whole or any substantial
part of the properties of Tenant (provided such receiver shall not have been
removed or discharged within 60 days of the date of his qualification).

                           (g) [i] Any receiver, administrator, custodian or
other person takes possession or control of any of the Leased Property and
continues in possession for 60 days; [ii] any writ against any of the Leased
Property is not released within 60 days; [iii] any judgment is rendered or
proceedings are instituted against the Leased Property or Tenant which affect
the



                                       21
<PAGE>   23

Leased Property or any part thereof, which is not dismissed for 60 days
(except as otherwise provided in this section); [iv] all or a substantial part
of the assets of Tenant are attached, seized, subjected to a writ or distress
warrant, or are levied upon, or come into the possession of any receiver,
trustee, custodian, or assignee for the benefit of creditors; [v] Tenant is
enjoined, restrained, or in any way prevented by court order (other than ex
parte order) from conducting all or a substantial part of its business or
affairs; or [vi] except as otherwise permitted hereunder, a final notice of
lien, levy or assessment is filed of record with respect to all or any part of
the Leased Property or any property of Tenant located at the Leased Property
and is not dismissed, discharged, or bonded-off within 30 days or is not
otherwise addressed pursuant to Section 7.3.

                           (h) Any representation or warranty made by Tenant in
this Lease or any other document executed in connection with this Lease, any
guaranty of or other security for this Lease, or any report, certificate,
application, financial statement or other instrument furnished by Tenant
pursuant hereto or thereto shall prove to be false, misleading or incorrect in
any material respect as of the date made.

                           (i) Tenant or any Affiliate defaults on any
indebtedness or obligation to Landlord or any Landlord Affiliate, including,
without limitation, any lease with Landlord or any Landlord Affiliate, or
Tenant, Sterling or any Affiliate receives notice of acceleration of payment in
connection with a default under any Material Obligation unless Tenant can
demonstrate to Landlord that such acceleration will not cause Tenant to be in
violation of Section 15.7, and any applicable grace or cure period with respect
to default under such indebtedness or obligation expires without such default
having been cured. This provision applies to all such indebtedness and
obligations as they may be amended, modified, extended, or renewed from time to
time.

                           (j) Except as otherwise specifically permitted
herein, the assignment, sublease or the occurrence of any other change in
Tenant's leasehold interest in the Leased Property, which shall not include any
change in Tenant's stock ownership.

                           (k) The license for the Facility or any other
Government Authorization, is cancelled, suspended or otherwise invalidated,
notice of impending revocation proceedings is received and Tenant fails to
diligently contest such proceeding, or any reduction occurs in the number of
licensed beds or units at the Facility in excess of 3%.

                           8.2 Remedies. Landlord may exercise any one or more
of the following remedies upon the occurrence of an Event of Default:

                           (a) Landlord may re-enter and take possession of the
Leased Property without terminating the Lease, and lease the Leased Property
for the account of Tenant at a commercially reasonable rate, holding Tenant
liable for all costs of the Landlord in reletting the Leased Property and for
the difference in the amount received by such reletting and the amounts payable
by Tenant under the Lease.

                           (b) Landlord may terminate this Lease, exclude
Tenant from possession of the Leased Property and use efforts to lease the
Leased Property to others at a



                                       22
<PAGE>   24




commercially reasonable rate, holding Tenant liable for the difference in the
amounts received from such reletting and the amounts payable by Tenant under
the Lease.

                           (c) Landlord may re-enter the Leased Property and
have, repossess and enjoy the Leased Property as if the Lease had not been
made, and in such event, Tenant and its successors and assigns shall remain
liable for any contingent or unliquidated obligations or sums owing at the time
of such repossession.

                           (d) Landlord may have access to and inspect, examine
and make copies of the books and records and any and all accounts, data and
income tax and other returns of Tenant insofar as they pertain to the Leased
Property.

                           (e) Landlord may accelerate all of the unpaid Rent
hereunder so that the aggregate Rent for the unexpired term of this Lease
becomes immediately due and payable.

                           (f) Landlord may take whatever action at law or in
equity as may appear necessary or desirable to collect the Rent and other
amounts payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or covenants
of Tenant under the Commitment and this Lease, and may exercise all of
Landlord's remedies set forth in the Commitment and this Lease.

                           (g) With respect to the Collateral and Landlord's
security interest therein, Landlord may exercise all of its rights as secured
party under Article 9 of the Uniform Commercial Code as adopted in the State.
Landlord may sell the Collateral by public or private sale upon 10 days notice
to Tenant. Tenant agrees that a commercially reasonable manner of disposition
of the Collateral shall include, without limitation and at the option of
Landlord, a sale of the Collateral, in whole or in part, concurrently with the
sale of the Leased Property.

                           (h) Landlord may obtain control over and collect the
Receivables and apply the proceeds of the collections to satisfaction of
Tenant's Obligations unless prohibited by law. Tenant appoints Landlord or its
designee as attorney for Tenant with powers [i] to receive, to endorse, to sign
and/or to deliver, in Tenant's name or Landlord's name, any and all checks,
drafts, and other instruments for the payment of money relating to the
Receivables, and to waive demand, presentment, notice of dishonor, protest, and
any other notice with respect to any such instrument; [ii] to sign Tenant's
name on any invoice or bill of lading relating to any Receivable, drafts
against account debtors, assignments and verifications of Receivables, and
notices to account debtors; [iii] to send verifications of Receivables to any
account debtor; and [iv] to do all other acts and things necessary to carry out
this Lease. Landlord shall not be liable for any omissions, commissions, errors
of judgment, or mistakes in fact or law made in the exercise of any such powers
provided Landlord's exercise of such power is commercially reasonable. At
Landlord's option, Tenant shall [i] provide Landlord a full accounting of all
amounts received on account of Receivables with such frequency and in such form
as Landlord may require, either with or without applying all collections on
Receivables in payment of Tenant's Obligations or [ii] deliver to Landlord on
the day of receipt all such collections in the form received and duly endorsed
by Tenant. At Landlord's request, Tenant shall institute any action or enter
into any settlement determined by Landlord to be necessary to obtain recovery
or redress from any




                                       23
<PAGE>   25



account debtor in default of Receivables. Landlord may give notice of its
security interest in the Receivables to any or all account debtors with
instructions to make all payments on Receivables directly to Landlord, thereby
terminating Tenant's authority to collect Receivables. After terminating
Tenant's authority to enforce or collect Receivables, Landlord shall have the
right to take possession of any or all Receivables and records thereof and is
hereby authorized to do so, and only Landlord shall have the right to collect
and enforce the Receivables. Prior to the occurrence of an Event of Default, at
Tenant's cost and expense, but on behalf of Landlord and for Landlord's
account, Tenant shall collect or otherwise enforce all amounts unpaid on
Receivables and hold all such collections in trust for Landlord, but Tenant may
commingle such collections with Tenant's own funds, until Tenant's authority to
do so has been terminated, which may be done only after an Event of Default.
Notwithstanding any other provision hereof, Landlord does not assume any of
Tenant's obligations under any Receivable, and Landlord shall not be
responsible in any way for the performance of any of the terms and conditions
thereof by Tenant.

                           (i) Without waiving any prior or subsequent Event of
Default, Landlord may waive any Event of Default or, with or without waiving
any Event of Default, remedy any default.

                           (j) Landlord may terminate its obligation to
disburse Lease Advances.

                           (k) Landlord may enter and take possession of the
Land and Facility without terminating the Lease and complete renovation of the
Improvements (or any part thereof) and perform the obligations of Tenant under
this Lease. Without limiting the generality of the foregoing and for the
purposes aforesaid, Tenant hereby appoints Landlord its lawful attorney-in-fact
with full power to do any of the following: [i] complete renovation and
equipping of the Improvements in the name of Tenant; [ii] use unadvanced funds
remaining under the Lease Amount, or funds that may be reserved, escrowed, or
set aside for any purposes hereunder at any time, or to advance funds in excess
of the Lease Amount, to complete the Improvements; [iii] make changes in the
plans and specifications that shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the plans and
specifications; [iv] retain or employ new general contractors, subcontractors,
architects, engineers, and inspectors as shall be required for said purposes;
[v] pay, settle, or compromise all existing bills and claims, which may be
liens or security interests, or to avoid such bills and claims becoming liens
against the Facility or security interest against fixtures or equipment, or as
may be necessary or desirable for the completion of the construction and
equipping of the Improvements or for the clearance of title; [vi] do any and
every act that Tenant might do in its own behalf, to prosecute and defend all
actions or proceedings in connection with the Improvements; and [vii] to
execute, deliver and file all applications and other documents and take any and
all actions necessary to transfer the operations of the Facility to Landlord or
Landlord's designee. This power of attorney is a power coupled with an interest
and cannot be revoked.

                  8.3 Right of Set-Off. After an Event of Default occurs
hereunder and is continuing, Landlord may, and is hereby authorized by Tenant
to, at any time and from time to time without advance notice to Tenant (any such
notice being expressly waived by Tenant),




                                       24
<PAGE>   26



set-off and apply any and all sums held by Landlord, any indebtedness of
Landlord to Tenant, and any claims by Tenant against Landlord, against any
obligations of Tenant hereunder and against any claims by Landlord against
Tenant, whether or not such obligations or claims of Tenant are matured and
whether or not Landlord has exercised any other remedies hereunder. The rights
of Landlord under this section are in addition to any other rights and remedies
Landlord may have against Tenant.

                  8.4 Performance of Tenant's Covenants. Landlord may perform
any obligation of Tenant which Tenant has failed to perform within 10 days after
Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
Overdue Rate (as defined in Section 8.6).

                  8.5 Late Payment Charge. Tenant acknowledges that any default
in the payment of any installment of Rent payable hereunder will result in loss
and additional expense to Landlord in servicing any indebtedness of Landlord
secured by the Leased Property, handling such delinquent payments, and meeting
its other financial obligations, and because such loss and additional expense is
extremely difficult and impractical to ascertain, Tenant agrees that in the
event any Rent payable to Landlord hereunder is not paid within 10 days after
the due date, Tenant shall pay a late charge of 5% of the amount of the overdue
payment as a reasonable estimate of such loss and expenses, unless applicable
law requires a lesser charge, in which event the maximum rate permitted by such
law may be charged by Landlord. The 10 day grace period set forth in this
section shall not extend the time for payment of Rent or the period for curing
any default or constitute a waiver of such default.

                  8.6 Interest. In addition to the late payment charge, any
payment not made by Tenant within 10 days after the due date shall thereafter
bear interest at the rate (the "Overdue Rate") of the greater of [i] 18.5% per
annum; or [ii] 2.5% per annum above the Lease Rate then in effect (except that
if this Lease is governed by Texas law, the Overdue Rate shall be 18.0% per
annum); provided, however, that at no time will Tenant be required to pay
interest at a rate higher than the maximum legal rate and, provided further,
that if a court of competent jurisdiction determines that any other charges
payable under this Lease are deemed to be interest, the Overdue Rate shall be
adjusted to ensure that the aggregate interest payable under this Lease does not
accrue at a rate in excess of the maximum legal rate. Tenant shall not be
required to pay interest upon any late payment fees assessed pursuant to Section
8.5.

                  8.7 Litigation; Attorneys' Fees. Within five days after Tenant
has knowledge of any litigation or other proceeding that may be instituted
against Tenant that is material to the construction or operation of the Facility
or that is material to Tenant's business or financial condition, against the
Leased Property to secure or recover possession thereof, or that may affect the
title to or the interest of Landlord in the Leased Property, Tenant shall give
written notice thereof to Landlord. Tenant shall pay all reasonable costs and
expenses incurred by Landlord in enforcing or preserving Landlord's rights under
this Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including without limitation, [i] the fees,
expenses, and costs of any litigation, receivership, administrative, bankruptcy,
insolvency or other similar proceeding; [ii] reasonable attorney, paralegal,
consulting and witness




                                       25
<PAGE>   27



fees and disbursements, whether in house counsel or outside counsel; and [iii]
the expenses, including without limitation, lodging, meals, and transportation,
of Landlord and its employees, agents, attorneys, and witnesses in preparing
for litigation, administrative, bankruptcy, insolvency or other similar
proceedings and attendance at hearings, depositions, and trials in connection
therewith. All such costs, charges and fees payable by Tenant shall be deemed
to be Additional Rent under this Lease.

                  8.8 Escrows and Application of Payments. As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title, and interest in and to all monies escrowed with Landlord under
this Lease and all deposits with utility companies, taxing authorities and
insurance companies; provided, however, that Landlord shall not exercise its
rights hereunder until an Event of Default has occurred. Any payments received
by Landlord under any provisions of this Lease during the existence or
continuance of an Event of Default shall be applied to Tenant's obligations in
the order which Landlord may determine.

                  8.9 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.

                        ARTICLE 9: DAMAGE AND DESTRUCTION

                  9.1 Notice of Casualty. If the Leased Property shall be
destroyed, in whole or in part, or damaged by fire, flood, windstorm or other
casualty (a "Casualty"), Tenant shall give written notice thereof to the
Landlord within three business days after the occurrence of the Casualty. Within
15 days after the occurrence of the Casualty or as soon thereafter as such
information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord: [i] the date of the Casualty; [ii] the nature
of the Casualty; [iii] a description of the damage or destruction caused by the
Casualty including the type of Leased Property damaged and the area of the
Improvements damaged; [iv] a preliminary estimate of the cost to repair,
rebuild, restore or replace the Leased Property; [v] a preliminary estimate of
the schedule to complete the repair, rebuilding, restoration or replacement of
the Leased Property; [vi] a description of the anticipated property insurance
claim including the name of the insurer, the insurance coverage limits, the
deductible amount, the expected settlement amount, and the expected settlement
date; and [vii] a description of the business interruption claim including the
name of the insurer, the insurance coverage limits, the deductible amount, the
expected settlement amount, and the expected settlement date. Within five days
after request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.

                  9.2 Substantial Destruction.

                  9.2.1 If the Improvements are substantially destroyed at any
time other than during the final 18 months of the Initial Term or any Renewal
Term, Tenant shall promptly rebuild and restore the Leased Property in
accordance with Section 9.4 through Section 9.9 and Landlord shall make the
insurance proceeds available to Tenant for such restoration. The term
"substantially




                                       26
<PAGE>   28
destroyed" means any casualty resulting in the loss of use of 35% or more of the
licensed beds or units at any one Facility.

                  9.2.2 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or any Renewal Term, Tenant shall have
the option to either [i] rebuild the Leased Property in accordance with Section
9.4 through Section 9.9; or [ii] terminate this Lease; subject, however, to the
following conditions. In order for Tenant to elect to rebuild the Leased
Property, Tenant must satisfy the following conditions within 60 days after the
occurrence of the damage: [i] Tenant must give irrevocable notice to Landlord of
Tenant's election to rebuild and Tenant's election to either [a] renew this
Lease pursuant to Section 9.2.3 (if the damage occurred during the Initial
Term), or [b] purchase the Leased Property in accordance with the applicable
provisions of this Article 9 and Article 13; and [ii] if Tenant elects to renew
this Lease, each Phase IV Tenant must give irrevocable notice to Landlord that
such Phase IV Tenant elects to renew its respective Phase IV Lease or, if Tenant
elects to purchase, each Phase IV Tenant must give irrevocable notice to
Landlord that such Phase IV Tenant elects to purchase the Leased Property
subject to its respective Phase IV Lease. In order for Tenant to elect to
terminate this Lease, Tenant must give irrevocable notice to Landlord, within 60
days after the occurrence of the damage, of Tenant's election to terminate this
Lease; provided, however, that Tenant shall pay to Landlord all Rent and all
other obligations accrued under this Lease through the effective date of
termination and, if the amount of insurance proceeds received or to be received
by Landlord is less than the Lease Amount, Tenant shall pay to Landlord the
amount by which the Lease Amount exceeds the amount of insurance proceeds.
Termination of this Lease shall not be effective until all such amounts have
been paid by Tenant to Landlord and the insurance proceeds have been paid to
Landlord.

                  The failure of Tenant to give Landlord notice of Tenant's
election within 60 days after the occurrence of the damage shall constitute an
election to terminate and Tenant shall be liable to Landlord for all Rent and
other obligations under this Lease and the amount, if any, by which the Lease
Amount exceeds the amount of insurance proceeds received by Landlord.

                  9.2.3 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term and if Tenant and each Phase IV Tenant
give irrevocable notice to Landlord of its respective election to renew, the
current Term of each Phase IV Lease shall continue until its expiration date and
the Renewal Term shall commence on the day following the expiration date. All
other terms of each Phase IV Lease for the Renewal Term shall be in accordance
with Article 12 of such Phase IV Lease. The Leased Property will be restored by
Tenant in accordance with Section 9.4 through Section 9.9.

                  9.2.4 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or the Renewal Term and if Tenant and
each Phase IV Tenant gives irrevocable notice to Landlord of its respective
election to purchase its respective Leased Property, the purchase price will be
the Fair Market Value determined in accordance with Section 12.2(d). For
purposes of determining the Fair Market Value, the Leased Property will be
valued as if it had been restored to be equal in value to the Leased Property
existing immediately prior to the occurrence of the damage. All other terms of
such purchase shall be in accordance with Article 13. The closing shall occur
not more than 60 days after the Fair Market Value of the



                                       27
<PAGE>   29



Leased Property has been determined. Landlord shall hold the insurance proceeds
until the closing of the purchase of the Leased Property and at closing shall
deliver the proceeds to Tenant.

                  9.3 Partial Destruction. If the Leased Property is not
substantially destroyed, then Tenant shall comply with the provisions of Section
9.4 and Landlord shall make the insurance proceeds available to Tenant for such
restoration.

                  9.4 Restoration. Tenant shall promptly repair, rebuild, or
restore the Leased Property, at Tenant's expense, so as to make the Leased
Property at least equal in value to the Leased Property existing immediately
prior to such occurrence and as nearly similar to it in character as is
practicable and reasonable. Before beginning such repairs or rebuilding, or
letting any contracts in connection with such repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not unreasonably
withhold or delay, plans and specifications meeting the requirements of Section
16.2 for such repairs or rebuilding. Promptly after receiving Landlord's
approval of the plans and specifications and receiving the proceeds of
insurance, Tenant will begin such repairs or rebuilding and will prosecute the
repairs and rebuilding to completion with diligence, subject, however, to
strikes, lockouts, acts of God, embargoes, governmental restrictions, and other
causes beyond Tenant's reasonable control. Landlord will make available to
Tenant the net proceeds of any fire or other casualty insurance paid to Landlord
for such repair or rebuilding as the same progresses. Tenant shall be
responsible for collection of the insurance proceeds, subject to Landlord's
prior reasonable consent to any settlement, and Tenant shall bear all costs of
collection, including attorneys' fees. Payments will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord. Prior to commencing the repairing or rebuilding, Tenant shall
deliver to Landlord for Landlord's approval a schedule setting forth the
estimated monthly draws for such work. Landlord will contribute to such payments
out of the insurance proceeds an amount equal to the proportion that the total
net amount received by Landlord from insurers bears to the total estimated cost
of the rebuilding or repairing, multiplied by the payment by Tenant on account
of such work. Landlord may, however, withhold 10% from each payment due
subcontractors until the work is completed and proof has been furnished to
Landlord that no lien or liability has attached or will attach to the Leased
Property or to Landlord in connection with such repairing or rebuilding. Upon
the completion of rebuilding and the furnishing of such proof, the balance of
the net proceeds of such insurance payable to Tenant on account of such
repairing or rebuilding will be paid to Tenant. Tenant will obtain and deliver
to Landlord a temporary or final certificate of occupancy before the Leased
Property is reoccupied for any purpose. Tenant shall complete such repairs or
rebuilding in accordance with the building codes and all applicable laws,
ordinances, regulations, or orders of any state, municipal, or other public
authority affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body. Any
remaining proceeds of insurance after such restoration will be Tenant's
property.

                  9.5 Insufficient Proceeds. If the proceeds of any insurance
settlement are not sufficient to pay the costs of Tenant's repair, rebuilding or
restoration under  Section  9.4 in full, Tenant shall deposit with Landlord at
Landlord's option, and within 20 days of Landlord's request, an amount
sufficient in Landlord's reasonable judgment to complete such repair, rebuilding
or



                                       28
<PAGE>   30



restoration. Tenant shall not, by reason of the deposit or payment, be entitled
to any reimbursement from Landlord or diminution in or postponement of the
payment of the Rent.

                  9.6 Not Trust Funds. Notwithstanding anything herein or at law
or equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.

                  9.7 Landlord's Inspection. During the progress of such repairs
or rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specifications. Upon the
receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies, omissions, or such other respect. Tenant's obligations to supply
insurance, according to Article 4, will be applicable to any repairs or
rebuilding under this section.

                  9.8 Landlord's Costs. Tenant shall, within 30 days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith. With respect to any inspections by the
architect or engineer employed by Landlord, Tenant shall pay no more than
$500.00 per day plus out of pocket expenses for travel, lodging, food and
transportation.

                  9.9 No Rent Abatement. Except to the extent that business
interruption insurance proceeds are received by Landlord, Rent will not abate
pending the repairs or rebuilding of the Leased Property.

                            ARTICLE 10: CONDEMNATION

                  10.1 Total Taking. If, by exercise of the right of eminent
domain or by conveyance made in response to the threat of the exercise of such
right ("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the




                                       29
<PAGE>   31



property of the Landlord, except for damages awarded to Tenant as compensation
for diminution in value of the leasehold of the Leased Property provided the
award to Landlord is not less than the Lease Amount.

                  10.1.1 If the entire Leased Property is taken during the final
18 months of the Initial Term or the Renewal Term and Landlord elects to
terminate each Phase IV Lease, Tenant shall have the option to purchase each
Phase IV Facility (but not less than all Phase IV Facilities). Tenant shall give
Landlord notice of Tenant's election to purchase within 15 days after delivery
of the notice of Landlord's intent to terminate. If Tenant elects to purchase
each Phase IV Facility, the purchase price shall be the Fair Market Value as
determined in accordance with Section 12.2(d). All other terms of the option to
purchase shall be in accordance with Article 13.

                  10.2 Partial Taking. If, after a Taking, so much of the Leased
Property remains that the Leased Property can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
the Leased Property in the condemning authority or the taking of possession of
the Leased Property by the condemning authority; [ii] at its cost, Tenant shall
restore so much of the Leased Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iii] upon
completion of the restoration, Landlord will pay Tenant the lesser of the net
award made to Landlord on the account of the Taking (after deducting from the
total award, attorneys', appraisers', and other reasonable fees and costs
incurred in connection with the obtaining of the award and amounts paid to the
holders of mortgages secured by the Leased Property), or Tenant's actual
out-of-pocket costs of restoring the Leased Property; and [iv] Landlord shall be
entitled to the balance of the net award. The restoration shall be completed in
accordance with Section 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed
to apply to condemnation instead of casualty.

                  10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding
anything in this Lease or at law or equity to the contrary, none of the
condemnation award paid to Landlord shall be deemed trust funds, and Landlord
shall be entitled to dispose of such proceeds as provided in this Article 10.
Tenant expressly assumes all risk of loss, including a decrease in the use,
enjoyment, or value, of the Leased Property from any Condemnation.

                          ARTICLE 11: TENANT'S PROPERTY

                  11.1 Tenant's Property. Tenant shall install, place, and use
on the Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "Tenant's Property".

                  11.2 Requirements for Tenant's Property. Tenant shall comply
with all of the following requirements in connection with Tenant's Property:



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<PAGE>   32


                           (a) Tenant shall, at Tenant's sole cost and expense,
maintain, repair, and replace Tenant's Property.

                           (b) Tenant shall, at Tenant's sole cost and expense,
keep Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, earthquake, and other physical loss
perils commonly covered by fire and extended coverage, boiler and machinery, and
difference in conditions insurance in an amount not less than 90% of the then
full replacement cost thereof. Tenant shall use the proceeds from any such
policy for the repair and replacement of Tenant's Property.

                           (c) Tenant shall pay all taxes applicable to Tenant's
Property.

                           (d) If Tenant's Property is damaged or destroyed by
fire or any other cause, Tenant shall promptly repair or replace Tenant's
Property unless Landlord elects to terminate this Lease pursuant to Section
9.2.2.

                           (e) Unless an Event of Default or any event which,
with the giving of notice or lapse of time, or both, would constitute an Event
of Default has occurred, Tenant may remove Tenant's Property from the Leased
Property from time to time provided that [i] the items removed are not required
to operate the Leased Property for the Facility Uses (unless such items are
being replaced by Tenant); and [ii] Tenant repairs any damage to the Leased
Property resulting from the removal of Tenant's Property.

                           (f) Tenant shall not, without the prior written
consent of Landlord or as otherwise provided in this Lease, remove any Tenant's
Property or Leased Property. Tenant shall, at Landlord's option, remove Tenant's
Property upon the termination or expiration of this Lease and shall repair any
damage to the Leased Property resulting from the removal of Tenant's Property.
If Tenant fails to remove Tenant's Property within 30 days after request by
Landlord, then Tenant shall be deemed to have abandoned Tenant's Property,
Tenant's Property shall become the property of Landlord, and Landlord may
remove, store and dispose of Tenant's Property. In such event, Tenant shall have
no claim or right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such removal.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.

                           (g) Tenant shall perform its obligations under any
equipment lease or security agreement for Tenant's Property. For equipment loans
or leases for equipment having an original cost in excess of $50,000.00, Tenant
shall cause such equipment lessor or lender to enter into a nondisturbance
agreement with Landlord upon terms and conditions acceptable to Landlord,
including without limitation, the following: [i] Landlord shall have the right
(but not the obligation) to assume such equipment lease or security agreement
upon the occurrence of an Event of Default by Tenant hereunder; [ii] such
equipment lessor or lender shall notify Landlord of any default by Tenant under
the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default; and [iii] Landlord shall have the right to
assign its



                                       31
<PAGE>   33



interest in the equipment lease or security agreement and nondisturbance
agreement. Tenant shall, within 30 days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
and approving the equipment lease, security agreement and nondisturbance
agreement, including without limitation, reasonable attorneys' fees and costs.

                           ARTICLE 12: RENEWAL OPTIONS

                  12.1 Renewal Options. Tenant has the option to renew ("Renewal
Option") this Lease for one 15-year renewal term ("Renewal Term"). Tenant can
exercise each Renewal Option only upon satisfaction of the following conditions:

                           (a) There shall be no uncured Event of Default, or
any event which with the passage of time or giving of notice would constitute an
Event of Default, at the time Tenant exercises its Renewal Option nor on the
date the Renewal Term is to commence.

                           (b) Tenant shall give Landlord irrevocable written
notice of renewal ("Renewal Notice") no later than the date which is [i] 90 days
prior to the expiration date of the Initial Term; or [ii] if applicable, 15 days
after the occurrence of the substantial destruction of the Improvements as set
forth in Sections 9.2.2 and 9.2.3.

                           (c) Each Phase IV Tenant shall concurrently give
irrevocable notice of renewal for each Phase IV Lease.

                  12.2 Effect of Renewal. The following terms and conditions
will be applicable if Tenant renews the Lease:

                           (a) Effective Date. The effective date of the Renewal
Term will be the first day after the expiration date of the Initial Term. The
first day of the Renewal Term is also referred to as the Renewal Date.

                           (b) Lease Amount. Effective as of the Renewal Date, a
single Lease Amount will be computed by summing all Lease Advance Amounts
(including the Acquisition Amount).

                           (c) Lease Rate. Effective as of the Renewal Date, a
single Lease Rate will be computed equal to the Renewal Rate. The Renewal Rate
for the Renewal Term shall be the fair market value lease rate for this type of
lease as determined in accordance with the following provisions. The parties
shall attempt to determine the fair market value lease rate by mutual agreement
within 15 days after the date Tenant gives the Renewal Notice. If the parties do
not agree on such lease rate within the 15 day period, the appraisal procedure
set forth in Section 12.2(d) shall be used. The appraisers shall be instructed
to appraise the fair market value lease rate as a financing lease rate for a
health care facility of the same type as the Facility. The appraised rates
submitted by the three appraisers shall be ranked from highest to lowest, the
rate (highest or lowest) which is furthest from the middle rate shall be
discarded, and the remaining two appraised rates shall be averaged to arrive at
the appraised lease rate. The Renewal Rate shall be the appraised lease rate
provided, however, that Landlord shall not be obligated to renew




                                       32
<PAGE>   34



this Lease at a Renewal Rate less than the lease rate then being charged by
Landlord to tenants of comparable creditworthiness for comparable facilities.

                           (d) Fair Market Value. The fair market value lease
rate or fair market value, as the case may be (the "Fair Market Value"), of the
Leased Property shall be determined as follows:

                                    (i) Landlord and Tenant shall each give the
other party notice of the name of a qualified MIA or SRA appraiser 15 days after
giving of the Renewal Notice. The two appraisers will then select a third
appraiser within an additional five days. Each appraiser must demonstrate to the
reasonable satisfaction of both Landlord and Tenant that it has significant
experience in appraising assisted living and other health care properties
substantially similar to the Leased Property. Within five days after
designation, each appraiser shall submit a resume to Landlord and Tenant setting
forth such appraiser's qualifications including education and experience with
similar properties. A notice of objections to the qualifications of any
appraiser shall be given within 10 days after receipt of such resume. If a party
fails to timely object to the qualifications of an appraiser, then the appraiser
shall be conclusively deemed satisfactory. If a party gives a timely notice of
objection to the qualifications of an appraiser, then the disqualified appraiser
shall be replaced by an appraiser selected by the qualified appraisers or, if
all appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.

                                    (ii) The Fair Market Value shall be
determined by the appraisers within 60 days after the appointment of the
appraisers as follows. Each of the appraisers shall be instructed to prepare an
appraisal of the Leased Property in accordance with the following instructions:

                  The Leased Property is to be valued upon the three
                  conventional approaches to estimate value known as the Income,
                  Sales Comparison and Cost Approaches. Once the approaches are
                  completed, the appraiser correlates the individual approaches
                  into a final value conclusion.

The three approaches to estimate value are summarized as follows:

                  INCOME APPROACH: This valuation approach recognizes that the
                  value of the operating tangible and intangible asset can be
                  represented by the expected economic viability of the business
                  giving returns on and of the assets and shall use a management
                  fee of 7%.

                  SALES COMPARISON APPROACH: This valuation approach is based
                  upon the principle of substitution. When a facility is
                  replaceable in the market, the market approach assumes that
                  value tends to be set at the price of acquiring an equally
                  desirable substitute facility. Since healthcare market
                  conditions change and frequently are



                                       33
<PAGE>   35




                  subject to regulatory and financing environments, adjustments
                  need to be considered. These adjustments also consider the
                  operating differences such as services and demographics.

                  COST APPROACH: This valuation approach estimates the value of
                  the tangible assets only. Value is represented by the market
                  value of the land plus the depreciated reproduction cost of
                  all improvements and equipment.

In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangibles and intangible assets,
consider the operating characteristics of the business and have the most
significant influence on attracting potential investors.

The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.

                                    (iii) Tenant shall pay, or reimburse
Landlord for, all costs and expenses in connection with the appraisals.

                           (e) Base Rent. Effective as of the Renewal Date, the
annual Base Rent will be changed to equal the product of [i] the Lease Amount on
the applicable Renewal Date times [ii] the new Lease Rate equal to the Renewal
Rate.

                           (f) Other Terms and Conditions. Except for the
modifications set forth in this Section 12.2, all other terms and conditions of
the Lease will remain the same for the Renewal Term. The Lease Rate and Base
Rent will increase annually as set forth in Section 2.2.

                  12.3 Effect of Non-Renewal or Expiration of Lease. The
following terms and conditions will be applicable if Tenant does not renew this
Lease:

                           (a) Extension of Current Term. The Initial Term will
be extended for 180 days (the "Extended Term").

                           (b) Lease Payments. During the Extended Term, Tenant
shall continue to make monthly payments of Rent (including Base Rent) based upon
the then existing Lease Rate.

                       ARTICLE 13: RIGHT OF FIRST REFUSAL

                  13.1 Right of First Refusal.

                  Tenant shall have a right of first refusal to purchase the
Facility. If at any time during the Term, Landlord shall receive a bona fide
offer ("Offer") from a third person for the



                                       34
<PAGE>   36



purchase of the Leased Property, which Offer Landlord desires to accept,
Landlord shall promptly deliver to Tenant a copy of such Offer. Tenant shall
have the right for a period of 60 days thereafter to elect to purchase the
Leased Property on the same terms and conditions as those set forth in the
Offer. If Tenant elects to purchase the Leased Property, Tenant must give
written notice thereof to Landlord no later than the 60th day after the date
Landlord delivers the Offer to Tenant. If Tenant does not elect to exercise its
right of first refusal as set forth in this section, Landlord shall be free to
sell and convey the Leased Property to the third party purchaser in accordance
with the terms and provisions of the Offer, subject to this Lease. In the event
that Landlord does not consummate the sale of the Leased Property to such
purchaser, Tenant's right of first refusal under this section shall remain
applicable to subsequent bona fide offers from third persons.

                  13.2 Closing. The purchase of the Leased Property by Tenant
shall close in accordance with the Offer. At the closing, Tenant shall pay the
Purchase Price and all closing costs in immediately available funds and Landlord
shall convey title to the Leased Property to Tenant or to Tenant's assignee by a
recordable limited warranty deed subject only to Permitted Exceptions and
encumbrances approved in writing by Tenant and limited warranty bill of sale.
The warranties provided for in such documents shall not be limited by any
limitations upon Landlord's liability as provided in this Lease. Landlord shall
also execute those affidavits reasonably required by the title company for the
issuance of an owner's policy of title insurance.

                  13.3 Failure to Close. If Tenant for any reason fails to
purchase the Leased Property after Tenant has accepted the Offer, then Tenant
shall pay Landlord all costs and expenses incurred by Landlord as a result of
the failure to close including costs of unwinding swap transactions or other
interest rate protection devices and preparing for the closing. Tenant shall
continue to be obligated as lessee hereunder for the remainder of the Term
(including the Extended Term as set forth in Section 12.3).

                  13.4 Failure to Exercise Renewal Option. If Tenant for any
reason does not exercise its Renewal Option in accordance with the terms and
conditions of this Lease before the expiration of the then current Term, Tenant
shall be deemed to have forfeited its equity contribution and all proprietary
and ownership interest in the Leased Property.

                         ARTICLE 14: NEGATIVE COVENANTS

                  Until Tenant's Obligations shall have been performed in full,
Tenant covenants and agrees that Tenant shall not do any of the following
without the prior written consent of Landlord which consent shall not be
unreasonably withheld:

                  14.1 No Debt. Tenant shall not create, incur, assume, or
permit to exist any indebtedness related to the Facility other than [i] trade
debt incurred in the ordinary course of Tenant's business; [ii] indebtedness for
Facility working capital purposes in an amount not to exceed $150,000.00; [iii]
indebtedness that is secured by any Permitted Lien; and [iv] unsecured
indebtedness that will not cause Tenant to be in violation of Section 15.7.



                                       35
<PAGE>   37



                  14.2 No Liens. Tenant shall not create, incur, or permit to
exist any lien, charge, encumbrance, easement or restriction upon the Leased
Property or any lien upon or pledge of any interest in Tenant related to the
Facility, except for Permitted Liens.

                  14.3 No Guaranties. Tenant shall not create, incur, assume, or
permit to exist any guarantee of any loan or other indebtedness except for the
endorsement of negotiable instruments for collection in the ordinary course of
business or guaranties that will not cause Tenant to be in violation of Section
15.7.

                  14.4 No Transfer. Tenant shall not sell, lease, sublease,
mortgage, convey, assign or otherwise transfer any legal or equitable interest
in the Leased Property or any part thereof, except for transfers made in
connection with any Permitted Lien and transfers to an Affiliate.

                  14.5 No Dissolution. Tenant shall not dissolve, liquidate,
merge, consolidate or terminate its existence or sell, assign, lease, or
otherwise transfer (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
except for mergers, consolidations or other structural changes in Tenant that
will not cause Tenant to be in violation of Section 15.7.

                  14.6 [INTENTIONALLY OMITTED]

                  14.7 No Investments. Tenant shall not purchase or otherwise
acquire, hold, or invest in securities (whether capital stock or instruments
evidencing indebtedness) of or make loans or advances to any person, including,
without limitation, any Affiliate, or any shareholder, member or partner of
Tenant, or any Affiliate, except for cash balances temporarily invested in
short-term or money market securities and except for purchases, acquisitions,
advances, investments or loans that will not cause Tenant to be in violation of
Section 15.7.

                  14.8 Contracts. Tenant shall not execute or modify any
material contracts or agreements with respect to the Facility except for
contracts and modifications approved by Landlord. Contracts made in the ordinary
course of business and in an amount less than $150,000.00 shall not be
considered "material" for purposes of this paragraph.

                  14.9 Subordination of Payments to Affiliates. After the
occurrence of an Event of Default and until such Event of Default is cured,
Tenant shall not make any payments or distributions (including, without
limitation, salary, bonuses, fees, principal, interest, dividends, liquidating
distributions, management fees, cash flow distributions or lease payments) to
any Affiliate, or any shareholder, member or partner of Tenant or any Affiliate,
except for ordinary payroll.

                  14.10 Change of Location or Name. Tenant shall not change any
of the following without giving Landlord at least 60 days' advance written
notice: [i] the location of the principal place of business or chief executive
office of Tenant, or any office where any of Tenant's books and records are
maintained; or [ii] the name under which Tenant conducts any of its business or
operations.



                                       36
<PAGE>   38



                        ARTICLE 15: AFFIRMATIVE COVENANTS

                  15.1 Perform Obligations. Tenant shall perform all of its
obligations under this Lease, the Government Authorizations, the Permitted
Exceptions, and all Legal Requirements. Tenant shall take all necessary action
to obtain all Government Authorizations required for the operation of the
Facility as soon as possible after the Effective Date.

                  15.2 Proceedings to Enjoin or Prevent Construction. If any
proceedings are filed seeking to enjoin or otherwise prevent or declare invalid
or unlawful Tenant's construction, occupancy, maintenance, or operation of the
Facility or any portion thereof, Tenant will cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse ruling or
decision, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any
temporary or permanent injunction that may be entered, and use its best efforts
to bring about a favorable and speedy disposition of all such proceedings and
any other proceedings.

                  15.3 Documents and Information.

                  15.3.1 Furnish Documents. Tenant shall periodically during the
term of the Lease deliver to Landlord the Annual Financial Statements, Periodic
Financial Statements and other documents described on Exhibit C within the
specified time periods. With each delivery of Annual Financial Statements and
Periodic Financial Statements to Landlord, Tenant shall also deliver to Landlord
a certificate signed by the Chief Financial Officer of Tenant, an Annual
Facility Financial Report or Quarterly Facility Financial Report, as applicable,
and a Quarterly Facility Accounts Receivable Aging Report all in the form of
Exhibit D. In addition, Tenant shall deliver to Landlord the Annual Facility
Financial Report and a Quarterly Facility Accounts Receivable Aging Report
(based upon internal financial statements) within 90 days after the end of each
fiscal year.

                  15.3.2 Furnish Information. Tenant shall [i] promptly supply
Landlord with such information concerning its financial condition, affairs and
property, as Landlord may reasonably request from time to time hereafter; [ii]
promptly notify Landlord in writing of any condition or event that constitutes a
breach or event of default of any term, condition, warranty, representation, or
provisions of this Agreement or any other agreement, and of any material adverse
change in its financial condition; [iii] maintain a standard and modern system
of accounting; [iv] permit Landlord or any of its agent or representatives to
have access to and to examine all of its books and records regarding the
financial condition of the Facility at any time or times hereafter during
business hours and after reasonable oral or written notice; and [v] permit
Landlord to copy and make abstracts from any and all of said books and records.

                  15.3.3 Further Assurances and Information. Tenant shall, on
request of Landlord from time to time, execute, deliver, and furnish documents
as may be necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or any Facility as Landlord, or any existing or proposed creditor of



                                       37
<PAGE>   39



Landlord, or any auditor or underwriter of Landlord, may reasonably require from
time to time, including, without limitation, a current Tenant's Certificate and
Facility Financial Report in the form of Exhibit D.

                  15.3.4 Material Communications. Tenant shall transmit to
Landlord, within five business days after receipt thereof, any material
communication affecting the Facility, this Lease, the Legal Requirements or the
Government Authorizations, and Tenant will promptly respond to Landlord's
inquiry with respect to such information. Tenant shall promptly notify Landlord
in writing after Tenant has knowledge of any potential, threatened or existing
litigation or proceeding against, or investigation of, Tenant or the Facility
that may affect the right to operate the Facility or Landlord's title to the
Facility or Tenant's interest therein. Without otherwise limiting the term
"material" as used in the preceding sentence, any litigation or proceeding
involving a claim of $50,000.00 or more or involving a threatened or alleged
violation of an Environmental Law shall be deemed to be material.

                  15.3.5 Requirements for Financial Statements. Tenant shall
meet the following requirements in connection with the preparation of the
financial statements: [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles consistently applied;
[ii] all unaudited financial statements shall be prepared in a manner
substantially consistent with prior audited and unaudited financial statements
submitted to Landlord; [iii] all financial statements shall fairly present the
financial condition and performance for the relevant period in all material
respects; [iv] the financial statements shall include all notes to the financial
statements and a complete schedule of contingent liabilities and transactions
with Affiliates; and [v] the audited financial statements shall contain an
unqualified opinion, except to the extent such opinion references a change in
treatment made in accordance with generally accepted accounting principles.

                  15.3.6 Confidentiality. Landlord shall use reasonable efforts
not to disclose the information provided by Tenant under this Section 15.3;
provided, however, that Landlord may disclose such information to any person or
entity to whom Landlord is required to make such disclosure; to governmental
authorities; and to any other person or entity having a legitimate business
interest in the Landlord, including, but not limited to, regulators, auditors,
accountants, attorneys, investors, underwriters, rating agencies, bond or surety
companies, and lenders of Landlord (including, but not limited to, collateral
pool lenders and line of credit lenders).

                  15.4 Compliance With Laws. Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect.
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations. Tenant shall be
solely responsible for compliance with all Legal Requirements, including the
ADA, and Landlord shall have no responsibility for such compliance.

                  15.5 Broker's Commission. Tenant and Landlord shall indemnify
each other from claims of brokers arising by the execution hereof or the
consummation of the transactions




                                       38
<PAGE>   40



contemplated hereby and from expenses incurred by Landlord or Tenant in
connection with any such claims (including attorneys' fees).

                  15.6 Existence and Change in Control. Tenant or any entity
into which Tenant is merged shall maintain its existence throughout the term of
this Agreement.

                  15.7 Financial Covenants. The defined terms used in this
section are defined in Section 15.7.1. The method of calculating Net Worth and
valuing assets shall be consistent with the Financial Statements. The following
financial covenants shall be met throughout the term of this Lease:

                  15.7.1 Definitions.

                           (a) "Cash Flow" means the net income of Tenant as
reflected on the income statement of Tenant plus [i] the amount of the provision
for depreciation and amortization; [ii] the amount of the provision for
management fees; plus [iii] the amount of the provision for income taxes; plus
[iv] the amount of the provision for Rent payments and interest and lease
payments, if any; minus [v] an imputed management fee equal to 8% of revenues
(net of contractual allowances); and minus [vi] an imputed replacement reserve
of $300.00 per unit at the Facility, per year.

                           (b) "Coverage Ratio" is the ratio of [i] Cash Flow
for each applicable period; [ii] to the Rent payments due pursuant to this Lease
and all other debt service of Tenant and lease payments relating to the Leased
Property for the applicable period.

                           (c) "Net Worth" means an amount equal to the total
consolidated fair market value of the tangible assets of the entity (excluding
good will and other intangible assets) minus the total consolidated liabilities
of such entity.

                  15.7.2 Coverage Ratio. Tenant shall maintain a Coverage Ratio
of not less than 1.25 to 1.0 [i] during at least one month of the 8 month period
following the Commencement Date and [ii] for each fiscal year during the second
full year that the Facility is operational and for each year thereafter;
provided, however, that after two or more of Tenant's and Sterling's assisted
living facilities financed by Landlord are in their second full year of
operation, the Coverage Ratio for any one or more facilities may be as low as
1.15 to 1.0 if the collective Coverage Ratio for all such facilities (that are
in operation at least one year) is at least 1.25 to 1.0.

                  15.7.3 Shareholders' Equity. Tenant and its consolidated
subsidiaries shall maintain combined shareholders' equity and subordinated debt
of at least $10,000,000.00.

                  15.7.4 Current Ratio. Tenant and its consolidated subsidiaries
shall maintain for each fiscal quarter a ratio of current assets to current
liabilities of not less than 1.25 to 1.00 for the second full year that the
Facility is operational and for each year thereafter.



                                       39
<PAGE>   41



                  15.7.5 Minimum Cash Requirement. Tenant shall maintain cash
and cash equivalents of at least $500,000.00.

                  15.7.6 Working Capital. Tenant shall maintain available
working capital for the Facility in the amount not less than $100,000.00. The
available working capital may be included as part of the cash requirement under
Section 15.7.5.

                  15.8 Transfer of License. If this Lease is terminated due to
expiration of the Term, pursuant to an Event of Default or for any reason other
than Tenant's purchase of the Leased Property, or if Tenant vacates the Leased
Property without termination of this Lease, Tenant shall execute, deliver and
file all documents and statements requested by Landlord to effect the transfer
of the Facility license and Government Authorizations to an entity designated by
Landlord, subject to any required approval of governmental regulatory
authorities, and Tenant shall provide to Landlord all information and records
required by Landlord in connection with the transfer of the license and
Government Authorizations.

            ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS

                  16.1 Prohibition on Alterations and Improvements. Except for
Permitted Alterations (as hereinafter defined), Tenant shall not make any
structural or nonstructural changes, alterations, additions and/or improvements
(hereinafter collectively referred to as "Alterations") to the Leased Property.

                  16.2 Approval of Alterations. If Tenant desires to perform any
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Provided Tenant
has given Landlord written notice at the time of delivery of the Plans and
Specifications of the effect of Landlord's failure to respond, Landlord's
failure to respond within 60 days of receipt of Plans and Specifications shall
be deemed to constitute Landlord's approval. Within 30 days after receipt of an
invoice, Tenant shall reimburse Landlord for all costs and expenses incurred by
Landlord in reviewing and, if required, approving or disapproving the Plans and
Specifications, inspecting the Leased Property, and otherwise monitoring
compliance with the terms of this Article 16. Tenant shall comply with the
requirements of Section 16.4 in making any Permitted Alterations.

                  16.3 Permitted Alterations. Permitted Alterations means any
one of the following: [i] Alterations approved by Landlord; [ii] Alterations
required under Section 7.2; [iii] Alterations having a total cost of less than
$100,000.00; or [iv] repairs, rebuilding and restoration required or undertaken
pursuant to Section 9.4.

                  16.4 Requirements for Permitted Alterations. Tenant shall
comply with all of the following requirements in connection with any Permitted
Alterations:



                                       40
<PAGE>   42



                           (a) The Permitted Alterations shall be made in
accordance with the approved Plans and Specifications.

                           (b) The Permitted Alterations and the installation
thereof shall comply with all applicable legal requirements and insurance
requirements.

                           (c) The Permitted Alterations shall be done in a good
and workmanlike manner, shall not impair the value or the structural integrity
of the Leased Property, and shall be free and clear of all mechanic's liens.

                           (d) Tenant shall, at Tenant's expense, obtain a
builder's completed value risk policy of insurance insuring against all risks of
physical loss, including collapse and transit coverage, in a nonreporting form,
covering the total value of the work performed, and equipment, supplies, and
materials, and insuring initial occupancy. Landlord and any mortgagee of
Landlord shall be additional insureds of such policy. Landlord shall have the
right to approve the form and substance of such policy.

                           (e) Tenant shall pay the premiums required to
increase the amount of the insurance coverages required by Article 4 to reflect
the increased value of the Improvements resulting from installation of the
Permitted Alterations, and shall deliver to Landlord a certificate evidencing
the increase in coverage.

                           (f) Tenant shall, not later than 60 days after
completion of the Permitted Alterations, deliver to Landlord a revised
"as-built" survey of the Leased Property if the Permitted Alterations altered
the Land or "footprint" of the Improvements and an "as-built" set of Plans and
Specifications for the Permitted Alterations in form and substance satisfactory
to Landlord.

                           (g) Tenant shall, not later than 30 days after
Landlord sends an invoice, reimburse Landlord for any reasonable costs and
expenses, including attorneys' fees and architects' and engineers' fees,
incurred in connection with reviewing and approving the Permitted Alterations
and ensuring Tenant's compliance with the requirements of this section. The fee
for Landlord's consulting engineer is $500.00 per day plus out-of-pocket
expenses for travel, lodging, food and transportation.

                  16.5 Ownership and Removal of Permitted Alterations. The
Permitted Alterations shall become a part of the Leased Property, owned by
Landlord, and leased to Tenant subject to the terms and conditions of this
Lease. Tenant shall not be required or permitted to remove any Permitted
Alterations.

                  16.6 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease, Tenant shall, within 30 days after notice from Landlord, remove the signs
and restore the Leased Property to its original condition.



                                       41
<PAGE>   43



                             ARTICLE 17: [RESERVED]

               ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY

                  18.1 Prohibition on Assignment and Subletting. Tenant
acknowledges that Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant. Tenant may not assign,
mortgage, hypothecate, pledge, or transfer any interest in this Lease, or in the
Leased Property, in whole or in part, without the prior written consent of
Landlord, which Landlord may withhold in its sole and absolute discretion. The
following transactions will be deemed an assignment or sublease requiring
Landlord's prior written consent: [i] an assignment by operation of law (other
than as a result of mergers, consolidation or other structured changes in Tenant
that will not cause Tenant to be in violation of Section 15.7; [ii] an
imposition (whether or not consensual) of a lien, mortgage, or encumbrance upon
Tenant's interest in the Lease; and [iii] an arrangement (including but not
limited to, management agreements, concessions, licenses, and easements) which
allows the use or occupancy of all or part of the Leased Property by anyone
other than Tenant or any other permitted manager. Landlord's consent to any
assignment or sublease will not release Tenant (or any guarantor) from its
payment and performance obligations under this Lease, but rather Tenant, any
guarantor, and Tenant's assignee or sublessee will be jointly and severally
liable for such payment and performance. An assignment or sublease without the
prior written consent of Landlord will be void at the Landlord's option.
Landlord's consent to one assignment or sublease will not waive the requirement
of its consent to any subsequent assignment or sublease. Subject to the
foregoing and Section 18.2, Landlord shall consent to a sublease of the Facility
or a management agreement, provided the sublessee or manager is an Affiliate and
the execution of the sublease or management agreement does not result in a lapse
in licensure.

                  18.2 Requests for Landlord's Consent to Assignment, Sublease
or Management Agreement. If Tenant requests Landlord's consent to a specific
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that [a] such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; [b] such assignment,
sublease or management agreement may not be modified without the prior written
consent of Landlord not to be unreasonably withheld or delayed; [c] if this
Lease shall terminate before the expiration of such assignment, sublease or
management agreement, the assignee, subtenant or manager thereunder will, at
Landlord's option, attorn to Landlord and waive any right the assignee,
subtenant or manager may have to terminate the assignment, sublease or
management agreement or surrender possession thereunder as a result of the
termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or



                                       42
<PAGE>   44



payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured. Tenant hereby collaterally assigns
to Landlord, as security for the performance of its obligations hereunder, all
of Tenant's right, title, and interest in and to any assignment, sublease or
management agreement now or hereafter existing for all or part of the Leased
Property. Tenant shall, at the request of Landlord, execute such other
instruments or documents as Landlord may request to evidence this collateral
assignment. If Landlord, in its sole and absolute discretion, consents to such
assignment, sublease, or management agreement, such consent shall not be
effective until [i] a fully executed copy of the instrument of assignment,
sublease or management agreement has been delivered to Landlord; [ii] in the
case of an assignment, Landlord has received a written instrument in which the
assignee has assumed and agreed to perform all of Tenant's obligations under the
Lease; and [iii] Tenant has paid to Landlord a fee in the amount of $1,500.00;
and [iv] Landlord has received reimbursement from Tenant or the assignee for all
reasonable attorneys' fees and expenses and all other reasonable out-of-pocket
expenses incurred in connection with determining whether to give its consent,
giving its consent and all matters relating to the assignment.

                  18.3 Agreements with Residents. Notwithstanding Section 18.1,
Tenant may enter into an occupancy agreement with residents of the Leased
Property without the prior written consent of Landlord provided that [i] the
agreement does not provide for lifecare services (a single payment to provide
services for the remainder of occupants life); [ii] Tenant may not collect rent
for more than one month in advance except that Tenant may collect security
deposits in an amount that does not exceed two months rent; and [iii] all
residents of the Leased Property are accurately shown in Tenant's accounting
records.

                  18.4 Sale of Leased Property. If Landlord or any subsequent
owner of the Leased Property sells the Leased Property, its liability for the
performance of its agreements in this Lease will end on the date of the sale of
the Leased Property, and Tenant will look solely to the purchaser for the
performance of those agreements. Landlord shall remain liable to Tenant for any
breach of this Lease by Landlord that occurs during the period of Landlord's
ownership of the Leased Property. For purposes of this section, any holder of a
mortgage or security agreement which affects the Leased Property at any time,
and any landlord under any lease to which this Lease is subordinate at any time,
will be a subsequent owner of the Leased Property when it succeeds to the
interest of Landlord or any subsequent owner of the Leased Property.

                  18.5 Assignment by Landlord. Landlord may transfer, assign,
mortgage, collaterally assign, or otherwise dispose of Landlord's interest in
this Lease or the Leased Property.

                       ARTICLE 19: HOLDOVER AND SURRENDER

                  19.1 Holding Over. Should Tenant, with or without the express
or implied consent of Landlord, continue to hold and occupy the Leased Property
after the expiration of the Term, such holding over beyond the Term and the
acceptance or collection of Rent by the Landlord shall operate and be construed
as creating a tenancy from month-to-month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by




                                       43
<PAGE>   45



giving Tenant 10 days written notice, and at any time thereafter Landlord may
re-enter and take possession of the Leased Property.

                  19.2 Surrender. Except for [i] Permitted Alterations; [ii]
normal and reasonable wear and tear (subject to the obligation of Tenant to
maintain the Leased Property in good order and repair during the Term); and
[iii] damage and destruction not required to be repaired by Tenant, Tenant shall
surrender and deliver up the Leased Property at the expiration or termination of
the Term in as good order and condition as of the Commencement Date.

                             ARTICLE 20: [RESERVED]

           ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND
                             ESTOPPEL CERTIFICATES

                  21.1 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Lease, Tenant's possession of the Leased Property will
not be disturbed by Landlord.

                  21.2 Subordination. Subject to the terms and conditions of
this section, this Lease and Tenant's rights under this Lease are subordinate to
any ground lease or underlying lease, first mortgage, first deed of trust, or
other first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior. The foregoing subordination provision is
expressly conditioned upon any lessor or mortgagee being obligated and bound to
recognize Tenant as the tenant under this Lease, and such lessor or mortgagee
shall have no right to disturb Tenant's possession, use and occupancy of the
Leased Property or Tenant's enjoyment of its rights under this Lease unless and
until an Event of Default occurs hereunder. Any foreclosure action or proceeding
by any mortgagee with respect to the Leased Property shall not affect Tenant's
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this section, to confirm or effect any such
subordination, provided that any such document shall include a non-disturbance
provision as set forth in this section satisfactory to Tenant. Any mortgagee of
the Leased Property shall be deemed to be bound by the non-disturbance provision
set forth in this section. If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
section. This power of attorney is coupled with an interest and is irrevocable.

                  21.3 Attornment. If any holder of any mortgage, indenture,
deed of trust, or other similar instrument described in Section 21.2 succeeds to
Landlord's interest in the Leased




                                       44
<PAGE>   46



Property, Tenant will pay to such holder all Rent subsequently payable under
this Lease. Tenant shall, upon request of anyone succeeding to the interest of
Landlord, automatically become the tenant of, and attorn to, such successor in
interest without changing this Lease. The successor in interest will not be
bound by [i] any payment of Rent for more than one month in advance; [ii] any
amendment or modification of this Lease thereafter made without its consent as
provided in this Lease provided Tenant has knowledge that Landlord's interest
has been transferred and that such successor in interests consent is required;
[iii] any claim against Landlord arising prior to the date on which the
successor succeeded to Landlord's interest; or [iv] any claim or offset of Rent
against the Landlord. Upon request by Landlord or such successor in interest and
without cost to Landlord or such successor in interest, Tenant will execute,
acknowledge and deliver an instrument or instruments confirming the attornment.
If Tenant fails or refuses to execute, acknowledge, and deliver any such
instrument within 20 days after written demand, then Landlord or such successor
in interest will be entitled to execute, acknowledge, and deliver any document
on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby constitutes and
irrevocably appoints Landlord, its successors and assigns, as Tenant's
attorney-in-fact to execute, acknowledge, and deliver on behalf of Tenant any
such document. This power of attorney is coupled with an interest and is
irrevocable.

                  21.4 Estoppel Certificates. At the request of Landlord or any
mortgagee or purchaser of the Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of the Leased Property certifying the
following: [i] that the Lease is unmodified and in full force and effect, or if
there have been modifications that the same is in full force and effect as
modified and stating the modifications; [ii] the date to which Rent and other
charges have been paid; [iii] whether Tenant or Landlord is in default or
whether there is any fact or condition which, with notice or lapse of time, or
both, would constitute a default, and specifying any existing default, if any;
[iv] that Tenant has accepted and occupies the Leased Property; [v] that Tenant
has no defenses, set-offs, deductions, credits, or counterclaims against
Landlord, if that be the case, or specifying such that exist; and [vi] such
other information as may reasonably be requested by Landlord or any mortgagee or
purchaser. Any purchaser or mortgagee may rely on this estoppel certificate. If
Tenant fails to deliver the estoppel certificates to Landlord within 10 days
after the request of the Landlord, then Tenant shall be deemed to have certified
that [a] the Lease is in full force and effect and has not been modified, or
that the Lease has been modified as set forth in the certificate delivered to
Tenant; [b] Tenant has not prepaid any Rent or other charges except for the
current month; [c] Tenant has accepted and occupies the Leased Property; [d] to
Tenant's knowledge, neither Tenant nor Landlord is in default nor is there any
fact or condition which, with notice or lapse of time, or both, would constitute
a default; and [e] to Tenant's knowledge, Tenant has no defenses, set-offs,
deductions, credits, or counterclaims against Landlord. Tenant hereby
irrevocably appoints Landlord as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on Tenant's behalf any estoppel certificate to which
Tenant does not object within the time period specified in Landlord's
transmittal of the certificate to Tenant. This power of attorney is coupled with
an interest and is irrevocable.



                                       45
<PAGE>   47



                   ARTICLE 22: REPRESENTATIONS AND WARRANTIES

                  Tenant hereby makes the following representations and
warranties, as of the Effective Date, to Landlord and acknowledges that Landlord
is granting the Lease in reliance upon such representations and warranties.
Tenant's representations and warranties shall survive the Closing and, except to
the extent made as of a specific date, shall continue in full force and effect
until Tenant's Obligations have been performed in full.

                  22.1 Organization and Good Standing. Tenant is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in and is in good standing
under the laws of the State.

                  22.2 Power and Authority. Tenant has the power and authority
to execute, deliver and perform this Lease. Tenant has taken all requisite
action necessary to authorize the execution, delivery and performance of
Tenant's obligations under this Lease.

                  22.3 Enforceability. This Lease constitutes a legal, valid,
and binding obligation of Tenant enforceable in accordance with its terms.

                  22.4 Government Authorizations. The Facility is in compliance
with all Legal Requirements. All Government Authorizations are in full force and
effect. Except as otherwise noted in Exhibit E, Tenant holds all Government
Authorizations necessary for the operation of the Facility as a 42 unit/42 bed
assisted living facility. Seller presently holds all Government Authorizations
necessary for the Facility's operation as a 42 unit/42 bed assisted living
facility. Upon admission of residence, Tenant will be authorized to operate the
Facility as a 42 unit/42 bed assisted living facility until a license to operate
the Facility is issued to Tenant. Tenant has filed all applications and reports
and taken all necessary action to obtain all Government Authorizations as soon
as possible after the Effective Date, subject to governmental approval, and
Tenant has no knowledge of any fact or circumstance that would prevent or delay
Tenant's obtaining of such Government Authorizations.

                  22.5 Financial Statements. Tenant has furnished Landlord with
true, correct, and complete copies of the Financial Statements. The Financial
Statements fairly present the financial position of Tenant, as of the respective
dates and the results of operations for the periods then ended in conformance
with generally accepted accounting principles applied on a basis consistent with
prior periods. The Financial Statements and other information furnished to
Landlord are true, complete and correct and, as of the Effective Date, no
material adverse change has occurred since the furnishing of such statements and
information. As of the Effective Date, the Financial Statements and other
information do not contain any untrue statement or omission of a material fact
and are not misleading in any material respect. Tenant is solvent, and no
bankruptcy, insolvency, or similar proceeding is pending or contemplated by or,
to the knowledge of Tenant, against Tenant.

                  22.6 Condition of Facility. To the best of Tenant's knowledge,
all of the mechanical and electrical systems, heating and air-conditioning
systems, plumbing, water and sewer systems, and all other items of mechanical
equipment or appliances are in good working order,




                                       46
<PAGE>   48



condition and repair, are of sufficient size and capacity to service the
Facility for the Facility Uses and conform with all applicable ordinances and
regulations, and with all building, zoning, fire, safety, and other codes, laws
and orders. The Improvements, including the roof and foundation, are
structurally sound and free from leaks and other defects.

                  22.7 Compliance with Laws. To the best of Tenant's knowledge,
there is no violation of, or noncompliance with, [i] any laws, orders, rules or
regulations, ordinances or codes of any kind or nature whatsoever relating to
the Facility or the ownership or operation thereof (including without
limitation, building, fire, health, occupational safety and health, zoning and
land use, planning and environmental laws, orders, rules and regulations); [ii]
any covenants, conditions, restrictions or agreements affecting or relating to
the ownership, use or occupancy of the Facility; or [iii] any order, writ,
regulation or decree relating to any matter referred to in [i] or [ii] above.

                  22.8 No Litigation. As of the Effective Date [i] there are no
actions or suits, or any proceedings or investigations by any governmental
agency or regulatory body pending against Tenant or the Facility which, if
determined adversely to Tenant, would materially and adversely affect the
Facility, title thereto, operation thereof or the financial condition of Tenant
and Tenant has not received notice of any threatened actions, suits, proceedings
or investigations against Tenant or the Facility at law or in equity, or before
any governmental board, agency or authority, which, if determined adversely to
Tenant, would materially and adversely affect the Facility or title to the
Facility (or any part thereof), the right to operate the Facility as presently
operated, or the financial condition of Tenant; [ii] there are no unsatisfied or
outstanding material or adverse judgments against Tenant or the Facility; [iii]
there is no labor dispute materially and adversely affecting the operation or
business conducted by Tenant at the Facility; and [iv] Tenant has not been
notified in writing of any facts or circumstances which might reasonably form
the basis for any such action, suit, or proceeding.

                  22.9 Consents. The execution, delivery and performance of this
Lease will not require any consent, approval, authorization, order, or
declaration of, or any filing or registration with, any court, any federal,
state, or local governmental or regulatory authority, or any other person or
entity, the absence of which would materially impair the ability of Tenant to
operate the Facility as presently operated.

                  22.10 No Violation. The execution, delivery and performance of
this Lease [i] do not and will not conflict with, and do not and will not result
in a breach of the Articles of Incorporation or Bylaws of Tenant; [ii] do not
and will not conflict with, and do not and will not result in a breach of, and
do not and will not constitute a default under (or an event which, with or
without notice or lapse of time, or both, would constitute a default under), any
of the terms, conditions or provisions of any agreement or other instrument or
obligation to which Tenant is a party or by which its assets are bound; and
[iii] do not and will not violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Tenant or the Facility.

                  22.11 Reports and Statements. All reports, statements,
certificates and other data furnished by or on behalf of Tenant to Landlord in
connection with this Lease, and all representations and warranties made herein
or in any certificate or other instrument delivered in




                                       47
<PAGE>   49
connection herewith and therewith, are true and correct in all material respects
and do not omit to state any material fact or circumstance necessary to make the
statements contained herein or therein, in light of the circumstances under
which they are made, not misleading as of the date of such report, statement,
certificate or other data. The copies of all agreements and instruments
submitted to Landlord, including, without limitation, all agreements relating to
management of the Facility, the Letter of Credit, and Tenant's working capital
are true, correct and complete copies and include all amendments and
modifications of such agreements.

                  22.12 ERISA. All plans (as defined in Section 4021(a) of the
Employee Retirement Income Security Act of 1974, as amended or supplemented from
time to time ("ERISA")) for which Tenant is an "employer" or a "substantial
employer" (as defined in Sections 3(5) and 4001(a)(2) of ERISA,
respectively) are in compliance with ERISA and the regulations and published
interpretations thereunder. To the extent Tenant maintains a qualified defined
benefit pension plan: [i] there exists no accumulated funding deficiency; [ii]
no reportable event and no prohibited transaction has occurred; [iii] no lien
has been filed or threatened to be filed by the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA; and [iv]
Tenant has not been deemed to be a substantial employer.

                  22.13 Chief Executive Office. Tenant maintains its chief
executive office and its books and records at the address set forth in the
introductory paragraph of this agreement.

                  22.14 Other Name or Entities. Tenant has not, since November
1, 1997, [i] changed its name, [ii] used any name other than the name stated at
the beginning of this agreement, or other than names under which Tenant's
facilities do business, such as the name of the Facility, or [iii] merged or
consolidated with, or acquired any of the assets of, any corporation or other
business, other than acquisitions of operating facilities.

                  22.15 Parties in Possession. Except as disclosed on Exhibit B,
there are no parties in possession of any Leased Property or any portion thereof
as managers, lessees, tenants at sufferance, or trespassers.

                  22.16 Access. Access to the Land is directly from a dedicated
public right-of-way without any easement. To the knowledge of Tenant, there is
no fact or condition which would result in the termination or reduction of the
current access to and from the Land to such right-of-way.

                  22.17 Utilities. There are available at the Land gas,
municipal water, and sanitary sewer lines, storm sewers, electrical and
telephone services in operating condition which are adequate for the operation
of the Facility at a reasonable cost. The Land has direct access to utility
lines located in a dedicated public right-of-way without any easement. As of the
Effective Date, there is no pending or, to the knowledge of Tenant, threatened
governmental or third party proceeding which would impair or result in the
termination of such utility availability.

                  22.18 Condemnation and Assessments. As of the Effective Date,
Tenant has not received notice of, and there are no pending or, to the best of
Tenant's knowledge, threatened, condemnation, assessment or similar proceedings
affecting or relating to the Facility, or any




                                       48
<PAGE>   50
portion thereof, or any utilities, sewers, roadways or other public improvements
serving the Facility.

                  22.19 Zoning. As of the Effective Date, [i] the use and
operation of the Facility as a 42 unit/42 bed assisted living facility is a
permitted use under the applicable zoning code; [ii] except as disclosed on
Exhibit E hereto, no special use permits, conditional use permits, variances, or
exceptions have been granted or are needed for such use of each Facility; [iii]
the Land is not located in any special districts such as historical districts or
overlay districts; and [iv] the Facility has been constructed in accordance with
and complies with all applicable zoning laws, including but not limited to,
dimensional, parking, setback, screening, landscaping, sign and curb cut
requirements.

                  22.20 Pro Forma Statement. Tenant has delivered to Landlord a
true, correct and complete copy of the Pro Forma Statement. The Pro Forma
Statement shows Tenant's reasonable expectation of the most likely results of
Facility operations for the five year period.

                  22.21 Environmental Matters. During the period of Tenant's
ownership of the Leased Property, if any, and to the best of Tenant's knowledge
after diligent inquiry, for the period Tenant did not own the Leased Property,
[i] the Leased Property is in compliance with all Environmental Laws; [ii] there
were no releases of Hazardous Materials on, from, or under the Leased Property,
except in compliance with all Environmental Laws; [iii] no Hazardous Materials
have been, are or will be used, generated, stored, or disposed of on the Leased
Property, except in compliance with all Environmental Laws; [iv] no permit is or
has been required to be obtained by Tenant from the Environmental Protection
Agency or any similar agency or department of any state or local government for
the use or maintenance of any Improvements; and [v] no summons, citation or
inquiry has been made by any such environmental unit, body or agency or a third
party demanding any right of recovery for payment or reimbursement for costs
incurred under CERCLA or any other Environmental Laws and the Land is not
subject to the lien of any such agency. "Disposal" and "release" shall have the
meaning set forth in CERCLA.

                  22.22 Leases and Contracts. As of the Effective Date and
except as disclosed on Exhibit F, there are no leases or contracts (including
but not limited to, insurance contracts, maintenance contracts, construction
contracts, employee benefit plans, employment contracts, equipment leases,
security agreements, architect agreements, and management contracts) to which
Tenant is a party relating to any part of the ownership, operation, possession,
construction, management or administration of the Land or the Facility.

                  22.23 No Default. As of the Effective Date, [i] there is no
existing Event of Default under this Lease; and [ii] no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute or result in such an Event of Default. Except as disclosed to
Landlord in writing, Tenant and Sterling are not in default, after expiration of
any applicable grace period, under any Related Lease.

                  22.24 Tax Status. To the best of Tenant's knowledge, all
of the mechanical and electrical systems, heating and air conditioning systems,
plumbing, water and sewer systems, and




                                       49
<PAGE>   51



all other items of mechanical equipment or appliances are in good working order,
condition and repair, or of sufficient size and capacity to service the Facility
as presently operated, and conform with all applicable ordinances and
regulations, and with all building, zoning, fire, safety, and other codes, laws
and orders. The Improvements, including the roof and foundation, are
structurally sound and free from leaks and other defects.

                           ARTICLE 23: FUTURE PROJECTS

                  23.1 Obligation for Future Projects. Subject to the
requirements, terms and conditions of the Commitment and this Lease, Landlord
has committed to finance additional assisted living facilities to be developed
by Tenant, Sterling or an Affiliate ("Tenant Projects"). Landlord's obligation
to provide financing for each Tenant Project is subject to the satisfaction of
Landlord's due diligence requirements and the closing conditions set forth in
the Commitment.

                          ARTICLE 24: SECURITY INTEREST

                  24.1 Collateral. Tenant hereby grants to Landlord a security
interest in the following described property, whether now owned or hereafter
acquired by Tenant (the "Collateral"), to secure the payment and performance of
Tenant's obligations under this Lease:

                           (a) All machinery, furniture, equipment, trade
fixtures, appliances, inventory and all other goods (as "equipment," "inventory"
and "goods" are defined for purposes of Article 9 ("Article 9") of the Uniform
Commercial Code as adopted in the State) and any leasehold interest of Tenant in
any of the foregoing (except for any leasehold interest in property owned by
Landlord), now or hereafter located in or on or used or usable in connection
with the Land, Improvements, or Fixtures and replacements, additions, and
accessions thereto, including without limitation those items which are to become
fixtures or which are building supplies and materials to be incorporated into an
Improvement or Fixture.

                           (b) All accounts, contract rights, general
intangibles, instruments, documents, and chattel paper [as "accounts", "contract
rights", "general intangibles", "instruments", "documents", and "chattel paper",
are defined for purposes of Article 9] now or hereafter arising in connection
with the business located in or on or used or usable in connection with the
Land, Improvements, or Fixtures, and replacements, additions, and accessions
thereto.

                           (c) All franchises, permits, licenses, operating
rights, certifications, approvals, consents, authorizations and other general
intangibles regarding the use, occupancy or operation of the Improvements, or
any part thereof, including without limitation, certificates of need, state
health care facility licenses, and Medicare and Medicaid provider agreements, to
the extent permitted by law.

                           (d) Unless expressly prohibited by the terms thereof,
all contracts, agreements, contract rights and materials relating to the design,
construction or operation of the Improvements, including but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.




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<PAGE>   52



                           (e) All ledger sheets, files, records, computer
programs, tapes, other electronic data processing materials, and other
documentation relating to the preceding listed property or otherwise used or
usable in connection with the Land and Improvements.

                           (f) The products and proceeds of the preceding listed
property, including without limitation cash and non-cash proceeds, proceeds of
proceeds, and insurance proceeds.

                  24.2 Additional Documents. At the request of Landlord, Tenant
shall execute additional security agreements, financing statements, and such
other documents as may be requested by Landlord to maintain and perfect such
security interest. Tenant hereby irrevocably appoints Landlord, its successors
and assigns, as Tenant's attorney-in-fact to execute, acknowledge, deliver and
file such documents on behalf of Tenant. This power of attorney is coupled with
an interest and is irrevocable.

                  24.3 Notice of Sale. With respect to any sale or other
disposition of any of the Collateral after the occurrence of an Event of
Default, Landlord and Tenant agree that the giving of five days notice by
Landlord, sent by overnight delivery, postage prepaid, to Tenant's notice
address designating the time and place of any public sale or the time after
which any private sale or other intended disposition of such Collateral is to be
made, shall be deemed to be reasonable notice thereof and Tenant waives any
other notice with respect thereto.

                            ARTICLE 25: MISCELLANEOUS

                  25.1 Notices. Landlord and Tenant hereby agree that all
notices, demands, requests, and consents (hereinafter "notices") required to be
given pursuant to the terms of this Lease shall be in writing, shall be
addressed to the addresses set forth in the introductory paragraph of this
Lease, and shall be served by [i] personal delivery; [ii] United States mail,
postage prepaid; or [iii] nationally recognized overnight courier; provided,
however, that any notice of an Event of Default shall be served by (I) personal
delivery; (ii) certified United States mail, postage prepaid, return receipt
requested; or (iii) nationally recognized overnight courier. A copy of any
notice given to Tenant shall be sent to Miriam J. Dent, Esq., Rogers & Hardin,
229 Peachtree Street, N.E., 2700 International Tower, Peachtree Center, Atlanta,
Georgia 30303, but the failure to give the notice required by this sentence
shall not affect the validity or effectiveness of the notices to Tenant
hereunder. All notices shall be deemed to be given upon the earlier of actual
receipt or three business days after mailing, or one business day after deposit
with the overnight courier. Any notices meeting the requirements of this section
shall be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.

                  25.2 Advertisement of Leased Property. In the event the
parties hereto have not executed a renewal Lease within 120 days prior to the
expiration of this Lease, then Landlord or its agent shall have the right to
enter the Leased Property at all reasonable times for the purpose of exhibiting
the Leased Property to others and to place upon the Leased Property for and
during the period commencing 120 days prior to the expiration of this Lease,
"for sale" or "for rent" notices or signs.



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<PAGE>   53



                  25.3 Entire Agreement. The Commitment and this Lease
constitute the entire agreement between Landlord and Tenant with respect to the
subject matter hereof. No representations, warranties, and agreements have been
made by Landlord except as set forth in the Commitment and this Lease. If there
is any direct conflict between the terms and provisions of the Commitment and
the terms of this Lease, this Lease shall govern. Tenant hereby reaffirms the
Commitment and all provisions thereof. The Commitment shall survive the
execution of this Lease.

                  25.4 Severability. If any term or provision of this Lease is
held to be invalid or unenforceable, such holding shall not affect the remainder
of this Lease and the same shall remain in full force and effect, unless such
holding substantially deprives Tenant of the use of the Leased Property or
Landlord of the rents herein reserved, in which event this Lease shall forthwith
terminate as if by expiration of the Term.

                  25.5 Captions and Headings. The captions and headings are
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope of this Lease or the intent of any provision hereof.

                  25.6 Governing Law. This Lease shall be construed under the
laws of the State.

                  25.7 Memorandum of Lease. Tenant shall not record this Lease.
Tenant may, however, record a memorandum of lease approved by Landlord.

                  25.8 Waiver. No waiver by Landlord of any condition or
covenant herein contained, or of any breach of any such condition or covenant,
shall be held or taken to be a waiver of any subsequent breach of such covenant
or condition, or to permit or excuse its continuance or any future breach
thereof or of any condition or covenant, nor shall the acceptance of Rent by
Landlord at any time when Tenant is in default in the performance or observance
of any condition or covenant herein be construed as a waiver of such default, or
of Landlord's right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.

                  25.9 Binding Effect. This Lease will be binding upon and inure
to the benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.

                  25.10 Power of Attorney. Effective upon [i] the occurrence and
during the continuance of an Event of Default or upon [ii] termination of the
Lease, Tenant hereby irrevocably and unconditionally appoints Landlord, or
Landlord's authorized officer, agent, employee or designee, as Tenant's true and
lawful attorney-in-fact, to act for Tenant in Tenant's name, place, and stead,
to execute, deliver and file all applications and any and all other necessary
documents or things to effect the issuance, transfer, reinstatement, renewal
and/or extension of any and all Governmental Authorizations issued to Tenant or
applied for by Tenant in connection with Tenant's operation of the Facility, to
permit any transferee to operate the Facility under the Governmental
Authorizations, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its




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<PAGE>   54



attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to the full performance of
Tenant's Obligations. Except in the case of an emergency, Landlord shall give
Tenant three business days prior written notice before acting on behalf of
Tenant pursuant to this power of attorney.

                  25.11 No Offer. Landlord's submission of this Lease to Tenant
is not an offer to lease the Leased Property, or an agreement by Landlord to
reserve the Leased Property for Tenant. Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.

                  25.12 Modification. This Lease may only be modified by a
writing signed by both Landlord and Tenant except for the automatic extension of
the Term pursuant to Section 1.2. All references to this Lease, whether in this
Lease or in any other document or instrument, shall be deemed to incorporate all
amendments, modifications and renewals of this Lease, made after the date
hereof. If Tenant requests Landlord's consent to any change in ownership, merger
or consolidation of Tenant, any assumption of the Lease, or any modification of
the Lease, Tenant shall provide Landlord all relevant information and documents
sufficient to enable Landlord to evaluate the request. In connection with any
such request, Tenant shall pay to Landlord a fee in the amount of $1,500.00 and
shall pay all of Landlord's reasonable attorney's fees and expenses and other
reasonable out-of-pocket expenses incurred in connection with Landlord's
evaluation of Tenant's request, the preparation of any documents and amendments,
the subsequent amendment of any documents between Landlord and its collateral
pool lenders (if applicable), and all related matters.

                  25.13 Landlord's Modification. Tenant acknowledges that
Landlord may mortgage the Leased Property or use the Leased Property as
collateral for a collateralized mortgage obligations or Real Estate Mortgage
Investment Companies (REMICS). If any mortgage lender of Landlord desires any
modification of this Lease, Tenant agrees to consider such modification in good
faith and to execute an amendment of this Lease if Tenant finds such
modification acceptable in Tenant's reasonable discretion provided such
modification does not materially diminish Tenant's rights under the Lease.

                  25.14 No Merger. The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.

                  25.15 Laches. No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.



                                       53
<PAGE>   55


                  25.16 Limitation on Tenant's Recourse. Tenant's sole recourse
against Landlord, and any successor to the interest of Landlord in the Leased
Property, is to the interest of Landlord, and any such successor, in the Leased
Property. Tenant will not have any right to satisfy any judgment which it may
have against the Landlord, or any such successor, from any other assets of
Landlord, or any such successor. In this section, the terms "Landlord" and
"successor" include the shareholders, venturers, and partners of "Landlord" and
"successor" and the officers, directors, and employees of the same. The
provisions of this section are not intended to limit Tenant's right to seek
injunctive relief or specific performance.

                  25.17 Construction of Lease. This Lease has been prepared by
Landlord and its professional advisors and reviewed by Tenant and its
professional advisors. Landlord, Tenant, and their advisors believe that this
Lease is the product of all their efforts, that it expresses their agreement,
and agree that it shall not be interpreted in favor of either Landlord or Tenant
or against either Landlord or Tenant merely because of their efforts in
preparing it.

                  25.18 Counterparts. This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.

                  25.19 Custody of Escrow Funds. Any funds paid to Landlord in
escrow hereunder may be held by Landlord or, at Landlord's election, by a
financial institution, the deposits or accounts of which are insured or
guaranteed by a federal or state agency. The funds shall not be deemed to be
held in trust, may be commingled with the general funds of Landlord or such
other institution, and shall not bear interest.

                  25.20 Landlord's Status as a REIT. Tenant acknowledges that
Landlord has now and may hereafter elect to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code.

                  25.21 Exhibits. The following exhibits are attached hereto and
incorporated herein:

                  Exhibit A:        Legal Description
                  Exhibit B:        Permitted Exceptions
                  Exhibit C:        Documents to be Delivered
                  Exhibit D:        Certificate and Facility Financial Report
                  Exhibit E:        Government Authorizations
                  Exhibit F:        List of Leases and Contracts

                  25.22 Waiver of Jury Trial. Landlord and Tenant waive trial by
jury in any action, proceeding or counterclaim brought by either of them against
the other on all matters arising out of this Lease or the use and occupancy of
the Leased Property (except claims for personal injury or property damage). If
Landlord commences any summary proceeding for nonpayment of Trent, Tenant will
not interpose, and waives the right to interpose, any counterclaim in any such
proceeding.




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<PAGE>   56
                  25.23 Attorney's Fees and Expenses. Tenant shall pay to
Landlord all reasonable costs and expenses incurred by Landlord in administering
this Lease and the security for this Lease, enforcing or preserving Landlord's
rights under this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including but not limited to, [a] reasonable
attorney's and paralegal's fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees incurred by Landlord in connection with any
litigation or other proceeding.

                  25.24 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY
SUBMITS AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR
FEDERAL COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO FOR ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO [I] THE
COMMITMENT; [II] THIS LEASE; OR [III] ANY DOCUMENT EXECUTED BY TENANT IN
CONNECTION WITH THIS LEASE. TENANT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT TENANT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. TENANT AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW.

                  TENANT AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF
LANDLORD, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT,
THIS LEASE OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO, WAUKESHA COUNTY, WISCONSIN OR
MAURY COUNTY, TENNESSEE.

                  TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN
ANY MANNER AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT
OR IMPAIR LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW, OR LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT IN THE COURTS OF ANY OTHER JURISDICTION.

                  25.25 Survival. The following provisions shall survive
termination of the Lease: Article 9 (Damage & Destruction); Article 10
(Condemnation); Article 16 (Alterations); and Section 25.25 (Survival).

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]



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<PAGE>   57


<TABLE>
                  IN WITNESS WHEREOF, the parties hereto have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.

Signed and acknowledged
in the presence of                                               HCRI TENNESSEE PROPERTIES, INC.


                                                                 By: HCRI Tennessee Properties, L.P.,
                                                                     Its General Partner
<S>                                                             <C>
Signature                                                        By:   /s/ Erin C. Ibele
           -----------------------------------                        -----------------------------------------
Print Name
           -----------------------------------                        Title:Vice President, Corporate Secretary
                                                                            -----------------------------------
Signature
           -----------------------------------
Print Name
           -----------------------------------

                                                                 ALTERNATIVE LIVING SERVICES, INC.
                                                                 d/b/a ALTERRA

Signature                                                        By: /s/ Mark Ohlendorf
           -----------------------------------                       ------------------------------------------
Print Name
           -----------------------------------                       Title: Senior Vice President
                                                                           ------------------------------------
Signature
           -----------------------------------
Print Name                                                           Tax I.D. No.: 39-1771281
           -----------------------------------                                               ------------------
</TABLE>

STATE OF OHIO                  )
                               ) SS:
COUNTY OF LUCAS                )

                  The foregoing instrument was acknowledged before me this ___
day of March, 1999 by _________________________, the _________________________
of HCRI Tennessee Properties, L.P., a Tennessee limited partnership, as the
general partner of HCRI Tennessee Properties, Inc., a Delaware corporation, on
behalf of the corporation.

                                                -------------------------------
                                                Notary Public


My Commission Expires:                                        [SEAL]
                       ---------------



                                       56
<PAGE>   58



STATE OF WISCONSIN             )
                               ) SS:
COUNTY OF WAUKESHA             )

                  The foregoing instrument was acknowledged before me this ___
day of March, 1999 by _________________________, the _________________________
of Alternative Living Services, Inc. d/b/a Alterra, a Delaware corporation, on
behalf of the corporation.

                                                -------------------------------
                                                Notary Public


My Commission Expires: ---------------                        [SEAL]


THIS INSTRUMENT PREPARED BY:

OKSANA M. LUDD, ESQ.
SHUMAKER, LOOP & KENDRICK, LLP
1000 JACKSON STREET



                                       57