[Milledgeville, GA]

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                                    L E A S E



                      HEALTH CARE PROPERTY INVESTORS, INC.,

                                    as Lessor


                                       AND


              INTEGRATED LIVING COMMUNITIES OF MILLEDGEVILLE, INC.,


                                    as Lessee



                          Dated as of February 28, 1997





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<PAGE>
                                      LEASE


                  THIS LEASE  ("Lease") is dated as of the 28th day of February,
1997,  and  is  between  HEALTH  CARE  PROPERTY  INVESTORS,   INC.,  a  Maryland
corporation ("Lessor") and INTEGRATED LIVING COMMUNITIES OF MILLEDGEVILLE, INC.,
a Delaware corporation ("Lessee").


                                   ARTICLE I.
                                   ----------

                  1.       Leased Property; Term

                  Upon and subject to the terms and conditions  hereinafter  set
forth,  Lessor  leases to Lessee and Lessee  leases  from Lessor all of Lessor's
rights  and  interest  in  and  to  the  following   (collectively  the  "Leased
Property"):

                           (a) the real property described in Exhibit A attached
         hereto (collectively, the "Land");

                           (b) all  buildings,  structures,  Fixtures  and other
         improvements  of  every  kind  now or  hereafter  located  on the  Land
         including,  alleyways and connecting tunnels, sidewalks, utility pipes,
         conduits  and lines  (on-site  and  off-site  to the extent  Lessor has
         obtained  any  interest  in  the  same),  parking  areas  and  roadways
         appurtenant  to such  buildings and  structures  and Capital  Additions
         funded by Lessor (collectively, the "Leased Improvements");

                           (c) all easements,  rights and appurtenances relating
         to the Land and the Leased  Improvements  (collectively,  the  "Related
         Rights"); and

                           (d) all  equipment,  machinery,  fixtures,  and other
         items  of real  and/or  personal  property,  including  all  components
         thereof,  now and hereafter  located in, on or used in connection  with
         and   permanently   affixed   to  or   incorporated   into  the  Leased
         Improvements,  including 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, apparatus, sprinkler systems,
         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  to   constitute   real  estate,   together   with  all
         replacements,   modifications,   alterations   and  additions   thereto
         (collectively, the "Fixtures"); and

                           (e) the  machinery,  equipment,  furniture  and other
         personal property described on Exhibit B attached hereto, together with
         all  replacements  and substitutes  therefor  (collectively,  "Lessor's
         Personal Property").

                  SUBJECT, HOWEVER, to the easements,  encumbrances,  covenants,
conditions and  restrictions  and other matters which affect the Leased Property
as of the  date  hereof  or the  Commencement  Date  or  created  thereafter  as
permitted  hereunder to have and to hold for (1) a fixed term (the "Fixed Term")
commencing on the Commencement  Date, as defined below, and ending at 11:59 p.m.
Los Angeles  time on the later of (A) the  expiration  of the  fifteenth  (15th)
Lease Year and (B) the  expiration  of the "Fixed  Term" of the Newest  Facility
Group Lease (as defined below), but in no event later than the expiration of the
20th Lease Year and

                                       1
<PAGE>
(2) the Extended  Terms provided for in Article XIX unless this Lease is earlier
terminated as hereinafter provided. Following the Commencement Date, the parties
shall  execute an amendment  to this Lease in  substantially  the form  attached
hereto as Exhibit C to confirm certain matters,  including the Commencement Date
of this Lease and the  Minimum  Rent  determined  pursuant to Section 3.1 below.
Upon any change in the Minimum Rent in accordance with the provisions of Section
3.1 below or otherwise pursuant to this Lease, at Lessor's request,  the parties
shall similarly  execute an amendment to this Lease confirming such matters.  In
addition,  upon the "Commencement  Date" of any Facility Group Lease (as defined
below)  following the  Commencement  Date of this Lease (if any),  including the
Newest  Facility  Group Lease,  Lessor may prepare and, if prepared,  Lessor and
Lessee shall execute and deliver an amendment to this Lease  confirming that (x)
such  Facility  Group Lease is a  "Facility  Group  Lease" for  purposes of this
Lease,  and (y) the extension of the Fixed Term of this Lease to be  coterminous
with the  "Fixed  Term" of the  Newest  Facility  Group  Lease,  as  applicable.
Notwithstanding  the  foregoing,  the  failure of Lessor to  prepare  and/or the
failure of Lessee to so execute and deliver any such amendment shall not, absent
manifest  error,  affect Lessor's  determination  of the matters to be confirmed
thereby.

                                   ARTICLE II.
                                   -----------

                  2.  Definitions.  For all  purposes of this  Lease,  except as
otherwise expressly provided or unless the context otherwise  requires,  (i) the
terms defined in this Article have the meanings assigned to them in this Article
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
GAAP as at the time applicable; (iii) all references in this Lease to designated
"Articles,"  "Sections" and other  subdivisions are to the designated  Articles,
Sections and other  subdivisions of this Lease;  (iv) the word "including" shall
have the same meaning as the phrase "including,  without  limitation," and other
similar phrases;  and (v) the words "herein," "hereof" and "hereunder" and other
similar words refer to this Lease as a whole and not to any particular  Article,
Section or other subdivision:

                  ACH:  As defined in Section 3.1.
                  ---
                  Additional Charges:  As defined in Article III.
                  ------------------
                  Additional Rent:  As defined in Article III.
                  ---------------
                  Affiliate: Any Person which, directly or indirectly,  controls
or is  controlled  by or is under  common  control  with any other  Person.  For
purposes of this definition,  "control"  (including the correlative  meanings of
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession,  directly or indirectly,  of the power
to direct or cause the direction of the  management and policies of such Person,
through the ownership of fifty  percent (50%) or more of the voting  securities,
partnership  interests or other equity interests,  including any Subsidiary of a
Person.   Notwithstanding   the  foregoing,   when  used  with  respect  to  any
corporation, the term "Affiliate" shall mean (i) any Person which owns, directly
or  indirectly  (including  through one or more  intermediaries),  fifty percent
(50%) or more of any class of voting security of such  corporation,  which class
has the power to elect a majority of the Board of Directors, (ii) any Subsidiary
of such  corporation  and (iii) any  Subsidiary of a Person  described in clause
(i).

                  Appraiser:  As defined in Article XXXIV.
                  ---------
                  Award:  All  compensation,  sums or anything of value awarded,
paid or received
                  
                                       2
<PAGE>
on a total or partial Condemnation.

                  Bankruptcy Code: The United Stated  Bankruptcy Code (11 U.S.C.
ss. 101 et seq.), and any successor statute or legislation thereto.

                  Base Gross  Revenues:  (i) For the Fixed Term,  Fifty  Percent
(50%) of the Gross Revenues for the second Lease Year of the Fixed Term and (ii)
for each Extended  Term, if any,  Fifty Percent (50%) of the Gross  Revenues for
the first Lease Year of such Extended Term. In determining  Additional  Rent for
any partial Lease Year, Base Gross Revenues for such partial Lease Year shall be
determined by multiplying the applicable Base Gross Revenues by a fraction,  the
numerator  of which is the  number  of days in the  partial  Lease  Year and the
denominator of which is 365.

                  BLS:  Bureau of Labor Statistics, U.S. Department of Labor.

                  Business Day: Each Monday,  Tuesday,  Wednesday,  Thursday and
Friday which is not a day on which  national  banks in the City of New York, New
York are authorized, or obligated, by law or executive order, to close.

                  Capital Additions:  One or more new buildings,  or one or more
additional  structures annexed to any portion of any of the Leased Improvements,
or the material expansion of existing improvements, which are constructed on any
parcel or portion of the Land, during the Term, including  construction of a new
wing or new story,  or the  renovation  of existing  improvements  on the Leased
Property  in order to  provide a  functionally  new  facility  needed to provide
services not previously  offered.  The Capital Addition Project shall be treated
for all purposes of this Lease as a "Capital Addition," and all amounts advanced
to Lessee, or otherwise expended by Lessor with respect thereto shall be treated
as "Capital Addition Costs" funded by Lessor.

                  Capital Addition Costs: The costs of any Capital Addition made
to the Leased Property  whether paid for by Lessee or Lessor,  including (i) all
permit fees and other costs imposed by any governmental  authority,  the cost of
site preparation,  the cost of construction  including  materials and labor, the
cost of supervision and related design,  engineering and architectural services,
the cost of any fixtures,  and if and to the extent approved by Lessor, the cost
of  construction  financing;  (ii) fees paid to obtain  necessary  licenses  and
certificates;  (iii) if and to the extent  approved  by Lessor in writing and in
advance,  the cost of any land  contiguous  to the Leased  Property  which is to
become a part of the  Leased  Property  purchased  for the  purpose  of  placing
thereon the Capital  Addition or any portion  thereof or for providing  means of
access thereto, or parking facilities therefor,  including the cost of surveying
the same;  (iv) the cost of  insurance,  real  estate  taxes,  water and  sewage
charges  and  other   carrying   charges  for  such  Capital   Addition   during
construction; (v) the cost of title insurance; (vi) reasonable fees and expenses
of legal  counsel;  (vii) filing,  registration  and  recording  taxes and fees;
(viii)  documentary  stamp and similar taxes;  and (ix) all reasonable costs and
expenses  of Lessor and any Person  which has  committed  to finance the Capital
Addition,  including (a) the  reasonable  fees and expenses of their  respective
legal counsel;  (b) printing  expenses;  (c) filing,  registration and recording
taxes and fees; (d)  documentary  stamp and similar taxes;  (e) title  insurance
charges and appraisal  fees;  (f) rating agency fees;  and (g)  commitment  fees
charged by any Person  advancing  or  offering  to  advance  any  portion of the
financing for such Capital Addition.

                  Capital Addition Project:  As defined in Section 10.3.
                  ------------------------

                                       3
<PAGE>
                  Cash Flow: The net income from the Facility, determined on the
basis of GAAP applied on a consistent  basis,  plus the sum of (i)  depreciation
and  amortization  expense;  (ii) Rent and  other  expenses  payable  hereunder,
excluding,  however,  Impositions;  (iii) management fees; and (iv) income taxes
paid by Lessee;  less the sum of (x) a management  fee allowance of five percent
(5%) of Gross  Revenues  for the  corresponding  period  plus (y) an annual  Two
Hundred Dollar ($200) per unit reserve, pro-rated for the corresponding period.

                  Cash Flow Coverage: For any period,  calculated as of the last
day of the period,  the ratio of Cash Flow  attributable to such period to total
Rent payable for such period under the Lease.

                  Closing Date:  As defined in the Contract of Acquisition.
                  ------------
                  Code:  The Internal Revenue Code of 1986, as amended.
                  ----
                  Commencement Date:  The Closing Date.
                  -----------------

                  Commercial Occupancy  Arrangement:  Any commercial (as opposed
to resident or patient) Occupancy Arrangement.

                  Competing  Facility:  Any  facility or  institution  providing
services  or goods  similar to those  provided  or to be provided at the time in
question in connection with the Facility and the Primary Intended Use or similar
to those  provided in  connection  with any other  Permitted Use hereunder as to
which Lessee then desires to change the Facility's Primary Intended Use.

                  Condemnation:  The exercise of any governmental power, whether
by legal  proceedings  or  otherwise,  by a  Condemnor  or a  voluntary  sale or
transfer by Lessor to any  Condemnor,  either  under threat of  condemnation  or
while legal proceedings for condemnation are pending.

                  Condemnor:  Any public or quasi-public  authority,  or private
corporation or individual, having the power of Condemnation.

                  Consolidated   Financials:   For  any  fiscal  year  or  other
accounting  period for Lessee and its consolidated  Subsidiaries,  statements of
earnings  and retained  earnings  and of changes in financial  position for such
period and for the period from the  beginning of the  respective  fiscal year to
the end of such  period  and the  related  balance  sheet  as at the end of such
period,  together with the notes thereto,  all in reasonable  detail and setting
forth in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year, and prepared in accordance with GAAP.

                  Consolidated Net Worth: At any time, with respect to a Person,
the sum of the following for such Person and its consolidated  Subsidiaries,  as
the case may be, on a consolidated basis determined in accordance with GAAP:

                           (i) the amount of capital  or stated  capital  (after
         deducting the cost of any shares held in its treasury), plus

                           (ii)the  amount  of  capital   surplus  and  retained
         earnings  (or, in the case of a capital  surplus or  retained  earnings
         deficit, minus the amount of such deficit), minus


                                       4
<PAGE>
                           (iii) the sum of the following  (without  duplication
         of  deductions  in respect of items  already  deducted  in  arriving at
         surplus and  retained  earnings):  (a)  unamortized  debt  discount and
         expense;  and (b) any write-up in book value of assets resulting from a
         revaluation   thereof  subsequent  to  the  most  recent   Consolidated
         Financials prior to the date hereof,  excluding,  however,  any (i) net
         write-up in value of foreign  currency in  accordance  with GAAP,  (ii)
         write-up  resulting  from a  reversal  of a  reserve  for bad  debts or
         depreciation,  and (iii) write-up resulting from a change in methods of
         accounting for inventory.

                  Contract of  Acquisition:  The agreement of even date herewith
by and among  Lessor and Lessee  relative  to the  acquisition  by Lessor of the
Leased Property.

                  Cost of Living Index:  The Consumer  Price Index for All Urban
Consumers,  U.S. City Average  (1982-1984 = 100),  published by the BLS, or such
other renamed index. If the BLS changes the publication frequency of the Cost of
Living  Index  so  that a Cost  of  Living  Index  is not  available  to  make a
cost-of-living  adjustment as specified herein,  the  cost-of-living  adjustment
shall be based on the percentage difference between the Cost of Living Index for
the closest  preceding  month for which a Cost of Living Index is available  and
the Cost of Living Index for the comparison  month as required by this Lease. If
the BLS  changes  the base  reference  period for the Cost of Living  Index from
1982-84 = 100, the cost-of-living adjustment shall be determined with the use of
such  conversion  formula or table as may be  published  by the BLS.  If the BLS
otherwise  substantially  revises,  or ceases  publication of the Cost of Living
Index,  then a  substitute  index for  determining  cost-of-living  adjustments,
issued  by  the  BLS  or  by  a  reliable   governmental  or  other  nonpartisan
publication, shall be reasonably selected by Lessor.

                  County: The County or Township in which the Leased Property is
located.

                  CPI Increase: The percentage increase (but not decrease) in
(i) the Cost of Living Index published for the beginning of the first Quarter of
each Lease Year,  over (ii) the Cost of Living Index published for the beginning
of the first Quarter of the immediately prior Lease Year.

                  CPI Rent: An amount equal to the sum of (i) the product of (y)
the sum of the prior Lease Year's  Minimum Rent and Additional  Rent,  times (z)
the current CPI Increase and (ii) the prior Lease Year's Additional Rent.

                  Date of  Taking:  The  date  the  Condemnor  has the  right to
possession of the property being condemned.

                  Environmental Costs: As defined in Article XXXVI.

                  Environmental Laws:  Environmental Laws shall mean any and all
federal,  state,  municipal  and  local  laws,  statutes,   ordinances,   rules,
regulations,  guidances, policies, orders, decrees, judgments, whether statutory
or common law, as amended  from time to time,  now or  hereafter  in effect,  or
promulgated,  pertaining  to the  environment,  public  health  and  safety  and
industrial  hygiene,  including the use,  generation,  manufacture,  production,
storage,   release,   discharge,   disposal,   handling,   treatment,   removal,
decontamination,   clean-up,  transportation  or  regulation  of  any  Hazardous
Substance,  including  the  Clean  Air Act,  the  Clean  Water  Act,  the  Toxic
Substances Control Act, the Comprehensive  Environmental  Response  Compensation
and Liability Act, the Resource Conservation and Recovery Act, the


                                       5
<PAGE>
Federal Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and
the Occupational Safety and Health Act.

                  Event of Default:  As defined in Article XVI.
                  ----------------
                  Extended Term(s):  As defined in Article XIX.
                  ---------------

                  Facility:  The current  40-unit,  approximately  21,000 square
foot assisted-living care facility being operated on the Leased Property.

                  Facility Group Leases: Those certain other leases described on
Exhibit E attached hereto and  incorporated  herein by this reference,  together
with all other leases hereinafter entered into between Lessor or an Affiliate of
Lessor and Lessee or an Affiliate of Lessee which recite that they are "Facility
Group Leases".  This Lease shall be deemed a "Facility Group Lease" for purposes
of each other Facility Group Lease. Notwithstanding the foregoing, the following
 shall apply:

                           (i) If the Leased Property is transferred or conveyed
         by Lessor to any Person  (other than an Affiliate of Lessor) this Lease
         shall be deemed a  "Facility  Group  Lease"  only with  respect to each
         other  Facility  Group Lease which is also  transferred  or conveyed by
         Lessor  or an  Affiliate  of  Lessor  to the  same  Person  and/or  its
         Affiliate(s); and

                           (ii) If the "Leased  Property" of any other  Facility
         Group Lease is  transferred  or conveyed by Lessor or any  Affiliate of
         Lessor to any Person  (other  than Lessor or an  Affiliate  of Lessor),
         such Facility Group Lease shall be deemed a "Facility Group Lease" with
         respect to this Lease only to the extent  that the Leased  Property  is
         also   transferred   or  conveyed   to  the  same  Person   and/or  its
         Affiliate(s).

                  Facility Mortgage:  As defined in Article XIII.
                  -----------------
                  Facility Mortgagee:  As defined in Article XIII.
                  ------------------
                  Facility Operating Deficiency:  A deficiency in the conduct of
the operation of the Facility which, in the reasonable  determination of Lessor,
if not corrected  within a reasonable  time,  would  jeopardize  the  Facility's
licensure or  certification  under  government  reimbursement  programs,  to the
extent applicable.

                  Fair Market Rental: The fair market rental value of the Leased
Property,  or  applicable  portion  thereof,  including  any periodic  increases
therein,  determined in accordance  with the appraisal  procedures  set forth in
Articles  XXXIV.  Notwithstanding  the  foregoing,  if Lessee shall enter into a
Master Sublease in accordance with the applicable  provisions of Article XXIV in
a bona fide, arms-length transaction with any Person (other than an Affiliate of
Lessee),  then the Fair Market Rental of the Leased Property,  or the applicable
portion  thereof,  for purposes of Section  24.2(b)  shall be the rent  (however
denominated and paid) payable under such Master  Sublease,  unless in connection
with the  transaction(s)  as to which such Master  Sublease is a part (including
any  step,  tiered  or  indirect  transactions),  additional  or  other  rent or
consideration is payable to Lessee or any Affiliate of Lessee in addition to the
rent payable under the Master Sublease,  in which event the appraisers appointed
pursuant to the appraisal  procedures set forth in Article XXXIV shall determine
whether the rent  payable to Lessee or any  Affiliate of Lessee under the Master
Sublease is reasonably related to the Fair Market Rental of the Leased Property,
or applicable portion thereof, as also determined


                                       6
<PAGE>
pursuant to this  definition  and the appraisal  procedures set forth in Article
XXXIV. If so reasonably  related,  the Fair Market Rental of the Leased Property
for  purposes of Section  24.2(b)  shall be deemed the rent  payable  under such
Master Sublease.  Otherwise,  the Fair Market Rental of the Leased Property,  or
applicable  portion  thereof,  for  purposes of such  Section  24.2(b)  shall be
determined pursuant to this definition and the appraisal procedures set forth in
Article  XXXIV,  but  in  no  event  greater  than  the  total  rent  and  other
consideration  payable to Lessee or any Affiliate of Lessee in  connection  with
such  Master  Sublease  and the other  transaction(s)  as to which  such  Master
Sublease is a part. As used in this  definition,  the term "rent" shall mean all
consideration paid or given, directly or indirectly,  to Lessee or any Affiliate
of Lessee under the Master Sublease and/or in connection with the transaction(s)
or to which such Master Sublease is a part. For purposes of this definition, the
definition  of "Fair  Market  Value"  below and the  provisions  of Section 24.8
below, the term "consideration" shall mean and include money, services, property
and  other  things  of  value,  including  payment  of  costs,  cancellation  of
indebtedness,  discounts,  rebates, barter and the like. For purposes of Section
24.2 below and the  payment of  "Transfer  Consideration"  to Lessor as provided
therein,  if any  rent or  other  consideration  is  payable  to  Lessee  or any
Affiliate  of Lessee in a form other  than cash,  Lessor  shall be  entitled  to
receive the applicable "Transfer Consideration" on account thereof in cash based
upon the fair market value of such consideration.

                  Fair  Market  Value:  The  fair  market  value  of the  Leased
Property, and all Capital Additions, determined in accordance with the appraisal
procedures  set forth in Article  XXXIV or Section  35.1,  as  applicable.  Fair
Market  Value shall be the higher  value  obtained  by assuming  that the Leased
Property is unencumbered by this Lease or encumbered by this Lease.  Further, in
determining  Fair Market Value the  positive or negative  effect on the value of
the Leased Property  attributable to the interest rate,  amortization  schedule,
maturity  date,  prepayment  penalty  and  other  terms  and  conditions  of any
encumbrance  which  will not be removed at or prior to the date as of which such
Fair Market Value  determination is being made shall be taken into account.  The
Leased  Property  shall be valued  at its  highest  and best use which  shall be
presumed to be as a  fully-permitted  Facility  operated in accordance  with the
provisions  of this Lease.  Fair market value of the Leased  Property  shall not
include "going concern" or "business  enterprise" value  attributable to factors
other than the  highest and best use of the Leased  Property.  In  addition,  in
determining   Fair  Market  Value,  the  negative  value  of  (a)  any  deferred
maintenance or other items of repair or replacement of the Leased Property,  (b)
any  then  current  or  prior  licensure  or  certification   violations  and/or
admissions  holds and (c) any other  breach or  failure  of Lessee to perform or
observe its obligations  hereunder shall not be taken into account;  rather, the
Leased Property,  and every part thereof, shall be deemed to be in the condition
required by this Lease  (i.e.,  good order and  repair) and Lessee  shall at all
times be deemed to have  operated  the Facility in  compliance  with and to have
performed all  obligations of the Lessee under this Lease.  Notwithstanding  the
foregoing,  in the event of a bona fide,  arms-length  Transfer  with any Person
(other  than an  Affiliate  of  Lessee  and  other  than  pursuant  to a  Master
Sublease),  the Fair Market Value of the Leased Property for purposes of Section
24.2(c) below shall be the gross  consideration  (as defined  above)  payable to
Lessee or any Affiliate of Lessee in connection  with such Transfer for Lessee's
leasehold  interest in the Leased Property  created under this Lease,  unless in
connection  with  the  transaction(s)  as  to  which  such  Transfer  is a  part
(including any step, tiered or indirect transactions), additional or other gross
consideration is payable to Lessee or any Affiliate of Lessee in addition to the
gross  consideration  allocated by the parties thereto to the leasehold interest
created  hereby,  in  which  event  the  appraisers  appointed  pursuant  to the
appraisal  procedures  set forth in Article  XXXIV shall  determine  whether the
portion of such gross consideration payable to Lessee or any Affiliate of Lessee
in such  transaction(s) and allocated for the leasehold estate created hereby as
initially determined by the parties thereto is


                                       7
<PAGE>
 reasonably  related to the Fair Market  Value of the Leased  Property,  as also
determined pursuant to this definition and the appraisal procedures set forth in
such  Article  XXXIV.  If so  reasonably  related,  the Fair Market Value of the
Leased Property for purposes of such Section 24.2(c) shall be deemed the portion
of the gross  consideration  so allocated by the  parties.  Otherwise,  the Fair
Market Value of the Leased  Property for purposes of such Section  24.2(c) shall
be determined pursuant to this definition and the appraisal procedures set forth
in such Article  XXXIV,  but in no event  greater  than the gross  consideration
payable to Lessee or any  Affiliate of Lessee in  connection  with such Transfer
and the other transaction(s) as to which such Transfer is a part.

                  Fixed Term:  As defined in Article I.
                  ----------
                  Fixtures:  As defined in Article I.
                  --------
                  GAAP:  Generally accepted accounting principles.
                  ----
                  Gross Revenues: All revenues received or receivable from or by
reason of the operation of the Facility or any other use of the Leased Property,
Lessee's  Personal  Property and all Capital  Additions  including  all revenues
received or receivable for the use of or otherwise attributable to units, rooms,
beds and other facilities provided,  meals served, services performed (including
ancillary services),  space or facilities subleased or goods sold on or from the
Leased  Property  and all  Capital  Additions;  provided,  however,  that  Gross
Revenues shall not include:

                  (i) non-operating  revenues such as interest income (including
         interest earned on sinking funds, Special Security Accounts or any bond
         funds  originally and  specifically  formulated as a requirement of any
         bond issue utilized to finance Lessee's business  operations) or income
         from the sale of assets not sold in the ordinary course of business;

                  (ii)     bad debt in accordance with GAAP;

                  (iii)    refunds made to patients, customers or clients;

                  (iv) federal, state or local excise or sales taxes and any tax
         based upon or  measured  by such  revenues  which is added to or made a
         part of the amount  billed to the  patient or other  recipient  of such
         services  or  goods,   whether   included  in  the  billing  or  stated
         separately; and

                  (v)     refunds or credits on account of taxes paid by Lessee.

         Gross  Revenues  for each  Lease  Year shall  include  all cost  report
settlement  amounts  received in or payable during such Lease Year in accordance
with GAAP relating to health care  accounting,  regardless of the year that such
settlement  amounts are applicable  to;  provided,  however,  that to the extent
settlement  amounts are applicable to years, or portions  thereof,  prior to the
Commencement  Date,  such  settlement  amounts  shall not be  included  in Gross
Revenues  for the Lease Year in which such  settlement  amounts are  received or
paid. Gross Revenues shall also include the Gross Revenues of any Occupant under
a Commercial Occupancy Arrangement,  i.e., the Gross Revenues generated from the
operations  conducted  on or from  such  subleased,  licensed  or other  used or
occupied portion of the Leased Property shall be included  directly in the Gross
Revenues; provided, however, that the rent received or receivable by Lessee from
or under such Commercial Occupancy Arrangement shall be


                                       8
<PAGE>
excluded from Gross Revenues for such purpose.

                  Guarantor:  ILC.
                  ---------
                  Guaranty:  The  Guaranty  of even date  herewith  executed  by
Guarantor. 
                  Handling:  As defined in Article XXXVII.
                  --------
                  Hazardous Substances:  Collectively,  any petroleum, petroleum
product or byproduct  or any  substance,  material or waste  regulated or listed
pursuant to any Environmental Law.

                  HCPI:  Health  Care  Property  Investors,   Inc.,  a  Maryland
corporation.

                  ILC:   Integrated   Living   Communities,   Inc.,  a  Delaware
corporation.

                  Impositions: Collectively, all taxes, including capital stock,
franchise and other state taxes of Lessor (or, if Lessor is not HCPI, of HCPI as
a result of its investment in Lessor), ad valorem,  sales, use, single business,
gross  receipts,  transaction  privilege,  rent or  similar  taxes;  assessments
including  assessments  for  public  improvements  or  benefits,  whether or not
commenced  or  completed  prior  to the date  hereof  and  whether  or not to be
completed within the Term; ground rents;  water,  sewer and other utility levies
and charges;  excise tax levies;  fees including  license,  permit,  inspection,
authorization and similar fees; and 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 and/or the Rent
and all interest and penalties thereon attributable to any failure in payment by
Lessee  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 (i) Lessor or
Lessor's  interest in the Leased Property,  (ii) the Leased Property or any part
thereof or any rent therefrom or any estate,  right,  title or interest therein,
or (iii) 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;  provided,  however,  that
nothing  contained in this Lease shall be construed to require Lessee to pay (a)
any tax based on net income (whether denominated as a franchise or capital stock
or other tax) imposed on Lessor or any other Person,  (b) any  transfer,  or net
revenue tax of Lessor or any other Person except Lessee and its successors,  (c)
any tax  imposed  with  respect to the sale,  exchange or other  disposition  by
Lessor  of any  Leased  Property  or the  proceeds  thereof,  or (d)  except  as
expressly  provided  elsewhere in this Lease,  any  principal or interest on any
indebtedness on the Leased  Property for which Lessor is the obligor,  except to
the  extent  that any such  tax,  assessment,  tax  levy or  charge  of the type
described in clause (a), (b) or (c) above is levied, assessed or imposed in lieu
thereof  or as a  substitute  for any tax which is  otherwise  included  in this
definition.

                  Incremental  Gross Revenues:  The positive amount,  if any, by
which the Gross  Revenues  for the  current  Lease  Year or  partial  Lease Year
exceeds the Base Gross Revenues.
                  Insurance  Requirements:  The  terms of any  insurance  policy
required by this Lease and all requirements of the issuer of any such policy and
of any insurance board,  association,  organization or company necessary for the
maintenance of any such policy.

                  Intangible  Property:  All  accounts,  proceeds  of  accounts,
rents, profits,  income or revenues derived from the use of rooms or other space
within the Leased  Property or the  providing  of services in or from the Leased
Property;  documents,  chattel  paper,  instruments,  contract  rights,  deposit
accounts, general intangibles, causes of action, now owned or hereafter


                                       9
<PAGE>
acquired  by  Lessee  (including  any right to any  refund  of any  Impositions)
arising  from or in  connection  with  Lessee's  operation  or use of the Leased
Property;  all licenses and permits now owned or hereinafter acquired by Lessee,
which are necessary or desirable for Lessee's use of the Leased Property for its
Primary Intended Use or any other Permitted Use, including,  if applicable,  any
certificate of need or similar  certificate;  the right to use any trade name or
other name  associated with the Facility;  and any and all third-party  provider
agreements (including Medicare and Medicaid).

                  Land:  As defined in Article I.
                  ----
                  Lease:  As defined in the preamble.
                  -----
                  Lease Rate:  Nine and Seventy-Nine Hundredths Percent (9.79%).
                  ----------
                  Lease Year:  Each period of twelve (12) full  calendar  months
from and after the  Commencement  Date,  unless the  Commencement  Date is a day
other  than the first  (1st) day of a  calendar  month,  in which case the first
Lease Year shall be the period commencing on the Commencement Date and ending on
the last day of the twelfth  (12th) full month  following the month in which the
Commencement  Date occurs and each subsequent Lease Year shall be each period of
twelve  (12) full  calendar  months  after the last day of the prior Lease Year;
provided,  however,  that the last Lease Year during the Term may be a period of
less than twelve (12) full calendar  months and shall end on the last day of the
Term.

                  Leased  Improvements;  Leased  Property:  Each as  defined  in
Article I.
                  ------------------------------------
                  Leasehold FMV:  As defined in Article XXIV.
                  -------------
                  Legal Requirements:  All federal, state, county, municipal and
other governmental statutes, laws (including common law and Environmental Laws),
rules, policies,  guidance,  codes, orders,  regulations,  ordinances,  permits,
licenses,   covenants,   conditions,   restrictions,   judgments,   decrees  and
injunctions affecting either the Leased Property, Lessee's Personal Property and
all Capital Additions or the construction,  use or alteration  thereof,  whether
now or  hereafter  enacted  and in force,  including  any which may (i)  require
repairs,  modifications  or alterations in or to the Leased  Property,  Lessee's
Personal  Property and all Capital  Additions,  (ii) in any way adversely affect
the use and enjoyment thereof, or (iii) regulate the transport,  handling,  use,
storage or disposal or require the cleanup or other  treatment of any  Hazardous
Substance.

                  Lessee:  As defined in the preamble.
                  ------

                  Lessee's Personal  Property:  The Personal Property other than
Lessor's Personal Property.

                  Lessor:  As defined in the preamble.
                  ------
                  Lessor's Personal Property:  As defined in Article I.
                  --------------------------
                  Letter of Credit Date:  As defined in Section 21.2.
                  ---------------------
                  Master Sublease:  As defined in Article XXIV.
                  ---------------
                  Minimum Rent:  As defined in Article III.
                  ------------

                                       10
<PAGE>
                  Minimum  Repurchase  Price:  At any given time, the sum of (i)
the "Purchase  Price" of the Leased  Property at the time of  acquisition of the
Leased Property by Lessor, together with any closing costs incurred by Lessor in
connection  therewith in excess of the amount reimbursed to Lessor,  all as more
particularly  provided  in the  Contract  of  Acquisition  plus (ii) any Capital
Addition Costs funded by Lessor.

                  Newest  Facility Group Lease.  At any given time, that certain
Facility  Group Lease the  "Commencement  Date" of which has occurred later than
the "Commencement Date" of any other Facility Group Lease.

                  Occupancy   Arrangement:   Any  sublease,   license  or  other
arrangement with a Person for the right to use, occupy or possess any portion of
the Leased Property and/or any Capital Additions.

                  Occupant:  Any Person under an Occupancy Arrangement.
                  --------
                  Offer:  As defined in Article XXXV.
                  -----

                  Officer's  Certificate:  A certificate  of Lessee signed by an
officer authorized to so sign by its board of directors or by-laws.

                  Overdue  Rate: On any date, a rate equal to 2% above the Prime
Rate,  but in no event  greater  than the  maximum  rate  then  permitted  under
applicable law.

                  Payment Date: Any due date for the payment of the installments
of Minimum Rent, Additional Rent or any other sums payable under this Lease.

                  Permitted    Use:    Alzheimer    care,    congregate    care,
assisted-living,  or skilled  nursing  facility and such other uses necessary or
incidental  to such use.  Without  limiting  the  specificity  of the  foregoing
"Permitted  Use(s)," in no event shall Lessee use the  Facility,  or any portion
thereof, as independent apartments for seniors.

                  Person:  Any  individual,   corporation,   partnership,  joint
venture,  association,  joint stock company, trust, unincorporated organization,
government or any agency or political  subdivision  thereof or any other form of
entity.

                  Personal  Property:  All  machinery,  furniture and equipment,
including phone systems and computers, trade fixtures,  inventory,  supplies and
other  personal  property  used in  connection  with the operation of the Leased
Property for its Primary Intended Use, other than Fixtures.

                  Primary Intended Use: The specific Permitted Use for which the
Facility is being  operated at any time during the Term in accordance  with this
definition.  Initially,  the  Primary  Intended  Use  shall  be  an  Alzheimer's
assisted-living care facility.  Lessee shall give to Lessor not less than thirty
(30) days prior written notice of any change in the Primary  Intended Use to any
other  Permitted  Use  hereunder.  Lessee  shall not be  entitled  to change the
Primary Intended Use to any other Permitted Use (i) without first providing such
notice to Lessor or (ii) at any time after the occurrence of an Event of Default
hereunder which remains uncured (if applicable).  In addition,  without Lessor's
prior written  consent,  which consent may be given or withheld in Lessor's sole
and  absolute  discretion,  Lessee  shall not be  entitled to change the Primary
Intended  Use to any other  Permitted  Use if Lessee or any  Affiliate of Lessee
then


                                       11
<PAGE>
owns,  operates or manages or has a material  interest  (including a controlling
interest) in a Competing Facility within the Ten Mile Area or, if such change in
use is to occur after the eighth (8th) Lease Year of the Fixed Term or after the
Third (3rd) Lease Year of either Extended Term, as applicable, within either the
Ten Mile Area or the Ten-Fifteen Mile Area.

                  Prime  Rate:  On any date,  a rate equal to the annual rate on
such date  announced by the Bank of New York to be its prime,  base or reference
rate for 90-day unsecured loans to its corporate borrowers of the highest credit
standing  but in no event  greater than the maximum  rate then  permitted  under
applicable law. If the Bank of New York discontinues its use of such prime, base
or reference rate or ceases to exist,  Lessor shall designate the prime, base or
reference rate of another state or federally chartered bank based in New York to
be used for the purpose of calculating the Prime Rate hereunder.

                  Put Event:  An Event of Default  hereunder  which results in a
material  reduction  (i.e.,  5% or more) in the Fair Market  Value of the Leased
Property, provided that the Fair Market Value of the Leased Property taking into
account  the  occurrence  of such  Event of  Default  is less  than the  Minimum
Repurchase  Price.  In determining  the Fair Market Value of the Leased Property
following  an Event of Default,  the  appraisers  appointed  pursuant to Article
XXXIV shall  determine such Fair Market Value for the Leased Property (i) taking
into  account such Event of Default and (ii) as though such Event of Default had
not occurred. Notwithstanding that Lessor and Lessee have specifically defined a
"Put Event," in no event shall the same be deemed to derogate the materiality of
an Event of Default as provided  in Section  16.1 below  (including  an Event of
Default  which does not  constitute  a Put Event) or  otherwise  limit  Lessor's
rights and remedies upon the occurrence of an Event of Default,  including those
rights and remedies set forth in Sections 16.2, 16.3 and 16.4 below.

                  Quarter:  During each Lease Year, the first three (3) calendar
month  period  commencing  on the first  (1st) day of such  Lease  Year and each
subsequent  three (3) calendar  month period  within such Lease Year;  provided,
however, that (i) the first Quarter during the Term may be a period of more than
three (3) months and shall  commence on the  Commencement  Date and end upon the
expiration of the third (3rd) full  calendar  month  following the  Commencement
Date and (ii) the last  Quarter  during  the Term may be a period  of less  than
three (3) calendar months and shall end on the last day of the Term.

                  Related Lessee  Persons:  Any Person(s)  which controls Lessee
and  would  be  deemed  an  Affiliate  of  Lessee,   including   any   partners,
shareholders,  principals or trustees of Lessee or any  partners,  shareholders,
principals  or trustees  of any such  Person(s)  to the extent the same  control
Lessee and would be deemed an Affiliate of Lessee.


                  Removable  Personal  Property:  Any item of Lessee's  Personal
Property which (i) does not constitute a replacement  (whether or not an upgrade
thereof),  modification,  alteration  or  substitution  of or to any of Lessor's
Personal  Property or (ii) is not  required in order to operate the  Facility in
compliance with all licensure and certification requirements and all other Legal
Requirements and Insurance Requirements for the Primary Intended Use.

                  Rent:  Collectively,  the Minimum  Rent,  Additional  Rent and
Additional Charges.

                  SEC:     Securities and Exchange Commission.
                  ---
                  State:  The State or Commonwealth in which the Leased Property
is located.


                                       12
<PAGE>

                  Subsidiaries:  Corporations,  partnerships,  limited liability
companies,  business  trusts or other  legal  entities  with  respect to which a
Person  owns,  directly  or  indirectly,  50% or more  of the  voting  stock  or
partnership, membership or other equity interest, respectively.

                  Ten Mile Area:  As defined in Section 6.4.1.

                  Ten-Fifteen Mile Area:  As defined in Section 6.4.1.

                  Term:  Collectively,  the Fixed Term and any Extended Term(s),
as the context may require, unless earlier terminated.

                  Transfer:  As defined in Article XXIV.

                  Transfer Consideration:  As defined in Article XXIV.

                  Unavoidable Delays: To the extent  specifically  applicable to
any provision of this Lease, delays resulting from a cause beyond the reasonable
control of a party  responsible  for  performing  an obligation  hereunder.  For
purposes of this definition,  cause shall be beyond the reasonable  control of a
party  when such cause  would  affect any  person  similarly  situated  (such as
strike,  lockout,  power failure, act of God,  governmental  restriction,  enemy
action, civil commotion,  fire or unavoidable  casualty) but shall not be beyond
the  reasonable  control  of such  party when  peculiar  to such party  (such as
financial inability,  lack of funds or failure to order long lead time materials
sufficiently  in advance).  To the extent  applicable to a particular  provision
herein,  in the event of any  occurrence  which a party  believes  constitutes a
cause  beyond  the  reasonable  control  of such  party and which will delay any
performance by such party hereunder, such party shall promptly in writing notify
the other  party of the  occurrence  and nature of such cause,  the  anticipated
period of delay and the steps being taken by such party to mitigate  the effects
of such delay.

                  Unsuitable for Its Primary  Intended Use: A state or condition
of the Facility such that by reason of damage or destruction or Condemnation, in
the good faith judgment of Lessor and Lessee, the Facility cannot be operated on
a commercially practicable basis for its Primary Intended Use.

                                  ARTICLE III.
                                  ------------

                  3.1 Rent.  Lessee  will pay to  Lessor in lawful  money of the
United  States of America  which shall be legal tender for the payment of public
and  private  debts,  without  offset  or  deduction,   the  amounts  set  forth
hereinafter  as Minimum Rent and  Additional  Rent during the Term.  Payments of
Minimum  Rent  shall  be made  by a  prearranged  payment  deposit  through  the
Electronic  Automated  Clearing  House  Network  ("ACH")  initiated by Lessee to
Lessor's  account at an ACH member bank on or before the fifth (5th) day of each
calendar month.  Payments of Additional  Rent shall be made at Lessor's  address
set forth in Article  XXXIII or at such other  place or to such other  Person as
Lessor from time to time may designate in writing.

                  3.1.1  Minimum  Rent.  Subject  to upward  adjustment(s)  with
respect to the Capital Addition Project funded by Lessor as described in Section
10.3 below, for the period from the Commencement  Date through the expiration of
the Fixed Term, Lessee shall pay to Lessor "Minimum Rent" monthly, in advance on
or before the first day of each  calendar  month,  an amount equal to $18,764.17
(i.e., one-twelfth (1/12) of the product of (i) the Lease


                                       13
<PAGE>
Rate times (ii) the Minimum  Repurchase Price as of the Commencement  Date). The
first monthly payment of Minimum Rent shall be payable on the Commencement  Date
(prorated as to any partial  calendar month at the beginning of the Term).  Such
monthly  Minimum  Rent shall be  increased  from time to time on the date of any
payment or funding by Lessor on account of the Capital Addition Project pursuant
to the provisions of Section 10.3 by one-twelfth  (1/12th) of the product of (a)
the amount of the particular  payment or funding by Lessor,  times (b) Three and
Twenty-Five  Hundredths  Percent  (3.25%) above the ten-year U.S.  Treasury Note
Rate,  published  in the Wall  Street  Journal  on the date of such  payment  or
funding by Lessor and quoting the rate for the  immediately  prior Business Day.
If the  ten-year  U.S.  Treasury  Note  Rate is  discontinued  prior to any such
payment or funding by Lessor,  then such calculation  shall be made instead to a
substitute  rate  selected by Lessor that is  comparable  with the ten-year U.S.
Treasury Note rate, and such  substitute rate shall be compared to ten-year U.S.
Treasury Note rate,  published in the Wall Street Journal as of the date hereof.
Similarly, if the Wall Street Journal is discontinued,  a substitute publication
selected by Lessor  shall be used.  Such  monthly  Minimum  Rent payable for any
month(s)  during  which an increase in the Minimum  Rent occurs by reason of any
payments or funding by Lessor on account of the Capital Addition Project,  shall
be prorated based upon the number of days for which such adjusted rental amounts
apply. From time to time at Lessor's request, Lessor and Lessee shall enter into
an  amendment  of this  Lease  in form  acceptable  to  Lessor  to  reflect  the
adjustment in the monthly  Minimum Rent payable  hereunder by reason of any such
payments  or  fundings  by Lessor on account of the  Capital  Addition  Project.
Failure  of Lessee to so  execute  and  deliver  any such  amendment  shall not,
however, affect the determination of the monthly Minimum Rent payable hereunder.
Minimum Rent for the Extended  Terms,  if any, shall be determined in accordance
with the provisions of Article XIX.

                  3.1.2 Additional Rent. In addition to the Minimum Rent, Lessee
shall,  commencing  with (x) the first (1st)  Quarter of the second  (2nd) Lease
Year of the Fixed Term and  continuing  through the expiration of the Fixed Term
and (y) the first (1st)  Quarter of the second (2nd) Lease Year of each Extended
Term, if any, and continuing  through the expiration of the applicable  Extended
Term, pay to Lessor annual "Additional Rent" in an amount equal to the CPI Rent;
provided,  however,  that in no  event  shall  the sum of the  Minimum  Rent and
Additional  Rent paid or payable  by Lessee  for (1) any Lease  Year  during the
Fixed Term  commencing with the second (2nd) Lease year of the Fixed Term or (2)
any Lease Year during the applicable  Extended Term, if any, commencing with any
second (2nd) Lease Year of such Extended Term, be:

                       (a) less than the lesser of (i) One  Hundred  Two Percent
(102%) of the sum of the  Minimum  Rent and  Additional  Rent paid or payable by
Lessee for the immediately  prior Lease Year of the applicable Term (taking into
account the annualized  increase in the Minimum Rent resulting from any payments
or funding by Lessor on account of the  Capital  Addition  Project  pursuant  to
Section 10.3) and (ii) the sum of (A) the Minimum Rent and Additional  Rent paid
or payable for the  immediately  prior Lease Year,  plus (B) One Hundred Percent
(100%) of Incremental Gross Revenues; nor

                       (b) more than One Hundred Five Percent  (105%) of the sum
of  Minimum  Rent  and  Additional  Rent  paid  or  payable  by  Lessee  for the
immediately  prior Lease Year of the  applicable  Term  (taking into account the
annualized  increase in the Minimum Rent  resulting  from any  payments  made by
Lessor on account of the Capital Addition Project pursuant to Section 10.3).

                  3.2  Quarterly  Calculation  and Payment of  Additional  Rent;
Annual  Reconciliation.


                                       14
<PAGE>
                  3.2.1  Lessee  shall   calculate  and  pay   Additional   Rent
quarterly, in arrears, for the portion of the entire Lease Year, on a cumulative
basis,  up to the  end  of the  Quarter  then  most  recently  ended,  less  the
Additional Rent already paid and attributable to such Lease Year. If at the time
any calculation on account of Additional Rent is to be made the applicable Gross
Revenues  are not yet  available  (if  applicable)  Lessee  shall  use its  best
estimate of the applicable Gross Revenues.  Each quarterly payment of Additional
Rent  shall be  delivered  to Lessor,  together  with an  Officer's  Certificate
setting forth the calculation thereof, on or before the last Business Day of the
calendar month immediately following the end of the corresponding Quarter.

                  3.2.2  Within  ninety  (90) days  after the end of each  Lease
Year, Lessee shall deliver to Lessor either (a) an Officer's Certificate setting
forth the Gross  Revenues  for such Lease Year or (b) an  Officer's  Certificate
stating that  Incremental  Gross Revenues for such Lease Year exceed Two Percent
(2%) of the sum of Minimum  Rent and  Additional  Rent paid or payable by Lessee
for the  immediately  prior  Lease  Year.  Following  receipt  by Lessor of such
Certificate, Lessor shall, if applicable, determine the Additional Rent for such
Lease Year based upon Gross Revenues and give Lessee notice of the same together
with  the  calculations  upon  which  the  Additional  Rent was  based.  If such
Additional  Rent based  upon Gross  Revenues  exceeds  the sum of the  quarterly
payments of Additional Rent previously paid by Lessee with respect to such Lease
Year,  Lessee shall forthwith pay such deficiency to Lessor.  If such Additional
Rent  based  upon  Gross  Revenues  for such  Lease Year is less than the amount
previously  paid by Lessee  with  respect  thereto,  Lessor  shall,  at Lessee's
option,  either  (i)  remit  to  Lessee  its  check in an  amount  equal to such
difference,  or (ii) credit such  difference  against the quarterly  payments of
Additional Rent next coming due.

                  3.2.3 Any difference  between the annual  Additional  Rent for
any Lease Year as shown in said  Officer's  Certificate  and the total amount of
quarterly  payments for such Lease Year  previously  paid by Lessee,  whether in
favor of Lessor or  Lessee,  shall  bear  interest  at a rate  equal to the rate
payable on 90-day U.S.  Treasury Bills as of the last Business Day of such Lease
Year until the amount of such difference shall be paid or otherwise discharged.

                  3.2.4 If the expiration or earlier  termination of the Term is
a day  other  than the last day of a Lease  Year,  then the  amount  of the last
quarterly  installment of Additional Rent shall be paid pro rata on the basis of
the actual number of days in such Lease Year.

                  3.2.5 As soon as  practicable  after the expiration or earlier
termination of the Term, a final reconciliation of Additional Rent shall be made
taking  into  account,   among  other  relevant   adjustments,   any  unresolved
contractual  allowances  which relate to Gross  Revenues  accrued  prior to such
expiration or  termination;  provided that if the final  reconciliation  has not
been made within six (6) months of such expiration or termination,  then a final
reconciliation  shall  be made at that  time  based  on all  available  relevant
information,  including  Lessee's  good faith best estimate of the amount of any
unresolved contractual allowances.

                  3.3 Confirmation of Gross Revenues.  Lessee shall utilize,  or
cause to be utilized, an accounting system for the Leased Property in accordance
with its usual and customary  practices  and in accordance  with GAAP which will
accurately  record all Gross  Revenues and Lessee shall retain for at least five
(5) years after the expiration of each Lease Year  reasonably  adequate  records
conforming to such  accounting  system showing all Gross Revenues for such Lease
Year. Lessor, at its own expense except as provided hereinbelow,


                                       15
<PAGE>
shall  have the right  from time to time (but in no event more than one time per
Lease Year or partial  Lease Year) by its  accountants  or  representatives,  to
review  and/or  audit the  information  set forth in the  Officer's  Certificate
referred to in Section 3.2(a) and in connection with such review and/or audit to
examine  Lessee's  records with respect thereto  (including  supporting data and
sales tax returns)  subject to any  prohibitions or limitations on disclosure of
any such data under  applicable  law or  regulations  including any duly enacted
"Patients'  Bill of Rights" or similar  legislation,  or as may be  necessary to
preserve  the  confidentiality  of the  Facility-patient  relationship  and  the
physician-patient  privilege.  If any  such  review  and/or  audit  discloses  a
deficiency in the payment of Additional Rent on account thereof (if applicable),
Lessee shall forthwith pay to Lessor the amount of the deficiency  together with
interest thereon at the Overdue Rate compounded  monthly from the date when said
payment should have been made to the date of payment thereof. If any such review
and/or audit discloses that the Gross Revenues  actually  received by Lessee for
any Lease Year exceed  those  reported by Lessee by more than Two Percent  (2%),
Lessee  shall  pay the  costs  of  such  review  and/or  audit  (whether  or not
Additional  Rent is based  upon Gross  Revenues).  Any  proprietary  information
obtained  by Lessor  pursuant to such  review  and/or  audit shall be treated as
confidential,   except  that  such   information  may,  subject  to  appropriate
confidentiality safeguards, be used in any litigation or arbitration proceedings
between the parties or disclosed to prospective lenders or purchasers.

                  3.4  Additional  Charges.  In addition to the Minimum Rent and
Additional  Rent, (i) Lessee shall,  subject to the provisions of Article XII of
this  Lease,  also  pay and  discharge  as and when due and  payable  all  other
amounts, liabilities, obligations and Impositions which Lessee assumes or agrees
to pay  under  this  Lease  prior to the date on which  such  items  may be paid
without  interest,  fine,  penalty  or  forfeiture  or such other date as may be
specified  in this  Lease;  and (ii) in the event of any  failure on the part of
Lessee to pay any of those items  referred to in clause (i) above,  Lessee shall
also promptly pay and discharge every fine, penalty, interest and cost which may
be added for non-payment or late payment of such items (the items referred to in
clauses  (i) and  (ii)  above  being  referred  to  herein  collectively  as the
"Additional Charges").


                                       16
<PAGE>
                  3.5 Late Payment of RentLate.  LESSEE HEREBY ACKNOWLEDGES THAT
LATE  PAYMENT BY LESSEE TO LESSOR OF RENT WILL CAUSE  LESSOR TO INCUR  COSTS NOT
CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH IS PRESENTLY ANTICIPATED TO BE
EXTREMELY  DIFFICULT  TO  ASCERTAIN.  SUCH  COSTS  MAY  INCLUDE  PROCESSING  AND
ACCOUNTING  CHARGES AND LATE CHARGES WHICH MAY BE IMPOSED ON LESSOR BY THE TERMS
OF ANY LOAN  AGREEMENT  AND OTHER  EXPENSES OF A SIMILAR OR  DISSIMILAR  NATURE.
ACCORDINGLY, IF ANY INSTALLMENT OF RENT OTHER THAN ADDITIONAL CHARGES PAYABLE TO
A PERSON OTHER THAN LESSOR SHALL NOT BE PAID WITHIN FIVE (5) BUSINESS DAYS AFTER
ITS DUE DATE, LESSEE WILL PAY LESSOR ON DEMAND A LATE CHARGE EQUAL TO THE LESSER
OF (I) THREE PERCENT (3%) OF THE AMOUNT OF SUCH  INSTALLMENT OR (II) THE MAXIMUM
AMOUNT  PERMITTED BY LAW. THE PARTIES  AGREE THAT THIS LATE CHARGE  REPRESENTS A
FAIR AND  REASONABLE  ESTIMATE  OF THE COSTS THAT LESSOR WILL INCUR BY REASON OF
LATE PAYMENT BY LESSEE.  THE PARTIES FURTHER AGREE THAT SUCH LATE CHARGE IS RENT
AND  NOT  INTEREST  AND  SUCH   ASSESSMENT  DOES  NOT  CONSTITUTE  A  LENDER  OR
BORROWER/CREDITOR  RELATIONSHIP  BETWEEN  LESSOR AND LESSEE.  IN  ADDITION,  THE
AMOUNT  UNPAID,  INCLUDING ANY LATE CHARGES,  SHALL BEAR INTEREST AT THE OVERDUE
RATE  COMPOUNDED  MONTHLY FROM THE DUE DATE OF SUCH  INSTALLMENT  TO THE DATE OF
PAYMENT  THEREOF,  AND LESSEE SHALL PAY SUCH  INTEREST TO LESSOR ON DEMAND.  THE
PAYMENT OF SUCH LATE CHARGE OR SUCH INTEREST SHALL NOT CONSTITUTE WAIVER OF, NOR
EXCUSE OR CURE, ANY DEFAULT UNDER THIS LEASE, NOR PREVENT LESSOR FROM EXERCISING
ANY OTHER RIGHTS AND REMEDIES AVAILABLE TO LESSOR.

                           Lessor's Initials:
                                             ----------------
                           Lessee's Initials:
                                             ----------------

                  3.6 Net  LeaseNet  Lease.  This Lease is and is intended to be
what is commonly  referred to as a "net,  net,  net" or "triple net" lease.  The
Rent shall be paid  absolutely net to Lessor,  so that this Lease shall yield to
Lessor the full amount of the installments of Minimum Rent,  Additional Rent and
Additional Charges throughout the Term.


                                       17
<PAGE>
                                   ARTICLE IV.
                                   -----------

                  4.1      Impositions.

                           4.1.1.  Subject to Article XII  relating to permitted
contests,  Lessee  shall pay, or cause to be paid,  all  Impositions  before any
fine, penalty, interest or cost may be added for non-payment.  Lessee shall make
such payments directly to the taxing  authorities  where feasible,  and promptly
furnish  to Lessor  copies of  official  receipts  or other  satisfactory  proof
evidencing  such  payments.  Except as  provided  in the last  sentence  of this
Section 4.1.1 and in Section 4.1.7 below, Lessee's obligation to pay Impositions
shall be absolutely fixed upon the date such Impositions  become a lien upon the
Leased Property or any part thereof. If any Imposition may, at the option of the
taxpayer, lawfully be paid in installments, whether or not interest shall accrue
on the unpaid  balance  of such  Imposition,  Lessee  may pay the same,  and any
accrued  interest on the unpaid balance of such  Imposition,  in installments as
the same respectively become due and before any fine, penalty,  premium, further
interest  or cost may be added  thereto.  In such  event,  Lessee  shall only be
responsible  for those  installments  on account of such  Impositions  which are
assessed during the Term.

                           4.1.2 Lessor  shall  prepare and file all tax returns
and reports as may be required by Legal  Requirements  with  respect to Lessor's
net income,  gross  receipts,  franchise  taxes and taxes on its capital  stock.
Lessee shall  prepare and file all tax returns and reports as may be required by
Legal Requirements with respect to Lessee or the Leased Property.

                           4.1.3 Any  refund due from any  taxing  authority  in
respect of any  Imposition  paid by Lessee  shall be paid over to or retained by
Lessee if no Event of Default shall have occurred  hereunder and be  continuing.
Any other  refund  shall be paid  over to or  retained  by Lessor to offset  any
amounts payable by Lessee to Lessor hereunder.

                           4.1.4 Lessor and Lessee  shall,  upon the  reasonable
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  reasonably
necessary to prepare any required  returns and reports.  If any property covered
by this Lease is classified as personal property for tax purposes,  Lessee shall
file all  personal  property  tax  returns in such  jurisdictions  where it must
legally so file. Lessor, to the extent it possesses the same, and Lessee, to the
extent it possesses the same, shall provide the other party, upon request,  with
cost and depreciation  records  necessary for filing returns for any property so
classified  as  personal  property.  Where  Lessor is legally  required  to file
personal  property  tax returns and to the extent  practicable,  Lessee shall be
provided with copies of assessment  notices  indicating a value in excess of the
reported value in sufficient time for Lessee to file a protest.

                           4.1.5 Lessee may, upon notice to Lessor,  at Lessee's
option and at Lessee's sole cost and expense, protest, appeal, or institute such
other  proceedings as Lessee may deem  appropriate to effect a reduction of real
estate or  personal  property  assessments  and Lessor,  at Lessee's  expense as
aforesaid,  shall reasonably  cooperate with Lessee in such protest,  appeal, or
other action but at no cost or expense to Lessor.  Billings for reimbursement by
Lessee  to  Lessor  of  personal  property  or  real  property  taxes  shall  be
accompanied by copies of a bill therefor and payments thereof which identify the
personal property or real property with respect to which such payments are made.

                           4.1.6  Lessor  shall give prompt  notice to Lessee of
all Impositions  payable by Lessee hereunder of which Lessor has knowledge,  but
Lessor's  failure  to give any such  notice  shall in no way  diminish  Lessee's
obligations hereunder to pay such Impositions.


                                       18
<PAGE>
                           4.1.7   Impositions   imposed   in   respect  of  the
tax-fiscal  period  during  which  the Term  terminates  shall be  adjusted  and
prorated  between Lessor and Lessee,  whether or not such  Imposition is imposed
before or after such termination.

                  4.2  Utilities.  Lessee  shall  pay or  cause  to be paid  all
charges for electricity,  power, gas, oil, water and other utilities used in the
Leased  Property  and all Capital  Additions  thereto.  Lessee shall also pay or
reimburse  Lessor for all costs and expenses of any kind whatsoever which at any
time with respect to the Term hereof may be imposed  against Lessor by reason of
any of the  covenants,  conditions  and/or  restrictions  affecting  the  Leased
Property or any portion thereof, or with respect to easements, licenses or other
rights  over,  across or with respect to any  adjacent or other  property  which
benefits  the  Leased  Property,  including  any  and  all  costs  and  expenses
associated  with any utility,  drainage and parking  easements which were (a) in
effect  as of the  Commencement  Date,  (ii)  imposed  upon the Land  after  the
Commencement  Date in accordance with the terms of this Lease or (iii) otherwise
consented to in writing by Lessee.

                  4.3  Insurance.  Lessee  shall  pay or  cause  to be paid  all
premiums  for  the  insurance  coverage  required  to be  maintained  by  Lessee
hereunder.

                  4.4 Impound Account.  If Lessee,  at any time during the Term,
does not timely make payment of any Impositions or insurance  premiums  required
pursuant to Section 4.1 or Section 4.3, Lessor may, at any time  thereafter,  at
its  option to be  exercised  by thirty  (30)  days'  written  notice to Lessee,
require Lessee to deposit, at the time of any payment of Minimum Rent, an amount
equal to  one-twelfth  of Lessee's  estimated  annual  taxes,  of every kind and
nature,  required pursuant to Section 4.1 plus one-twelfth of Lessee's estimated
annual  insurance  premiums  required  pursuant  to Section  4.3 into an impound
account as directed by Lessor.  Such amounts  shall be applied to the payment of
the obligations in respect of which said amounts were deposited in such order of
priority as Lessor shall  determine,  on or before the respective dates on which
the same or any of them would become delinquent.  The cost of administering such
impound  account  shall be paid by Lessee.  Nothing in this Section 4.4 shall be
deemed to affect any right or remedy of Lessor hereunder.

                  4.5 Tax Service.  If, on two (2) or more occasions  during the
Term, Lessee fails to provide Lessor with reasonable documentation demonstrating
that Impositions imposed upon the Leased Property have been paid within ten (10)
days after  written  request  therefor by Lessor,  then if  requested by Lessor,
Lessee  shall,  at its sole  cost and  expense,  engage  the  services  of a tax
reporting  company,  to be designated by Lessor, and cause such company to issue
to Lessor reports covering the Leased Property.


                                       19
<PAGE>
                                   ARTICLE V.
                                   ----------

                  5.  No  Termination,   Abatement,  etc.  Except  as  otherwise
specifically  provided in this Lease, Lessee shall remain bound by this Lease in
accordance  with its terms and shall not seek or be entitled  to any  abatement,
deduction,  deferment  or reduction of Rent,  or set-off  against the Rent.  The
respective  obligations  of Lessor and Lessee shall not be affected by reason of
(i) any damage to or destruction of the Leased  Property or any portion  thereof
from whatever cause or any  Condemnation  of the Leased  Property or any portion
thereof;  (ii) the  lawful or  unlawful  prohibition  of, or  restriction  upon,
Lessee's use of the Leased Property,  or any portion  thereof,  the interference
with such use by any Person or by reason of eviction by paramount  title;  (iii)
any claim that Lessee has or might have against  Lessor by reason of any default
or  breach of any  warranty  by Lessor  hereunder  or under any other  agreement
between  Lessor and Lessee or to which Lessor and Lessee are  parties;  (iv) any
bankruptcy, insolvency, reorganization,  composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee or
transferee of Lessor; or (v) for any other cause,  whether similar or dissimilar
to any of the  foregoing,  other  than a  discharge  of  Lessee  from  any  such
obligations  as a matter of law.  Lessee hereby  specifically  waives all rights
arising from any 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) which may entitle
Lessee to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Lessee hereunder,  except as otherwise  specifically provided in
this Lease. The obligations of Lessor and Lessee hereunder shall be separate and
independent  covenants and agreements and the Rent and all other sums payable by
Lessee  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.

                                   ARTICLE VI.
                                   -----------

                  6.1 Ownership of the Leased Property. Lessee acknowledges that
the Leased Property is the property of Lessor and that Lessee has only the right
to the exclusive  possession  and use of the Leased  Property upon the terms and
conditions  of this Lease.  Lessee  shall,  at its  expense,  restore the Leased
Property to the condition required by Section 9.1.4.

                  6.2  Personal  PropertyPersonal  Property.  During  the  Term,
Lessee  shall,  as necessary and at its expense,  install,  affix or assemble or
place on any parcels of the Land or in any of the Leased Improvements, any items
of  Lessee's  Personal  Property  and  replacements  thereof  which shall be the
property of and owned by Lessee.  Except as provided in Sections  6.3 and 16.10,
Lessor shall have no rights to Lessee's Personal Property.  Lessee shall provide
and maintain during the entire Term all Personal Property  necessary in order to
operate  the  Facility  in  compliance  with  all  licensure  and  certification
requirements,   all  Legal  Requirements  and  all  Insurance  Requirements  and
otherwise in accordance with customary  practice in the industry for the Primary
Intended Use.

                  6.3  Transfer of Personal  Property  and Capital  Additions to
LessorTransfer of Personal  Property and Capital  Additions to Lessor.  Upon the
expiration or earlier termination of this Lease, all Capital Additions not owned
by Lessor and Lessee's  Personal  Property  shall become the property of Lessor,
free of any  encumbrance  and Lessee shall  execute all  documents  and take any
other actions reasonably  necessary to evidence such ownership and discharge any
encumbrance  thereon;  provided,  however,  that  subject to Section  6.4 below,
Lessee  shall be entitled to remove all  Removable  Personal  Property  from the
Leased  Property at the end of the Term so long as Lessee  repairs any damage to
the Leased Property caused by such removal.


                                       20
<PAGE>
                  6.4   Option  to   Purchase   Removable   Personal   Property.
Notwithstanding  anything to the  contrary in this Lease,  Lessor shall have the
option,  exercisable by written notice to the Lessee,  not less than thirty (30)
days prior to the end of the Term or within  thirty  (30) days after the earlier
termination  of this  Lease,  to purchase  all or any  portion of the  Removable
Personal  Property at the then book value of each item of Removable  Property as
reflected on Lessee's books and records  maintained in accordance  with GAAP, or
if no book value, then for an amount equal to the then unamortized original cost
thereof. Such amortization rate, if applicable,  shall be in accordance with the
useful life of the particular item of Removable  Personal Property as reasonably
determined by Lessee in accordance with GAAP. Upon payment of the purchase price
therefor,  Lessee  shall  convey the  Removable  Personal  Property  free of any
encumbrance  and  shall  execute  all  documents  and  take  any  other  actions
reasonably necessary to evidence the transfer and conveyance of ownership of the
Removable  Personal  Property  to Lessor and the  discharge  of any  encumbrance
thereon.

                                  ARTICLE VII.
                                  ------------

                  7.1  Condition  of the Leased  Property.  Lessee  acknowledges
receipt and delivery of  possession  of the Leased  Property and that Lessee has
examined and otherwise  has  knowledge of the  condition of the Leased  Property
prior to the  execution  and delivery of this Lease and has found the same to be
in good order and repair, free from Hazardous  Substances not in compliance with
Legal  Requirements,  and satisfactory for its purposes  hereunder.  Regardless,
however,  of any examination or inspection made by Lessee and whether or not any
patent or latent defect or condition was revealed or discovered thereby,  Lessee
is leasing the Leased Property "AS IS" in its present  condition.  Lessee waives
any claim or action  against  Lessor in respect of the  condition  of the Leased
Property including any defects or adverse conditions not discovered or otherwise
known  by  Lessee  as  of  the  date   hereof.   LESSOR  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 THE NATURE OR QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT
BEING  AGREED  THAT ALL SUCH  RISKS,  LATENT OR  PATENT,  ARISING  FROM  EVENTS,
CONDITIONS  OR  CIRCUMSTANCES  OCCURRING  PRIOR TO OR DURING  THE TERM ARE TO BE
BORNE  SOLELY BY LESSEE  INCLUDING  ALL  RESPONSIBILITY  AND  LIABILITY  FOR ANY
ENVIRONMENTAL REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS.

                  7.2 Use of the Leased Property

                           7.2.1  Lessee  covenants  that  it  will  obtain  and
maintain all  authorizations  and approvals needed to use and operate the Leased
Property and the Facility for the Primary  Intended Use in accordance with Legal
Requirements  including applicable licenses,  provider agreements,  permits, and
Medicare and/or Medicaid certification.

                           7.2.2 Lessee shall use or cause to be used the Leased
Property and the  improvements  thereon for its Primary  Intended Use. Except as
otherwise set forth in the definition of Primary  Intended Use, Lessee shall not
use the Leased Property or any portion thereof or any Capital  Addition  thereto
for any other use without the prior  written  consent of Lessor,  which  consent
Lessor may withhold in its sole discretion.


                                       21
<PAGE>
                           7.2.3  Except as a result of (a) damage,  destruction
or  Condemnation   and  such  reasonable   period  of  time  to  effect  repairs
necessitated  thereby,  or (b) any other occurrence of the nature and type of an
Unavoidable Delay, Lessee shall operate  continuously the entire Leased Property
and all Capital  Additions  thereto in accordance with its Primary Intended Use.
Lessee shall devote the entire Facility and all Capital Additions thereto to the
Primary Intended Use, except for areas reasonably required for office or storage
space uses  incidental to the Primary  Intended  Use.  Lessee shall be deemed in
violation  of the  foregoing  provision  if,  except for  medically  appropriate
reasons or as a result of (i) damage,  destruction or Condemnation,  or (ii) any
other  occurrence  of the  nature  and  type  of an  Unavoidable  Delay,  Lessee
voluntarily transfers, in the aggregate during any twelve (12) month period, ten
percent  (10%) or more of the  patients  or  residents  located in the  Facility
without replacing such patients or residents within such 12-month period.

                           7.2.4  Subject to Legal  Requirements  and  Insurance
Requirements,  Lessee shall  conduct its business at the Facility in  conformity
with the standards of patient and/or resident care practice  currently  provided
in  similar  facilities  in the State  which are owned,  operated  or managed by
Lessee or any Affiliate of Lessee, or if no such other similar facilities are so
owned,  operated  or managed by Lessee or any  Affiliate  of Lessee in the State
then consistent  with the current  standards  provided in similar  facilities in
other states  (such  standards to be adjusted to take into account the effect of
any Legal Requirements  and/or Insurance  Requirements  applicable in such other
states compared to those  applicable in the State) which are owned,  operated or
managed by Lessee or any Affiliate of Lessee.

                           7.2.5  Lessee  shall  not  commit  or  suffer  to  be
committed any waste to the Leased  Property or any Capital  Addition  thereto or
cause or permit any nuisance to be maintained thereon.

                           7.2.6  Lessee  shall  neither  suffer  nor permit the
Leased  Property or any  portion  thereof or any Capital  Addition  thereto,  or
Lessee's  Personal  Property,  to be used  in such a  manner  that  (a)  impairs
Lessor's  title  thereto or to any portion  thereof or (b) results in a claim of
adverse use or possession,  or an implied  dedication of the Leased  Property or
any portion thereof or any Capital Addition thereto.

                           7.2.7  To  the  extent  applicable  for  purposes  of
determining  the Additional  Rent payable by Lessee  hereunder,  for purposes of
computing  Incremental  Gross Revenues for any Lease Year or other period during
which  Lessee is in breach or  violation  of any of the  covenants  set forth in
Sections 7.2.1 through 7.2.4 shall be deemed to be the greater of Lessee's Gross
Revenues  for (i) such Lease Year or other  period,  or (ii) 100% of the highest
Gross Revenues for any prior Lease Year or any corresponding period of any prior
Lease Year, as applicable, as determined by Lessor.

                  7.3 Lessor to Grant Easements, etc. Lessor shall, from time to
time so long as no Event of  Default  has  occurred  and is  continuing,  at the
request of Lessee and at Lessee's cost and expense,  but subject to the approval
of Lessor,  which  approval  shall not be  unreasonably  withheld or delayed (i)
grant  easements  and other  rights in the  nature of  easements;  (ii)  release
existing  easements or other rights in the nature of easements which are for the
benefit of the Leased Property;  (iii) dedicate or transfer  unimproved portions
of the Leased Property for road, highway or other public purposes;  (iv) execute
petitions to have the Leased  Property  annexed to any municipal  corporation or
utility  district;  (v) execute  amendments  to any  covenants,  conditions  and
restrictions  affecting the Leased Property; and (vi) execute and deliver to any
Person any instrument  appropriate  to confirm or effect such grants,  releases,
dedications and transfers to the extent of its interest in the Leased Property,


                                       22
<PAGE>
but only upon delivery to Lessor of an Officer's  Certificate  stating that such
grant release, dedication, transfer, petition or amendment is not detrimental to
the proper  conduct of the  business of Lessee on the Leased  Property  and does
not, in Lessee's  reasonable  business judgment,  materially reduce the value of
the Leased Property.

                  7.4  Preservation  of Value and  Utility  of Leased  Property.
Lessee acknowledges that a fair return to Lessor on its investment in the Leased
Property is dependent,  in part,  on the  concentration  on the Leased  Property
during  the  Term of the  business  of  Lessee  and its  Affiliates  (i.e.,  the
operation of the Facility for its Primary Intended Use) in the geographical area
of the Leased Property.  Lessee further acknowledges that diversion of residents
and/or  patients,  as  applicable,  from the  Facility  to other  facilities  or
institutions  owned,  operated or managed,  whether  directly or indirectly,  by
Lessee or its Affiliates  could have a material  adverse impact on the value and
utility of the Leased Property. Accordingly, Lessor and Lessee agree as follows:

                           7.4.1  During  the Term  and for a period  of two (2)
years  thereafter,  neither  Lessee  nor  any of  its  Affiliates,  directly  or
indirectly,  shall  operate,  own,  manage or have any  interest in or otherwise
participate in or receive revenues from any Competing  Facility  (whether now or
hereafter in operation), within a ten (10) mile radius from the outside boundary
of the Leased Property (the "Ten Mile Area").  By its signature  hereto,  Lessee
represents  and warrants to Lessor that neither Lessee nor any of its Affiliates
currently has any such interest in any such Competing  Facility  within such Ten
Mile Area. In addition, the following shall apply:

                                  (a)  Lessee  or any of its  Affiliates  may at
         anytime  directly  or  indirectly,  operate,  own,  manage  or have any
         interest in or otherwise  participate  in or receive  revenues from any
         Competing  Facility  outside of a radius of fifteen (15) miles from the
         outside boundary of the Leased Property.

                                  (b)  Prior  to the  expiration  of the  eighth
         (8th) Lease Year of the Fixed Term,  and prior to the expiration of the
         third (3rd) Lease Year of each Extended Term, if any,  Lessee or any of
         its  Affiliates  may acquire and may directly or  indirectly,  operate,
         own,  manage or have an  interest  in or  otherwise  participate  in or
         receive revenues from any Competing  Facility (whether now or hereafter
         in operation)  within a radius from ten (10) to fifteen (15) miles from
         the outside  boundary of the Leased  Property  (the  "Ten-Fifteen  Mile
         Area").

                                  (c)  From  and  after  the  expiration  of the
         eighth  (8th)  Lease  Year of the  Fixed  Term,  and from and after the
         expiration of the third (3rd) Lease Year of each Extended Term, if any,
         if  Lessee  or  any  of  its  Affiliates  shall  acquire,  directly  or
         indirectly,  any material interest (including any controlling interest)
         in any  Competing  Facility,  including in the  operation or management
         thereof,  within the Ten-Fifteen  Mile Area, then Lessor may by written
         notice  to  Lessee  given  at  anytime  after  the date  Lessee  or any
         Affiliate  of Lessee  acquires  the same,  extend the then Term of this
         Lease for the next  subsequent  Extended  Term  (i.e.,  ten (10)  Lease
         Years).  In such event, the applicable  Extended Term shall be upon all
         the terms and  conditions  as  provided  for in  Article  XIX as though
         Lessee was entitled to and had exercised the same;  provided,  however,
         that in no event  shall (i) the Term of this Lease be  extended  beyond
         the second  Extended  Term pursuant to this  subsection  (c) or (ii) an
         extension of the Term of this Lease for any such Extended Term pursuant
         to this  subsection  (c) extend the "Term" of any other  Facility Group
         Lease.  The provisions of this subsection (c) (i.e.,  Lessor's right to
         extend the Term) shall not apply with respect to any Competing


                                       23
<PAGE>
         Facility which is operated, managed or owned by Lessee or any Affiliate
         of Lessee prior to the expiration of the eighth (8th) Lease Year of the
         Fixed  Term,  or the third (3rd) Lease Year of any  Extended  Term,  as
         applicable.

                        (d)  Without  limiting  Lessor's  rights as  provided in
         subsection (c) above, during the Term (including the Extended Terms, if
         any) Lessor shall have a first  refusal to finance  (and/or  refinance)
         any Competing  Facility now or hereafter owned or proposed to be owned,
         directly or indirectly, by Lessee or any Affiliate of Lessee within the
         Ten-Fifteen  Mile  Area  upon  the same  terms  and  conditions  of any
         financing  (or  refinancing)  from any third party which  Lessee or any
         Affiliate  of Lessee  intends  to accept  (or has  accepted  subject to
         Lessor's  right of  first  refusal  herein),  including  any  financing
         (and/or refinancing) of such Competing Facility together with any other
         facilities  owned or proposed to be owned,  directly or indirectly,  by
         Lessee or any Affiliate of Lessee (whether or not such other facilities
         are located  within the  Ten-Fifteen  Mile Area).  If,  during the Term
         (including  the Extended  Terms,  if any),  Lessee or any  Affiliate of
         Lessee reaches such agreement or a tentative  agreement with respect to
         the  terms  and  conditions  of any  such  third  party  financing  (or
         refinancing)  for any such Competing  Facility  within the  Ten-Fifteen
         Mile Area  (whether  by itself or with one or more  other  facilities),
         Lessee shall  promptly  notify  Lessor of the material  terms  thereof,
         including the principal balance,  purchase price, interest, lease rate,
         amortization  rate or term,  as  applicable.  Lessor shall have fifteen
         (15) days after  receipt of such  notice from  Lessee  within  which to
         exercise  Lessor's  right of first  refusal  and agree to provide  such
         financing (or refinancing) upon the same material terms as described in
         the notice to Lessor,  which  agreement  shall include,  if applicable,
         Lessor's  agreement  to provide  such  financing  or  refinancing  with
         respect to any such other  facilities  which are  included  in the same
         financing (or refinancing)  package with such Competing Facility within
         the Ten-Fifteen Mile Area. If Lessor shall not exercise  Lessor's right
         of first  refusal  within said  fifteen  (15) day period and within the
         manner  herein  provided,  Lessee shall be free for a period of one (1)
         year after the  expiration  of said  fifteen  (15) day period to obtain
         financing  (or  refinancing)  with respect to such  Competing  Facility
         within  the  Ten-Fifteen  Mile  Area  (and  any such  other  facilities
         described  in such notice to Lessor) from any third party upon terms no
         less favorable  than those so offered to Lessor.  If such financing (or
         refinancing)  is not  consummated,  Lessor's  right of first refusal as
         provided  in this  subsection  (d) with  respect to any such  Competing
         Facility  shall  be  re-instituted,   as  to  any  subsequent  proposed
         financing  (or  refinancing)  of the same by Lessee or any Affiliate of
         Lessee.  As used in this subsection (d),  "financing (or  refinancing)"
         shall mean and  include a loan  (including  a loan  secured by the real
         estate  and  other   collateral  of  a  Competing   Facility)  and  any
         sale-leaseback or similar transaction.  Notwithstanding anything to the
         contrary in this subsection (d), Lessor shall not have a right of first
         refusal with respect to (i) any  seller/transferor  take-back financing
         provided to Lessee or an  Affiliate  of Lessee in  connection  with the
         acquisition of a Competing  Facility within the Ten-Fifteen  Mile Area,
         so  long  as   such   take-back   financing   was   required   by  such
         seller/transferor  as  a  condition  to  such  acquisition,   (ii)  the
         assumption  by Lessee  or any  Affiliate  of  Lessee  of any  financing
         encumbering a Competing Facility within the Ten-Fifteen Mile Area which
         financing  existed prior to the date of  acquisition  of such Competing
         Facility by Lessee or any  Affiliate  of Lessee or (iii) any  financing
         (or   refinancing)  of  any   non-competing   facilities  or  Competing
         Facilities located outside of the Ten-Fifteen Mile Area which are owned
         or proposed  to be owned by Lessee or an  Affiliate  of Lessee,  unless
         such facilities (or some of them) are included in a proposed  financing
         (and/or  refinancing)  package  with a  Competing  Facility  within the
         Ten-Fifteen  Mile Area as to which Lessor has a right of first  refusal
         hereunder.

                                       24
<PAGE>
All distances provided for in this Section 7.4.1 shall be measured on a straight
line  rather than  driving  distance  basis.  In the event that any portion of a
Competing  Facility is located within the Ten Mile Area or the Ten-Fifteen  Mile
Area,  as the case may be, then the entire  Competing  Facility  shall be deemed
located within such area.

                           7.4.2  For a  period  of one (1) year  following  the
Term, neither Lessee nor any of its Affiliates shall,  without the prior written
consent of Lessor,  which  consent may be given or  withheld  in  Lessor's  sole
discretion,  hire,  engage or otherwise  employ any  management  or  supervisory
personnel working on or in connection with the Leased Property.

                           7.4.3 Except for medically  appropriate reasons or as
a result of damage,  destruction or  Condemnation,  prior to and for a period of
two (2) years after the expiration or earlier  termination of this Lease, Lessee
shall not recommend or actively solicit (e.g., through direct mailers, telephone
solicitation or other forms of  communication  directed at patients or residents
of the Facility or their  relatives)  the removal or transfer of any resident or
patient from the Leased Property to any other Competing Facility owned, operated
or  managed  by Lessee  or any  Affiliate  of  Lessee or in which  Lessee or any
Affiliate of Lessee has an interest (financial or otherwise).

                                  ARTICLE VIII.
                                  -------------

                  8.   Compliance   with  Legal  and   Insurance   Requirements,
Instruments,  etc.  Subject to Article XII  regarding  permitted  contests,  and
without limiting the specific provisions of Article XXXVII below, Lessee, at its
expense,  shall  promptly (i) comply with all Legal  Requirements  and Insurance
Requirements regarding the use, operation,  maintenance,  repair and restoration
of the Leased Property,  Lessee's  Personal  Property and all Capital  Additions
whether or not compliance therewith may require structural changes in any of the
Leased  Improvements or Capital  Additions thereto or interfere with the use and
enjoyment of the Leased Property and (ii) procure,  maintain and comply with all
licenses,  certificates of need,  provider  agreements and other  authorizations
required for the use of the Leased Property,  Lessee's Personal Property and all
Capital  Additions for the Primary  Intended Use and any other use of the Leased
Property,  Lessee's Personal Property and all Capital Additions then being made,
and for the proper  erection,  installation,  operation and  maintenance  of the
Leased Property,  Lessee's Personal Property and all Capital  Additions.  Lessor
may,  but shall not be  obligated  to,  enter upon the Leased  Property  and all
Capital  Additions  thereto  and take  such  actions  and incur  such  costs and
expenses to effect such compliance as it deems advisable to protect its interest
in the Leased Property and Capital Additions thereto, and Lessee shall reimburse
Lessor for all costs and  expenses  incurred by Lessor in  connection  with such
actions. Lessee covenants and agrees that the Leased Property, Lessee's Personal
Property and all Capital Additions shall not be used for any unlawful purpose.


                                       25
<PAGE>
                                   ARTICLE IX.
                                   -----------

                  9.1 Maintenance and Repair

                           9.1.1  Lessee,  at its  expense,  shall  maintain the
Leased Property,  and every portion thereof,  Lessee's  Personal Property (other
than the Removable Personal Property) and all Capital Additions, and all private
roadways,  sidewalks and curbs appurtenant to the Leased Property, and which are
under Lessee's control in good order and repair whether or not the need for such
repairs  occurs as a result of Lessee's  use, any prior use, the elements or the
age  of  the  Leased  Property,  Lessee's  Personal  Property  and  all  Capital
Additions,  and, with reasonable promptness,  make all necessary and appropriate
repairs  thereto of every kind and nature,  including  those necessary to comply
with changes in any Legal Requirements, whether interior or exterior, structural
or non-structural,  ordinary or extraordinary, foreseen or unforeseen or arising
by reason of a condition existing prior to the Commencement Date. Lessee, at its
expense, shall maintain all Removable Personal Property in a safe condition. All
repairs  shall be at least  equivalent in quality to the original  work.  Lessee
will not take or omit to take any action the taking or  omission  of which might
materially  impair the value of the Leased  Property  or the  ability to use the
Leased  Property  or any part  thereof or any Capital  Addition  thereto for its
Primary Intended Use.

                           9.1.2  Lessor  shall not under any  circumstances  be
required to (i) build or rebuild any improvements on the Leased  Property;  (ii)
make any repairs,  replacements,  alterations,  restorations  or renewals of any
nature to the Leased Property, whether ordinary or extraordinary,  structural or
non-structural,  foreseen or unforeseen,  or to make any expenditure  whatsoever
with  respect  thereto,  unless  the  need  therefor  was  caused  by the  gross
negligence  or  willful   misconduct  of  Lessor,   its  employees,   agents  or
contractors;  or (iii)  maintain the Leased  Property in any way.  Lessee hereby
waives, to the extent permitted by law, the right to make repairs at the expense
of Lessor  pursuant  to any law in effect at the time of the  execution  of this
Lease or hereafter enacted.

                           9.1.3  Nothing  contained in this Lease and no action
or inaction by Lessor  shall be  construed  as (i)  constituting  the consent or
request of Lessor,  expressed  or  implied,  to any  contractor,  subcontractor,
laborer,  materialman  or  vendor  to or for the  performance  of any  labor  or
services  or  the  furnishing  of  any  materials  or  other  property  for  the
construction,  alteration,  addition,  repair or  demolition of or to the Leased
Property or any part  thereof or any Capital  Addition  thereto;  or (ii) giving
Lessee any right,  power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim  against  Lessor in respect
therefor or create any right, title, interest,  lien, claim or other encumbrance
upon the estate of Lessor in the Leased Property,  or any portion thereof or any
Capital Addition thereto.

                           9.1.4  Unless  Lessor  shall convey any of the Leased
Property to Lessee pursuant to the provisions of this Lease,  Lessee shall, upon
the  expiration  or earlier  termination  of the Term,  vacate and surrender the
Leased Property,  Lessee's Personal Property (other than the Removable  Personal
Property)  and all Capital  Additions  to Lessor in the  condition  in which the
Leased  Property  was  originally  received  from Lessor and  Lessee's  Personal
Property and Capital  Additions  were  originally  introduced  to the  Facility,
except as  repaired,  rebuilt,  restored,  altered or added to as  permitted  or
required by the provisions of this Lease and except for ordinary wear and tear.

                  9.2 Encroachments,  Restrictions,  Mineral Leases, etc. If any
of the Leased 


                                       26
<PAGE>
Improvements  or  Capital  Additions  shall,  at any  time,  encroach  upon  any
property,  street or right-of-way,  or shall violate any restrictive covenant or
other  agreement  affecting  the  Leased  Property,  or any part  thereof or any
Capital  Addition  thereto,  or shall  impair  the  rights of  others  under any
easement or right-of-way to which the Leased Property is subject,  or the use of
the Leased  Property or any Capital  Addition  thereto is  impaired,  limited or
interfered  with by reason of the exercise of the right of surface  entry or any
other  provision  of a lease  or  reservation  of any oil,  gas,  water or other
minerals, then promptly upon the request of Lessor or any Person affected by any
such  encroachment,  violation  or  impairment,  Lessee,  at its  sole  cost and
expense,  but  subject  to its  right  to  contest  the  existence  of any  such
encroachment,  violation or impairment,  shall protect, indemnify, save harmless
and defend Lessor from and against all losses, liabilities, obligations, claims,
damages,  penalties,  causes of action, costs and expenses (including reasonable
attorneys',  consultants' and experts' fees and expenses) based on or arising by
reason of any such  encroachment,  violation or  impairment.  In the event of an
adverse final determination with respect to any such encroachment,  violation or
impairment,  Lessee  shall  either (i)  obtain  valid and  effective  waivers or
settlements  of all claims,  liabilities  and damages  resulting  from each such
encroachment,  violation or impairment,  whether the same shall affect Lessor or
Lessee;  or (ii) make such  changes in the Leased  Improvements  and any Capital
Addition  thereto,  and take such  other  actions,  as Lessee in the good  faith
exercise  of  its  judgment  deems  reasonably   practicable,   to  remove  such
encroachment  or to end such violation or impairment,  including,  if necessary,
the  alteration  of any of  the  Leased  Improvements  or any  Capital  Addition
thereto,  and in any event take all such actions as may be necessary in order to
be able to continue  the  operation of the Leased  Improvements  and any Capital
Addition thereto for the Primary Intended Use substantially in the manner and to
the extent the Leased  Improvements and Capital Additions were operated prior to
the  assertion  of  such   encroachment,   violation  or  impairment.   Lessee's
obligations  under this  Section 9.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other  insurance  and, to the extent the  recovery  thereof is not  necessary to
compensate Lessor for any damages incurred by any such  encroachment,  violation
or  impairment,  Lessee shall be entitled to a credit for any sums  recovered by
Lessor under any such policy of title or other insurance.

                  9.3 Repairs to be Performed by Lessee.  Lessee  shall,  at its
own expense, on or before June 1, 1997, perform certain deferred maintenance and
repairs to the Facility based on the recommendations of Barge, Waggoner,  Sumner
and Cannon, Inc. as described in the Building Condition  Evaluation Report dated
February 25, 1997 (the "Building Report") and summarized as follows:

                      (a)      Site:
                               ----
                                    (i)  Remove  and  replace  concrete  parking
                  lot/drives  where  severely  cracked  --  approximately  4,500
                  square feet of concrete.

                                    (ii)  Provide  parking  lot  striping at the
                  front and rear of the Facility.

                                    (iii) Provide  erosion  control and drainage
                  improvements to the two (2) designated  areas specified in the
                  Building Report.

                           (b)      Building Exterior:

                                    (i)    Provide    maintenance/painting    of
                  foundations, window frames, porches, steps and handrails.


                                       27
<PAGE>
                                    (ii)   Provide   termite    inspection   and
                  treatment.

                           (c)      Building Interior:

                                    (i)  Provide   repairs  or   replacement  to
                  skylight and to water damaged ceiling in apartment.

                           (d)      ADA Compliance:

                                    (i) Install compliant signage and faucet for
                  the existing public toilet.

                                    (ii)  Install  compliant  panic  hardware at
                  fire doors.

                  Upon completion of the aforementioned deferred maintenance and
repairs,  Lessee shall provide to Lessor  copies of all  invoices,  work orders,
contracts, receipts, cancelled checks (front and back), an Officer's Certificate
and other  documentation  reasonably  requested by Lessor to show that such work
was completed.

                                   ARTICLE X.
                                   ----------

Construction  of Capital  Additions  to the Leased  Property.  Without the prior
written  consent of Lessor which consent may be withheld or granted by Lessor in
its sole and absolute discretion,  Lessee shall (a) make no Capital Additions on
or structural  alterations to the Leased  Property and (b) not enlarge or reduce
the size of the Facility or otherwise alter or affect any main Facility systems,
including  any  main  plumbing,  electrical  or  heating,  ventilating  and  air
conditioning  systems of the  Facility;  provided,  however,  that Lessor hereby
agrees not to  unreasonably  withhold  its consent to any Capital  Additions  or
structural  alterations to the Leased  Property  which,  for any single project,
costs less than $100,000, or when aggregated with all other projects (other than
the Capital Addition  Project  described in Section 10.3 below) during the Term,
costs less than $200,000.

General  Requirements  for all  Approved  Capital  Additions.  For  all  Capital
Additions which Lessee desires to make and which Lessor has approved pursuant to
Section 10.1 above or 10.3 below, the following shall apply:

                           (a) Such construction shall not commence until Lessee
has   delivered   to  Lessor  and  Lessor  has  approved   detailed   plans  and
specifications  in form  acceptable  to  Lessor  with  respect  to such  Capital
Addition.  There shall be no changes to any such plans and  specifications  once
approved by Lessor without Lessor's written consent.

                           (b) Such construction shall not commence to and until
Lessee has delivered to Lessor and Lessor has approved a detailed  budget of all
costs projected to be incurred in connection  with the planning,  permitting and
construction  of the Capital  Addition,  including an allowance  for costs to be
incurred by Lessor in connection with its review, approval and monitoring of the
project.  Such  allowance  shall  be  paid to  Lessor  as an  Additional  Charge
hereunder  or, in connection  with the Capital  Additions  Project  described in
Section 10.3 below,  accrued by Lessor and deemed part of the Capital  Additions
Costs funded by Lessor.

                           (c) Such construction shall not commence until Lessee
has  procured  and paid for all  municipal  and other  governmental  permits and
authorizations required


                                       28
<PAGE>
therefor.  Lessor  shall  join  in the  application  for  any  such  permits  or
authorizations  whenever such action is necessary;  provided,  however, that (i)
any such joinder shall be at no cost or expense to Lessor (except as provided in
Section  10.3);  and (ii) any plans and  specifications  required to be filed in
connection with any such application shall have been approved by Lessor.

                           (d)  Lessee  shall  have  procured  or  caused  to be
procured a payment and performance bond for the full value of such construction,
which bond shall name Lessor as an  additional  obligee and otherwise be in form
and substance and issued by a Person reasonably satisfactory to Lessor.

                           (e)  Such  construction  shall  not,  and a  licensed
architect or engineer  selected by Lessee and approved by Lessor,  shall certify
to Lessor that such  construction  shall not, impair the structural  strength of
any  component  of the  Facility  or  overburden  the  main  electrical,  water,
plumbing,  HVAC or other  building  systems  of the  Facility  or any  component
thereof.

                           (f) Lessee's licensed  architect or engineer approved
by Lessor  shall  certify to Lessor that the detailed  plans and  specifications
conform to and  comply  with all  applicable  building,  subdivision  and zoning
codes, laws, ordinances, regulations and other Legal Requirements imposed by all
governmental  authorities  having  jurisdiction  over the Leased  Property,  all
Insurance  Requirements and all private  covenants,  conditions and restrictions
affecting all or any portion of the Leased Property.

                           (g) Such construction  shall,  when completed,  be of
such a character as not to decrease the value or utility of the Leased  Property
as it was immediately before such Capital Addition.

                           (h)  During   and   following   completion   of  such
construction,  the parking which is located at the Facility or on the Land shall
remain  adequate for the operation of the Facility for its Primary  Intended Use
and in no event  shall  such  parking  be less  than  that (i)  which  was or is
required by all Legal  Requirements or (ii) which was located at the Facility or
on the Land prior to such construction.

                           (i)  All   work   done  in   connection   with   such
construction  shall be done promptly and in a good and workmanlike  manner using
first-class materials and in conformity with all Legal Requirements.

                           (j)  Promptly   following  the   completion  of  such
construction,  Lessee  shall  deliver  to Lessor  "as  built"  drawings  of such
addition,  certified as accurate by the licensed  architect or engineer selected
by Lessee and approved by Lessor to supervise such work.

                           (k) If by  reason  of the  construction  of any  such
Capital  Addition  a new  Certificate  of  Occupancy  for any  component  of the
Facility  is  required,  Lessee  shall  obtain and furnish a copy of the same to
Lessor promptly upon completion of the Capital Addition.


                                       29
<PAGE>
                  10.3 Funding of Capital  Addition  Project.  Capital  Addition
Project

                           10.3.1  Provided that no Event of Default  exists and
no event or  condition  exists  which with notice  and/or  passage of time would
constitute an Event of Default,  Lessor shall fund (or accrue, as applicable) an
amount not to exceed $275,000.00 for the "Capital Addition  Project";  provided,
however,  that groundbreaking for such Capital Addition Project commences within
180 days of the Commencement  Date and provided further that Lessor shall not be
required to fund any advance  requested  after the  expiration  of the 545th day
following  the  Commencement  Date. As used herein,  the term "Capital  Addition
Project" shall mean at a minimum the  construction of not less than ten (10) new
resident/patient  units to the Facility and may include such other  improvements
to the Facility as Lessee may propose  subject to Lessor's  approval as provided
in Section 10.1 above. The modification to the Minimum Rent  attributable to any
funds advanced or accrued by Lessor on account of the Capital  Addition  Project
shall be as set forth in Article III.

                           10.3.2  Lessor  shall  advance the funds agreed to be
funded by Lessor  pursuant  to  Section  10.3.1  upon  completion  of the entire
Capital Addition Project and Lessor's receipt of the following:

                           (a) Any information,  certificates, licenses, permits
or documents requested by Lessor which are necessary to confirm that Lessee will
be  able  to use  the  Capital  Addition  Project  upon  completion  thereof  in
accordance with the Primary Intended Use, including all required federal,  state
or local government licenses and approvals;

                           (b) An Officer's  Certificate  and, if  requested,  a
certificate  from Lessee's  licensed  architect or engineer  approved by Lessor,
setting  forth in  reasonable  detail the actual costs for the Capital  Addition
Project;

                           (c) A deed  conveying  title  to  Lessor  to any land
acquired for the purpose of constructing  the Capital  Addition Project free and
clear of any  liens  or  encumbrances  except  those  approved  by  Lessor,  and
accompanied by a final as-built survey thereof satisfactory to Lessor;

                           (d) Endorsements to any then existing policy of title
insurance covering the Leased Property or commitments  therefor  satisfactory in
form and substance to Lessor updating the same without any additional  exception
except as may be approved by Lessor;

                           (e) If  appropriate,  a new  owner's  policy of title
insurance  insuring  fee simple  title to any land  conveyed  to Lessor free and
clear of all liens and encumbrances except as may be approved by Lessor;

                           (f) If requested by Lessor, a M.A.I. appraisal of the
Leased Property indicating that the value of the Leased Property upon completion
of the Capital  Addition Project will exceed the Fair Market Value of the Leased
Property  immediately  prior  thereto  by an amount  not less  than  ninety-five
percent (95%) of the total cost of the Capital Addition Project; and

                           (g)  Such   other   billing   statements,   invoices,
certificates,  endorsements,  opinions, site assessments,  surveys, resolutions,
ratifications,  lien releases and waivers and other  instruments and information
reasonably required by Lessor.

Notwithstanding  the  foregoing,  upon  Lessor's  receipt  and  approval  of the
detailed budget for


                                       30
<PAGE>
the Capital Addition  Project as provided in Section 10.2(b) above,  Lessor may,
in its sole  discretion and at the request of Lessee,  agree to fund the Capital
Addition  Project  based  upon  periodic  disbursements,  but in no  event  more
frequently than once per month. In such event, such periodic disbursements shall
be made on such basis as Lessor and Lessee may agree, provided that prior to any
such  disbursement  Lessor shall receive,  to the extent  applicable,  the items
described  in  subparagraphs  (a)  through  (g) above with  respect to each such
disbursement.

                                   ARTICLE XI.
                                   -----------

                  11. Liens.  Subject to the  provisions of Article XII relating
to permitted contests, Lessee will not directly or indirectly create or allow to
remain  and will  promptly  discharge  at its  expense  any  lien,  encumbrance,
attachment,  title retention  agreement or claim upon the Leased Property or any
Capital  Addition  thereto or any  attachment,  levy,  claim or  encumbrance  in
respect of the Rent,  excluding,  however, (i) this Lease; (ii) the matters that
existed  as of the  Commencement  Date;  (iii)  restrictions,  liens  and  other
encumbrances  which are  consented  to in writing by  Lessor,  or any  easements
granted  pursuant to the  provisions of Section 7.3; (iv) liens for  Impositions
which  Lessee is not  required to pay  hereunder;  (v)  subleases  permitted  by
Article XXIV;  (vi) liens for  Impositions  not yet  delinquent;  (vii) liens of
mechanics, laborers, materialmen,  suppliers or vendors for amounts not yet due;
and (viii) any liens  which are the  responsibility  of Lessor  pursuant  to the
provisions of Article XXXVI.


                                       31
<PAGE>

                                  ARTICLE XII.
                                  ------------

                  12. Permitted  Contests.  Lessee, upon prior written notice to
Lessor,  on its own or in Lessor's name, at Lessee's  expense,  may contest,  by
appropriate  legal  proceedings  conducted in good faith and with due diligence,
the amount,  validity or  application,  in whole or in part, of any licensure or
certification decision,  Imposition,  Legal Requirement,  Insurance Requirement,
lien, attachment,  levy, encumbrance,  charge or claim; subject, however, to the
further  requirement  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
Lessor  and from the Leased  Property  or any  Capital  Addition  thereto;  (ii)
neither the Leased Property or any Capital Addition thereto,  the Rent therefrom
nor any part or interest in either thereof would be in any danger of being sold,
forfeited,  attached or lost pending the outcome of such  proceedings;  (iii) in
the case of a Legal  Requirement,  neither  Lessor  nor  Lessee  would be in any
danger of civil or criminal  liability for failure to comply  therewith  pending
the outcome of such proceedings; (iv) if any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand  Dollars  ($50,000),  Lessee
shall deliver to Lessor and its counsel an opinion of legal  counsel  reasonably
acceptable  to Lessor to the  effect set forth in  clauses  (i),  (ii) and (iii)
above,  to the  extent  applicable;  (v) in the  case  of a  Legal  Requirement,
Imposition,  lien,  encumbrance  or charge,  Lessee  shall give such  reasonable
security as may be reasonably  required by Lessor to insure ultimate  payment of
the same and to prevent  any sale or  forfeiture  of the Leased  Property or any
Capital  Addition  thereto  or  the  Rent  by  reason  of  such  non-payment  or
noncompliance;  and (vi) in the case of an Insurance  Requirement,  the coverage
required by Article  XIII shall be  maintained.  If any such  contest be finally
resolved against Lessor or Lessee, Lessee shall 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.  Lessor,  at
Lessee's expense,  shall execute and deliver to Lessee such  authorizations  and
other  documents  as may  reasonably  be required in any such  contest,  and, if
reasonably  requested by Lessee or if Lessor so desires,  Lessor shall join as a
party  therein.  The  provisions  of this  Article XII shall not be construed to
permit  Lessee to contest  the  payment of Rent or any other  amount  payable by
Lessee to Lessor  hereunder.  Lessee shall indemnify,  defend,  protect and save
Lessor harmless from and against any liability, cost or expense of any kind that
may be imposed  upon  Lessor in  connection  with any such  contest and any loss
resulting therefrom.

                                  ARTICLE XIII.
                                  -------------

                  13.1 General Insurance  Requirements.  During the Term, Lessee
shall at all times keep the Leased  Property,  and all property located in or on
the Leased Property,  including Capital Additions, the Fixtures and the Personal
Property,  insured with the kinds and amounts of insurance described below. This
insurance shall be written by companies  authorized to do insurance  business in
the State in which the Leased  Property is located.  All liability type policies
must name Lessor as an  "additional  insured." All property,  loss of rental and
business  interruption  type policies  shall name Lessor as "loss payee." Losses
shall be  payable  to Lessor  and/or  Lessee as  provided  in  Article  XIV.  In
addition, the policies, as appropriate, shall name as an "additional insured" or
"loss  payee"  the  holder  of any  mortgage,  deed of trust  or other  security
agreement  ("Facility   Mortgagee")  securing  any  indebtedness  or  any  other
Encumbrance  placed on the Leased  Property in accordance with the provisions of
Article XXXVI  ("Facility  Mortgage")  by way of a standard form of  mortgagee's
loss payable endorsement.  Any loss adjustment shall require the written consent
of Lessor,  Lessee, and each Facility Mortgagee.  Evidence of insurance shall be
deposited  with Lessor and, if requested,  with any Facility  Mortgagee(s).  The
policies shall insure against the following risks:


                                       32
<PAGE>
                           13.1.1  Loss  or  damage  by  fire,   vandalism   and
malicious  mischief,  extended  coverage  perils  commonly known as special form
perils,  earthquake  (including  earth  movement),  sinkhole and windstorm in an
amount not less than the insurable value on a replacement cost basis (as defined
below in Section 13.2) and including a building ordinance coverage endorsement;

                           13.1.2 Loss or damage by explosion of steam  boilers,
pressure  vessels  or  similar  apparatus,  now or  hereafter  installed  in the
Facility,  in such limits with respect to any one accident as may be  reasonably
requested by Lessor from time to time;

                           13.1.3 Flood (when the Leased  Property is located in
whole or in part within a designated  100-year  flood plain area) and such other
hazards and in such amounts as may be customary for comparable properties in the
area;

                           13.1.4  Loss of rental  value in an  amount  not less
than twelve (12) months' Rent payable  hereunder or business  interruption in an
amount not less than twelve (12) months of income and normal operating  expenses
including payroll and Rent payable  hereunder with an endorsement  extending the
period of indemnity by at least ninety (90) days (Building Ordinance - Increased
Period of Restoration Endorsement)  necessitated by the occurrence of any of the
hazards described in Sections 13.1.1, 13.1.2 or 13.1.3;

                           13.1.5  Claims for bodily  injury or property  damage
under a policy of commercial  general liability  insurance with amounts not less
than One Million and No/100 Dollars  ($1,000,000.00)  combined  single limit and
Three Million No/100 Dollars ($3,000,000.00) in the annual aggregate; and

                           13.1.6  Medical  professional  liability with amounts
not less than One Million Dollars  ($1,000,000)  combined single limit and Three
Million Dollars ($3,000,000) in the annual aggregate.

                  13.2 Replacement Cost. The term "replacement  cost" shall mean
the actual  replacement  cost of the insured property from time to time with new
materials and  workmanship  of like kind and quality.  If either party  believes
that the  replacement  cost has  increased  or  decreased at any time during the
Term, it shall have the right to have such replacement  cost  redetermined by an
impartial national insurance company reasonably  acceptable to both parties (the
"impartial  appraiser");   provided,  however,  that  in  no  event  shall  such
redetermination  occur more frequently than one time every three (3) Lease Years
without  the  mutual  consent of the  parties.  The party  desiring  to have the
replacement  cost  so  redetermined   shall   forthwith,   on  receipt  of  such
determination  by the impartial  appraiser,  give written  notice thereof to the
other party hereto. The determination of the impartial  appraiser shall be final
and  binding on the  parties  hereto,  and Lessee  shall  forthwith  increase or
decrease  the amount of the  insurance  carried  pursuant to this Article to the
amount so determined by the impartial  appraiser.  Each party shall pay one-half
(1/2) of the  fee,  if any,  of the  impartial  appraiser.  If  Lessee  has made
improvements  to the Leased  Property,  Lessor may at Lessee's  expense have the
replacement  cost  redetermined  at any time after such  improvements  are made,
regardless of when the replacement cost was last determined.

                  13.3  Additional  Insurance.  In  addition  to  the  insurance
described  above,  Lessee shall  maintain  such  additional  insurance as may be
reasonably  required  from  time to time by any  Facility  Mortgagee  and  shall
further at all times maintain  adequate workers'  compensation  coverage and any
other coverage required by Legal Requirements for all Persons employed by Lessee
on the Leased Property and any Capital Addition thereto in accordance with Legal
Requirements.


                                       33
<PAGE>
                  13.4 Waiver of Subrogation.  All insurance policies carried by
either party covering the Leased Property and any Capital  Addition  thereto and
Lessee's  Personal Property  including  contents,  fire and casualty  insurance,
shall  expressly  waive  any  right of  subrogation  on the part of the  insurer
against the other  party.  Each party waives any claims it has against the other
party to the extent such claim is covered by insurance.

                  13.5 Policy  Requirements.  All of the  policies of  insurance
referred to in this Article shall be written in form reasonably  satisfactory to
Lessor  and by  insurance  companies  with a  policyholder  rating  of "A" and a
financial  rating of "X" in the most recent  version of Best's Key Rating Guide.
Lessee  shall  pay all of the  premiums  therefor  as and when due  (whether  in
installments or otherwise), and deliver such policies or certificates thereof to
Lessor prior to their effective date (and with respect to any renewal policy, at
least thirty (30) days prior to the expiration of the existing  policy),  and in
the event of the failure of Lessee either to effect such  insurance in the names
herein called for or to pay the premiums therefor as and when due, or to deliver
such policies or certificates  thereof to Lessor, at the times required,  Lessor
shall be entitled,  but shall have no  obligation,  to effect such insurance and
pay the  premiums  therefor,  in which  event the cost  thereof,  together  with
interest  thereon at the Overdue Rate,  shall be repayable to Lessor upon demand
therefor.  Each insurer shall agree,  by  endorsement  on the policy or policies
issued by it, or by  independent  instrument  furnished to Lessor,  that it will
give to Lessor thirty (30) days' written notice before the policy or policies in
question  shall be altered,  allowed to expire or  cancelled.  Each policy shall
have a  deductible  or  deductibles,  if any,  which are no  greater  than those
normally maintained for similar facilities in the State.

                  13.6  Increase  in Limits.  If either  party shall at any time
believe the limits of the insurance required hereunder to be either excessive or
insufficient,  the parties shall  endeavor to agree in writing on the proper and
reasonable  limits for such  insurance  to be carried and such  insurance  shall
thereafter  be  carried  with the limits  thus  agreed on until  further  change
pursuant to the provisions of this Section; provided, however, that such changes
shall not occur more  frequently than one time per Lease Year without the mutual
consent of the parties.  If the parties  shall be unable to agree  thereon,  the
proper  and  reasonable  limits  for  such  insurance  to be  carried  shall  be
determined by an impartial third party  reasonably  selected by Lessor.  Nothing
herein shall  permit the amount of  insurance to be reduced  below the amount or
amounts required by any of the Facility Mortgagee.

                  13.7  Blanket   Policies  and   Policies   Covering   Multiple
Locations.  Notwithstanding  anything to the contrary contained in this Article,
Lessee's  obligations to carry the casualty insurance provided for herein may be
brought within the coverage of a blanket policy or policies of insurance carried
and maintained by Lessee or its Affiliate;  provided, however, that the coverage
afforded Lessor will not be reduced or diminished or otherwise be different from
that which would exist under a separate policy meeting all other requirements of
this  Lease by  reason  of the use of such  blanket  policy  of  insurance,  and
provided  further  that the  requirements  of this  Article  XIII are  otherwise
satisfied.  For any liability  policies  covering  facilities in addition to the
Leased  Property,   Lessor  may  require  excess  limits  as  Lessor  reasonably
determines.


                                       34
<PAGE>
                  13.8 No Separate Insurance.  Lessee shall not, on Lessee's own
initiative  or pursuant to the request or  requirement  of any third party,  (i)
take out separate  insurance  concurrent in form or contributing in the event of
loss  with  that  required  in this  Article  to be  furnished  by, or which may
reasonably  be required to be furnished  by, Lessee or (ii) 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 as to which Lessee has notice or actual knowledge, including in
all cases Lessor and all Facility Mortgagees, are included therein as additional
insured  and the loss is payable  under  such  insurance  in the same  manner as
losses are payable under this Lease.  Lessee shall immediately  notify Lessor of
the taking out of any such separate insurance or of the increasing of any of the
amounts of the then  existing  insurance  by  securing an  additional  policy or
additional policies.

                                  ARTICLE XIV.
                                  ------------

                  14.1 Insurance Proceeds. All proceeds payable by reason of any
loss or damage to the Leased Property, or any portion thereof,  under any policy
of insurance  required to be carried  hereunder shall be paid to Lessor and made
available,  subject to  reasonable  conditions  and  requirements,  by Lessor to
Lessee  from time to time upon  request  of Lessee as work  progresses,  for the
reasonable costs of  reconstruction or repair, as the case may be, of any damage
to or  destruction of the Leased  Property,  or any portion  thereof;  provided,
however,  that so long as no Event of Default  has  occurred  hereunder,  if the
proceeds of any such  insurance are less than  $50,000.00,  then Lessee shall be
entitled to receive such proceeds directly from the insurer. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Leased Property (or in the event neither Lessor nor Lessee is required or
elects to repair and restore,  all such insurance proceeds) shall be retained by
or paid over to Lessor,  as the case may be,  except as  otherwise  specifically
provided below in this Article XIV. All salvage  resulting from any risk covered
by  insurance  shall  belong to Lessor.  In the event of any  insured  casualty,
Lessee's obligation to commence  reconstruction or repair of the Leased Property
as provided herein, if applicable, shall accrue upon the earlier of (i) the date
of settlement of any insurance  claim with respect to such casualty and (ii) one
hundred twenty (120) days  following the date of such casualty.  In the event of
an uninsured casualty,  Lessee's obligation to commence restoration or repair of
the Leased  Property as provided  herein,  if applicable,  shall accrue ten (10)
days  following  the  date of such  casualty.  Lessee  shall  commence  any such
restoration  or repair  work  which  Lessee is  required  to  perform  hereunder
promptly  after its  obligation  hereunder  first accrues and  thereafter  shall
diligently prosecute such work to completion.

                  14.2 Insured Casualty
                       ----------------

                           14.2.1 If the Leased Property is damaged or destroyed
from a risk  covered  by  insurance  carried  by Lessee  such that the  Facility
thereby is rendered Unsuitable for its Primary Intended Use, Lessee shall either
(i) restore the Leased Property to  substantially  the same condition as existed
immediately  before such damage or destruction in accordance with the provisions
of Section 14.1, or (ii) offer to acquire the Leased  Property from Lessor for a
purchase price equal to the greater of (y) the Minimum  Repurchase  Price or (z)
the Fair Market Value immediately prior to such damage or destruction. If Lessor
does not accept  Lessee's offer to so purchase the Leased  Property,  Lessee may
either  withdraw  such  offer and  proceed to restore  the  Leased  Property  in
accordance  with  the  provisions  of  Section  14.1 to  substantially  the same
condition as existed  immediately before such damage or destruction or terminate
the Lease in which  event  Lessor  shall be  entitled  to retain  the  insurance
proceeds.

                           14.2.2 If the Leased  Property is damaged from a risk
covered by


                                       35
<PAGE>
insurance carried by Lessee, but the Facility is not thereby rendered Unsuitable
for its Primary  Intended  Use,  Lessee  shall  restore  the Leased  Property to
substantially  the same condition as existed  immediately  before such damage in
accordance  with the provisions of Section 14.1. Such damage shall not terminate
this Lease;  provided,  however,  that if Lessee cannot within a reasonable time
after  diligent  efforts  obtain the necessary  government  approvals  needed to
restore and operate the Facility for its Primary  Intended Use, Lessee may offer
to purchase the Leased Property for a purchase price equal to the greater of the
Minimum  Repurchase  Price or the Fair Market  Value  immediately  prior to such
damage.  If Lessee  shall make such  offer and Lessor  does not accept the same,
Lessee may either withdraw such offer and proceed to restore the Leased Property
to substantially the same condition as existed immediately before such damage or
destruction in accordance  with the provisions of Section 14.1, or terminate the
Lease, in which event Lessor shall be entitled to retain the insurance proceeds.

                           14.2.3  If the  cost  of the  repair  or  restoration
exceeds the amount of proceeds received by Lessor from the insurance required to
be carried  hereunder,  Lessee shall  contribute  any excess  amounts  needed to
restore the Facility. Such difference shall be paid by Lessee to Lessor together
with any other  insurance  proceeds,  for  application to the cost of repair and
restoration.

                           14.2.4 If Lessor  accepts  Lessee's offer to purchase
the Leased  Property,  this Lease shall terminate as to the Leased Property upon
payment of the  purchase  price and Lessor  shall remit to Lessee all  insurance
proceeds  pertaining to the Leased Property then held by Lessor.  The provisions
of Section  44.6 below shall apply with respect to any such  termination  of the
Lease pursuant to this Section 14.2.4.

                  14.3 Uninsured Casualty
                       ------------------

                           (a) If the Leased  Property  is damaged or  destroyed
from a risk not covered by insurance  carried by Lessee,  such that the Facility
is thereby rendered Unsuitable for its Primary Intended Use, Lessee shall either
(i) restore the Leased Property to  substantially  the same condition as existed
immediately  prior  to  such  damage  or  destruction  in  accordance  with  the
provisions of Section  14.1,  or (ii) offer to acquire the Leased  Property from
Lessor for a purchase  price equal to the greater of (y) the Minimum  Repurchase
Price  or (z)  the  Fair  Market  Value  immediately  prior  to such  damage  or
destruction.  If Lessor does not accept Lessee's offer to so purchase the Leased
Property,  which Lessor shall have the right to accept or reject in its sole and
absolute  discretion,  Lessee  shall  immediately  proceed to restore the Leased
Property to  substantially  the same condition as existed  immediately  prior to
such damage or destruction in accordance with the provisions of Section 14.1.

                           (b) If the Leased Property is damaged from a risk not
covered by insurance carried by Lessee, but the Facility is not thereby rendered
Unsuitable  for its  Primary  Intended  Use,  Lessee  shall  restore  the Leased
Property to substantially  the same condition that existed before such damage in
accordance  with the provisions of Section 14.1. Such damage shall not terminate
this Lease;  provided,  however,  that if Lessee cannot within a reasonable time
after  diligent  efforts  obtain the necessary  government  approvals  needed to
restore and operate the Facility for its Primary  Intended Use, Lessee may offer
to purchase the Leased Property for a purchase price equal to the greater of (y)
the Minimum  Repurchase Price or (z) the Fair Market Value  immediately prior to
such damage.  If Lessor does not accept Lessee's offer to so purchase the Leased
Property,  which Lessor shall have the right to accept or reject in its sole and
absolute  discretion,  Lessee  shall  immediately  proceed to restore the Leased
Property to  substantially  the same condition that existed  immediately  before
such damage or destruction in accordance with the provisions of Section 14.1.


                                       36
<PAGE>
                           (c) If Lessor accepts  Lessee's offer to purchase the
Leased Property  pursuant to either of Sections 14.3.1 or 14.3.2, as applicable,
this  Lease  shall  terminate  as to the  Leased  Property  upon  payment of the
applicable purchase price.

                  14.4 No  Abatement  of Rent.  This Lease shall  remain in full
force and effect and Lessee's  obligation  to pay the Rent and all other charges
required by this Lease shall  remain  unabated  during the period  required  for
adjusting insurance, satisfying Legal Requirements, repair and restoration.

                  14.5 Waiver. Lessee waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.

                                   ARTICLE XV.
                                   -----------

                  15. Condemnation

                           15.1 Total Taking.  If the Leased Property is totally
and permanently taken by Condemnation,  this Lease shall terminate as of the day
before the Date of Taking, and the provisions of Section 44.6 below shall apply.

                           15.2 Partial  TakingPartial  Taking.  If a portion of
the Leased Property is taken by Condemnation,  this Lease shall remain in effect
if the Facility is not thereby rendered Unsuitable for Its Primary Intended Use,
but if the Facility is thereby rendered Unsuitable for its Primary Intended Use,
this Lease shall terminate as of the day before the Date of Taking.

                           15.3  RestorationRestoration.  If there is a  partial
taking of the Leased  Property  and this Lease  remains in full force and effect
pursuant to Section 15.2,  Lessor shall make  available to Lessee the portion of
the Award  necessary and  specifically  identified for restoration of the Leased
Property and Lessee shall  accomplish all necessary  restoration  whether or not
the amount provided by the condemnor for restoration is sufficient.

                           15.4 Award-DistributionAward-Distribution. The entire
Award shall belong to and be paid to Lessor,  except that, subject to the rights
of the Facility  Mortgagees,  Lessee shall be entitled to receive from the Award
the value of Lessee's  Personal Property and any Capital Additions not funded or
accrued by Lessor  and, if and to the extent  such Award  specifically  includes
such items, lost profits value and moving expenses;  provided,  however, that in
any event  Lessor  shall  receive  from the Award,  subject to the rights of the
Facility Mortgagees, no less than the greater of (a) the Fair Market Value prior
to the institution of the Condemnation and (b) the Minimum Repurchase Price.

                           15.5 Temporary  TakingTemporary Taking. The taking of
the  Leased  Property,  or any  part  thereof,  shall  constitute  a  taking  by
Condemnation  only  when  the use and  occupancy  by the  taking  authority  has
continued for longer than 180 consecutive days. During any shorter period, which
shall be a temporary  taking,  all the  provisions of this Lease shall remain in
full  force and  effect  and the Award  allocable  to the Term  shall be paid to
Lessee.

                           15.6  Sale  Under  Threat of  CondemnationSale  Under
Threat of Condemnation.  A sale by Lessor to any Condemnor,  either under threat
of Condemnation or while Condemnation proceedings are pending, shall be deemed a
Condemnation  for purposes of this Lease.  Lessor may, without any obligation to
Lessee,  agree to sell and/or  convey to any Condemnor all or any portion of the
Leased Property free from this Lease and the rights of Lessee hereunder  without
first  requiring  that any  action or  proceeding  be  instituted  or pursued to
judgment;  provided, however, that no such agreement to sell and/or convey shall
affect Lessee's rights pursuant to


                                       37
<PAGE>
Section 15.4 above.

                                  ARTICLE XVI.
                                  ------------

                  16.1 Events of  DefaultEvents  of Default.  Any one or more of
the following shall constitute an "Event of Default":

                           (a) a default  shall  occur  under any other lease or
other  agreement or instrument,  including the Contract of  Acquisition  and any
other  Facility  Group  Lease,  with or in favor of Lessor or any  Affiliate  of
Lessor and made by or with Lessee or any  Affiliate  of Lessee where the default
is not cured within any applicable grace period set forth therein;

                           (b) Lessee shall fail to pay any  installment of Rent
when the same  becomes due and  payable and such  failure is not cured by Lessee
within a period of five (5)  business  days after  notice  thereof  from Lessor;
provided,  however,  that such notice shall be in lieu of and not in addition to
any notice  which  under  applicable  law may be required in order to declare an
Event of Default;

                           (c) Lessee shall fail to obtain a letter of credit as
required by Article XXI;

                           (d) if Lessee  shall fail to  observe or perform  any
other term, covenant or condition of this Lease and such failure is not cured by
Lessee  within  thirty (30) days after notice  thereof from Lessor,  unless such
failure  cannot with due diligence be cured within a period of thirty (30) days,
in which  case such  failure  shall not be deemed to be an Event of  Default  if
Lessee  proceeds  promptly  and  with due  diligence  to cure  the  failure  and
diligently  completes the curing thereof;  provided,  however,  that such notice
shall be in lieu of and not in addition to any notice which under applicable law
may be required in order to declare an Event of Default;

                           (e)      Lessee or any Guarantor shall:

                                    (i) admit in writing  its  inability  to pay
its debts generally as they become due,

                                    (ii)  file a  petition  in  bankruptcy  or a
petition to take advantage of any insolvency act,

                                    (iii) make an assignment  for the benefit of
its creditors,

                                    (iv)  consent  to  the   appointment   of  a
receiver of itself or of the whole or any substantial part of its Property, or

                                    (v)  file  a  petition  or  answer   seeking
reorganization  or arrangement  under the Federal  bankruptcy  laws or any other
applicable law or statute of the United States of America or any state thereof;

                           (f) Lessee or any Guarantor  shall be  adjudicated as
bankrupt  or a court of  competent  jurisdiction  shall enter an order or decree
appointing,  without the consent of Lessee, a receiver of Lessee or of the whole
or substantially  all of its property,  or approving a petition filed against it
seeking  reorganization  or arrangement  of Lessee under the Federal  bankruptcy
laws or any other  applicable  law or statute of the United States of America or
any state thereof,  and such  judgment,  order or decree shall not be vacated or
set aside or stayed


                                       38
<PAGE>
within ninety (90) days from the date of the entry thereof;

                           (g) Lessee or any  Guarantor  shall be  liquidated or
dissolved, or shall begin proceedings toward such liquidation or dissolution, or
shall, in any manner,  permit the sale or divestiture of  substantially  all its
assets;

                           (h) the  estate or  interest  of Lessee in the Leased
Property or any part thereof shall be levied upon or attached in any  proceeding
and the same shall not be vacated or discharged  within the later of ninety (90)
days after  commencement  thereof or thirty (30) days after receipt by Lessee of
notice thereof from Lessor; provided, however, that such notice shall be in lieu
of and not in addition to any notice which under  applicable law may be required
in order to declare an Event of Default;

                           (i) any  Transfer  which  requires  Lessor's  consent
occurs  without  Lessor's  consent in accordance  with the provisions of Article
XXIV and such Transfer  remains in effect and is not cancelled or unwound within
thirty (30) days after written  notice thereof from Lessor;  provided,  however,
that such notice  shall be in lieu of and not in  addition  to any notice  which
under applicable law may be required in order to declare an Event of Default;

                           (j) any of the  representations or warranties made by
Lessee in the Contract of  Acquisition  during any  applicable  survival  period
therefor or by any  Guarantor in the  Guaranty  proves to be untrue when made in
any material  respect which  materially  and adversely  affects Lessor and which
remains  uncured for thirty (30) days after written  notice thereof from Lessor;
provided,  however,  that such notice shall be in lieu of and not in addition to
any notice  which  under  applicable  law may be required in order to declare an
Event of Default;

                           (k) except for medically  appropriate reasons or as a
result of (i) damage,  destruction or Condemnation or (ii) any other  occurrence
of the  nature and type of an  Unavoidable  Delay,  any local,  state or federal
agency having  jurisdiction over the operation of the Facility  removes,  in the
aggregate during any twelve (12) month period,  ten percent (10%) or more of the
patients or residents  located in the  Facility,  unless within thirty (30) days
after  notice from Lessor,  Lessee  shall have cured or  corrected  the cause or
condition  which resulted in such removal and within  forty-five (45) days after
such cure shall have replaced such patients or residents so removed;

                           (l) Lessee  fails to give  notice to Lessor not later
than fifteen (15) Business Days after Lessee's receipt thereof of any Class A or
equivalent  fine notice from any  governmental  authority  or officer  acting on
behalf thereof relating to the Facility;

                           (m) Lessee fails to notify Lessor within fifteen (15)
Business  Days  after  receipt  of  any  notice  from  any  governmental  agency
terminating  or suspending or  threatening  termination  or  suspension,  of any
material license or certification relating to the Facility;

                           (n) Lessee  fails to give  notice to Lessor not later
than  fifteen  (15)  Business  Days after any  notice,  claim or demand from any
governmental authority or any officer acting on behalf thereof, of any violation
of any law, order,  ordinance,  rule or regulation with respect to the operation
of the Facility, which violation would have a material adverse effect on Lessor,
the Facility or the operation thereof for its Primary Intended Use;

                           (o)  Lessee  fails  to cure or abate  any  Class A or
equivalent   violation  occurring  during  the  Term  that  is  claimed  by  any
governmental authority, or any officer acting


                                       39
<PAGE>
on behalf thereof, of any law, order,  ordinance,  rule or regulation pertaining
to the  operation  of the  Facility,  and  within  the  time  permitted  by such
authority for such cure or abatement,  unless (i) said violation has no material
effect on Lessor, the Facility or the operation thereof for its Primary Intended
Use and Lessee  thereafter  diligently  and in good faith  proceeds to cure such
violation  or (ii)  Lessee  is  reasonably  and in good  faith  contesting  such
violation;

                           (p) any proceedings are instituted  against Lessee by
any  governmental  authority  which are  reasonably  likely to result in (i) the
revocation of any material  license granted to Lessee which is necessary for the
operation of the Facility  for the Primary  Intended  Use, or (ii) to the extent
applicable,  the  decertification  of the  Facility  from  participation  in the
Medicare or Medicaid  reimbursement  program or the issuance of a stop placement
order against Lessee, and such proceedings are not vacated,  set aside or stayed
within sixty (60) days after the institution  thereof, but in any event prior to
the revocation of any such license and/or  decertification  of the Facility,  as
applicable;

                           (q) any  acceleration  of any  indebtedness  or other
monetary obligations of (i) Lessee in the sum of $1 Million or more has occurred
or (ii) any  Guarantor  has occurred  where the amount of such  indebtedness  or
obligation  is in excess of the lesser of (A) $10  Million  (as  adjusted by the
Consumer  Price Index to equate to constant  1996  dollars) and (B)  Twenty-Five
Percent (25%) of the Consolidated Net Worth of such Guarantor; or

                           (r) any default  shall  occur  under any  guaranty of
Lessee's  obligations  under  this Lease  (including  the  Guaranty)  where such
default is not cured within any applicable grace period set forth therein.

                  16.2  Certain  Remedies.  If an Event of  Default  shall  have
occurred,  Lessor  may  terminate  this  Lease by giving  Lessee  notice of such
termination  and the Term shall  terminate  and all rights of Lessee  under this
Lease shall cease.  Lessor shall have all rights at law and in equity  available
to Lessor as a result of any Event of Default.  Lessee  shall pay as  Additional
Charges all costs and  expenses  incurred  by or on behalf of Lessor,  including
reasonable  attorneys'  fees and  expenses,  as a result of any Event of Default
hereunder. If an Event of Default shall have occurred and be continuing, whether
or not this Lease has been  terminated  pursuant to this  Section  16.2,  Lessee
shall,  to the  extent  permitted  by  law,  if  required  by  Lessor  so to do,
immediately  surrender  to Lessor  possession  of the  Leased  Property  and any
Capital  Additions  thereto  and quit the same and  Lessor  may  enter  upon and
repossess  the Leased  Property and any Capital  Addition  thereto by reasonable
force,  summary proceedings,  ejectment or otherwise,  and may remove Lessee and
all other Persons and any of Lessee's Personal Property from the Leased Property
and any Capital Addition thereto.

                  16.3  Damages.  (a) The  termination  of this  Lease;  (b) the
repossession of the Leased Property and any Capital  Addition  thereto;  (c) the
failure of Lessor,  notwithstanding  reasonable good faith efforts, to relet the
Leased Property; (d) the reletting of all or any portion of the Leased Property;
or (e) the failure or  inability of Lessor to collect or receive any rentals due
upon any such  reletting,  shall  not  relieve  Lessee  of its  liabilities  and
obligations  hereunder,  all  of  which  shall  survive  any  such  termination,
repossession  or  reletting.  If  any  such  termination  occurs,  Lessee  shall
forthwith  pay to Lessor  all Rent due and  payable  with  respect to the Leased
Property to and including the date of such  termination.  Thereafter,  following
any such termination,  Lessee shall forthwith pay to Lessor, at Lessor's option,
as and for  liquidated  and agreed  current  damages  for an Event of Default by
Lessee, the sum of:

                           (i) the worth at the time of award of the unpaid Rent
         which had been earned at the time of termination,


                                       40
<PAGE>
                           (ii) the worth at the time of award of the  amount by
         which the unpaid Rent which would have been  earned  after  termination
         until the time of award  exceeds  the amount of such  rental  loss that
         Lessee proves could have been reasonably avoided,

                           (iii) the worth at the time of award of the amount by
         which the  unpaid  Rent for the  balance  of the Term after the time of
         award  exceeds the amount of such rental loss that Lessee  proves could
         be reasonably avoided, plus

                           (iv) any other amount necessary to compensate  Lessor
         for all the detriment proximately caused by Lessee's failure to perform
         its  obligations  under this Lease or which in the  ordinary  course of
         things would be likely to result therefrom.

         As used in clauses (i) and (ii) above, the "worth at the time of award"
         shall be computed by allowing  interest at the Overdue Rate. As used in
         clause (iii) above,  the "worth at the time of award" shall be computed
         by discounting  such amount at the discount rate of the Federal Reserve
         Bank of San Francisco at the time of award plus two percent  (2%).  For
         purposes of determining the worth at the time of the award,  Additional
         Rent that would have been  payable for the  remainder of the Term shall
         be deemed to be the greater of (y) the same as the Additional  Rent for
         the then current Lease Year or, if not  determinable,  the  immediately
         preceding  Lease  Year;  and (z) such  other  amount  as  Lessor  shall
         demonstrate could reasonably have been earned.

         Alternatively,  if Lessor does not elect to terminate this Lease,  then
without  termination  of Lessee's  right to possession  of the Leased  Property,
Lessee shall pay to Lessor, at Lessor's option, as and for agreed damages for an
Event of Default, each installment of said Rent and other sums payable by Lessee
to Lessor  under the Lease as the same becomes due and  payable,  together  with
interest at the Overdue  Rate from the date when due until paid,  and Lessor may
enforce, by action or otherwise, any other term or covenant of this Lease.

                  16.4 Receiver. Upon the occurrence of an Event of Default, and
upon  commencement  of  proceedings  to enforce the rights of Lessor  hereunder,
Lessor shall be entitled, as a matter of right, to the appointment of a receiver
or  receivers  acceptable  to  Lessor of the  Leased  Property  and any  Capital
Addition  thereto  of the  revenues,  earnings,  income,  products  and  profits
thereof, pending the outcome of such proceedings,  with such powers as the court
making such appointment shall confer.

                  16.5  Lessee's  Obligation  to Purchase.  If a Put Event shall
have occurred, then Lessor may require Lessee to purchase the Leased Property on
the first  Minimum Rent Payment  Date  occurring  not less than thirty (30) days
after the date specified in a notice from Lessor  requiring such purchase for an
amount  equal to the greater of (i) the Fair Market  Value,  or (ii) the Minimum
Repurchase  Price,  plus,  in  either  event,  all  Rent  then  due and  payable
(excluding the  installment of Minimum Rent due on the purchase date). If Lessor
exercises such right,  Lessor shall convey the Leased  Property to Lessee on the
date fixed  therefor in  accordance  with the  provisions  of Article XVIII upon
receipt of the purchase price therefor and this Lease shall thereupon terminate.
Any purchase by Lessee of the Leased Property  pursuant to this Section shall be
in lieu of the  damages  specified  in Section  16.3 and in lieu of any right to
recover  actual  damages  under the  Contract of  Acquisition  for breach of any
covenant, representation or warranty thereunder.

                  16.6 Waiver.  If Lessor initiates  judicial  proceedings or if
this Lease is terminated by Lessor pursuant to this Article,  Lessee waives,  to
the extent permitted by applicable law, (i) any right of redemption, re-entry or
repossession;  and  (ii) the  benefit  of any  laws  now or  hereafter  in force
exempting property from liability for rent or for debt.


                                       41
<PAGE>
                  16.7  Application  of Funds.  Any payments  received by Lessor
under any of the provisions of this Lease during the existence or continuance of
any Event of  Default  which are made to Lessor  rather  than  Lessee due to the
existence of an Event of Default shall be applied to Lessee's obligations in the
order which  Lessor may  determine  or as may be  prescribed  by the laws of the
State.

                  16.8  Facility  Operating  Deficiencies.  On notice or request
therefor  by Lessor to  Lessee,  upon the  occurrence  of a  Facility  Operating
Deficiency  specified with  particularity in Lessor's  notice,  and for a period
equal to the greater of six (6) months or the time necessary fully to remedy the
Facility Operating Deficiency,  Lessee shall engage the services of a management
consultant,  unaffiliated  with  Lessee and  approved  by Lessor,  to review the
management of the Facility for the purpose of making  recommendations  to remedy
the Facility  Operating  Deficiency(ies).  The management  consultant shall have
complete access to the Facility, its records,  offices and facilities,  in order
that it may carry out its duties.  Lessee shall cause such management consultant
to  prepare  and  deliver  to  Lessor  and  Lessee  a  written   report  of  its
recommendations  within thirty (30) days after its  engagement.  If Lessee shall
fail to designate a management  consultant  acceptable to Lessor within five (5)
days after receipt of the notice of request therefor,  Lessor may designate such
management  consultant by further notice to Lessee.  Lessee shall be responsible
for payment of all fees and  expenses  reasonably  charged  and  incurred by the
management  consultant  in  carrying  out  its  duties.  Lessee  shall  promptly
implement  any  and all  reasonable  recommendations  made  by  such  management
consultant  in  order  to  promptly  correct  or cure  such  Facility  Operating
Deficiency;  provided, however, that in no event shall Lessee implement any such
recommendations  if the same would otherwise cause an Event of Default hereunder
(e.g.,  a Transfer or change in use of the Leased  Property),  without  Lessor's
prior written  consent,  which consent may be given or withheld in Lessor's sole
and absolute discretion.

                  16.9     [Reserved]
                           ---------
                  16.10 Lessor's Security  Interest.  The parties intend that if
an Event of Default  occurs  under this  Lease and this Lease is  terminated  by
Lessor pursuant to Section 16.2,  Lessor will control Lessee's Personal Property
and the  Intangible  Property  so that  Lessor or its  designee  or nominee  can
operate or re-let the Leased  Property  intact  for its  Primary  Intended  Use.
Accordingly,  to implement such  intention,  and for the purpose of securing the
payment and performance obligations of Lessee hereunder, Lessor and Lessee agree
as follows:

                           16.10.1 Lessee,  as debtor,  hereby grants to Lessor,
as secured party, a security  interest and an express  contractual lien upon all
of Lessee's right,  title and interest in and to Lessee's  Personal Property and
in and to the Intangible Property and any and all products,  rents, proceeds and
profits  thereof in which Lessee now owns or  hereafter  acquires an interest or
right, including any leased Lessee's Personal Property. This Lease constitutes a
security  agreement  covering  all  such  Lessee's  Personal  Property  and  the
Intangible  Property.  The security  interest  granted to Lessor with respect to
Lessee's  Personal  Property  in this  Section  16.10 is  intended by Lessor and
Lessee to be subordinate to any security interest granted in connection with the
financing or leasing of all or any portion of the Lessee's  Personal Property so
long as the lessor or financier of such  Lessee's  Personal  Property  agrees to
give  Lessor  written  notice of any  default by Lessee  under the terms of such
lease or financing arrangement,  to give Lessor a reasonable time following such
notice to cure any such default and consents to Lessor's  written  assumption of
such lease or financing  arrangement  upon Lessor's curing of any such defaults.
This security  agreement and the security  interest created herein shall survive
the expiration or earlier termination of this Lease.


                                       42
<PAGE>

                           16.10.2 If  required by Lessor at any time during the
Term,   Lessee  shall  execute  and  deliver  to  Lessor,   in  form  reasonably
satisfactory to Lessor,  additional security agreements,  financing  statements,
fixture  filings and such other  documents as Lessor may  reasonably  require to
perfect or continue the  perfection  of Lessor's  security  interest in Lessee's
Personal  Property  and the  Intangible  Property  and any and all  products and
proceeds  thereof now owned or acquired by Lessee.  In the event Lessee fails to
execute  any  financing  statement  or other  documents  for the  perfection  or
continuation  of Lessor's  security  interest,  such  failure  shall,  after any
applicable  notice and cure period set forth in Section 16.1 above, be deemed an
Event of Default hereunder.

                           16.10.3 Upon the  occurrence  of an Event of Default,
Lessor shall be entitled to exercise any and all rights or remedies available to
a secured  party under the Uniform  Commercial  Code,  or  available to a lessor
under the laws of the State,  with respect to Lessee's Personal Property and the
Intangible  Property,  including the right to sell the same at public or private
sale.

                                  ARTICLE XVII.
                                  -------------

                  17. Lessor's Right to Cure Lessee's  Default.  If Lessee shall
fail to make any payment or to perform any act  required to be made or performed
hereunder,  Lessor,  without waiving or releasing any obligation or default, may
after written  notice to Lessee,  but shall be under no obligation to, make such
payment or perform  such act for the account  and at the expense of Lessee,  and
may, to the extent  permitted  by law,  enter upon the Leased  Property  and any
Capital  Addition  thereto for such purpose and take all such action thereon as,
in Lessor's  opinion,  may be necessary or appropriate  therefor.  No such entry
shall be deemed an eviction of Lessee.  All sums so paid by Lessor and all costs
and expenses,  including reasonable  attorneys' fees and expenses,  so incurred,
together with  interest  thereon at the Overdue Rate from the date on which such
sums or  expenses  are paid or  incurred  by Lessor,  shall be paid by Lessee to
Lessor on demand.

                                 ARTICLE XVIII.
                                 --------------

                  18. Purchase of the Leased  Property.  If Lessee purchases the
Leased  Property  from  Lessor,  Lessor  shall,  upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent due and
payable with respect to any period ending on or before the date of the purchase,
deliver to Lessee an appropriate deed or other  conveyance  conveying the entire
interest of Lessor in and to the Leased Property to Lessee free and clear of all
encumbrances  other than (i) those that  Lessee has agreed  hereunder  to pay or
discharge; (ii) those mortgage liens, if any, which Lessee has agreed in writing
to accept and to take title subject to; (iii) those liens and encumbrances which
were in effect on the date of conveyance of the Leased  Property to Lessor;  and
(iv) any other  encumbrances  permitted  hereunder  to be  imposed on the Leased
Property  which are  assumable  at no cost to Lessee or to which Lessee may take
subject  without  cost to Lessee.  Lessee  shall  receive a credit  against  the
applicable  purchase  price for the total of the  encumbrances  assumed or taken
subject to and the  difference  between the  applicable  purchase  price and the
total of such  encumbrances  assumed or taken subject to shall be paid to Lessor
or as Lessor may direct in  immediately  available  funds.  All expenses of such
conveyance,  including the cost of title insurance,  reasonable  attorneys' fees
incurred by Lessor in  connection  with such  conveyance  and release,  transfer
taxes and recording and escrow fees, shall be paid by Lessee.


                                       43
<PAGE>

                                  ARTICLE XIX.
                                  ------------

                  19.1 Renewal  TermsRenewal  Terms.  Provided  that no Event of
Default,  or event which, with notice or lapse of time or both, would constitute
an Event of  Default,  has  occurred  and is  continuing,  either at the date of
exercise or upon the  commencement  of an Extended Term (as hereunder  defined),
then  Lessee  shall  have the right to renew  this  Lease  for two (2)  ten-year
renewal  terms (each,  an "Extended  Term),  upon (i) giving  written  notice to
Lessor of such  renewal  not less than  eighteen  (18)  months and not more than
twenty-one (21) months prior to the expiration of the then current Term and (ii)
the  Lessee  under  each  other  Facility  Group  Lease  concurrently  therewith
exercises  its right to renew such  Facility  Group Lease for the  corresponding
Extended  Term in the manner and within the time provided in Article XIX of such
Facility Group Lease. During each Extended Term, all of the terms and conditions
of this Lease  shall  continue  in full force and effect  except that the annual
Minimum Rent for and during such  Extended  Term shall be the greater of (a) the
then  current  annual Fair  Market  Rental for the Leased  Property  and (b) the
annual Minimum Rent and  Additional  Rent payable for the last Lease Year of the
immediately preceding Term.

                  Notwithstanding anything to the contrary in this Section 19.1,
Lessor,  in its sole  discretion,  may waive the condition to Lessee's  right to
renew this Lease that no Event of Default,  or event which, with notice or lapse
of time or both,  would  constitute  an Event of  Default,  have  occurred or be
continuing,  and the same may not be used by  Lessee  as a means to  negate  the
effectiveness of Lessee's exercise of its renewal right for such Extended Term.

                  19.2  Lessor's  Rights of Renewal  and Early  Termination.  In
order to  facilitate  the transfer of the  operations of the Facility to a third
party  and/or to locate a  replacement  lessee,  Lessor  shall have the one time
right to either (i)  terminate  this  Lease up to four (4) months  early or (ii)
extend  the Term of this  Lease for up to four (4)  months.  Such right of early
termination  shall be  exercised  by Lessor,  if at all, by written  notice from
Lessor to Lessee  given not less than  ninety (90) days prior to the date Lessor
desires to terminate this Lease and stating the date of such termination  (which
date shall not be earlier  than four (4) months prior to the  expiration  of the
Term).  In the event that Lessor shall exercise such right of early  termination
within the time and in the manner herein provided, this Lease shall terminate on
the date of termination  specified in Lessor's  notice.  Such right of extension
shall be exercised by Lessor, if at all, by written notice from Lessor to Lessee
given not less  than four (4)  months  prior to the  expiration  of the Term and
stating the date through which Lessor is extending the Term of this Lease (which
date  shall not be later  than four (4) months  after the  originally  scheduled
expiration  date).  In the  event  that  Lessor  shall  exercise  such  right of
extension,  all of the terms and conditions of this Lease shall continue in full
force and effect  and  Lessee  shall  continue  to pay Rent for and during  such
extension  period at the same Minimum Rent and Additional  Rent rates as were in
effect upon the expiration of the originally scheduled Term; provided,  however,
that  Lessor  shall  have the right to  terminate  this  Lease  during  any such
extension  period upon not less than thirty  (30) days prior  written  notice to
Lessee. In such event, this Lease, as previously extended,  shall terminate upon
the date specified in Lessor's notice of termination.


                                       44
<PAGE>

                                   ARTICLE XX.
                                   -----------

                  20.  Holding  Over.  Except as  provided in Section  19.2,  if
Lessee shall for any reason remain in possession  of the Leased  Property  after
the expiration or earlier termination of the Term, such possession shall be as a
month-to-month  tenant  during  which time Lessee shall pay as Minimum Rent each
month twice the sum of (i) monthly  Minimum Rent  applicable  to the prior Lease
Year, plus (ii) one-twelfth of the aggregate  Additional Rent payable applicable
to the prior Lease Year, together with all Additional Charges and all other sums
payable by Lessee pursuant to this Lease.  During such period of  month-to-month
tenancy,  Lessee  shall be  obligated  to perform  and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other
than the  right,  to the extent  given by law to  month-to-month  tenancies,  to
continue its occupancy and use of the Leased Property.  Nothing contained herein
shall constitute the consent,  express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.

                                  ARTICLE XXI.
                                  ------------

                  21.1  Letters of Credit.  During the entire Term and for sixty
(60) days after the  expiration  or earlier  termination  of this Lease,  Lessee
shall have obtained letters of credit from a financial institution  satisfactory
to Lessor  but in any event with (a) not less than $100  Million in net  assets,
(b) a financial  rating of not less than 60 as rated by  Sheshonoff  Information
Services,  Inc.  (or  any  equivalent  rating  thereto  from  any  successor  or
substitute rating service selected by Lessor) and (c) an investment grade rating
from each of  Standard  and Poors  Corporation  and Moody's  Investors  Service,
naming  Lessor as  beneficiary  to secure  Lessee's  obligations  hereunder  and
Lessee's  and any  Affiliate  of Lessee's  obligations  under any other lease or
other  agreement or  instrument  with or in favor of Lessor or any  Affiliate of
Lessor  (including any other Facility Group Lease), at the times, in the amounts
and for the  purposes  set  forth  below.  Each  letter  of  credit  shall be in
substantially the form of Exhibit D hereto. Each letter of credit shall be for a
term of not less than one (1) year and irrevocable during that term. Each letter
of credit  shall  provide  that it will be honored  upon a signed  statement  by
Lessor  that  Lessor is  entitled  to draw upon the letter of credit  under this
Lease,  and shall  require no signature  or statement  from any party other than
Lessor.  No notice to Lessee shall be required to enable Lessor to draw upon the
letter of credit.  Each letter of credit shall also provide that  following  the
honor of any drafts in an amount less than the aggregate amount of the letter of
credit, the financial  institution shall return the original letter of credit to
Lessor and Lessor's  rights as to the  remaining  amount of the letter of credit
will not be extinguished. In the event of a transfer of Lessor's interest in the
Leased Property, Lessor shall have the right to transfer the letter of credit to
the transferee and thereupon shall,  without any further  agreement  between the
parties,  be released by Lessee from all  liability  therefor,  and it is agreed
that the  provisions  hereof shall apply to every  transfer or assignment of the
letter of credit to a new  Lessor.  The  letter  of credit  may be  assigned  as
security in connection with a Facility  Mortgage.  If the financial  institution
from which  Lessee has  obtained a letter of credit  shall  admit in writing its
inability  to pay its debts  generally  as they become  due,  file a petition in
bankruptcy  or a petition  to take  advantage  of any  insolvency  act,  make an
assignment  for the benefit of its  creditors  consent to the  appointment  of a
receiver of itself or of the whole or any substantial  part of its property,  or
file a  petition  or answer  seeking  reorganization  or  arrangement  under the
Federal  bankruptcy  laws or any other  applicable  law or statute of the United
States of America or any state  thereof,  then Lessee shall obtain a replacement
letter of credit  within  thirty  (30) days of such act from  another  financial
institution satisfactory to Lessor.

                  21.2 Times for Obtaining  Letters of CreditTimes for Obtaining
Letters of Credit.  The initial letter of credit shall be obtained and delivered
to Lessor prior to or contemporaneous with the Commencement Date.


                                       45
<PAGE>
The  letters  of  credit  covering  subsequent  periods  shall be  obtained  and
delivered  to Lessor not less than thirty (30) days prior to the  expiration  of
the then existing letter of credit ("Letter of Credit Date").  The term for each
such  letter of credit  shall  begin no later  than the  expiration  date of the
previous letter of credit.

                  21.3 Amounts for Letters of Credit. Letters of credit covering
the first  Lease  Year  shall be in an amount  equal to  one-third  (1/3) of the
annual Minimum Rent payable by Lessee under this Lease for the applicable  Lease
Year.  The  letters of credit  covering  subsequent  Lease  Years shall be in an
amount  equal to  one-third  (1/3) of the sum of the  annual  Minimum  Rent plus
Lessor's  reasonable estimate of the Additional Rent to be payable by Lessee for
the applicable Lease Year.

                  21.4 Uses of Letters of Credit. Lessor shall have the right to
draw upon a letter of credit up to its full amount  whenever an Event of Default
has occurred or an event of default  under any other lease or agreement  between
Lessor or an Affiliate of Lessor and Lessee or an Affiliate of Lessee (including
under any other  Facility  Group  Lease)  or under any other  letter of  credit,
guaranty,  mortgage, deed of trust, or other instrument executed by Lessee or an
Affiliate of Lessee in favor of Lessor or an  Affiliate of Lessor has  occurred;
provided  further,  if Lessee  fails to obtain a  satisfactory  letter of credit
prior to the  applicable  Letter of Credit  Date,  Lessor may draw upon the full
amount of the then existing  letter of credit  without giving any notice or time
to cure to  Lessee.  No such draw  shall (i) cure or  constitute  a waiver of an
Event of Default, (ii) be deemed to fix or determine the amounts to which Lessor
is  entitled  to recover  under this Lease or  otherwise,  or (iii) be deemed to
limit or waive Lessor's right to pursue any remedies provided for in this Lease.
If all or any portion of a letter of credit is drawn  against by Lessor,  Lessee
shall, within two (2) business days after demand by Lessor,  cause the issuer of
such letter of credit to issue Lessor,  at Lessee's  expense,  a replacement  or
supplementary  letter of credit in  substantially  the form  attached  hereto as
Exhibit D such that at all times during the Term,  Lessor shall have the ability
to draw on one or more letters of credit totalling, in the aggregate, the amount
required pursuant to Section 21.3.

                                  ARTICLE XXII.
                                  -------------

                  22.  Risk of  Loss.  The  risk of loss or of  decrease  in the
enjoyment and  beneficial  use of the Leased  Property as a  consequence  of the
damage or destruction thereof by fire, the elements,  casualties, thefts, riots,
wars or otherwise,  or in consequence of  foreclosures,  attachments,  levies or
executions  (other than by Lessor and Persons  claiming  from,  through or under
Lessor)  is assumed by Lessee,  and no such event  shall  entitle  Lessee to any
abatement of Rent.


                                       46
<PAGE>

                                 ARTICLE XXIII.
                                 --------------

                  23.  General   Indemnification.   In  addition  to  the  other
indemnities contained herein, and notwithstanding the existence of any insurance
carried by or for the  benefit of Lessor or Lessee,  and  without  regard to the
policy  limits of any such  insurance,  Lessee shall  protect,  indemnify,  save
harmless  and defend  Lessor  from and  against  all  liabilities,  obligations,
claims,  damages,  penalties,  causes of action,  costs and expenses,  including
reasonable attorneys', consultants' and experts' fees and expenses, imposed upon
or incurred by or asserted against Lessor by reason of: (i) any accident, injury
to or death of Persons or loss of or damage to  property  occurring  on or about
the Leased  Property or  adjoining  sidewalks;  (ii) any use,  misuse,  non-use,
condition,  maintenance  or repair by Lessee of the Leased  Property;  (iii) any
failure on the part of Lessee to perform or comply with any of the terms of this
Lease;  (iv) the  non-performance  of any of the terms and provisions of any and
all existing and future subleases of the Leased Property entered into during the
Term to be performed  by any party  thereunder;  (v) any claim for  malpractice,
negligence or  misconduct  committed by any Person on or working from the Leased
Property; and (vi) the violation of any Legal Requirement.

                  Notwithstanding  the existence of any insurance  carried by or
for the benefit of Lessor or Lessee,  and without regard to the policy limits of
any such insurance,  Lessor shall protect,  indemnify,  save harmless and defend
Lessee  from  and  against  all  liabilities,   obligations,   claims,  damages,
penalties,   causes  of  action,   costs  and  expenses,   including  reasonable
attorneys', consultants' and experts' fees and expenses imposed upon or incurred
by or asserted  against  Lessee as a result of the gross  negligence  or willful
misconduct of Lessor, its employees, agents or contractors.

                  Any amounts  which  become  payable by Lessee or Lessor  under
this  Article  shall be paid  within ten (10) days after  liability  therefor is
determined  by  litigation  or  otherwise,  and if not  timely  paid  shall bear
interest at the Overdue Rate from the date of such  determination to the date of
payment.  Lessee, at its sole cost and expense, shall contest, resist and defend
any such claim,  action or proceeding  asserted or instituted against Lessor for
which Lessee is obligated to indemnity  Lessor  hereunder or may  compromise  or
otherwise dispose of the same as Lessee sees fit;  provided,  however,  that any
legal  counsel   selected  by  Lessee  to  defend  Lessor  shall  be  reasonably
satisfactory  to Lessor.  Lessor,  at its sole cost and expense,  shall contest,
resist and defend any such claim,  action or  proceeding  asserted or instituted
against  Lessee for which Lessor is obligated to indemnify  Lessee  hereunder or
may  compromise or otherwise  dispose of the same as Lessor sees fit;  provided,
however,  that any legal  counsel  selected by Lessor to defend  Lessee shall be
reasonably satisfactory to Lessee. All indemnification covenants are intended to
apply to losses,  damages,  injuries,  claims,  etc.  incurred  directly  by the
indemnified parties and their property,  as well as by the indemnifying party or
third party, and their property. For purposes of this Article XXIII, any acts or
omissions  of  Lessee,  or  by  employees,   agents,   assignees,   contractors,
subcontractors  or others acting for or on behalf of Lessee (whether or not they
are negligent, intentional, willful or unlawful), shall be strictly attributable
to Lessee.  It is  understood  and agreed that payment  shall not be a condition
precedent to enforcement of the foregoing indemnification obligations.


                                       47
<PAGE>
                                  ARTICLE XXIV.
                                  -------------

                  24.      Transfers.
                           ---------
                           24.1 Prohibition.  Except as provided in Section 24.9
below,  Lessee shall not, without  Lessor's prior written consent,  which may be
withheld in Lessor's sole and absolute discretion, either directly or indirectly
or through one or more step transactions or tiered transactions,  voluntarily or
by operation of law, (i) assign, convey, sell, pledge, mortgage,  hypothecate or
otherwise  encumber,  transfer  or  dispose  of all or any part of this Lease or
Lessee's leasehold estate hereunder, (ii) Master Sublease all or any part of the
Leased Property and/or any Capital  Additions,  (iii) engage the services of any
Person for the management or operation of all or any part of the Leased Property
and/or any Capital Additions,  (iv) convey, sell, assign, transfer or dispose of
any stock or  partnership,  membership  or other  interests  (whether  equity or
otherwise)  in Lessee  (which shall include any  conveyance,  sale,  assignment,
transfer  or  disposition  of any  stock  or  partnership,  membership  or other
interests (whether equity or otherwise) in any Related Lessee Persons),  if such
conveyance, sale, assignment,  transfer or other disposition results in a change
in control of Lessee (or any Related  Lessee  Person) from the Person(s)  owning
fifty percent (50%) or more of the voting securities,  partnership  interests or
other equity  interests in Lessee (or any Related  Lessee Person) prior thereto,
(v) dissolve,  merge or consolidate Lessee (which shall include any dissolution,
merger or consolidation of any Related Lessee Person) with any other Person,  if
such dissolution, merger or consolidation, directly or indirectly or through one
or more step transactions or tiered transactions, results in a change in control
of Lessee (or in any Related  Lessee  Person)  from the  Person(s)  owning fifty
percent (50%) or more of the voting securities,  partnership  interests or other
equity interests in Lessee (or any Related Lessee Person) prior thereto, or (vi)
sell,  convey,  assign or  otherwise  transfer all or  substantially  all of the
assets of Lessee (which shall include any sale, conveyance,  assignment or other
transfer of all or substantially all of the assets of any Related Lessee Person)
(each of the  aforesaid  acts  referred  to in clauses  (i)  through  (vi) being
referred to herein as a "Transfer").  Any Occupancy  Arrangement with respect to
more than fifteen percent (15%) of the Facility to any Person or its Affiliates,
directly  or  indirectly,  or through  one or more step  transactions  or tiered
transactions,  shall be  deemed  to be a "Master  Sublease"  hereunder.  For any
Occupancy Arrangement  transaction not requiring the consent of Lessor hereunder
(i.e., an Occupancy  Arrangement  not  constituting a Master  Sublease),  Lessee
shall,  within ten (10) days of entering  into any such  Occupancy  Arrangement,
notify Lessor of the existence of such Occupancy Arrangement and the identity of
the Occupant  and supply  Lessor with a copy of the  agreement  relating to such
Occupancy  Arrangement  and  any  other  related  documentation,   materials  or
information reasonably requested by Lessor.

                  24.2 Consent. Prior to any Transfer, Lessee shall first notify
Lessor of its desire to do so and shall  submit in  writing  to Lessor:  (i) the
name of the proposed Occupant,  assignee, manager or other transferee;  (ii) the
terms and  provisions  of the Transfer,  including any  agreements in connection
therewith; and (iii) such financial information as Lessor reasonably may request
concerning the proposed Occupant, assignee, manager or other transferee. Without
limiting  Lessor's absolute and unequivocal right to impose any other conditions
to granting its consent to a Transfer hereunder, Lessor may:

                                    (a)  require  that  the  obligations  of any
Occupant, assignee, manager or other transferee which is an Affiliate of another
Person be guaranteed by its parent or  controlling  Person and that any Guaranty
of this Lease be reaffirmed by any Guarantor notwithstanding such Transfer.

                           (b) with respect to any such Transfer  constituting a
Master


                                       48
<PAGE>
Sublease,  require  Lessee to pay to Lessor one  hundred  percent  (100%) of all
Transfer Consideration (defined below).  "Transfer Consideration" shall mean the
positive difference, if any, between the Fair Market Rental and the Rent payable
by Lessee determined on a monthly basis, prorating the Rent, as appropriate,  if
less than all of the Facility is Master Subleased. The difference for each month
shall be paid by Lessee to Lessor monthly when the Minimum Rent is due.

                           (c) with  respect  to any  other  Transfer  (i.e.,  a
Transfer  other than pursuant to a Master  Sublease),  require  Lessee to pay to
Lessor one hundred  percent  (100%) of the gross fair  market  value of Lessee's
leasehold interest (the "Leasehold FMV"),  determined by appraisal in accordance
with the appraisal procedures set forth in Article XXXIV, excluding any business
value in excess of real estate value.

The  consent by Lessor to any  Transfer  shall not  constitute  a consent to any
subsequent Transfer or to any subsequent or successive  Transfer.  Any purported
or attempted Transfer contrary to the provisions of this Article shall be void.

                           24.3  Attornment  and Related  Matters Any  Occupancy
Arrangement  (whether or not the same  constitutes a Master  Sublease)  shall be
expressly subject and subordinate to all applicable terms and conditions of this
Lease and provide that Lessor,  at its option and without any  obligation  to do
so, may require any  Occupant to attorn to Lessor,  in which event  Lessor shall
undertake the obligations of Lessee,  as sublessor,  licensor or otherwise under
such Occupancy  Arrangement  from the time of the exercise of such option to the
termination of such Occupancy  Arrangement  and in such case Lessor shall not be
liable for any prepaid rents,  fees or other charges or for any prepaid security
deposits  paid by such  Occupant  to Lessee or for any other  prior  defaults of
Lessee  under such  Occupancy  Arrangement.  In the event that Lessor  shall not
require such  attornment  with respect to any Occupancy  Arrangement,  then such
Occupancy  Arrangement  shall  automatically  terminate  upon the  expiration or
earlier  termination  of this Lease,  including any early  termination by mutual
agreement of Lessor and Lessee. Furthermore,  any Occupancy Arrangement or other
agreement  regarding  a Transfer  shall  expressly  provide  that the  Occupant,
assignee,  manager or other  transferee shall furnish Lessor with such financial
and operational  information and information about the physical condition of the
Facility,  including the information  required by Section 25.2 herein, as Lessor
may request from time to time.

                           24.4 [Reserved]

                           24.5  Costs.   Lessee  shall  reimburse   Lessor  for
Lessor's  reasonable  costs  and  expenses  incurred  in  conjunction  with  the
processing and documentation of any request to Transfer,  including  attorneys',
architects',  engineers' or other consultants' fees whether or not such Transfer
is actually consummated.

                           24.6 No Release of Lessee's Obligations.  No Transfer
shall relieve Lessee of its obligation to pay the Rent and to perform all of the
other obligations to be performed by Lessee  hereunder.  The liability of Lessee
named herein and any immediate and remote successor in interest of Lessee (i.e.,
by means of any Transfer),  and the due  performance of the  obligations of this
Lease on Lessee's  part to be  performed  or  observed,  shall not in any way be
discharged,  released or impaired by any (i) agreement which modifies any of the
rights or obligations of the parties under this Lease (provided,  however,  that
the same shall not be binding  upon  Lessee  unless  agreed or  consented  to in
writing by Lessee)  (ii)  stipulation  which  extends the time  within  which an
obligation under this Lease is to be performed,  (iii) waiver of the performance
of an obligation  required  under this Lease,  or (iv) failure to enforce any of
the obligations set forth in this Lease. If any Occupant, assignee,


                                       49
<PAGE>
manager or other  transferee  defaults in any performance due hereunder,  Lessor
may proceed  directly  against the Lessee named herein  and/or any immediate and
remote  successor in interest of Lessee without  exhausting its remedies against
such Occupant, assignee, manager or other transferee.

                           24.7  REIT  Protection.  Anything  contained  in this
Lease to the contrary  notwithstanding,  (i) no Transfer shall be consummated on
any basis  such that the  rental or other  amounts  to be paid by the  Occupant,
assignee,  manager or other transferee thereunder would be based, in whole or in
part,  on the  income or  profits  derived  by the  business  activities  of the
Occupant,  assignee, manager or other transferee;  (ii) Lessee shall not furnish
or render any services to the Occupant, assignee, manager or other transferee or
manage or operate the Leased  Property so  Transferred;  (iii)  Lessee shall not
Transfer to any Person in which Lessor owns an interest,  directly or indirectly
(by applying constructive  ownership rules set forth in Section 856(d)(5) of the
Code);  or (iv) Lessee  shall not Transfer in any other manner which could cause
any  portion of the  amounts  received  by Lessor  pursuant to this Lease or any
Occupancy  Arrangement to fail to qualify as "rents from real  property"  within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto or which  could  cause any other  income of Lessor to fail to qualify as
income described in Section 856(c)(2) of the Code.

                           24.8  Transfers  In  Bankruptcy.  In the  event  of a
Transfer  pursuant to the provisions of the Bankruptcy  Code, all  consideration
payable or otherwise to be delivered in connection  with such Transfer  shall be
paid or  delivered  to Lessor,  shall be and remain the  exclusive  property  of
Lessor and shall not  constitute  property  of Lessee or of the estate of Lessee
within the  meaning  of the  Bankruptcy  Code.  Any  consideration  constituting
Lessor's property pursuant to the immediately preceding sentence and not paid or
delivered  to Lessor  shall be held in trust for the  benefit  of Lessor  and be
promptly  paid or delivered to Lessor.  For purposes of this Section  24.8,  the
term  "consideration"  shall  have the same  meaning  given to such  term in the
definition  of Fair Market  Rental as provided in Article I above.  In the event
any such  consideration  is other  than  cash,  the  fair  market  value of such
consideration shall be paid or delivered to Lessor in cash.

                           24.9 Special Transactions.

                                    24.9.1      Transfer      to      Affiliate.
Notwithstanding  anything to the  contrary in Section  24.1,  but subject to the
provisions  of Section  24.7 above,  Lessor's  consent  shall not be required in
connection with and the provisions of Section 24.2 above shall not apply to, any
Transfer to an Affiliate of Lessee,  including  any  assignment of this Lease or
any Master Sublease of the Leased  Property to any Affiliate of Lessee,  so long
as in connection therewith, each of the following conditions is met:

                           (a) In  connection  with such  Transfer,  there is no
change in the use of the Leased  Property  from the Primary  Intended Use except
for a change in use to another Permitted Use as herein provided;

                           (b) Except in the case of a Transfer  resulting  from
merger or  consolidation  as to which Lessee is not the  surviving  party and in
which the transferee  assumes the obligations of Lessee hereunder as a matter of
law,  any  Affiliate-transferee  shall assume all of the  obligations  of Lessee
hereunder  accruing  subsequent to the effective date of such Transfer and by an
instrument in writing in form and substance reasonably satisfactory to Lessor. A
copy of such  executed  assumption  shall be  delivered to Lessor along with the
notice specified in clause (e) below;


                                       50
<PAGE>

                           (c) Any  Master  Subletting  shall be  subject to the
provisions of Section 24.3 above.

                           (d) Neither  the  original  Lessee nor any  Guarantor
shall be  released  from  any of the  obligations  of the  Lessee  hereunder  or
Guarantor  under the Guaranty (or any other  guaranty),  as applicable,  whether
occurring prior to or after the effective date of such Transfer;

                           (e) Within ten (10) days after the  effectiveness  of
such  Transfer,  Lessee shall notify Lessor in writing of the occurrence of such
event,  the  effective  date  thereof,  the facts  placing  the same  within the
provisions of this Section 24.9.1 (including the relationship between Lessee and
such  Affiliate-transferee) and any other change in the address for billings and
notices to Lessee pursuant to this Lease, accompanied by an executed copy of the
assumption or Master Sublease (if any) required pursuant to this Lease.

                           24.9.2    Public     Offering;     Public    Trading.
Notwithstanding anything to the contrary in Section 24.1, Lessor's consent shall
not be required in connection  with and the provisions of Section 24.2 shall not
apply to any  transfer  of any  stock of  Lessee  or ILC as a result of a public
offering of Lessee's  or ILC's  stock which (a)  constitutes  a bona fide public
distribution of such stock pursuant to a firm commitment  underwriting or a plan
of distribution  registered  under the Securities Act of 1933 and (b) results in
such stock being  listed for trading on the American  Stock  Exchange or the New
York Stock  Exchange or authorized for quotation on the NASDAQ  National  Market
immediately upon the completion of such public offering. In addition, so long as
such  stock is  listed  for  trading  on any such  exchange  or  authorized  for
quotation  on such  market,  the  transfer  or  exchange of such stock over such
exchange  or market  shall not be deemed a  Transfer  hereunder  unless the same
(whether in one transaction or in any step or series of transactions) results in
a change in control of Lessee or ILC (including  pursuant to a tender or similar
offer to acquire the outstanding and issued securities of such entity).

                           24.9.3 ILC.  Notwithstanding anything to the contrary
in Section 24.1,  but subject to the  provisions  of Section 24.7 above,  Lessor
shall  consent to any Transfer  resulting  from (a) a sale or transfer of all or
substantially all of the outstanding  capital stock of ILC or a sale or transfer
of all or  substantially  all of the  assets  of ILC,  in each  case to a single
purchaser or transferee in a single  transaction or (b) a merger,  consolidation
or stock  exchange  to which  ILC is a party,  so long as each of the  following
conditions is met:

                                            (i) The  Consolidated  Net  Worth of
the purchaser or  transferee  resulting  from a Transfer  pursuant to clause (a)
above or the surviving  party  resulting from a Transfer  pursuant to clause (b)
above, as the case may be, immediately following the effectiveness of such event
shall be equal to or greater  than the greater of (A) $55  Million (as  adjusted
pursuant to the Cost of Living Index to equate to constant 1996 dollars) and (B)
the lesser of (1) the  Consolidated  Net Worth of ILC  immediately  prior to the
effectiveness  of such event and (2) $100 Million (as  adjusted  pursuant to the
Cost of Living Index to equate to constant 1996 dollars).

                                            (ii) The debt to equity ratio of the
purchaser or transferee  resulting from a Transfer  pursuant to clause (a) above
or the surviving party  resulting from a Transfer  pursuant to clause (b) above,
as the case may be, immediately  following the effectiveness of such event shall
not be greater  than the debt to equity  ratio of ILC  immediately  prior to the
effectiveness  of such event.  For  purposes of this clause  (ii),  "debt" shall
include the capitalized  value of any operating  leases to which ILC and/or such
transferee or surviving  entity  (and/or their  consolidated  Subsidiaries)  are
parties and the same


                                       51
<PAGE>
shall be demonstrated by financial  statements  prepared in accordance with GAAP
and reasonably satisfactory to Lessor.

                                            (iii) The  purchaser  or  transferee
resulting from a Transfer  pursuant to clause (a) above or the other party(s) to
the  Transfer  pursuant  to clause  (b)  above,  as the case may be,  shall have
sufficient  operating  experience  and history with respect to a business of the
nature,  type and size of the  business  of ILC as the same  exists  immediately
prior to the  effectiveness  of such event, as reasonably  determined by Lessor.
Such  purchaser or transferee or other party to such  Transfer,  as the case may
be, shall be deemed to have  "sufficient  operating  experience and history" if,
(A) immediately prior to the  effectiveness of such Transfer,  such purchaser or
transferee  or other  party,  as the case may be,  operated or managed  (whether
directly or through its operating  Subsidiary(ies)),  facilities of the type and
of a number  equal to or  greater  than the  number of the  facilities  operated
and/or managed by ILC and its  Subsidiary(ies),  or fifty (50) whichever is less
and has been in the  business of  operating or managing  such  facilities  for a
period not less than the period in which ILC has been in business,  or three (3)
years  whichever  is less,  or (B) such  transferee  or  purchaser  or surviving
entity,  as the case may be, shall  immediately  following the  effectiveness of
such Transfer, and for a period of not less than one (1) year thereafter, retain
and/or hire in a full-time  management or consulting  capacity at least one-half
(1/2) of the principal  officers of ILC who were in the  employment of ILC prior
to the  effectiveness of Transfer.  For purposes of this clause (iii), ILC shall
be deemed to have been in business since June 30, 1996.

                                            (iv)   Except   in  the  case  of  a
Transfer as to which such  transferee  or purchaser or surviving  party,  as the
case may be,  assumes the  obligations  of ILC under the Guaranty as a matter of
law,  such  transferee  or  purchaser  or  surviving  party shall  execute a new
guaranty for this Lease  consistent in form and substance with the Guaranty,  in
which event ILC shall  automatically be relieved of any of its obligations under
the Guaranty accruing after the effective date of such Transfer.

                                            (v) No Event of  Default  shall have
occurred and be continuing hereunder.

                                            (vi)   Lessor   shall   receive  the
applicable  information  required  by  Section  24.2 with  respect  to each such
proposed Transfer and the proposed purchaser or transferee resulting therefrom.

                                            (vii)  In   connection   with   such
Transfer,  Lessor  shall  receive one  hundred  percent  (100%) of the  Transfer
Consideration or one hundred percent (100%) of the Leasehold FMV, as applicable,
as set forth in subsections (b) and (c) of Section 24.2 above.


                                       52
<PAGE>
                                  ARTICLE XXV.
                                  ------------

                  25.      Officer's Certificates and Financial Statements
                           -----------------------------------------------
                  25.1 Officer's Certificate.  At any time and from time to time
upon Lessee's  receipt of not less than twenty (20) days' prior written  request
by Lessor,  Lessee shall furnish to Lessor an Officer's  Certificate  certifying
(i) that this Lease is  unmodified  and in full force and  effect,  or that this
Lease  is  in  full  force  and  effect  as  modified  and  setting   forth  the
modifications;  (ii) the dates to which the Rent has been paid; (iii) whether or
not, to the best knowledge of Lessee, Lessor is in default in the performance of
any  covenant,  agreement  or  condition  contained  in this Lease  and,  if so,
specifying  each such  default  of which  Lessee  may have  knowledge;  and (iv)
responses to such other questions or statements of fact as Lessor, any ground or
underlying  lessor,  any  purchaser  or  any  current  or  prospective  Facility
Mortgagee shall reasonably  request.  Lessee's failure to deliver such statement
within such time shall  constitute  an  acknowledgement  by Lessee that (x) this
Lease is unmodified and in full force and effect except as may be represented to
the contrary by Lessor;  (y) Lessor is not in default in the  performance of any
covenant,  agreement  or condition  contained  in this Lease;  and (z) the other
matters  set  forth in such  request,  if any,  are true and  correct.  Any such
certificate  furnished pursuant to this Article may be relied upon by Lessor and
any current or prospective  Facility  Mortgagee,  ground or underlying lessor or
purchaser of the Leased  Property.  Lessee shall not be required to deliver such
certificate more than four (4) times per Lease Year.

                           25.2  Statements.  Lessee shall furnish the following
statements to Lessor:

                                    (a) within 150 days after the end of each of
         Lessee's  and   Guarantor's   fiscal  years,  a  copy  of  the  audited
         consolidated  balance sheets of Lessee,  its consolidated  Subsidiaries
         and  Guarantor as of the end of such fiscal year,  and related  audited
         consolidated  statements  of income,  changes in common stock and other
         stockholders'  equity and changes in the financial  position of Lessee,
         its  consolidated  Subsidiaries  and  Guarantor  for such fiscal  year,
         prepared  in  accordance  with  GAAP  applied  on a basis  consistently
         maintained throughout the period involved,  such consolidated financial
         statements to be certified by nationally  recognized  certified  public
         accountants;

                                    (b) within 150 days after the end of each of
         Lessee's and  Guarantor's  fiscal  years,  and together with the annual
         audit  report  furnished  in  accordance  with  clause  (a)  above,  an
         Officer's  Certificate  stating  that  to  the  best  of  the  signer's
         knowledge and belief after making due inquiry, Lessee is not in default
         in the  performance or observance of any of the terms of this Lease, or
         if Lessee shall be in default, specifying all such defaults, the nature
         thereof, and the steps being taken to remedy the same;

                                    (c)  within  forty-five  (45) days after the
         end of each month for those months occurring from the Commencement Date
         to three  months  after the first month in which the average  Cash Flow
         Coverage  for the  Facility  equals or exceeds 1.3 for such month,  all
         consolidated  financial reports Lessee produces for reporting  purposes
         and detailed statements of income and detailed  operational  statistics
         regarding  occupancy  rates,  patient and  resident mix and patient and
         resident rates by type for the Facility;  and thereafter  within ninety
         (90) days after the end of each of  Lessee's  quarters,  all  quarterly
         consolidated  financial reports Lessee produces for reporting  purposes
         and detailed statements of income and detailed  operational  statistics
         regarding  occupancy  rates,  patient and  resident mix and patient and
         resident rates by type for the


                                       53
<PAGE>
Facility;

                                    (d) within 150 days after the end of each of
         Lessee's  fiscal  years,  a copy of each  cost  report  filed  with the
         appropriate governmental agency for the Facility;

                                    (e) within  thirty  (30) days after they are
         required to be filed with the SEC,  copies of any annual reports and of
         information, documents and other reports, or copies of such portions of
         any of the  foregoing  as the SEC may  prescribe,  which  Lessee or any
         Guarantor  is required  to file with the SEC  pursuant to Section 13 or
         15(d) of the Securities Exchange Act of 1934;

                                    (f)  within  five (5)  Business  Days  after
         Lessee's receipt thereof, copies of all written communications received
         by Lessee  from any  regulatory  agency  relating to (i) surveys of the
         Facility for purposes of licensure, Medicare and Medicaid certification
         and  accreditation  and (ii) any proceeding,  formal or informal,  with
         respect to cited  deficiencies  with respect to services and activities
         provided and performed at the Facility,  including patient and resident
         care,  patient and resident  activities,  patient and resident therapy,
         dietary, medical records, drugs and medicines,  supplies,  housekeeping
         and  maintenance,  or the condition of the  Facility,  and involving an
         actual or threatened  warning,  imposition  of a fine or a penalty,  or
         suspension,  termination or revocation of the Facility's  license to be
         operated in accordance with its Primary Intended Use;

                                    (g) to the extent  available  to  customers,
         depositors,  shareholders or the public,  within 150 days after the end
         of each fiscal year of the financial  institution issuing the letter of
         credit  required under Article XXI, a copy of the audited  consolidated
         balance  sheets  of such  financial  institution  as of the end of such
         fiscal year, and related unaudited  consolidated  statements of income,
         changes in common  stock and other  stockholders  equity and changes in
         the  financial   position  of  such  financial   institution   and  its
         consolidated  subsidiaries  for each  such  fiscal  year,  prepared  in
         accordance with generally accepted  accounting  principles applied on a
         basis  consistently  maintained  throughout the period  involved,  such
         consolidated   financial  statements  to  be  certified  by  nationally
         recognized certified public accountants. Lessee shall be deemed to have
         satisfied its obligations under this clause (g) if Lessee shall request
         in writing to such financial  institution  that Lessor be placed on the
         distribution  list of such financial  institution  for delivery of such
         financial statements;

                                    (h)  within  five (5)  Business  Days  after
         Lessee's receipt thereof,  copies of all claims,  reports,  complaints,
         notices,  warnings  or asserted  violations  relating in any way to the
         Leased Property or Lessee's use thereof; and

                                    (i) with reasonable  promptness,  such other
         information  respecting (i) the financial and operational condition and
         affairs of Lessee and the Facility,  (ii) the physical condition of the
         Leased  Property  and  any  Capital  Addition  thereto  and  (iii)  any
         suspected  Transfer,  including the then equity or voting  ownership in
         Lessee or in any Related Lessee Person (as defined in Article XXIV), in
         each  case  as  Lessor  may  reasonably  request,  in  the  form  of  a
         questionnaire or otherwise, from time to time.

                           25.3 Charges. Lessee acknowledges that the failure to
         furnish Lessor with any of the  certificates or statements  required by
         this  Article  XXV will cause  Lessor to incur costs and  expenses  not
         contemplated hereunder, the exact amount of which is presently


                                       54
<PAGE>
anticipated to be extremely difficult to ascertain. Accordingly, if Lessee fails
to furnish Lessor with any of the  certificates  or statements  required by this
Article XXV, Lessee shall pay to Lessor upon demand $1,000 for each such failure
as Additional Charges.  The parties agree that this charge represents a fair and
reasonable  estimate  of the costs that  Lessor will incur by reason of Lessee's
failure to furnish  Lessor  with such  certificates  and  statements;  provided,
however,  that with respect to the first (only)  occurrence when Lessee fails to
furnish Lessor with any such  certificate  or statement  required by Article XXV
during  any  Lease  Year,  Lessee  shall  not be  required  to pay  such  $1,000
additional  charge  thereon if Lessee  delivers  the  certificate  or  statement
required  within five (5)  Business  Days after  receipt of written  notice from
Lessor of Lessee's failure to deliver the same.

                                  ARTICLE XXVI.
                                  -------------

                  26.  Lessor's  Right to Inspect and Show the Leased  Property.
Upon not less than  twenty-four  (24)  hours'  prior  written  notice to Lessee,
Lessee shall permit Lessor and its authorized representatives to (i) inspect the
Leased  Property and any Capital  Addition  thereto and (ii) exhibit the same to
prospective  purchasers  and lenders,  and during the last twelve (12) months of
the Term, to  prospective  lessees or managers,  in each  instance  during usual
business  hours  and  subject  to any  reasonable  security,  health,  safety or
confidentiality  requirements  of Lessee or any Legal  Requirement  or Insurance
Requirement.  Lessee shall  reasonably  cooperate  with Lessor in exhibiting the
Leased  Property and any Capital  Additions  thereto to prospective  purchasers,
lenders,  lessees and managers. Any such access to the Leased Property by Lessor
pursuant to this  Article  shall be  conducted  by Lessor in a manner that shall
interfere  with  Lessee's   business  at  the  Leased   Property  as  little  as
practicable.

                                 ARTICLE XXVII.
                                 --------------

                  27. No Waiver.  No failure by Lessor to insist upon the strict
performance  of any term  hereof  or to  exercise  any  right,  power or  remedy
hereunder  and no  acceptance  of full or  partial  payment  of Rent  during the
continuance of any default or Event of Default shall  constitute a waiver of any
such breach or of any such term.  No waiver of any breach  shall affect or alter
this Lease,  which shall  continue in full force and effect with  respect to any
other then existing or subsequent breach.

                                 ARTICLE XXVIII.
                                 ---------------

                  28. Remedies Cumulative.  Each legal, equitable or contractual
right, power and remedy of Lessor now or hereafter provided either in this Lease
or by statute or otherwise  shall be cumulative  and  concurrent and shall be in
addition to every other right, power and remedy and the exercise or beginning of
the  exercise by Lessor of any one or more of such  rights,  powers and remedies
shall not preclude the  simultaneous or subsequent  exercise by Lessor of any or
all of such other rights, powers and remedies.

                                  ARTICLE XXIX.
                                  -------------

                  29.  Acceptance of  Surrender.  No surrender to Lessor of this
Lease or of the Leased Property, or any part thereof or of any interest therein,
shall be valid or effective  unless  agreed to and accepted in writing by Lessor
and no act by Lessor or any representative or agent of Lessor, other than such a
written  acceptance  by  Lessor,  shall  constitute  an  acceptance  of any such
surrender.


                                       55
<PAGE>
                                  ARTICLE XXX.
                                  ------------

                  30. No  Merger.  There  shall be no merger of this Lease or of
the leasehold  estate  created hereby by reason of the fact that the same Person
may  acquire,  own or  hold,  directly  or  indirectly,  (i)  this  Lease or the
leasehold  estate created hereby or any interest in this Lease or such leasehold
estate and (ii) the fee estate in the Leased Property.

                                  ARTICLE XXXI.
                                  -------------

                  31.  Conveyance by Lessor. If Lessor or any successor owner of
the Leased  Property shall convey the Leased Property other than as security for
a debt,  Lessor or such successor  owner, as the case may be, shall thereupon be
released from all future  liabilities  and  obligations of the Lessor under this
Lease  arising or accruing  from and after the date of such  conveyance or other
transfer and all such future  liabilities  and  obligations  shall  thereupon be
binding upon the new owner.

                                 ARTICLE XXXII.
                                 --------------

                  32. Quiet  Enjoyment.  So long as Lessee shall pay the Rent as
the same  becomes  due and shall  comply with all of the terms of this Lease and
perform its obligations hereunder, Lessee shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor,  but subject to all liens
and encumbrances of record as of the date hereof,  or the  Commencement  Date or
created thereafter as permitted hereunder or thereafter  consented to by Lessee.
No failure by Lessor to comply with the foregoing covenant shall give Lessee any
right to cancel or  terminate  this Lease or abate,  reduce or make a  deduction
from or offset against the Rent or any other sum payable under this Lease, or to
fail to perform any other obligation of Lessee  hereunder.  Notwithstanding  the
foregoing,  Lessee shall have the right, by separate and  independent  action to
pursue any claim it may have against Lessor as a result of a breach by Lessor of
the covenant of quiet enjoyment contained in this Article.

                                 ARTICLE XXXIII.
                                 ---------------

                  33. Notices. Any notice,  consent,  approval,  demand or other
communication  required or permitted to be given  hereunder (a "notice") must be
in writing and may be served personally or by U.S. Mail. If served by U.S. Mail,
it shall be addressed as follows:

         If to Lessor:     Health Care Property Investors, Inc.
                           10990 Wilshire Boulevard
                           Suite 1200
                           Los Angeles, California 90024
                           Phone: (310) 473-1990
                           Fax:  (310) 444-7817
                           Attn:  Legal Department

         with a copy to:   Latham & Watkins
                           633 West Fifth Street, Suite 4000
                           Los Angeles, California 90071
                           Phone: (213) 485-1234
                           Fax:  (213) 891-8763
                           Attn:  David H. Vena, Esq.


                                       56
<PAGE>
         If to Lessee:     Integrated Living Communities of Milledgeville, Inc.
                           24850 Old 41 Road
                           Bonita Springs, Florida 34135
                           Phone: (941) 947-7200
                           Fax:  (941) 495-0711
                           Attn:    President and CEO

         with a copy to:   Integrated Living Communities, Inc.
                           24850 Old 41 Road
                           Bonita Springs, Florida 34135
                           Phone: (941) 947-7200
                           Fax:  (941) 495-0711
                           Attn:    General Counsel

Any  notice  which is  personally  served  shall be  effective  upon the date of
service;  any notice given by U.S. Mail shall be deemed  effectively  given,  if
deposited in the United States Mail, registered or certified with return receipt
requested,  postage  prepaid and  addressed  as provided  above,  on the date of
receipt,  refusal or non-delivery  indicated on the return receipt. In addition,
either  party may send  notices by a  nationally  recognized  overnight  courier
service provides written proof of delivery (such as U.P.S. or Federal  Express).
Any notice sent by a nationally  recognized overnight courier shall be effective
on the date of delivery to the party at its address specified above as set forth
in the courier's delivery receipt. Either party may, by notice to the other from
time to time in the manner  herein  provided,  specify a  different  address for
notice  purposes.  The foregoing  facsimile  numbers are for  convenience  only.
Notice by facsimile shall not be considered an effective manner of giving notice
for purposes of this Lease.


                                       57
<PAGE>
                                 ARTICLE XXXIV.
                                 --------------

                  34.  Appraiser.  If it becomes necessary to determine the Fair
Market Value, Fair Market Rental or Leasehold FMV for any purpose of this Lease,
the party  required or permitted to give notice of such  required  determination
shall include in the notice the name of a Person selected to act as appraiser on
its behalf.  Within ten (10) days after  receipt of any such notice,  Lessor (or
Lessee,  as the case may be) shall by notice to Lessee (or  Lessor,  as the case
may be) appoint a second Person as appraiser on its behalf.  The appraisers thus
appointed,  each of whom  must be a member  of the  American  Institute  of Real
Estate  Appraisers  (or  any  successor  organization  thereto),  shall,  within
forty-five  (45)  days  after  the  date  of the  notice  appointing  the  first
appraiser,  proceed to determine  the Fair Market  Value,  Fair Market Rental or
Leasehold FMV as of the relevant date (giving  effect to the impact,  if any, of
inflation  from the date of  their  decision  to the  relevant  date)  provided,
however  that if only one  appraiser  shall  have been so  appointed,  or if two
appraisers  shall have been so appointed but only one such appraiser  shall have
made such  determination  within fifty (50) days after the making of Lessee's or
Lessor's  request,  then the  determination of such appraiser shall be final and
binding upon the parties.  If the  Facility  had reached  stabilized  operations
prior to the  Commencement  Date, to the extent  consistent with sound appraisal
practice as then  existing at the time of any such  appraisal,  an appraisal for
Fair Market  Value shall be made on a basis  consistent  with the basis on which
the Leased  Property was appraised for purposes of  determining  its fair market
value at the time the Leased Property was acquired by Lessor.  If two appraisers
shall have been  appointed and shall have made their  determinations  within the
respective  requisite periods set forth above and if the difference  between the
amounts so  determined  shall not exceed ten percent (10%) of the lesser of such
amounts then the Fair Market Value, Fair Market Rental or Leasehold FMV shall be
an amount equal to fifty percent (50%) of the sum of the amounts so  determined.
If the  difference  between the amounts so  determined  shall exceed ten percent
(10%) of the lesser of such amounts,  then such two appraisers shall have twenty
(20) days to appoint a third  appraiser,  but if such  appraisers fail to do so,
then either  party may  request  the  American  Arbitration  Association  or any
successor  organization  thereto to appoint an appraiser within twenty (20) days
of such  request,  and both parties  shall be bound by any  appointment  so made
within  such  twenty  (20) day  period.  If no such  appraiser  shall  have been
appointed  within  such  twenty  (20)  days or  within  ninety  (90) days of the
original request for a determination of Fair Market Value, Fair Market Rental or
Leasehold  FMV,  whichever is earlier,  either Lessor or Lessee may apply to any
court  having  jurisdiction  to have such  appointment  made by such court.  Any
appraiser  appointed by the  original  appraisers,  by the American  Arbitration
Association  or by such court shall be  instructed  to determine the Fair Market
Value,  Fair  Market  Rental or  Leasehold  FMV  within  thirty  (30) days after
appointment of such appraiser.  The determination of the appraiser which differs
most in  terms of  dollar  amount  from  the  determinations  of the  other  two
appraisers  shall  be  excluded,  and  fifty  percent  (50%)  of the  sum of the
remaining two  determinations  shall be final and binding upon Lessor and Lessee
as the Fair Market Value,  Fair Market Rental or Leasehold  FMV. This  provision
for  determination by appraisal shall be specifically  enforceable to the extent
such remedy is available under applicable law, and any  determination  hereunder
shall be final and binding  upon the  parties  except as  otherwise  provided by
applicable  law.  Lessor and Lessee  shall each pay the fees and expenses of the
appraiser  appointed  by it and each shall pay one-half of the fees and expenses
of the third  appraiser and one-half of all other cost and expenses  incurred in
connection with each appraisal.


                                       58
<PAGE>
                                  ARTICLE XXXV.
                                  -------------

                  35.1 First  Refusal to Purchase.  Provided no Event of Default
has occurred  and is  continuing  hereunder,  Lessee shall have a right of first
refusal to purchase the Leased  Property  upon the same terms and  conditions of
any offer or counter  offer from a third party to purchase  the Leased  Property
which  Lessor  intends to accept (or has accepted  subject to Lessee's  right of
first refusal herein) (the "Offer");  provided, however that such right of first
refusal  shall not apply to (a) any sale,  transfer or other  conveyance  of the
Leased Property or any interest therein by Lessor to an Affiliate of Lessor, (b)
a sale or transfer of all or substantially all of the outstanding  capital stock
of Lessor or a sale or  transfer  of all or  substantially  all of the assets of
Lessor, in each case to a single purchaser or transferee in a single transaction
or (c) a merger, consolidation or stock exchange to which Lessor is a party; and
provided further that in no event shall Lessor be required to make or provide to
Lessee any  representations  or warranties with respect to the Leased  Property,
notwithstanding the terms of any such Offer. If, during the Term, Lessor desires
to accept (or has accepted subject to Lessee's right of first refusal herein) an
Offer,  Lessor shall promptly notify Lessee of the same,  which notice shall set
forth all of the material  terms and  conditions  of such Offer,  including  the
purchase  price for the Leased  Property.  Lessee  shall have  fifteen (15) days
after receipt of such notice from Lessor within which time to exercise  Lessee's
right of first  refusal.  Lessee may exercise such right of first refusal by (i)
delivering  written notice to Lessor stating that Lessee  unequivocally  accepts
the terms and  conditions of the Offer  applicable to Lessee as herein  provided
within such fifteen  (15) day period and (ii)  delivering  to Lessor  concurrent
with such notice a  reaffirmation  of the  Guaranty  executed by  Guarantor.  If
Lessee  exercises its right of first  refusal  within the time and in the manner
herein  provided,  then such  transaction  shall be consummated on or before the
date  specified for closing in the terms of the Offer at the price and otherwise
in  accordance  with (A) the terms and  conditions  of such Offer  applicable to
Lessee as herein  provided and (B) the  provisions  of Article XVIII and Section
35.2 to the extent not  inconsistent  therewith.  If Lessee  shall not  exercise
Lessee's  right of first refusal in the manner and within the time period herein
provided, Lessor shall be free for a period of one (1) year after the expiration
of said fifteen  (15) day period to sell the Leased  Property to any third party
at a price and upon terms no less  favorable  to Lessor than those so offered to
Lessee  pursuant to the Offer.  If such sale is  consummated,  Lessee's right of
first refusal  hereunder  shall  automatically  terminate and the same shall not
apply to any subsequent sale of the Leased  Property or any interest  therein to
any  subsequent  purchaser  or  transferee.  If such  sale  is not  consummated,
Lessee's   right  of  first  refusal  as  provided  in  this  Section  shall  be
reinstituted as to any subsequent sale of the Leased Property during the Term of
this Lease.

                  Notwithstanding  anything  to  the  contrary  herein  in  this
Section  35.1,  except with  respect to  transactions  of the type  described in
clauses (a) through (c) above as to which Lessee shall not have a right of first
refusal,  if and only if, (1) the Offer  includes  property  in  addition to the
Leased  Property  or (2) in  connection  with the  proposed  sale of the  Leased
Property  as set forth in the Offer,  Lessor or an  Affiliate  of Lessor is also
proposing to sell  concurrent or  substantially  concurrent with the sale of the
Leased  Property  other property of Lessor or an Affiliate of Lessor to the same
third-party and/or its Affiliates, then the following shall apply:

                  (x) Lessee's right of first refusal as herein provided,  shall
apply only with respect to the Leased Property.

                  (y) With respect to the circumstances described in clause (1),
if the Offer  does not  specifically  allocate  a  purchase  price to the Leased
Property, Lessor shall reasonably determine the same and include such allocation
in Lessor's written notice to Lessee of the


                                       59
<PAGE>
Offer.

                  (z) If Lessee shall timely and properly  exercise its right of
first refusal to purchase the Leased  Property as provided in this Section 35.1,
the purchase  price  payable by Lessee shall be the price set forth in the Offer
(or the amount allocated to the Leased Property as provided in clause (y) above,
as the case may be),  unless  concurrent  with Lessee's  exercise of such Offer,
Lessee  shall  deliver  written  notice to Lessor  that  Lessee  objects  to the
purchase price for the Leased  Property as set forth in the Offer (or the amount
so  allocated  to the Leased  Property  as  provided  in clause  (y)),  then the
purchase price payable by Lessee for the Leased  Property shall be the lesser of
(aa) the purchase  price for the Leased  Property set forth in the Offer (or the
amount so allocated  to the Leased  Property as provided in clause (y)) and (bb)
the Fair Market Value of the Leased  Property  determined in accordance with the
appraisal  procedures set forth in this clause (z). Within  forty-five (45) days
after  Lessee's  timely  exercise of its right of first refusal and objection to
the  purchase  price for the Leased  Property,  Lessor  shall cause a nationally
recognized  appraisal  firm  selected  by  Lessor,  in which  one or more of the
members,  officers  or  principals  of such  firm are  members  of the  American
Institute of Real Estate Appraisers (or any successor  organization thereto), to
determine  the Fair Market Value of the Leased  Property as of the relevant date
(giving  effect  to the  impact,  if any,  of  inflation  from  the date of such
appraiser's decision to the relevant date) and to deliver to Lessor and Lessee a
written report of the same. The  determination  of such appraiser shall be final
and binding upon the parties.  This  provision  for  determination  by appraisal
shall be  specifically  enforceable to the extent such remedy is available under
applicable law, and any determination  hereunder shall be final and binding upon
the parties except as otherwise  provided by applicable  law.  Lessor and Lessee
shall each pay one-half of the fees and expenses of such  appraiser and one-half
of all other costs and  expenses  incurred in  connection  with such  appraisal,
unless  the Fair  Market  Value of the Leased  Property  as  determined  by such
appraisal  is greater  than the  purchase  price for the Leased  Property as set
forth in the Offer (or so allocated to the Leased Property as provided in clause
(y)),  in which  case  Lessee  shall  pay all of the fees and  expenses  of such
appraiser  and any other costs and  expenses  incurred in  connection  with such
appraisal.

                  35.2 Other Defaults.  A default under any other lease or other
agreement or instrument, including any purchase contract formed upon exercise of
any other  right of first  refusal  or option to  purchase,  with or in favor of
Lessor or any Affiliate of Lessor and made by or with Lessee or any Affiliate of
Lessee  where such default is not cured within the  applicable  time period,  if
any, shall be deemed a default under this Article XXXV and the purchase contract
formed upon proper  exercise by Lessee of the right of first  refusal  contained
herein,  entitling  Lessor, as seller, at its option, to terminate such purchase
contract and any escrow established thereby.

                                 ARTICLE XXXVI.
                                 --------------

                  36.1  Lessor May Grant  Liens.  Without the consent of Lessee,
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any ground lease,  mortgage,  trust deed,  lien,  encumbrance  or title
retention  agreement  (collectively,  an "encumbrance") upon the Leased Property
and any Capital Addition  thereto,  or any portion thereof or interest  therein.
This Lease is and at all times  shall be  subject  and  subordinate  to any such
encumbrance  which may now or  hereafter  affect the Leased  Property and to all
renewals,  modifications,  consolidations,  replacements and extensions thereof.
This clause shall be self-operative  and no further  instrument of subordination
shall  be  required;   provided,   however,   that  in   confirmation   of  such
subordination,  Lessee shall execute  promptly any  certificate or document that
Lessor or any ground or underlying lessor,  mortgagee or beneficiary may request
for such purposes; provided further, however, that any such subjection


                                       60
<PAGE>
and subordination of this Lease or Lessee's  leasehold interest hereunder to any
such encumbrance  imposed after the Commencement  Date shall be conditioned upon
the  execution  by the holder of such  encumbrance  and  delivery to Lessee of a
non-disturbance and attornment agreement which provides,  in substance,  that so
long as no Event of Default has occurred,  the holder of such encumbrance  shall
not disturb  either  Lessee's  leasehold  interest or  possession  of the Leased
Property in accordance  with the terms thereof or other rights under this Lease.
If, in  connection  with  obtaining  financing  or  refinancing  for the  Leased
Property,  a Facility Mortgagee or prospective  Facility Mortgagee shall request
reasonable  modifications  to this Lease as a  condition  to such  financing  or
refinancing,  Lessee shall not withhold or delay its consent thereto, so long as
such  modifications do not increase Lessee's monetary  obligations  hereunder or
adversely affect Lessee's rights or non-monetary obligations under this Lease.

                  36.2 Attornment.  If Lessor's  interest in the Leased Property
is sold or conveyed upon the exercise of any remedy provided for in any Facility
Mortgage,  or otherwise  by  operation  of law:  (i) at the new owner's  option,
Lessee shall attorn to and recognize the new owner as Lessee's Lessor under this
Lease or enter into a new lease substantially in the form of this Lease with the
new owner,  and Lessee shall take such actions to confirm the  foregoing  within
ten (10) days after request;  and (ii) the new owner shall not be (a) liable for
any act or omission of Lessor under this Lease  occurring  prior to such sale or
conveyance, or (b) subject to any offset, abatement or reduction of rent because
of any  default  of Lessor  under  this  Lease  occurring  prior to such sale or
conveyance.

                                ARTICLE XXXVII.
                                ---------------

                  37.1  Hazardous   Substances.   Lessee  shall  not  allow  any
Hazardous  Substance to be located in, on, under or about the Leased Property or
incorporated in the Facility;  provided,  however, that Hazardous Substances may
be brought,  kept,  used or  disposed of in, on or about the Leased  Property in
quantities and for purposes similar to those brought,  kept, used or disposed of
in, on or about  similar  facilities  used for  purposes  similar to the Primary
Intended  Use and  which  are  brought,  kept,  used and  disposed  of in strict
compliance with Legal  Requirements.  Lessee shall not allow the Leased Property
to be used as a waste  disposal site or, except as permitted in the  immediately
preceding sentence, for the manufacturing,  handling,  storage,  distribution or
disposal of any Hazardous Substance.

                  37.2 Notices.  Lessee shall provide to Lessor promptly, and in
any event within  seventy-two (72) hours after Lessee's receipt thereof,  a copy
of any notice,  or  notification  with respect to, (i) any  violation of a Legal
Requirement relating to Hazardous Substances located in, on, or under the Leased
Property or any adjacent property;  (ii) any enforcement,  cleanup,  removal, or
other governmental or regulatory action instituted, completed or threatened with
respect to the Leased property; (iii) any claim made or threatened by any Person
against Lessee or the Leased  Property  relating to damage,  contribution,  cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any  Hazardous  Substance;  and (iv) any reports made to any  federal,  state or
local  environmental  agency arising out of or in connection  with any Hazardous
Substance  in, on,  under or removed  from the Leased  Property,  including  any
complaints, notices, warnings or asserted violations in connection therewith.

                  37.3  Remediation.  If Lessee  becomes aware of a violation of
any Legal Requirement relating to any Hazardous Substance in, on, under or about
the Leased Property or any adjacent property, or if Lessee, Lessor or the Leased
Property becomes subject to any


                                       61
<PAGE>
order  of any  federal,  state or  local  agency  to  repair,  close,  detoxify,
decontaminate  or  otherwise   remediate  the  Leased  Property,   Lessee  shall
immediately notify Lessor of such event and, at its sole cost and expense,  cure
such violation or effect such repair, closure,  detoxification,  decontamination
or other  remediation.  If Lessee fails to implement and  diligently  pursue any
such  cure,   repair,   closure,   detoxification,   decontamination   or  other
remediation,  Lessor shall have the right, but not the obligation,  to carry out
such  action  and to recover  from  Lessee all of  Lessor's  costs and  expenses
incurred in connection therewith.

                  37.4 Indemnity. Lessee shall indemnify, defend, protect, save,
hold  harmless,  and  reimburse  Lessor for, from and against any and all costs,
losses  (including,  losses of use or economic  benefit or diminution in value),
liabilities, damages, assessments,  lawsuits, deficiencies,  demands, claims and
expenses  (collectively,  "Environmental  Costs") (whether or not arising out of
third-party claims and regardless of whether liability without fault is imposed,
or sought to be imposed, on Lessor) incurred in connection with, arising out of,
resulting from or incident to, directly or indirectly, before or during the Term
(i) the production, use, generation, storage, treatment, transporting, disposal,
discharge,  release or other handling or disposition of any Hazardous Substances
from, in, on or about the Leased Property (collectively,  "Handling"), including
the  effects  of such  Handling  of any  Hazardous  Substances  on any Person or
property  within or outside  the  boundaries  of the Leased  Property,  (ii) the
presence  or  release of any  Hazardous  Substances  in, on,  under or about the
Leased  Property and (iii) the  violation of any Legal  Requirements  (including
Environmental Laws).  "Environmental Costs" include interest, costs of response,
removal,  remedial  action,   containment,   cleanup,   investigation,   design,
engineering and  construction,  damages  (including  actual,  consequential  and
punitive  damages) for personal  injuries and for injury to,  destruction  of or
loss  of  property  or  natural  resources,  relocation  or  replacement  costs,
penalties,   fines,   charges  or  expenses,   attorney's  fees,   expert  fees,
consultation  fees,  and court  costs,  and all amounts  paid in  investigating,
defending or settling any of the foregoing.

                  Without  limiting the scope or  generality  of the  foregoing,
Lessee  expressly  agrees to reimburse Lessor for any and all costs and expenses
incurred by Lessor:

                  (a) In  investigating  any and  all  matters  relating  to the
         Handling of any Hazardous Substances,  in, on, from, under or about the
         Leased Property;

                  (b) In bringing the Leased  Property into  compliance with all
         Legal Requirements; and

                  (c) Removing,  treating,  storing,  transporting,  cleaning-up
         and/or disposing of any Hazardous  Substances used, stored,  generated,
         released  or  disposed  of in,  on,  from,  under or about  the  Leased
         Property or offsite.

                  If any  claim is made  hereunder,  Lessee  agrees  to pay such
claim  promptly,  and in any event to pay such claim within sixty (60)  calendar
days after receipt by Lessee of notice thereof. If any such claim is not so paid
and Lessor is ultimately  found or agrees to be  responsible  therefore,  Lessee
agrees also to pay interest on the amount paid from the date of the first notice
of such claim, at the Overdue Rate.

                  37.5  Environmental  Inspection.  Lessor shall have the right,
from  time to time,  and upon not less  than  five (5) days  written  notice  to
Lessee,  except in the case of an  emergency  in which event no notice  shall be
required, to conduct an inspection of the Leased


                                       62
<PAGE>
Property to determine  the  existence or presence of Hazardous  Substances on or
about the Leased  Property.  Upon prior written  notice to Lessee,  Lessor shall
have the right to enter and inspect the Leased  Property,  conduct any  testing,
sampling and analyses it deems reasonably  necessary and shall have the right to
inspect  materials  brought  into  the  Leased  Property.  Lessor  may,  in  its
discretion,  retain such  experts to conduct the  inspection,  perform the tests
referred to herein, and to prepare a written report in connection therewith.  If
any such  inspections  or tests  indicate the presence or existence of Hazardous
Substances not  previously  disclosed to Lessor,  then all reasonable  costs and
expenses  incurred  by  Lessor  under  this  Section  shall be paid on demand as
Additional  Charges  by Lessee to Lessor.  Failure  to conduct an  environmental
inspection or to detect  unfavorable  conditions if such inspection is conducted
shall in no fashion be intended as a release of any liability for  environmental
conditions  subsequently  determined to be  associated  with or to have occurred
during  Lessee's  tenancy.  Lessee  shall  remain  liable for any  environmental
condition  related to or having occurred  during its tenancy  regardless of when
such  conditions are discovered and regardless of whether or not Lessor conducts
an environmental inspection at the termination of the Lease. The obligations set
forth in this Article shall survive the expiration or earlier termination of the
Lease.

                                ARTICLE XXXVIII.
                                ----------------

                  38.  Memorandum of Lease.  Lessor and Lessee  shall,  promptly
upon the request of either, enter into a short form memorandum of this Lease, in
form  suitable for recording  under the laws of the State.  Lessee shall pay all
costs and expenses of recording any such  memorandum  and shall fully  cooperate
with Lessor in removing from record any such  memorandum  upon the expiration or
earlier termination of the Term.

                                 ARTICLE XXXIX.
                                 --------------

                  39. Sale of Assets.  Notwithstanding  any other  provision  of
this Lease,  Lessor  shall not be  required  to (i) sell or transfer  the Leased
Property,  or any portion  thereof,  which is a real estate  asset as defined in
Section  856(c)(6)(B),  or functionally  equivalent successor provision,  of the
Code, to Lessee if Lessor's  counsel  advises  Lessor that such sale or transfer
may not be a sale of property described in Section 857(b)(6)(C), or functionally
equivalent successor provision,  of the Code or (ii) sell or transfer the Leased
Property,  or any portion thereof,  to Lessee if Lessor's counsel advises Lessor
that such sale or  transfer  could  result  in an  unacceptable  amount of gross
income for purposes of the ninety five percent (95%) gross income test contained
in Section 856(c)(2),  or functionally  equivalent successor  provision,  of the
Code. If Lessee has the right or obligation to purchase the property pursuant to
the terms herein, and if Lessor determines not to sell such property pursuant to
the above sentence,  then Lessee shall purchase such property,  upon and subject
to all applicable  terms and  conditions set forth in this Lease,  including the
provisions of Article XXXV, at such time as the transaction,  upon the advice of
Lessor's counsel, would be a sale of property (to the extent the Leased Property
is a real estate  asset)  described  in Section  857(b)(6)(C),  or  functionally
equivalent  successor  provision,  of the  Code,  and  would  not  result  in an
unacceptable  amount of gross  income for  purposes of the ninety  five  percent
(95%)  gross  income  test  contained  in  Section  856(c)(2),  or  functionally
equivalent  successor  provision  of the Code and until such time  Lessee  shall
lease the Leased  Property from Lessor at the Fair Market  Rental  determined in
accordance with Article XXXIV.


                                       63
<PAGE>
                                   ARTICLE XL.
                                   -----------

                             [INTENTIONALLY OMITTED]

                                  ARTICLE XLI.
                                  ------------

                  41.  Authority.   If  Lessee  is  a  corporation,   trust,  or
partnership,  Lessee,  and each  individual  executing  this  Lease on behalf of
Lessee,  represent  and  warrant  that each is duly  authorized  to execute  and
deliver this Lease on behalf of Lessee and shall  within  thirty (30) days after
execution  of  this  Lease  deliver  to  Lessor   evidence  of  such   authority
satisfactory to Lessor.

                                  ARTICLE XLII.
                                  -------------

                  42.  Attorneys'  Fees. If Lessor or Lessee brings an action or
other  proceeding  against the other to enforce any of the terms,  covenants  or
conditions  hereof or any  instrument  executed  pursuant to this  Lease,  or by
reason of any breach or default hereunder or thereunder, the party prevailing in
any such action or proceeding and any appeal  thereupon shall be paid all of its
costs and  reasonable  attorneys'  fees  incurred  therein.  In  addition to the
foregoing and other provisions of this Lease that specifically require Lessee to
reimburse,  pay or indemnify against Lessor's attorneys' fees, Lessee shall pay,
as Additional Charges,  all of Lessor's  reasonable  attorneys' fees incurred in
connection  with  the  enforcement  of this  Lease,  including  attorneys'  fees
incurred in connection  with Lessee's  exercise of its right to renew this Lease
for any  Extended  Term,  the  review of any  letters  of  credit,  the  review,
negotiation  or  documentation  of any  subletting,  assignment,  or  management
arrangement or any consent requested in connection therewith, and the collection
of past due Rent.

                                 ARTICLE XLIII.
                                 --------------

                  43.  Brokers.  Lessee warrants that it has not had any contact
or dealings  with any Person or real estate  broker which would give rise to the
payment of any fee or brokerage  commission in connection  with this Lease,  and
Lessee  shall  indemnify,  protect,  hold  harmless  and defend  Lessor from and
against any liability  with respect to any fee or brokerage  commission  arising
out of any act or omission of Lessee.  Lessor  warrants  that it has not had any
contact or dealings  with any Person or real estate broker which would give rise
to the payment of any fee or brokerage commission in connection with this Lease,
and Lessor shall  indemnify,  protect,  hold harmless and defend Lessee from and
against any liability  with respect to any fee or brokerage  commission  arising
out of any act or omission of Lessor.

                                  ARTICLE XLIV.
                                  -------------

                  44. Miscellaneous

                           44.1  .  Anything  contained  in  this  Lease  to the
contrary  notwithstanding,  all claims against,  and liabilities and indemnities
of, Lessee or Lessor arising prior to the  expiration or earlier  termination of
the Term shall survive such expiration or termination.  In addition,  all claims
against, and all liabilities and indemnities  hereunder of Lessee shall continue
in full  force  and  effect  and in favor of the  Lessor  named  herein  and its
successors and assigns, notwithstanding any conveyance of the Leased Property to
Lessee.


                                       64
<PAGE>
                           44.2  Severability.  If any term or provision of this
Lease or any  application  thereof shall be held invalid or  unenforceable,  the
remainder  of this  Lease and any other  application  of such term or  provision
shall not be affected thereby.

                           44.3 Non-Recourse. Lessee specifically agrees to look
solely  to the  Leased  Property  for  recovery  of any  judgment  from  Lessor;
provided,  however,  that if Lessor's equity in the Leased Property is less than
$1  Million,  then other  assets of Lessor  shall be  available  to satisfy  any
judgment  against  Lessor  as  provided  herein,  but only to the  extent of the
difference between the then amount of Lessor's equity in the Leased Property and
such $1 Million. It is specifically agreed that no constituent partner in Lessor
or officer,  director or employee of Lessor shall ever be personally  liable for
any such judgment or for the payment of any monetary  obligation to Lessee.  The
provision contained in the foregoing sentence is not intended to, and shall not,
limit any right that Lessee might  otherwise  have to obtain  injunctive  relief
against  Lessor,  or any other action not  involving  the personal  liability of
Lessor. Furthermore,  except as otherwise expressly provided herein, in no event
shall Lessor ever be liable to Lessee for any indirect or consequential  damages
suffered by Lessee from whatever cause.

                           44.4   Licenses.   Upon  the  expiration  or  earlier
termination of the Term,  Lessee shall transfer to Lessor or Lessor's  nominee a
fully operational  Facility and shall cooperate with Lessor or Lessor's designee
or nominee in connection  with the processing by Lessor or Lessor's  designee or
nominee  of any  applications  for all  licenses,  operating  permits  and other
governmental authorization, all contracts, including contracts with governmental
or  quasi-governmental  entities,  business records,  data, patient and resident
records,  and patient and  resident  trust  accounts,  which may be necessary or
useful for the operation of the  Facility;  provided that the costs and expenses
of any such transfer or the processing of any such application  shall be paid by
Lessor or Lessor's  designee or nominee.  Lessee  shall not commit any act or be
remiss in the  undertaking  of any act that would  jeopardize  the  licensure or
certification  of the  Facility,  and Lessee  shall  comply with all  reasonable
requests  for an  orderly  transfer  of the same  upon the  expiration  or early
termination  of the Term.  In addition,  upon  request,  Lessee  shall  promptly
deliver copies of all non-confidential  books and records relating to the Leased
Property and its operation to Lessor or Lessor's designee or nominee.

                           44.5   Successors   and   Assigns.   Subject  to  the
provisions  of Article  XXIV,  this Lease  shall be binding  upon Lessor and its
successors and assigns and upon Lessee and its successors and assigns.

                           44.6 Termination Date. If this Lease is terminated by
Lessor or Lessee under any provision hereof, and upon the expiration of the Term
(collectively, the "termination date"), the following shall pertain:

                                    (i) Lessee  shall vacate and  surrender  the
Leased Property,  Lessee's Personal Property (other than the Removable  Personal
Property,  which is subject to the option granted to Lessor  pursuant to Section
6.4) and all Capital  Additions to Lessor in the  condition  required by Section
9.1.4. Prior to such vacation and surrender, Lessee shall remove any items which
Lessee is permitted or required to remove  hereunder.  Lessee shall, at Lessee's
cost,  repair any damage to the Leased Property,  Lessee's Personal Property and
any Capital  Additions caused by such vacation and/or removal of any items which
Lessee is required or permitted  hereunder to remove.  Any items which Lessee is
permitted to remove but fails to remove prior to the  surrender to Lessor of the
Leased Property, Lessee's Personal


                                       65
<PAGE>
Property and any Capital  Additions  shall be deemed  abandoned  by Lessee,  and
Lessor may retain or dispose  of the same as Lessor  sees fit  without  claim by
Lessee thereto or to any proceeds  thereof.  If, after written notice to Lessee,
Lessor elects to remove and dispose of any such items  abandoned by Lessee,  the
cost of such  removal and  disposal  shall be an  Additional  Charge  payable by
Lessee to Lessor upon demand. Lessee shall pay all amounts payable by it through
the termination date and any costs charged pursuant to the immediately preceding
sentence,  each of the  parties  shall  bear  their own costs and fees  incurred
(including  all  costs  incurred  in  performing  their  respective  obligations
hereunder)  through the termination date and from and after the termination date
neither party shall have any further  obligations to the other, except for those
obligations set forth in this clause (i), those obligations  hereunder which are
intended  to survive the  expiration  or earlier  termination  of this Lease and
those specific obligations set forth in clause (ii) below.

                                    (ii)   Notwithstanding   the  provisions  of
clause (i), upon any such termination or expiration of this Lease, the following
shall pertain:

                                           (a) Lessee agrees to defend, protect,
indemnify,  defend and hold harmless Lessor from and against any and all claims,
costs, losses, expenses, damages, actions, and causes of action for which Lessee
is responsible under this Lease (including Lessee's indemnification  obligations
under  Articles  XXIII and XXXVII) and which accrue or have accrued on or before
the  termination  date.  Lessor agrees to use reasonable  efforts to give Lessee
prompt written notice of any such claim,  cost, loss, etc.;  provided,  however,
that  failure to give such  notice  shall not  relieve  Lessee of the  foregoing
indemnification  of  obligations  unless  Lessor's  failure to give such  notice
and/or to take  action with  respect  thereto  results in any  default  judgment
against Lessor or Lessee.

                                           (b) Lessee  shall  remain  liable for
the cost of all  utilities  used in or at the Leased  Property  and any  Capital
Additions  through the termination  date and accrued and unpaid,  whether or not
then billed,  as of the  termination  date until full payment thereof by Lessee.
Lessee shall obtain directly from the companies  providing such services closing
statements  for all services  rendered  through the  termination  date and shall
promptly  pay the same.  If any  utility  statement  with  respect to the Leased
Property and any Capital Additions includes charges for a period partially prior
to and  partially  subsequent  to the  termination  date,  such charges shall be
prorated as between Lessor and Lessee,  with Lessee  responsible for the portion
thereof  (based upon a fraction the  numerator of which is the number of days of
service on such statement  through the  termination  date and the denominator of
which is the total  number of days of service  on such  statement)  through  the
termination  date and Lessor shall be  responsible  for the  balance.  The party
receiving any such statement which requires  proration  hereunder shall promptly
pay such statement and the other party shall, within ten (10) days after receipt
of a copy of such statement,  remit to the party paying the statement any amount
for which such other party is responsible hereunder.

                                           (c)  Subject  to  the  provisions  of
Sections  4.1.1,  Lessee shall remain  responsible  for any and all  Impositions
imposed  against the Leased  Property,  the  Personal  Property  and any Capital
Additions with a lien date prior to the termination  date  (irrespective  of the
date of billing therefor) and for its pro rata share of any Impositions  imposed
in respect of the tax-fiscal period during which the Term terminates as provided
in Section  4.1.7,  and Lessee shall  indemnify  and hold Lessor  harmless  with
respect  to any  claims  for such  Impositions  or  resulting  from  non-payment
thereof.


                                       66
<PAGE>
                                           (d)  Lessee  shall  (y)  execute  all
documents and take any actions reasonably necessary to (1) cause the transfer of
all of Lessee's  Personal  Property (other than the Removable  Personal Property
which is subject to the option  granted to Lessor  pursuant to Section  6.4) and
any Capital  Additions  not owned by Lessor to Lessor,  in each case free of any
encumbrance,  as provided  in Section  6.3 and (2) remove this Lease  and/or any
memorandum hereof as a matter affecting title to the Leased Property as provided
in Article XXVIII and (z) comply with its covenants set forth in Section 44.4.

                                           (e) Lessee shall  continue to observe
the covenants of Lessee set forth in Sections 7.4.2 and 7.4.3.

                           44.7 Governing  LawGoverning Law. THIS LEASE (AND ANY
AGREEMENT  FORMED  PURSUANT  TO THE TERMS  HEREOF)  SHALL BE  GOVERNED  BY,  AND
CONSTRUED  AND  ENFORCED IN  ACCORDANCE  WITH,  THE  INTERNAL  LAWS OF THE STATE
(WITHOUT  REGARD OF PRINCIPLES OR CONFLICTS OF LAW) AND ANY  APPLICABLE  LAWS OF
THE UNITED STATES OF AMERICA.

                           44.8 Waiver of Trial by  JuryWaiver of Trial by Jury.
EACH OF LESSOR AND LESSEE  ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF
ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION OF
THE  UNITED  STATES AND THE STATE.  EACH OF LESSOR AND LESSEE  HEREBY  EXPRESSLY
WAIVES  ANY  RIGHT TO TRIAL BY JURY OF ANY  CLAIM,  DEMAND,  ACTION  OR CAUSE OF
ACTION (i) ARISING  UNDER THIS LEASE (OR ANY  AGREEMENT  FORMED  PURSUANT TO THE
TERMS HEREOF) OR (ii) IN ANY MANNER  CONNECTED  WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF LESSOR AND LESSEE WITH  RESPECT TO THIS LEASE (OR ANY  AGREEMENT
FORMED  PURSUANT  TO THE TERMS  HEREOF)  OR ANY OTHER  INSTRUMENT,  DOCUMENT  OR
AGREEMENT  EXECUTED OR DELIVERED IN  CONNECTION  HEREWITH,  OR THE  TRANSACTIONS
RELATED  HERETO OR THERETO,  IN EACH CASE  WHETHER NOW  EXISTING OR  HEREINAFTER
ARISING,  AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE;  EACH OF LESSOR
AND LESSEE  HEREBY AGREES AND CONSENTS  THAT ANY SUCH CLAIM,  DEMAND,  ACTION OR
CAUSE OF ACTION  SHALL BE  DECIDED  BY A COURT  TRIAL  WITHOUT A JURY,  AND THAT
EITHER  PARTY  MAY  FILE A COPY OF THIS  SECTION  WITH ANY  COURT AS  CONCLUSIVE
EVIDENCE  OF THE  CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL
BY JURY.

                  LESSOR'S INITIALS:        _______

                  LESSEE'S INITIALS:        _______

                           44.9 Lessee's  Equitable  RemediesLessee's  Equitable
Remedies. In the event that Lessee claims or asserts that Lessor has violated or
failed to perform a covenant  of Lessor not to  unreasonably  withhold  or delay
Lessor's  consent  or  approval  hereunder,   or  in  any  case  where  Lessor's
reasonableness  in  exercising  its judgment is in issue,  Lessee's  sole remedy
shall be an action for specific performance, declaratory judgment or injunction,
and (a) in no event  shall  Lessee be  entitled  to any  monetary  damages for a
breach of such covenant and (b) Lessee hereby  specifically  waives the right to
any  monetary  damages or other  remedies in  connection  with any such claim or
assertion; provided, however, that if Lessee establishes in a court of competent
jurisdiction  that Lessor has acted  maliciously  or in bad faith in withholding
its


                                       67
<PAGE>
consent in any instance  where Lessor has agreed  hereunder not to  unreasonably
withhold or delay its consent,  then the foregoing  limitations  shall not apply
and Lessee shall be entitled to seek any remedies  available at law or in equity
by reason of Lessor's actions.

                           44.10 Entire Agreement. This Lease, together with the
other Lessee Documents, as defined in the Contract of Acquisition,  the Exhibits
hereto and thereto and such other  documents  as are  contemplated  hereunder or
thereunder,  constitutes the entire agreement of the parties with respect to the
subject matter hereof, and may not be changed or modified except by an agreement
in writing signed by the parties.  Lessor and Lessee hereby agree that all prior
or contemporaneous oral understandings,  agreements or negotiations  relative to
the leasing of the Leased Property are merged into and revoked by this Lease.

                           44.11 Headings.  All titles and headings to sections,
subsections,  paragraphs  or  other  divisions  of this  Lease  are only for the
convenience  of the  parties  and shall not be  construed  to have any effect or
meaning  with  respect  to the other  contents  of such  sections,  subsections,
paragraphs or other  divisions,  such other content being  controlling as to the
agreement among the parties hereto.

                           44.12 Counterparts. This Lease may be executed in any
number of counterparts, each of which shall be a valid and binding original, but
all of which together shall constitute one and the same instrument.

                           44.13 Joint and  Several.  If more than one Person is
the Lessee under this Lease,  the  liability  of such  Persons  under this Lease
shall be joint and several.

                           44.14  Interpretation.  Both  Lessor and Lessee  have
been  represented by counsel and this Lease and every provision  hereof has been
freely and fairly negotiated.  Consequently,  all provisions of this Lease shall
be  interpreted  according  to their  fair  meaning  and shall  not be  strictly
construed against any party.

                           44.15  Further  Assurances.   The  parties  agree  to
promptly  sign  all  documents  reasonably  requested  to  give  effect  to  the
provisions of this Lease.

                  IN WITNESS  WHEREOF,  the parties have caused this Lease to be
executed and attested by their respective officers thereunto duly authorized.

HEALTH CARE PROPERTY                         INTEGRATED LIVING COMMUNITIES
INVESTORS, INC., a Maryland                  OF MILLEDGEVILLE, INC., a Delaware
corporation                                  corporation



By:                                          By:
     -----------------------------                ------------------------------

Its:                                         Its: 
     -----------------------------                ------------------------------


                                       68
<PAGE>


                                    EXHIBIT A
                                    ---------


                          Legal Description of the Land


         The land referred to is situated in the City of Milledgeville,  Baldwin
County, State of Georgia and is described as follows:

         All that  tract or  parcel of land  lying  and being in the 318th  G.M.
District  within  the  corporate  limits of the City of  Milledgeville,  Baldwin
County,  Georgia,  being a part  of Lot 42,  Valley  Hill  Estates  Subdivision,
containing  2.37 acres,  more or less,  according to a plat of a property survey
for  James  and Mimi H.  Brantley,  made by  James  E.  Smith,  Jr.,  a  Georgia
Registered Surveyor No. 1895, dated December 16, 1986, and recorded in Plat Book
3, Page 139,  Baldwin  County,  Georgia  Records,  which plat by this  reference
thereto is incorporated herein for a more particular and accurate description of
said property.

         This is the same  property  described in a warranty  deed from Linda W.
Waddell to James  Brantley and Mimi H.  Brantley  dated  December 30, 1986,  and
recorded in Deed Book 223, Page 556, Baldwin County, Georgia Records.

         TOGETHER  WITH  a  10-foot  wide  utility  easement  beginning  at  the
southwest  corner  of the  above-described  property  and  running  thence  in a
westerly  direction  with  equal  width  to its  intersection  with an  existing
sanitary  sewer line. The southern line of said easement is the southern line of
the remainder portion of said Lot No. 42; the western line is the existing sewer
line;  the northern line is 10 feet north of and parallel to the southern  line;
and the  eastern  line is part of the western  boundary  of the  above-described
property.  This easement is for the purpose of the  installation and maintenance
of a sanitary sewer line to service the above-described property.

                                      A-1
<PAGE>
                                    EXHIBIT B
                                    ---------


                       List of Lessor's Personal Property


                  All machinery,  equipment,  furniture,  furnishings,  moveable
                  walls or  partitions,  computers  or trade  fixtures  or other
                  tangible personal property used or useful in Lessee's business
                  on the Leased  Property,  excluding  items,  if any,  included
                  within the definition of Fixtures,  but specifically including
                  those items described in Schedule 1 hereto.

                                      A-1
<PAGE>
                                   Schedule 1
                                   ----------

                    Itemization of Lessor's Personal Property
                    -----------------------------------------
39    Bedroom dressers                     1    Desk with glass top             
36    Dresser mirrors                      3    Desks with chairs               
33    Night stands                         2    File cabinets                   
30    Beds with mattress & box springs     1    Bookcase                        
28    Resident room lamps                  1    Podium                          
35    Resident room chairs                 1    Buffet with mirror              
22    Resident room pictures               6    Extra mattresses and box springs
5     Living room sofas                    2    Maid carts                      
13    Living room chairs                   17   Folding chairs                  
9     End tables                           24   Porch rocking chairs            
5     Living room lamps                    3    Refrigerators                   
1     Coffee table                         3    Stoves                          
15    Living room pictures                 2    Freezers                        
10    Floor lamps                          3    Washing machines                
16    Dining room tables                   3    Dryers                          
42    Dining room chairs                   350  lb. capacity ice maker          
1     Beauty shop styling chair            35   lb. capacity ice maker          
1     Hairdryer and chair                       Kitchen utensils                
1     Entertainment cabinet                     Pots/pans                       
1     Television                                Plates/cups/glasses             
1     Sofa table                           1    Wheelchair                      
1     Piano with stool                       
1     Bridge table with 4 chairs


                                      1-1

<PAGE>
                                    EXHIBIT C
                                    ---------

                           Form of Amendment to Lease
                           --------------------------


         This  First   Amendment   to  Lease   ("Amendment")   is  dated  as  of
_________________,  199__ by and between HEALTH CARE PROPERTY INVESTORS, INC., a
Maryland   corporation   ("Lessor"),   and  INTEGRATED  LIVING   COMMUNITIES  OF
MILLEDGEVILLE, INC., a Delaware corporation ("Lessee").

                                    RECITALS

         A. Lessor and Lessee  entered into a Lease dated as of _______ __, 199_
(the    "Lease")    for    the    _________________    facility    located    in
________________________________________.

         B.  Lessor  and  Lessee  desire  to  memorialize  their   understanding
regarding certain provisions of the Lease.

                                    AGREEMENT

         Capitalized  terms not otherwise  defined herein shall have the meaning
ascribed to them in the Lease. Lessor and Lessee hereby agree as follows:

         1.  The Commencement Date of the Lease is_____________;

         2.  Subject to  extension to be  co-terminous  with the Facility  Group
Leases, the Fixed Term of the Lease shall end on _______________;

         3. The first Lease Year for the Lease commences on ____________,  199__
and ends on ____________, 199__;

         4. The first  Quarter for which  Additional  Rent shall be due shall be
_____________________________.

         Except as amended  above,  the Lease  between  Lessor and Lessee  shall
remain in full force and effect. This Amendment may be executed in any number of
counterparts,   all  of  which  together  shall  constitute  one  and  the  same
instrument.

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.

HEALTH CARE PROPERTY                          INTEGRATED LIVING COMMUNITIES     
INVESTORS, INC., a Maryland                   OF MILLEDGEVILLE, INC., a Delaware
corporation                                   corporation                       
                                                                                
                                                                                
                                                                             
By:                                           By:                         
   -----------------------------                 -------------------------------

Its:                                          Its: 
    ----------------------------                  ------------------------------

                                      1-2
<PAGE>
                                    EXHIBIT D
                                    ---------

                                     FORM OF
                      IRREVOCABLE STANDBY LETTER OF CREDIT

Health Care Property Investors, Inc.
10990 Wilshire Boulevard, Suite 1200
Los Angeles, California 90024

Date: _______________              Letter of Credit No.: ___________

                                   Expiration Date: ________________
GENTLEMEN:

We hereby  establish  our  irrevocable  letter  of credit in your  favor for the
account of  __________________________  available by your draft(s) on us payable
at sight not to exceed a total of

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

------------------------------(---------------------)   when accompanied by this
letter of credit and the following documents.

1)       A certificate  purported to be executed by a  representative  of Health
         Care Property  Investors,  Inc.  ("Lessor") stating that (a) Integrated
         Living Communities of Milledgeville,  Inc.,  (Lessee"),  as lessee, has
         committed an Event of Default  under the lease dated as of February 28,
         1997,  between Lessor, as lessor,  and Lessee, as lessee, or (b) Lessee
         or an affiliate of Lessee has  committed an event of default  under any
         other lease or agreement or other instrument with or in favor of Lessor
         or an affiliate of Lessor and stating the amount for which a draw under
         this letter of credit is made;  or (c) a  certificate  purported  to be
         executed  by a  representative  of Lessor  stating  that a  replacement
         letter of credit for this  instrument  has not been  supplied  prior to
         thirty (30) days in advance of the  expiration of this  instrument  for
         the account of Lessor.

2)       The  original  letter of credit  must  accompany  all  drafts  unless a
         partial draw is presented,  in which case the original  must  accompany
         the final draft.

  Partial  drawings  are  permitted,  with the letter of credit  being  reduced,
  without amendment, by the amount(s) drawn hereunder.

This letter of credit shall expire at 2:00 p.m. at the office of 

________________________________________ on the expiration date.

This letter of credit may be transferred or assigned by the  beneficiary  hereof
to any successor or assign of such  beneficiary's  interest in any such lease or
other  agreement or to any lender  obtaining a lien or security  interest in the
property  covered by any such lease.  Each draft  hereunder  by any  assignee or
successor  shall be  accompanied  by a copy of the fully  executed  documents or
judicial orders evidencing such encumbrance, assignment or transfer.

                                       D-1

                                       69
<PAGE>


Any   draft   drawn    hereunder    must   bear   the   legend    "Drawn   under
______________________________   Letter  of  Credit  Number   __________   dated
____________________.  Except so far as otherwise  expressly stated, this letter
of credit is  subject to the  "Uniform  Customs  and  Practice  for  Documentary
Credits (1993 Revision), International Chamber of Commerce Brochure No. 500." We
hereby  agree with you and all persons  negotiating  such drafts that all drafts
drawn and negotiated in compliance  with the terms of this letter of credit will
be duly honored upon  presentment and delivery of the documents  specified above
by certified or registered mail to _________________________________ located at


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

______________________________________________ if negotiated not later that 2:00
pm on or before the expiration date shown above.


Very truly yours,



By
   --------------------------------------

Its
    -------------------------------------

                                      D-2
<PAGE>
                                    EXHIBIT E
                                    ---------


                              FACILITY GROUP LEASES

The following leases between Lessor,  or an Affiliate of Lessor,  and Lessee, or
an Affiliate of Lessee,  shall be deemed "Facility Group Leases" for purposes of
this Lease:

(a)      That certain  lease dated as of September 30, 1996 between  Lessor,  as
         "Lessor," and Lessee's  Affiliate,  Integrated  Living  Communities  at
         Cabot  Pointe,  Inc., a Delaware  corporation,  as  "Lessee,"  covering
         certain "Leased  Property"  located in the  unincorporated  area of the
         County of Manatee, State of Florida;

(b)      That certain  lease dated as of February 21, 1997  between  Lessor,  as
         "Lessor," and Lessee's Affiliate, Integrated Living Communities of Lake
         Charles,  Inc., a Delaware  corporation,  as "Lessee," covering certain
         "Leased  Property"  located  in the  City of  Lake  Charles,  State  of
         Louisiana;

(c)      That certain  lease dated as of February 21, 1997  between  Lessor,  as
         "Lessor," and Lessee's  Affiliate,  Integrated  Living  Communities  of
         Alexandria, Inc., a Delaware corporation, as "Lessee," covering certain
         "Leased  Property"  located  in  the  City  of  Alexandria,   State  of
         Louisiana; and

(d)      That certain  lease dated as of February 21, 1997  between  Lessor,  as
         "Lessor," and Lessee's  Affiliate,  Integrated  Living  Communities  of
         Lafayette, Inc., a Delaware corporation,  as "Lessee," covering certain
         "Leased Property" located in the City of Lafayette, State of Louisiana;

together with any lease entered into after the date hereof  between Lessor or an
Affiliate of Lessor and Lessee or an  Affiliate of Lessee which  recites that it
is a "Facility Group Lease."

                                      E-1

<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

                                                                                                               Page
                                                                                                               ----

      <S>          <C>    <C>                                                                                 <C>
         ARTICLE I..............................................................................................  1
                   1.      Leased Property; Term................................................................  1

         ARTICLE II.............................................................................................  2
                   2.      Definitions..........................................................................  2

         ARTICLE III............................................................................................ 15
                   3.1     Rent................................................................................. 15
                   3.2     Quarterly Calculation and Payment of Additional Rent; Annual 
                           Reconciliation....................................................................... 17
                   3.3     Confirmation of Gross Revenues....................................................... 18
                   3.4     Additional Charges................................................................... 18
                   3.5     Late Payment of Rent................................................................. 18
                   3.6     Net Lease............................................................................ 19

         ARTICLE IV............................................................................................. 19
                   4.1     Impositions.......................................................................... 19
                   4.2     Utilities............................................................................ 20
                   4.3     Insurance............................................................................ 21
                   4.4     Impound Account...................................................................... 21
                   4.5     Tax Service.......................................................................... 21

         ARTICLE V.............................................................................................. 21
                   5.      No Termination, Abatement, etc....................................................... 21

         ARTICLE VI............................................................................................. 22
                   6.1     Ownership of the Leased Property..................................................... 22
                   6.2     Personal Property.................................................................... 22
                   6.3     Transfer of Personal Property and Capital Additions to Lessor........................ 22
                   6.4     Option to Purchase Removable Personal Property....................................... 22

         ARTICLE VII............................................................................................ 23
                   7.1     Condition of the Leased Property..................................................... 23
                   7.2     Use of the Leased Property........................................................... 23
                   7.3     Lessor to Grant Easements, etc....................................................... 24
                   7.4     Preservation of Value and Utility of Leased Property................................. 25

         ARTICLE VIII........................................................................................... 28
                   8.      Compliance with Legal and Insurance Requirements, Instruments, 
                           etc.................................................................................. 28

         ARTICLE IX............................................................................................. 28
                   9.1     Maintenance and Repair............................................................... 28
                   9.2     Encroachments, Restrictions, Mineral Leases, etc..................................... 29
                   9.3     Repairs to be Performed by Lessee.................................................... 30

         ARTICLE X.............................................................................................. 31
                   10.1    Construction of Capital Additions to the Leased Property............................. 31
                   10.2    General Requirements for all Approved Capital Additions.............................. 31
                   10.3    Funding of Capital Addition Project.................................................. 33


                                        i
<PAGE>


         ARTICLE XI............................................................................................. 34
                   11.     Liens................................................................................ 34

         ARTICLE XII............................................................................................ 34
                   12.     Permitted Contests................................................................... 34

         ARTICLE XIII........................................................................................... 35
                   13.1    General Insurance Requirements....................................................... 35
                   13.2    Replacement Cost..................................................................... 36
                   13.3    Additional Insurance................................................................. 36
                   13.4    Waiver of Subrogation................................................................ 36
                   13.5    Policy Requirements.................................................................. 37
                   13.6    Increase in Limits................................................................... 37
                   13.7    Blanket Policies and Policies Covering Multiple Locations............................ 37
                   13.8    No Separate Insurance................................................................ 37

         ARTICLE XIV............................................................................................ 38
                   14.1    Insurance Proceeds................................................................... 38
                   14.2    Insured Casualty..................................................................... 38
                   14.3    Uninsured Casualty................................................................... 39
                   14.4    No Abatement of Rent................................................................. 40
                   14.5    Waiver............................................................................... 40

         ARTICLE XV............................................................................................. 40
                   15.     Condemnation......................................................................... 40
                           15.1    Total Taking................................................................. 40
                           15.2    Partial Taking............................................................... 40
                           15.3    Restoration.................................................................. 40
                           15.4    Award-Distribution........................................................... 40
                           15.5    Temporary Taking............................................................. 41
                           15.6    Sale Under Threat of Condemnation............................................ 41

         ARTICLE XVI............................................................................................ 41
                   16.1    Events of Default.................................................................... 41
                   16.2    Certain Remedies..................................................................... 44
                   16.3    Damages.............................................................................. 44
                   16.4    Receiver............................................................................. 45
                   16.5    Lessee's Obligation to Purchase...................................................... 45
                   16.6    Waiver............................................................................... 46
                   16.7    Application of Funds................................................................. 46
                   16.8    Facility Operating Deficiencies...................................................... 46

         ARTICLE XVII........................................................................................... 47
                   17.     Lessor's Right to Cure Lessee's Default.............................................. 47

         ARTICLE XVIII.......................................................................................... 48
                   18.     Purchase of the Leased Property...................................................... 48

         ARTICLE XIX............................................................................................ 48
                   19.1    Renewal Terms........................................................................ 48
                   19.2    Lessor's Rights of Renewal and Early Termination..................................... 48

         ARTICLE XX............................................................................................. 49

                                       ii
<PAGE>
                   20.     Holding Over......................................................................... 49

         ARTICLE XXI............................................................................................ 49
                   21.1    Letters of Credit.................................................................... 49
                   21.2    Times for Obtaining Letters of Credit................................................ 50
                   21.3    Amounts for Letters of Credit........................................................ 50
                   21.4    Uses of Letters of Credit............................................................ 50

         ARTICLE XXII........................................................................................... 51
                   22.     Risk of Loss......................................................................... 51

         ARTICLE XXIII.......................................................................................... 51
                   23.     General Indemnification.............................................................. 51

         ARTICLE XXIV........................................................................................... 52
                   24.     Transfers............................................................................ 52
                           24.1    Prohibition.................................................................. 52
                           24.2    Consent...................................................................... 53
                           24.3    Attornment and Related Matters............................................... 53
                           24.4    [Reserved]................................................................... 54
                           24.5    Costs........................................................................ 54
                           24.6    No Release of Lessee's Obligations........................................... 54
                           24.7    REIT Protection.............................................................. 54
                           24.8    Transfers In Bankruptcy...................................................... 55
                           24.9    Special Transactions......................................................... 55
                           24.9.1           Transfer to Affiliate............................................... 55
                           24.9.2           Public Offering; Public Trading..................................... 56
                           24.9.3           ILC................................................................. 56

         ARTICLE XXV............................................................................................ 58
                   25.     Officer's Certificates and Financial Statements...................................... 58
                           25.1    Officer's Certificate........................................................ 58
                           25.2    Statements................................................................... 58
                           25.3    Charges...................................................................... 60

         ARTICLE XXVI........................................................................................... 60
                   26.     Lessor's Right to Inspect and Show the Leased Property............................... 60

         ARTICLE XXVII.......................................................................................... 60
                   27.     No Waiver............................................................................ 60

         ARTICLE XXVIII......................................................................................... 61
                   28.     Remedies Cumulative.................................................................. 61

         ARTICLE XXIX........................................................................................... 61
                   29.     Acceptance of Surrender.............................................................. 61

         ARTICLE XXX............................................................................................ 61
                   30.     No Merger............................................................................ 61

         ARTICLE XXXI........................................................................................... 61
                   31.     Conveyance by Lessor................................................................. 61

                                      iii

 
<PAGE>


         ARTICLE XXXII.......................................................................................... 61
                   32.     Quiet Enjoyment...................................................................... 61

         ARTICLE XXXIII......................................................................................... 62
                   33.     Notices.............................................................................. 62

         ARTICLE XXXIV.......................................................................................... 63
                   34.     Appraiser............................................................................ 63

         ARTICLE XXXV........................................................................................... 64
                   35.1    First Refusal to Purchase............................................................ 64
                   35.2    Other Defaults....................................................................... 66

         ARTICLE XXXVI.......................................................................................... 66
                   36.1    Lessor May Grant Liens............................................................... 66
                   36.2    Attornment........................................................................... 66

         ARTICLE XXXVII......................................................................................... 67
                   37.1    Hazardous Substances................................................................. 67
                   37.2    Notices.............................................................................. 67
                   37.3    Remediation.......................................................................... 67
                   37.4    Indemnity............................................................................ 67
                   37.5    Environmental Inspection............................................................. 68

                                       iv
<PAGE>




         ARTICLE XXXVIII........................................................................................ 69
                   38.     Memorandum of Lease.................................................................. 69

         ARTICLE XXXIX.......................................................................................... 69
                   39.     Sale of Assets....................................................................... 69

         ARTICLE XL.               [INTENTIONALLY OMITTED]...................................................... 69

         ARTICLE XLI............................................................................................ 70
                   41.     Authority............................................................................ 70

         ARTICLE XLII........................................................................................... 70
                   42.     Attorneys' Fees...................................................................... 70

         ARTICLE XLIII.......................................................................................... 70
                   43.     Brokers.............................................................................. 70

         ARTICLE XLIV........................................................................................... 70
                   44.     Miscellaneous........................................................................ 70
                           44.1    Survival..................................................................... 70
                           44.2    Severability................................................................. 71
                           44.3    Non-Recourse................................................................. 71
                           44.4    Licenses..................................................................... 71
                           44.5    Successors and Assigns....................................................... 71
                           44.6    Termination Date............................................................. 72
                           44.7    Governing Law................................................................ 73
                           44.8    Waiver of Trial by Jury...................................................... 73
                           44.9    Lessee's Equitable Remedies.................................................. 74
                           44.10   Entire Agreement............................................................. 74
                           44.11   Headings..................................................................... 74
                           44.12   Counterparts................................................................. 75
                           44.13   Joint and Several............................................................ 75
                           44.14   Interpretation............................................................... 75
                           44.15   Further Assurances........................................................... 75
</TABLE>

EXHIBITS
--------

Exhibit A                  Legal Description of the Land

Exhibit B                  List of Lessor's Personal Property

Exhibit C                  Form of Amendment

Exhibit D                  Form of Letter of Credit

Exhibit E                  Facility Group Leases

                                       v