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Exhibit 10.126

                                 LEASE AGREEMENT


         This Lease Agreement is made effective as of December 1, 1990 between
HEALTH CARE REIT, INC., a Delaware corporation ("Landlord"), having its
principal office located at One SeaGate, suite 1950, P.O. Box 1475, Toledo, Ohio
43603, and THE ARBORS HEALTH CARE CENTER INC., an Arizona corporation
("Tenant"), having its principal office located at 2105 Clubhouse Drive,
Greeley, Colorado 80634.

                                    RECITALS

         WHEREAS, Landlord and SIGNATURE HEALTH CARE CORPORATION, a Delaware
corporation (the "Guarantor") entered into an Agreement to Lease dated effective
as of November 1, 1990 (the "Agreement");

         WHEREAS, Guarantor assigned the Agreement to Tenant; and

         WHEREAS, Landlord and Tenant are entering into this Lease
Agreement pursuant to the Agreement;

         NOW, THEREFORE, Landlord and Tenant agree as follows:

                          ARTICLE I: PREMISES AND TERM

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

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

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

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

         (d) All permanently affixed equipment, machinery, fixtures, and other
items of real and/or personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the Improvements, including without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, and built-in oxygen and vacuum
systems, all of which, to the greatest extent permitted by law, are hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto but specifically
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excluding all items included within the category of Personal Property as defined
below (collectively the "Fixtures").

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

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

1.02 Term. The initial term of this Lease is ten (10) years commencing on
December 1, 1990 (the "Commencement Date") and expiring on November 30, 2000.
Provided that no Event of Default has occurred and that Tenant gives Landlord
notice on or before June 1, 2000, Tenant shall have the option to renew this
Lease for one (1) additional five (5) year term. The term "Term" means the
initial term and the renewal term. The term "Lease Year" means each twelve (12)
month period during the Term commencing on December 1 and ending on November 30.

1.03 Early Entry. Landlord may, at its sole discretion, grant possession of the
Leased Property to Tenant prior to the Commencement Date. If possession is
granted prior to the Commencement Date, Tenant shall be subject to all of the
terms and conditions of this Lease. The Rent (as hereinafter defined) shall be
prorated for the period of possession prior to the Commencement Date.

                                ARTICLE II: RENT

2.01 Base Rent. Tenant shall pay Landlord base rent (the "Base Rent") for the
Term in advance in consecutive monthly installments payable on the first day of
each month during the Term, commencing December 1, 1990 in accordance with the
Base Rent Schedule attached hereto as Exhibit D.

2.02 Additional Rent. In addition to Base Rent and Percentage Rent (as
hereinafter defined in Section 2.06), Tenant shall pay all other amounts,
liabilities, obligations and Impositions (as hereinafter defined) which Tenant
assumes or agrees to pay under this Lease and the Agreement and any fine,
penalty, interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the "Additional Rent") The Base Rent,
Percentage Rent, and Additional Rent are hereinafter referred to as "Rent".
Landlord shall have all legal, equitable and contractual
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rights, powers and remedies provided either in this Lease or by statute or
otherwise in the case of nonpayment of the Rent.

2.03 Place of Payment of Rent. Tenant shall make all payments of Rent at the
Landlord's address set forth in the first paragraph of this Lease or at such
other place as Landlord may designate from time to time.

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

2.05 No Termination, Abatement, Etc. Except as otherwise specifically provided
in this Lease, Tenant shall remain bound by this Lease in accordance with its
terms. Except as otherwise specifically provided in the Lease, Tenant shall not,
without the prior written consent of Landlord, which consent will not be
unreasonably withheld, modify, surrender or terminate the Lease, nor seek nor be
entitled to any abatement, deduction, deferment or reduction of Rent, or set-off
against the Rent. Except as specifically provided in this Lease, the obligations
of Landlord and Tenant shall not be affected by reason of (i) any damage to, or
destruction of, the Leased Property or any part thereof from whatever cause or
any Taking (as hereinafter defined) of the Leased Property or any part thereof;
(ii) the lawful or unlawful prohibition of, or restriction upon, Tenant's use of
the Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title; (iii) any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which Landlord
and Tenant are parties; (iv) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceeding affecting Landlord or any assignee or transferee of Landlord; or (v)
any other cause, whether similar or dissimilar to any of the foregoing, other
than a discharge of Tenant from any such obligations as a matter of law. Except
as otherwise specifically provided in this Lease, Tenant hereby specifically
waives all rights, including but not limited to, any rights under Arizona
Revised Statutes Section 33-343 or a successor statute thereto, 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) entitling Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder. The obligations of Landlord and Tenant hereunder shall be separate
and independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason of
an Event of Default.
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2.06 Percentage Rent. In addition to the monthly Base Rent, during the first and
second Lease Years, Tenant shall pay Landlord percentage rent (the "Percentage
Rent") in accordance with this Section 2.06 on the twenty-fifth (25th) day of
each month commencing on January 25, 1991. The Percentage Rent will be the
excess of (i) the product of (a) the Gross Revenues for the prior month times
(b) the Applicable Rent Factor set forth in Section 2.06.02; over (ii) the
monthly Base Rent. If any governmental agencies or third party payors increase
the reimbursement for the first and second Lease Years at any time after the
expiration of the first or second Lease Years or, if the Leased Property
realizes increased Gross Revenues from any other source for the first and second
Lease Years, so that gross revenues for the first and second Lease Years are
increased, then Tenant shall pay Percentage Rent based upon the adjusted gross
revenues.

         2.06.01 "Gross Revenues" means all revenues received or receivable from
or by reason of the operation of the Leased Property, or any other use of the
Leased Property, including without limitation all patient revenues received or
receivable for the use of or otherwise by reason of all rooms, beds and other
facilities provided, meals served, services performed, space or facilities
subleased or goods sold on the Leased Property, including without limitation,
and except as provided below, any consideration received under any subletting,
licensing, or other arrangements with third parties relating to the possession
or use of any portion of the Leased Property. Gross Revenues shall not include
(a) professional fees or charges by physicians and providers of ancillary
services who are independent contractors, when and to the extent such charges
are paid over to such physicians or providers of ancillary services, or
accompanied by separate charges for use of the Leased Property or any portion
thereof; (b) non-operating revenues such as interest income or income from the
sale of assets not sold in the ordinary course of business; and (c)) State or
Federal pass throughs of the cost of meeting State or Federal regulations,
rules, or statutes e.g. minimum wage pass throughs, OBRA regulation pass
throughs, and nurse-aid training pass throughs; provided, however, that any
profit component of the pass throughs shall be included in Gross Revenues. Gross
Revenues shall be adjusted for the following items: (i) contractual allowances
(difference between customary charges and amounts receivable based on contract)
relating to any period during the Term of the Lease; (ii) all proper patient
billing credits and adjustments according to generally accepted accounting
principles relating to health care accounting; and (iii) federal, state or local
excise taxes and any tax based upon or measured by said 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. To the
extent that the Leased Property is subleased by Tenant, Gross Revenues shall be
calculated for all purposes of the Lease by including the Gross Revenues of such
sub-lessees with respect to the subleased property, i.e., the Gross Revenues
generated from the operations conducted on such subleased portion of the Leased
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Property shall be included directly in the Gross Revenues for the purpose of
determining percentage rent payable under this Lease and the rent received or
receivable by Tenant from under such subleases shall be excluded from Gross
Revenues for such purpose.

         2.06.02 "Applicable Rent Factor" means (i) 8.67% for the First Lease
Year; and (ii) 9.7% for the Second Lease Year.

         2.06.03 On or before the twenty-fifth (25th) day of each month during
the first three (3) Lease Years of the Term, Tenant shall deliver to Landlord a
notarized, sworn statement (the "Tenant's Certification") setting forth the
Gross Revenues for the prior month and the Percentage Rent due, if any. In
addition to the Tenant's Certification, the Tenant shall deliver to Landlord
within five (5) days after such information is received, sent or made available,
but in no event later than the dates set forth below, the following: (i) any
reports sent to any reimbursement agency, including, but not limited to Medicaid
Cost Reports; (ii) copies of all Medicare Cost Reports; (iii) copies of all
interim or final cost settlements with Medicare authorities concerning Medicare
receivables with a debit or credit balance; (iv) patient census data by type of
patient on a quarterly basis within thirty (30) days after the end of each
calendar quarter beginning January 31, 1991; (v) reports of any changes in rates
for Medicare, Medicaid, private payor or any other provider paying for patients
in the Leased Property; and (vi) Tenant's calculation supporting any estimated
contractual allowances in the Financial Statements.

         2.06.04 Landlord or its duly authorized representatives may, on any
business day and during reasonable office hours, inspect Tenant's records of the
Gross Revenues, either at the Leased Property or elsewhere as reasonably
designated by Tenant, provided such inspection is made within twelve months
after a Tenant's Certification is furnished to Landlord by Tenant. Any claim by
Landlord for a revision of any Tenant's Certification must be made in writing to
Tenant within twelve (12) months after the date such Tenant's Certification is
furnished to Landlord, otherwise it shall be deemed waived by Landlord. If
Landlord inspects Tenant's records and such inspection shows an error(s) in the
Tenant's Certification which results in an understatement of the Gross Revenues
of five percent (5%) or more, then in addition to paying the additional
Percentage Rent on demand, Tenant shall pay Landlord, on demand, the reasonable
cost of such inspection as Additional Rent.

                     ARTICLE III: IMPOSITIONS AND UTILITIES

3.01 Payment of Impositions. Subject to the adjustments set forth herein, Tenant
shall pay, as Additional Rent, all Impositions (as hereinafter defined) that may
be levied or become a lien on the Leased Property or any part thereof at any
time (whether prior to or during the Term), without regard to prior ownership of
said Leased Property, before any fine, penalty, interest, or cost is incurred.
Tenant shall, upon request from Landlord, promptly
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furnish to Landlord copies of official receipts or other satisfactory proof
evidencing such payments. Tenant's obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a lien upon the
Leased Property or any part thereof. Tenant, at its expense, shall prepare and
file all tax returns and reports in respect of any Imposition as may be required
by governmental authorities. Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default (as hereinafter defined) shall have
occurred hereunder and be continuing. Landlord shall be entitled to any refund
from any taxing authority if an Event of Default has occurred and is continuing.
Any refunds retained by Landlord due to an Event of Default shall be applied as
provided in Section 9.08. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. In the event governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it may legally so file.
Landlord, to the extent it possesses the same, and Tenant, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Landlord is legally required to file personal
property tax returns, Tenant will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Tenant
to file a protest. Tenant may, upon notice to Landlord, at Tenant's option and
at Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at Tenant's expense as aforesaid,
shall fully cooperate with Tenant in such protest, appeal, or other action.
Tenant shall promptly reimburse Landlord for all personal property taxes paid by
Landlord upon receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term commences and terminates shall be adjusted and prorated
between Landlord and Tenant on a per them basis, with Tenant being obligated to
pay its pro rata share from and including the Commencement Date to and including
the expiration or termination date of the Term, whether or not such Imposition
is imposed before or after such commencement or termination, and Tenant's
obligation to pay its prorated share thereof shall survive such termination.
Tenant shall also pay to Landlord a sum equal to the amount which Landlord may
be caused to pay of any privilege tax, sales tax, gross receipts tax, rent tax,
occupancy tax or like tax (excluding any tax based on net income), hereinafter
levied, assessed, or imposed by any federal, state, county or municipal
governmental authority, or any subdivision thereof, upon or measured by or rent
or other consideration required to be paid by Tenant under this Lease.
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3.02 Definition of Impositions. "Impositions" means, collectively, (i) taxes
(including without limitation, all real estate and personal property ad valorem
(whether assessed as part of the real estate or separately assessed as unsecured
personal property, sales and use, business or occupation, single business, gross
receipts, transaction privilege, rent or similar taxes); (ii) assessments
(including without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and
whether or not to be completed with the Term); (iii) ground rents, water, sewer
or other rents and charges, excises, tax levies, and fees (including without
limitation, license, permit, inspection, authorization and similar fees); (iv)
all taxes imposed on Tenant's operations of the Leased Property, including
without limitation, employee withholding taxes, income taxes and intangible
taxes; and (v) all other governmental charges, in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property or any part thereof and/or the Rent
(including all interest and penalties thereon due to any failure in payment by
Tenant) , which at any time prior to, during or in respect of the Term hereof
may be assessed or imposed on or in respect of or be a lien upon (a) Landlord or
Landlord's interest in the Leased Property or any part thereof; (b) the Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein; or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Leased Property
or the leasing or use of the Leased Property or any part thereof. Tenant shall
not, however, be required to pay (i) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Landlord;
or (ii) except as provided in Section 13.01, any tax imposed with respect to the
sale, exchange or other disposition by Landlord of any Leased Property or the
proceeds thereof; provided, however, that if any tax, assessment, tax levy or
charge which Tenant is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (i) or (ii) immediately above is levied, assessed or imposed expressly in
lieu thereof, Tenant shall then pay such tax, levy, or charge set forth in said
clause (i) or (ii).

3.03 Escrow of Impositions. If Landlord's lender requires Landlord to escrow
real property taxes or other Impositions on a periodic basis during the Term,
Tenant, on notice from Landlord indicating this requirement, shall pay a sum of
money toward its liability under this Article to Landlord on a periodic basis in
accordance with the Lender's requirements. Landlord shall escrow the payments
received from Tenant in accordance with the requirements of its lender, and
shall furnish Tenant with a copy of the lender's requirements for escrow.
Further, if an Event of Default occurs hereunder, Tenant shall thereafter, at
Landlord's election, deposit with Landlord on the first day of each month during
the remaining Term hereof and any extended Term, a sum equal to one-twelfth
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(1/12th) of the Impositions assessed against the Leased Property for the
preceding tax year, which sums shall be used by Landlord toward payment of such
Impositions. Tenant, on demand, shall pay to Landlord any additional funds
necessary to pay and discharge the obligations of Tenant pursuant to the
provisions of this Section. The receipt by Landlord of the payment of such
Impositions by and from Tenant shall only be as an accommodation to Tenant, the
mortgagees, and the taxing authorities, and shall not be construed as rent or
income to Landlord, Landlord serving, if at all, only as a conduit for delivery
purposes.

3.04 Utilities. Tenant shall pay, as Additional Rent, all taxes, assessments,
charges, deposits, and bills for utilities, including without limitation charges
for water, gas, oil, sanitary and storm sewer, electricity, telephone service,
and trash collection, which may be charged against the occupant of the
Improvements during the Term. If an Event of Default occurs hereunder, Tenant
shall thereafter, at Landlord's election, deposit with Landlord on the first day
of each month during the remaining Term hereof and any extended Term, a sum
equal to one-twelfth (1/12th) of the amount of the annual utility expenses for
the preceding Lease Year, which sums shall be used by Landlord to pay such
utilities. Tenant shall, on demand, pay to Landlord any additional amount needed
to pay such utilities. Landlord's receipt of such payments shall only be an
accommodation to Tenant and the utility companies and shall not constitute rent
or income to Landlord. Tenant shall at all times maintain that amount of heat
necessary to ensure against the freezing of water lines. Tenant hereby agrees to
indemnify and hold Landlord harmless from and against any liability or damages
to the utility systems and the Leased Property that may result from Tenant's
failure to maintain sufficient heat in the Improvements.

3.05 Discontinuance of Utilities. Landlord will not be liable for damages to
person or property or for injury to, or interruption of, business for any
discontinuance of utilities nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of Rent or operate to release
Tenant from any of Tenant's obligations under this Lease.

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

                              ARTICLE IV: INSURANCE

4.01 Property Insurance. Tenant shall, at Tenant's expense, keep the
Improvements, Fixtures, Personal Property, and other components of the Leased
Property insured against the following risks:

         (a) Loss or damage by fire, vandalism and malicious mischief, sprinkler
leakage, and all other physical loss perils commonly covered by "All Risk"
insurance in an amount not less than one
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hundred percent (100%) of the then full replacement cost thereof (as hereinafter
defined). Such policy shall include an agreed amount endorsement if available at
a reasonable cost. Such policy shall also include endorsements for contingent
liability for operation of building laws, demolition costs, and increased cost
of construction.

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

         (c) Loss of rent under a rental value insurance policy covering risk of
loss during the first nine (9) months of reconstruction necessitated by the
occurrence of any hazards described in Sections 4.01(a) or 4.01(b) above, in an
amount sufficient to prevent Landlord or Tenant from becoming a coinsurer,
containing endorsements for extended period of indemnity and premium adjustment,
and written with an agreed amount clause if available at a reasonable cost.

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

         (e) if the Land is located in whole or in part within a designated
flood plain area, loss or damage caused by flood in commercially reasonable
amounts acceptable to Landlord.

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

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

         (a) Claims for personal injury or property damage commonly covered by
comprehensive general liability insurance with endorsements for nursing home
professional malpractice, blanket contractual, personal injury, owner's
protective liability, real property fire damage legal liability, voluntary
medical payments, products and completed operations, broad form property damage,
and extended bodily injury, with commercially reasonable amounts for bodily
injury, property damage, and voluntary medical payments acceptable to Landlord,
but with a combined single limit of not less than one Million Dollars
($1,000,000.00) per occurrence, Three Million Dollars ($3,000,000.00) aggregate.

         (b) Claims for personal injury and property damage commonly covered by
comprehensive automobile liability insurance, covering all owned and nonowned
automobiles, with commercially reasonable amounts for bodily injury, property
damage, and for automobile medical payments acceptable to Landlord, but with a
combined single
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limit of not less than One Million Dollars ($1,000,000.00) per occurrence, Three
Million Dollars ($3,000,000.00) aggregate.

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

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

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

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

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

         (c) Tenant shall be the "named insured" and Landlord shall be an
"additional named insured" on each policy.

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

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

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

         (g) At least thirty (30) days prior to the expiration of each policy,
Tenant shall deliver to Landlord a certificate showing renewal of such policy
and payment of the annual premium therefor.

4.04 Replacement Cost. The term "full replacement cost" means the actual
replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, not
later than thirty (30) days after the anniversary of each Lease Year of the
Term, increase the amount of the replacement cost endorsement for the
Improvements to equal
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the option exercise price set forth in Exhibit E for the current Lease Year
(except during the renewal term where the option exercise price for Lease Year
10 will apply) less Four Hundred Ten Thousand Dollars ($410,000.00) and the
replacement cost for the Personal Property will be Three Hundred Sixty Thousand
Dollars ($360,000.00). If Tenant makes any Permitted Alterations (as hereinafter
defined) to the Leased Property, Landlord may have such full replacement cost
redetermined at any time after such Permitted Alterations are made, regardless
of when the full replacement cost was last determined.

4.05 Blanket Policy. Notwithstanding anything to the contrary contained in this
Section, Tenant may carry the insurance required by this Article under a blanket
policy of insurance, provided that the coverage afforded Tenant will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all of the requirements of this Lease.

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

4.07 Waiver of Subrogation. Each party hereto hereby waives any and every claim
which arises or may arise in its favor and against the other party hereto during
the Term or any extension or renewal thereof, for any and all loss of, or damage
to, any of its property located within or upon, or constituting a part of, the
Leased Property, which loss or damage is covered by valid and collectible
insurance policies, to the extent that such loss or damage is recoverable under
such policies. Said mutual waiver shall be in addition to, and not in limitation
or derogation of, any other waiver or release contained in this Lease with
respect to any loss or damage to property of the parties hereto. Inasmuch as the
said waivers will preclude the assignment of any aforesaid claim by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party hereto agrees immediately to give each insurance company which has issued
to it policies of insurance, written notice of the terms of said mutual waivers,
and to have such insurance policies properly endorsed, if necessary, to prevent
the invalidation of said insurance coverage by reason of said
<PAGE>   12
waivers, so long as such endorsement is available at a reasonable cost.

4.08 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: (i)
Tenant shall obtain a standard form of mortgage clause insuring the interest of
the mortgagee; (ii) Tenant shall deliver evidence of insurance to such
mortgagee; (iii) loss adjustment shall require the consent of the mortgagee; and
(iv) Tenant shall obtain such other coverages and provide such other information
and documents as may be reasonably required by the mortgagee.

4.09 Escrows. If Landlord's lender requires the Landlord to escrow insurance
premiums on a periodic basis, or if an Event of Default occurs hereunder,
Tenant, after notice from Landlord, shall make such periodic payments in
accordance with the lender's or Landlord's requirements.

                              ARTICLE V: INDEMNITY

5.01 Tenant's Indemnification. Except as otherwise provided in the Agreement,
Tenant hereby agrees to indemnify and hold harmless Landlord, its agents, and
employees from and against any and all demands, claims, causes of action, fines,
penalties, damages (including consequential damages), losses, liabilities
(including strict liability), judgments, and expenses (including, without
limitation, attorneys' fees, court costs, and the costs set forth in Section
9.07) incurred in connection with or arising from: (i) the use or occupancy of
the Leased Property by Tenant or any persons claiming under Tenant; (ii) any
activity, work, or thing done, or permitted or suffered by Tenant in or about
the Leased Property; (iii) any acts, omissions, or negligence of Tenant or any
person claiming under Tenant, or the contractors, agents, employees, invitees,
or visitors of Tenant or any such person; (iv) any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind; and (v) any injury or damage to the
person, property or business of Tenant, its employees, agents, contractors,
invitees, visitors, or any other person entering upon the Leased Property under
the express or implied invitation of Tenant. If any action or proceeding is
brought against Landlord, its employees, or agents by reason of any such claim,
Tenant, upon notice from Landlord, will defend the claim at Tenant's expense
with counsel reasonably satisfactory to Landlord.

5.02 Environmental Compliance, Indemnity and Audits. Tenant shall comply with
the Environmental Compliance Provisions for Leases set forth on Exhibit F
attached hereto.

5.03 Limitation of Landlord's Liability. Except as otherwise provided in the
Agreement, Landlord, its agents, and employees,
<PAGE>   13
will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from any other cause
beyond Landlord's control.

                   ARTICLE VI: USE AND ACCEPTANCE OF PREMISES

6.01 Use of Leased Property. Tenant shall use and occupy the Leased Property
exclusively as a nursing home facility for the aged or physically infirm and for
no other purpose without the prior written consent of the Landlord, which
consent will not be unreasonably withheld. Tenant shall obtain and maintain all
 .approvals, licenses, and consents needed to use and operate the Leased Property
as a nursing home facility. Tenant shall promptly deliver to Landlord complete
copies of surveys, examinations, certification and licensure inspections,
compliance certificates, and other similar reports issued to Tenant by any
governmental agency.

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

6.03 Conditions of Use and Occupancy. Tenant agrees that during the Term it
shall use and keep the Leased Property in a careful, safe and proper manner; not
commit or suffer waste thereon; not use or occupy the Leased Property for any
unlawful purposes; not use or occupy the Leased Property or permit the same to
be used or
<PAGE>   14
occupied, for any purpose or business deemed extra hazardous on account of fire
or otherwise; keep the Leased Property in such repair and condition as may be
required by the Board of Health, or other city, state or federal authorities,
free of all cost to Landlord; not permit any acts to be done which will cause
the cancellation, invalidation, or suspension of any insurance policy; and
permit Landlord and its agents to enter upon the Leased Property at all
reasonable times after notice to Tenant to examine the condition thereof.

6.04 Financial Statements. Within one hundred twenty (120) days after the end of
each fiscal year, Tenant shall deliver to Landlord audited consolidated
financial statements of Guarantor (hereinafter defined), certified by a
nationally recognized accounting firm. The financial statements shall include a
complete schedule of contingent liabilities and transactions with affiliates.
Within forty-five (45) days after the end of each calendar quarter, Tenant shall
deliver to Landlord unaudited profit and loss statements of Guarantor.

6.05 Continuous Operation. Tenant shall, during the Term, continuously operate
the Leased Property as a nursing home facility and maintain its licensure,
certification for reimbursement, and accreditation.

                        ARTICLE VII: REPAIRS, COMPLIANCE
                         WITH LAWS, AND MECHANICS' LIENS

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

7.02 Compliance With Laws. Tenant shall comply with all laws, ordinances,
orders, rules, regulations, and other governmental requirements relating to the
use, condition, or occupancy of the Leased Property, including without
limitation, (i) licensure requirements for operation as a nursing home facility,
(ii) certification requirements needed to obtain reimbursement under the
Medicare and state Medicaid programs unless Tenant, after notice to Landlord,
determines to discontinue participation in such programs; (iii) requirements of
the board of fire insurance underwriters or insurance service office or any
other similar body having jurisdiction over the Leased Property, and (iv) all
zoning and building codes and Environmental Laws. At Landlord's request, from
<PAGE>   15
time to time, Tenant shall deliver to Landlord copies of certificates or permits
evidencing compliance with such laws, including without limitation, copies of
the nursing home facility license, provider agreements, certificates of
occupancy and building permits. Tenant hereby agrees to defend, indemnify and
hold Landlord harmless from and against any loss, liability (including strict
liability), claim, damage (including consequential damages), cost and expense
(including attorneys' fees) resulting from any failure by Tenant to comply with
any laws, ordinances, rules, regulations, and other governmental requirements.

7.03 Required Alterations. Tenant shall, at Tenant's sole cost and expense, make
any additions, changes, improvements or alterations to the Leased Property,
including structural alterations, which may be required by any governmental
authorities, including those required to continue certification under the
Medicare and Medicaid programs (unless Tenant has elected not to participate in
such programs), whether such changes are required by Tenant's use, changes in
the law, ordinances, or governmental regulations, defects existing as of the
date of this Lease, or any other cause whatever. All such additions, changes,
improvements or alterations shall be deemed to be Permitted Alterations and
shall comply with all laws requiring such alterations and with the provisions of
Section 8.02.

7.04 Mechanic's Liens. Tenant shall have no authority to permit or create a lien
against Landlord's interest in the Leased Property, and Tenant shall post
notices or file such documents as may be required to protect Landlord's interest
in the Leased Property against liens. Tenant hereby agrees to defend, indemnify,
and hold Landlord harmless from and against any mechanic's liens against the
Leased Property by reason of work, labor, services or materials supplied or
claimed to have been supplied on or to the Leased Property. Pursuant to Arizona
Revised Statutes Sections 33-1004 or any successor statute, Tenant shall
immediately remove, bond-off, or otherwise obtain the release of any 'mechanic's
lien filed against the Leased Property. Tenant shall pay all expenses in
connection therewith, including without limitation, damages, interest, court
costs and reasonable attorneys' fees.

7.05 Replacements of Fixtures and Personal Property. Tenant shall not remove
Fixtures and Personal Property from the Leased Property except to replace the
Fixtures and Personal Property by other similar items of equal quality and
value. Items being replaced by Tenant may be removed and shall become the
property of Tenant and items replacing the same shall be and remain the property
of Landlord. Tenant shall execute, upon written request from Landlord, any and
all documents necessary to evidence Landlord's ownership of the Personal
Property and replacements therefor. Tenant may finance replacements for the
Fixtures and Personal Property by equipment lease or by a security agreement and
financing statement; provided, however, that for any item of Fixtures or
Personal Property having a cost greater than or equal
<PAGE>   16
to Ten Thousand Dollars ($10,000.00), Tenant may not finance replacements by
security agreement or equipment lease unless (i) Landlord has consented to the
terms and conditions of the equipment lease or security agreement; (ii) the
equipment lessor or lender has entered into a nondisturbance agreement with
Landlord upon terms and conditions acceptable to Landlord, including without
limitation, the following: (a) Landlord shall have the right (but not the
obligation) to assume such security agreement or equipment lease upon the
occurrence of an Event of Default by Tenant under this Lease; (b) the equipment
lessor or lender shall notify Landlord of any default by Tenant under the
equipment lease or security agreement and give Landlord a reasonable opportunity
to cure such default; and (c) Landlord shall have the right to assign its rights
under the equipment lease, security agreement, or nondisturbance agreement; and
(iii) Tenant shall, within thirty (30) days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
and approving the equipment lease, security agreement, and nondisturbance
agreement, including limitation, reasonable attorneys' fees and costs.

                       ARTICLE VIII: ALTERATIONS AND SIGNS

8.01 Prohibition on Alterations and Improvements. Except for alterations
required by Section 7.03; (ii) replacements of Fixtures and Personal Property
provided for in Section 7.05; and (iii) alterations having an aggregate cost of
less than One Hundred Thousand Dollars ($100,000.00) in any Lease Year, Tenant
shall not make any structural or nonstructural changes, alterations, additions
and/or improvements (hereinafter collectively referred to as "Alterations") to
the Leased Property without the prior written consent of Landlord which consent
will not be unreasonably withheld. If Tenant desires to perform any Alterations,
Tenant shall deliver to Landlord plans, specifications, drawings, and such other
information as may be reasonably requested by Landlord (collectively the "Plans
and Specifications") showing the Alterations that Tenant desires to perform.
Landlord agrees not to unreasonably delay its review of the Plans and
Specifications. Tenant shall reimburse Landlord for all costs and expenses
reasonably incurred by Landlord in reviewing and approving or disapproving the
Plans and Specifications; provided, however, that Landlord will consult with
Tenant and notify Tenant of the estimated amount of such expenses. Tenant shall
comply with the requirements of Section 8.02 in making any Alterations approved
by Landlord (the "Permitted Alterations").

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

         (a) The Permitted Alterations shall be made in accordance with the
approved Plans and Specifications.
<PAGE>   17
         (b) The Permitted Alterations and the installation thereof shall comply
with all applicable legal requirements and insurance requirements.

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

         (d) Tenant shall deliver to Landlord a payment and performance bond,
with a surety acceptable to Landlord, in an amount equal to the estimated cost
of the Permitted Alterations, guaranteeing the completion of the work free and
clear of liens and in accordance with the approved Plans and Specifications, and
naming Landlord and any mortgagee of Landlord as joint obligees on such bond.

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

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

         (g) If the alterations are structural or additions, Tenant shall, not
later than sixty (60) days after completion of the Permitted Alterations,
deliver to Landlord a revised "as-built" survey of the Leased Property and an
"as-built" set of Plans and Specifications for the Leased Property in form and
substance satisfactory to Landlord.

         (h) Tenant shall, not later than thirty (30) days after completion of
the Permitted Alterations, reimburse Landlord for any costs and expenses,
including attorneys' fees and architects' and engineers, fees, reasonably
incurred in connection with reviewing and approving the Permitted Alterations
and ensuring Tenant's compliance with the requirements of this Section.

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

8.04 Signs. Tenant may, at its own expense, erect and maintain identification
signs at the Leased Property, provided such signs
<PAGE>   18
comply with all laws, ordinances, and regulations. Upon the occurrence of an
Event of Default or the termination or expiration of this Lease, Tenant shall,
within thirty (30) days after notice from Landlord, remove the signs and restore
the Leased Property to its original condition.

                        ARTICLE IX: DEFAULTS AND REMEDIES

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

         (a) Tenant fails to pay in full any installment of Rent, or any other
monetary obligation payable by Tenant under this Lease, within five (5) business
days after notice of nonpayment from Landlord.

         (b) Landlord gives three (3) or more notices of nonpayment of Rent to
Tenant in any Lease Year.

         (c) Tenant fails to observe and perform any other covenant, condition
or agreement under the Lease to be performed by Tenant (except those described
in Section 9.01(a) and 9.01(b) of this Lease) and (i) such failure continues for
a period of thirty (30) days after written notice thereof is given to Tenant by
Landlord; or (ii) if, by reason of the nature of such default, the same cannot
be remedied within said thirty (30) days, Tenant fails to proceed with
reasonable diligence (satisfactory to Landlord) after receipt of the notice to
cure the same or, in any event, fails to cure such default within sixty (60)
days after receipt of the notice.

         (d) Tenant abandons or vacates the Leased Property during the Term.

         (e) (i) The filing by Tenant of a petition under 11 U.S.C. or the
commencement of a bankruptcy or similar proceeding by Tenant; (ii) the failure
by Tenant within sixty (60) days to dismiss an involuntary bankruptcy petition
or other commencement of a bankruptcy, reorganization or similar proceeding
against Tenant, or to lift or stay any execution, garnishment or attachment of
such consequence as will impair its ability to carry on its operation at the
Leased Property; (iii) the entry of an order for relief under 11 U.S.C. in
respect of Tenant; (iv) any assignment by Tenant for the benefit of its
creditors; (v) the entry by Tenant into an agreement of composition with its
creditors; (vi) the approval by a court of competent jurisdiction of a petition
applicable to Tenant in any proceeding for its reorganization instituted under
the provisions of any state or federal bankruptcy, insolvency, or similar laws;
(vii) appointment by final order, judgement, or decree of a court of competent
jurisdiction of a receiver of a whole or any substantial part of the properties
of Tenant (provided such receiver shall not have been removed or discharged
within sixty (60) days of the date of his qualification).
<PAGE>   19
         (f) (i) any administrator, custodian or other person takes possession
or control of any of the Leased Property and continues in possession for sixty
(60) days; (ii) any writ against any of the Leased Property is not released
within sixty (60) days; (iii) any judgment is rendered or proceedings are
instituted against the Leased Property or Tenant which affect the Leased
Property or any part thereof, which is not dismissed for sixty (60) days (except
as otherwise provided in this Section; (iv) all or a substantial part of the
assets of Tenant are attached, seized, subjected to a writ or distress warrant,
or are levied upon, or come into the possession of any receiver, trustee,
custodian, or assignee for the benefit of creditors; (v) Tenant is enjoined,
restrained, or in any way prevented by court order, or any proceeding is filed
or commenced seeking to enjoin, restrain or in any way prevent Tenant from
conducting all or a substantial part of its business or affairs; or (vi) except
as permitted by Section 18.18, a notice of lien, levy or assessment is filed of
record with respect to all or any part of the property of Tenant and is not
dismissed with thirty (30) days.

         (g) Tenant or any Affiliate defaults on any obligation to Landlord,
Tenant defaults on any obligations under any agreements with respect to the
Leased Property, or Tenant defaults on any indebtedness or capital lease. As
used herein, "Affiliate" means any person, corporation, partnership, trust, or
other legal entity that, directly or indirectly, controls or is controlled by,
or is under common control with, Tenant or David Kremser. "Control" (and the
correlative meanings of the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause a direction of the management and policies of such entity.

         (h) Any guarantor of the Lease dies, dissolves, terminates, is
adjudicated incompetent, files a petition in bankruptcy, or is adjudicated
insolvent under 11 U.S.C. or any other insolvency law, or fails to comply with
any covenant or requirement set forth in the guarantee of such guarantor, and
Tenant fails within thirty (30) days to deliver to Landlord a substitute
guaranty or other collateral satisfactory to Landlord.

         (i) A default occurs under any agreement having annual payments of Two
Thousand Five Hundred Dollars ($2,500.00) or more affecting the ownership, use
or operation of the Leased Property or any property used in connection with the
operation of a nursing home facility on the Leased Property and is not cured
within any grace period set forth in such document; provided, however, that such
a default will not be an Event of Default hereunder if the Tenant is in good
faith diligently and continuously contesting such default.

         (j) The nursing home facility license is canceled, suspended or
otherwise invalidated.
<PAGE>   20
         (k) The Average Patient Census for any month is less than seventy-five
(75) patients. The term "Average Patient Census" means the average number of
patients use the Leased Property using the actual days of the month.

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

         (a) Landlord may terminate this Lease, exclude Tenant from possession
of the Leased Property and use reasonable efforts to lease the Leased Property
to others. If this Lease is terminated pursuant to the provisions of this
subparagraph (a), Tenant will remain liable to Landlord for damages in an amount
equal to the Rent and other sums which would have been owing by Tenant under
this Lease for the balance of the Term if this Lease had not been terminated,
less the net proceeds, if any, of any re-letting of the Leased Property by
Landlord subsequent to such termination, after deducting all Landlord's expenses
in connection with such reletting, including without limitation, the expenses
set forth in Section 9.02(b)(2) below. Landlord will be entitled to collect such
damages from Tenant monthly on the days on which the Rent and other amounts
would have been payable under this Lease if this Lease had not been terminated
and Landlord will be entitled to receive such damages from Tenant on each such
day. Alternatively, at the option of Landlord, if this Lease is terminated,
Landlord will be entitled to recover from Tenant (A) the worth at the time of
award of the unpaid Rent which had been earned at the time of termination; (B)
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 awards exceeds the
amount of such Rent loss that Tenant proves could reasonably have been avoided;
(C) the worth at the time of award of the amount by which the unpaid Rent for
the balance of the Term of this Lease after the time of award exceeds the amount
of such Rent loss that Tenant proves could reasonably be avoided; and (D) any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result from such failure.
The "worth at the time of award" of the amount referred to in clauses (A) and
(B) is computed by allowing interest at the rate of eighteen percent (18%) per
annum. The worth at the time of award of the amount referred to in clause (C) is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of Cleveland at the time of award. For the purpose of determining unpaid
Rent under clause (C), the Rent reserved in this Lease will be deemed to be the
sum of the following: (i) the Base Rent computed pursuant to Section 2.01; (ii)
the Additional Rent pursuant to Section 2.02 based upon the amount of the
Additional Rent for the month preceding the date of termination increased by
four percent (4%) per annum, compounded monthly, to the date on which the Lease
would have expired if Landlord had not terminated the Lease; and (iii) the
Percentage Rent pursuant to Section 2.06 based upon the amount of the Gross
Revenues for the month preceding the date of termination, as
<PAGE>   21
adjusted pursuant to Section 2.06, increased by four percent (4%) per annum,
compounded monthly, to the date on which the Lease would have expired if
Landlord had not terminated the Lease.

         (b) (1) Without demand or notice, Landlord may re-enter and take
possession of the Leased Property or any part of the Leased Property; and
repossess the Leased Property as of the Landlord's former estate; and expel the
Tenant from the Leased Property and those claiming through or under Tenant; and,
remove the effects of both or either, without being deemed guilty of any manner
of trespass and without prejudice to any remedies for arrears of Rent or
preceding breach of covenants or conditions. If Landlord elects to re-enter, as
provided in this paragraph (b) or if Landlord takes possession of the Leased
Property pursuant to legal proceedings or pursuant to any notice provided by
law, Landlord may, from time to time, without terminating this Lease, re-let the
Leased Property or any part of the Leased Property, either alone or in
conjunction with other portions of the Improvements of which the Leased Property
are a part, in Landlord's or Tenant's name but for the account of Tenant, for
such term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the Term of this Lease) and on such
terms and conditions (which may include concessions of free rent, and the
alteration and repair of the Leased Property) as Landlord, in its uncontrolled
discretion, may determine. Landlord may collect and receive the Rents for the
Leased Property. Landlord will not be responsible or liable for any failure to
re-let the Leased Property, or any part of the Leased Property, or for any
failure to collect any Rent due upon such re-letting. No such re-entry or taking
possession of the Leased Property by Landlord will be construed as an election
on Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord under this Lease or under
a forcible entry and detainer statute or similar law will constitute an election
by Landlord to terminate this Lease unless such notice specifically says so.
Landlord reserves the right following any such re-entry or re-letting, or both,
to exercise its right to terminate this Lease by giving Tenant such written
notice, and, in that event the Lease will terminate as specified in such notice.

         (2) If Landlord elects to take possession of the Leased Property
according to this subparagraph (b) without terminating the Lease, Tenant will
pay Landlord (i) the Rent and other sums which would be payable under this Lease
if such repossession had not occurred, less (ii) the net proceeds, if any, of
any re-letting of the Leased Property after deducting all of Landlord's expenses
incurred in connection with such re-letting, including without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration, remodeling, repair costs, and expenses of
preparation for such re-letting. if, in connection with any reletting, the new
Lease term extends beyond the existing Term or the Leased Property covered by
such re-letting include areas which are not part of the Lease Property, a fair
apportionment of the Rent received from such
<PAGE>   22
re-letting and the expenses incurred in connection with such re-letting will be
made in determining the net proceeds received from such re-letting. In addition,
in determining the net proceeds from such re-letting, any rent concessions will
be apportioned over the term of the new Lease. Tenant will pay such amounts to
Landlord monthly on the days on which the Rent and all other amounts owing under
this Lease would have been payable if possession had not been retaken Landlord
will be entitled to receive the rent and other amounts from Tenant on each such
day.

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

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

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

9.03 Right of Set-Off. Landlord may, and is hereby authorized by Tenant to, at
any time and from time to time, after advance notice to Tenant, set-off and
apply any and all sums held by Landlord, any indebtedness of Landlord to Tenant,
and any claims by Tenant against Landlord, against any obligations of Tenant
hereunder and against any claims by Landlord against Tenant, whether or not
Landlord has exercised any other remedies hereunder. The rights of Landlord
under this Section are in addition to any other rights and remedies Landlord may
have against Tenant.

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

9.05 Late Payment Charge. Tenant acknowledges that any default in the payment of
any installment of Rent payable hereunder will result in loss and additional
expense to Landlord in servicing any indebtedness of Landlord secured by the
Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within five (5) days after the due
date, Tenant shall pay a
<PAGE>   23
late charge of four percent (4%) of the amount of the overdue payment as a
reasonable estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may be
charged by Landlord. The five (5) day grace period set forth in this Section
shall not extend the time for payment of Rent or the period for curing any
default or constitute a waiver of such default.

9.06 Interest. Any payment not made by Tenant when due shall thereafter bear
interest at the rate (the "Overdue Rate") of the greater of (i) eighteen percent
(18%) per annum; or (ii) two percent (2t) per annum above the rate of interest
announced from time to time by National City Bank (Cleveland, Ohio) as its base
rate of interest. Tenant shall not, however, be required to pay interest upon
any late payment fees assessed pursuant to Section 9.05.

9.07 Litigation; Attorneys' Fees. Within ten (10) days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant, against the Leased Property to secure or recover possession thereof, or
that may affect the title to or the interest of Landlord in the Leased Property,
Tenant shall give written notice thereof to Landlord. Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
Landlord's rights under this Lease, whether or not an Event of Default has
actually occurred or has been declared and thereafter cured, including without
limitation, (i) the fees, expenses, and costs of any litigation, receivership,
administrative, bankruptcy, insolvency or other similar proceeding; (ii)
reasonable attorney, paralegal, consulting and witness fees and disbursements;
and (iii) the expenses, including without limitation, lodging, meals, and
transportation, of Landlord and its employees, agents, attorneys, and witnesses
in preparing for litigation, administrative, bankruptcy, insolvency or other
similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. All such costs, charges and fees as incurred shall be
deemed to be Additional Rent under this Lease.

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

9.09 Remedies Cumulative. The remedies of Landlord herein are cumulative to and
not in lieu of any other remedies available to Landlord at law or in equity. The
use of any one remedy shall not be taken to exclude or waive the right to use
any other remedy.
<PAGE>   24
9.10 Power of Attorney. Tenant hereby irrevocably and unconditionally appoints
Landlord, or Landlord's authorized officer, agent, employee or designee, as
Tenant's true and lawful attorney-in-fact, to act, after an Event of Default,
for Tenant in Tenant's name, place, and stead, and for Tenant's and Landlord's
use and benefit, to execute, deliver and file all applications and any and all
other necessary documents or things, to effect a transfer, reinstatement,
renewal and/or extension of any and all licenses and other governmental
authorizations issued to Tenant in connection with Tenant's operation of the
Leased Property, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to the full performance of the
Tenant's obligations under this Lease.

                        ARTICLE X: DAMAGE AND DESTRUCTION

10.01 General. Tenant shall notify Landlord if any of the Leased Property is
damaged or destroyed by reason of fire or any other cause. Tenant shall promptly
repair, rebuild, or restore the Leased Property, at Tenant's expense, so as to
make the Leased Property at least equal in value to the Leased Property existing
immediately prior to such occurrence and as nearly similar to it in character as
is practicable and reasonable. Before beginning such repairs or rebuilding, or
letting any contracts in connection with such repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not unreasonably
withhold or delay, complete and detailed plans and specifications for such
repairs or rebuilding. Promptly after receiving Landlord's approval of the plans
and specifications, Tenant will begin such repairs or rebuilding and will
prosecute the repairs and rebuilding to completion with diligence, subject,
however, to strikes, lockouts, acts of God, embargoes, governmental
restrictions, and other causes beyond Tenant's reasonable control. Landlord will
make available to Tenant the net proceeds of any fire or other casualty
insurance paid to Landlord for such repair or rebuilding as the same progresses,
after deduction of any costs of collection, including attorneys' fees. Payments
will be made against properly certified vouchers of a competent architect in
charge of the work and approved by Landlord. Prior to commencing the repairing
or rebuilding, Tenant shall deliver to Landlord for Landlord's approval a
schedule setting forth the estimated monthly draws for such work. Landlord will
contribute to such payments out of the insurance proceeds an amount equal to the
proportion that the total net amount received by Landlord from insurers bears to
the total estimated cost of the rebuilding or repairing, multiplied by the
payment by Tenant on account of such work. Landlord may, however, withhold ten
percent (10%) from each payment until the work of
<PAGE>   25
repairing or rebuilding is completed and proof has been furnished to Landlord
that no lien or liability has attached or will attach to the Leased Property or
to Landlord in connection with such repairing or rebuilding. Upon the completion
of rebuilding and the furnishing of such proof, the balance of the net proceeds
of such insurance payable to Tenant on account of such repairing or rebuilding
will be paid to Tenant. Tenant will obtain and deliver to Landlord a temporary
or final certificate of occupancy before the Leased Property is reoccupied for
any purpose. Tenant shall complete such repairs or rebuilding free and clear of
mechanic's or other liens, and in accordance with the building codes and all
applicable laws, ordinances, regulations, or orders of any state, municipal, or
other public authority affecting the repairs or rebuilding, and also in
accordance with all requirements of the insurance rating organization, or
similar body. Any remaining proceeds, of insurance after such restoration will
be Tenant's property.

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

10.03 Landlord's Costs. Tenant shall, within thirty (30) days after receipt of
an invoice from Landlord, pay the reasonable costs, expenses, and fees of any
architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith; provided, however, that Landlord will consult
with Tenant and notify Tenant of the estimated amount of such expenses.

10.04 No Rent Abatement. Notwithstanding anything to the contrary in Arizona
Revised Statutes Section 33-343 or any successor statutes, all rights under
which are hereby waived by Tenant, Rent will not abate pending the repairs or
rebuilding.
<PAGE>   26
10.05 Damage During Last Year. If, at any time during the last year of the Term,
the Leased Property is so damaged by f ire or otherwise that the cost of
restoration exceeds fifty percent (50%) of the replacement value of the Leased
Property (exclusive of foundations) immediately prior to such damage, Tenant
may, within thirty (30) days after such damage, give notice of its election to
terminate this Lease and, subject to the further provisions of this Section,
this Lease will cease on the tenth (10th) day after the delivery of such notice.
If this Lease is so terminated, Tenant will have no obligation to repair,
rebuild or replace the Leased Property, and the entire insurance proceeds will
belong to Landlord. If the Lease is not so terminated, Tenant shall rebuild the
Leased Property in accordance with Section 10.01.

                            ARTICLE XI: CONDEMNATION

11.01 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord, whether such damages shall
be awarded as compensation for diminution in value of the leasehold or to the
fee of the Leased Property; provided, however, that Landlord shall not be
entitled to any award made to Tenant for any taking of fixtures and Tenant's
Property and for moving expenses. Tenant shall also be entitled to any award
made for loss of business or the relocation thereof. Notwithstanding the
foregoing, Tenant shall not be entitled to any portion of the award which
reduces the amount of the award to which Landlord would otherwise be entitled if
no award were made to Tenant.

11.02 Partial Taking. If, after a Taking, so much of the Leased Property remains
that the Leased Property can be used for substantially the same purposes for
which it was used immediately before the Taking, then (i) this Lease will end as
to the part taken on the earlier of the vesting of title to the Leased Property
in the condemning authority or the taking of possession of the Leased Property
by the condemning authority; (ii) Base Rent for so much of the Leased Property
as remains will be reduced in the proportion of the floor area of the building
remaining after the Taking to the floor area of the building before the Taking;
(iii) at its cost, Tenant shall restore so much of the Leased Property as
remains to a sound architectural unit substantially suitable for the purposes
for which it was used immediately before the Taking, using good workmanship and
new, first-class materials; (iv) upon completion of the restoration, Landlord
will pay Tenant the lesser of the net award made to Landlord on the account of
the Taking (after deducting from the total award, attorneys', appraisers', and
<PAGE>   27
other fees and costs incurred in connection with the obtaining of the award and
amounts paid to the holders of mortgages secured by the Leased Property), or
Tenant's actual out-of-pocket costs of restoring the Leased Property; and (v)
Landlord shall be entitled to the balance of the net award.

                          ARTICLE XII: TENANTS PROPERTY

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

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

         (a) Tenant shall notify Landlord within one hundred twenty (120) days
after each anniversary of this Lease of any additions, substitutions, or
replacements of any item of Tenant's Property which individually has a cost of
more than $10,000.00 and shall furnish Landlord with such other information as
Landlord may request from time to time.

         (b) Tenant's Property shall be installed in a good and workmanlike
manner, in compliance with all governmental laws, ordinances, rules, and
regulations and all insurance requirements, and be installed free and clear of
any mechanic's liens.

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

         (d) Tenant shall, at Tenant's sole cost and expense, keep Tenant's
Property insured against loss or damage by fire, vandalism and malicious
mischief, sprinkler leakage, earthquake, and other physical loss perils commonly
covered by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than ninety percent (90%) of the then
full replacement cost thereof. Tenant shall use the proceeds from any such
policy for the repair and replacement of Tenant's Property. The insurance shall
meet the requirements of Section 4.03.

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

         (f) If Tenant's Property is damaged or destroyed by fire or any other
cause, Tenant shall promptly repair or replace Tenant's
<PAGE>   28
Property unless Tenant is entitled to and elects to terminate the Lease pursuant
to Section 10.05.

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

         (h) Tenant shall remove Tenant's Property upon the termination or
expiration of this Lease and shall repair any damage to the Leased Property
resulting from the removal of Tenant's Property. If Tenant fails to remove
Tenant's Property within thirty (30) days after the termination or expiration of
this Lease, then Tenant shall be deemed to have abandoned Tenant's Property,
Tenant's Property shall become the property of Landlord, and Landlord may
remove, store and dispose of Tenant's Property. In such event, Tenant shall have
no claim or right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such removal.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.

         (i) Tenant shall perform its obligations under any equipment lease or
security agreement for Tenant's Property. Tenant shall cause any equipment
lessor or any lender having a security interest in any of the Tenant's Property
having a cost in excess of Ten Thousand Dollars ($10,000.00) to enter into a
nondisturbance agreement with Landlord upon terms and conditions acceptable to
Landlord, including without limitation, the following: (i) Landlord shall have
the right (but not the obligation) to assume such equipment lease or security
agreement upon the occurrence of an Event of Default by Tenant hereunder; (ii)
such equipment lessor or lender shall notify Landlord of any default by Tenant
under the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default; and (iii) Landlord shall have the right to
assign its interest in the equipment lease or security agreement and
nondisturbance agreement. Tenant shall, within thirty (30) days after receipt of
an invoice from Landlord, reimburse Landlord for all costs and expenses incurred
in reviewing and approving the equipment lease, security agreement and
nondisturbance agreement, including without limitation, reasonable attorneys'
fees and costs.

         (j) Tenant hereby grants to Landlord a security interest under the
Uniform Commercial Code, as enacted in the state where the Leased Property is
located, in any of Tenant's Property which is now or may hereafter be placed
upon the Leased Property, including without limitation, Tenant's accounts,
contract rights,
<PAGE>   29
documents, instruments, chattel paper and general intangibles used in connection
with the Leased Property, and all proceeds therefrom, to secure the payment and
performance of Tenant's obligations under this Lease. At the request of
Landlord, Tenant shall execute additional security agreements, financing
statements, and such other documents as may be requested by Landlord to maintain
and perfect such security interest. Tenant hereby irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, deliver and file such documents on behalf of Tenant. This power of
attorney is coupled with an interest and is irrevocable. Notwithstanding the
foregoing, Landlord agrees to subordinate its security interest in patient
receivables arising prior to an Event of Default to a security interest granted
to an institutional lender making a working capital loan in an amount not to
exceed Three Hundred Thousand and No/100 Dollars ($300,000.00) and, in addition,
Landlord agrees to subordinate its security interest to any other purchase money
security interest upon terms and conditions approved by Landlord.

                        ARTICLE XIII: OPTION TO PURCHASE

13.01 Option to Purchase. Landlord grants to Tenant the continuing right and
option to purchase the Leased Property. Tenant may exercise this option at any
time after December 1, 1991 but before December 1, 2000 (the "Option Period"),
provided that (i) Tenant is not in default hereunder; (ii) Tenant gives Landlord
six (6) months prior written notice of its intention to exercise the option
prior to June 1, 2000; (iii) Tenant pays any prepayment penalty that might be
imposed by any loan financing the Leased Property in an amount not to exceed
Fifty Thousand and No/100 Dollars ($50,000.00), or, if Tenant elects to assume
such loan (if permitted by the loan documents and the lender releases and
discharges Landlord and its properties from any and all liability in connection
with the loan), Tenant pays any assumption fees imposed by the lender; and (iv)
Tenant pays all costs and expenses of Landlord in connection with the transfer
of the Leased Property to Tenant, including without limitation, (a) real
property transfer taxes or conveyance fees, (b) title searches and premiums, (c)
survey fees, (d) recording fees, and (e) legal expenses which legal expenses
shall not exceed Two Thousand Dollars ($2,000.00). The option exercise price is
as set forth in Exhibit E. This option to purchase is personal and may not be
assigned separate from any permitted assignment of the Lease.

13.02 Closing. The purchase of the Leased Property by Tenant shall close not
later than the later of (i) sixty (60) days, or (ii) five (5) days plus the
number of days' notice that Landlord must provide to its lender under its
financing of the Leased Property, in each case after Tenant gives Landlord
written notice of the exercise of the option. Landlord shall convey title to the
Leased Property to the Tenant by a transferable and recordable special warranty
deed and special warranty bill of sale.
<PAGE>   30
13.03 Failure to Exercise Option. If Tenant for any reason fails to purchase the
Leased Property at or before the end of the Option Period, then Tenant shall
continue to be obligated as lessee hereunder for the remainder of the Term,
without any further option to purchase. In that event, Tenant shall be deemed to
have lost and abandoned any proprietary or ownership right or interest it may
have had in the Leased Property.

                           ARTICLE XIV: ASSIGNMENT AND
                             SALE OF LEASED PROPERTY

14.01 Prohibition on Assignment and Subletting. Tenant acknowledges that
Landlord has entered into this Lease in reliance on the personal services and
business expertise of Tenant or the current owners of the Tenant. Tenant may not
assign, sublet, mortgage, hypothecate, pledge, or transfer any interest in this
Lease, or in the Leased Property, in whole or in part, without the prior written
consent of Landlord, which Landlord may withhold in its sole and absolute
discretion. The following transactions will be deemed an assignment or sublease
requiring Landlord's prior written consent: (i) an assignment by operation of
law; (ii) an imposition (whether or not consensual) of a lien, mortgage, or
encumbrance upon Tenant's interest in the Lease; (iii) an arrangement (including
but not limited to, management agreements, concessions, licenses, and easements)
which allows the use or occupancy of all or part of the Leased Property by
anyone other than Tenant; and (iv) a change of ownership of Tenant. Landlord's
consent to any assignment or sublease will not release Tenant (or any guarantor)
from its payment and performance obligations under this Lease, but rather
Tenant, any guarantor, and Tenant's assignee or sublessee will be jointly and
severally liable for such payment and performance. An assignment or sublease
without the prior written consent of Landlord will be void at the Landlord's
option. Landlord's consent to one assignment or sublease will not waive the
requirement of its consent to any subsequent assignment or sublease.

14.02 Requests for Landlord's Consent to Assignment, Sublease or Management
Agreement. If Tenant requests Landlord's consent to a specific assignment,
sublease, or management agreement, Tenant shall give Landlord (i) the name and
address of the proposed assignee, subtenant or manager; (ii) a copy of the
proposed assignment, sublease or management agreement; (iii) reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and (iv) banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that (a) such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; (b) such assignment,
sublease or
<PAGE>   31
management agreement may not be modified without the prior written consent of
Landlord; (c) if this Lease shall terminate before the expiration of such
assignment, sublease or management agreement, the assignee, subtenant or manager
thereunder will, at Landlord's option, attorn to Landlord and waive any right
the assignee, subtenant or manager may have to terminate the assignment,
sublease or management agreement' or surrender possession thereunder as a result
of the termination of this Lease; and (d) if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or payments under the assignment, sublease or management agreement directly to
Landlord. Tenant hereby collaterally assigns to Landlord, as security for the
performance of its obligations hereunder, all of Tenant's right, title, and
interest in and to any assignment, sublease or management agreement now or
hereafter existing for all or part of the Leased Property. Tenant shall, at the
request of Landlord, execute such other instruments or documents as Landlord may
request to evidence this collateral assignment. if Landlord, in its sole and
absolute discretion, consents to such assignment, sublease, or management
agreement, such consent shall not be effective until (i) a fully executed copy
of the instrument of assignment, sublease or management agreement has been
delivered to Landlord; (ii) in the case of an assignment, Landlord has received
a written instrument in which the assignee has assumed and agreed to perform all
of Tenant's obligations under the Lease; and (iii) Tenant has paid to Landlord a
fee in the amount of one-quarter percent (1/4%) of the option price applicable
to that Lease Year (except in the case of the renewal term, where the option
price for Lease Year 10 will be applicable) and Landlord has received
reimbursement for its attorneys' fees and costs incurred in connection with both
determining whether to give its consent and giving its consent.

14.03 Agreements with Residents. Notwithstanding Section 14.01, Tenant may enter
into an occupancy agreement with residents of the Leased Property without the
prior written consent of Landlord provided that (i) the agreement does not
provide for lifecare services; (ii) Tenant may not collect rent for more than
one month in advance; and (iii) all residents of the Leased Property are
accurately shown in Tenant's accounting records.

14.04 Sale of Leased Property. If Landlord or any subsequent owner of the Leased
Property sells the Leased Property, its liability for the performance of its
agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. For purposes of this Section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when its succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
<PAGE>   32
                       ARTICLE XV: HOLDOVER AND SURRENDER

15.01 Holding Over. Should Tenant, with or without the express or implied
consent of Landlord, continue to hold and occupy the Leased Property after the
expiration of the Term, such holding over beyond the Term and the acceptance or
collection of Rent by the Landlord shall operate and be construed as creating a
tenancy from month-to-month and not for any other term whatsoever. Said
month-to-month tenancy may be terminated by Landlord by giving Tenant ten (10)
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.

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

                           ARTICLE XVI: LEASE SECURITY

16.01 Security Deposit. Upon execution of this Lease by Tenant, Tenant shall
deliver to Landlord a security deposit (the "Security Deposit") in the amount of
Fifty Seven Thousand Six Hundred Dollars ($57,600.00) as security for the
performance of Tenant's obligations under this Lease. Landlord will not be
required to keep the Security Deposit separate from Landlord's general Funds and
Tenant will not be entitled to any interest on the Security Deposit.

16-02 Use of Security Deposit. Landlord may apply all or part of the Security
Deposit upon the occurrence of an Event of Default hereunder. Any such
application shall not cure an Event of Default. Landlord may apply the Security
Deposit to pay (i) all Rent and other charges and expenses payable by Tenant
hereunder; plus (ii) all expenses and costs incurred by Landlord in enforcing or
preserving Landlord's rights under this Lease or any other security for the
Lease, including without limitation, (a) the fees, expenses, and costs of any
litigation, receivership, administrative, bankruptcy, insolvency, or other
similar proceeding; (b) attorney, paralegal, consulting and witness fees and
disbursements; and (c) the expenses, including without limitation, lodging,
meals and transportation of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency,
or similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. If Landlord applies all or any portion of the Security
Deposit, Tenant will restore the Security Deposit to its original amount within
five (5) days after written notice is given by Landlord. The application of the
Security Deposit will not be a limitation on Landlord's damages or other rights
under this Lease, or a payment of liquidated damages, or an advance payment of
Rent.
<PAGE>   33
16.03 Return of Security Deposit. If Tenant pays the Rent and performs its other
obligations under the Lease, Landlord will return the unused portion of the
Security Deposit to Tenant within thirty (30) days after the end of the Term;
however, if Landlord has evidence that the Lease has been assigned by Tenant,
Landlord will return the Security Deposit to the assignee. Landlord may deliver
the Security Deposit to any purchaser of the Leased Property and will thereby be
discharged from any liability with respect to the Security Deposit.

16.04 Lease Guaranty. The payment of Rent and the performance of Tenants other
obligations pursuant to the Lease are guaranteed by Signature Health Care
Corporation pursuant to the Lease Guaranty of even date herewith.

                  ARTICLE XVII: QUIET ENJOYMENT, SUBORDINATION,
              ATTORNMENT, BOND FINANCING AND ESTOPPEL CERTIFICATES

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

17.02 Subordination. This Lease and Tenant's rights under this Lease are
subordinate to any ground lease or underlying lease, first mortgage, first deed
of trust, or other first lien against the Leased Property, together with any
renewal, consolidation, extension, modification or replacement thereof, which
now or at any subsequent time affects the Leased Property or any interest of
Landlord in the Leased Property, except to the extent that any such instrument
expressly provides that this Lease is superior. This provision will be
self-operative, and no further instrument or subordination will be required in
order to effect it. However, Tenant shall execute, acknowledge and deliver to
Landlord, at any time and from time to time upon demand by Landlord, such
documents as may be requested by Landlord or any mortgagee or any holder of any
mortgage or other instrument described in this Section, to confirm or effect any
such subordination. If Tenant fails or refuses to execute, acknowledge, and
deliver any such document within twenty (20) days after written demand, Landlord
may execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.

17.03 Attornment. If any holder of any mortgage, indenture, deed of trust, or
other similar instrument described in Section 17-02 succeeds to Landlord's
interest in the Leased Property, Tenant will pay to such holder all Rent
subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The successor
in interest will not be bound by (i) any payment of
<PAGE>   34
Rent for more than one (1) month in advance; (ii) any amendment or modification
of this Lease made without its written consent; (iii) any claim against Landlord
arising prior to the date on which the successor succeeded to Landlord's
interest; or (iv) any claim or offset of Rent against the Landlord. Upon request
by Landlord or such successor in interest and without cost to Landlord or such
successor in interest, Tenant will execute, acknowledge and deliver an
instrument or instruments confirming the attornment. If Tenant fails or refuses
to execute, acknowledge, and deliver any such instrument within twenty (20) days
after written demand, then Landlord or such successor in interest will be
entitled to execute, acknowledge, and deliver any document on behalf of Tenant
as Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.

17.04 Estoppel Certificates. At the request of Landlord or any mortgagee or
purchaser of the Leased Property, Tenant shall execute, acknowledge, and deliver
an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the following: (i) that
the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; (ii) the date to which Rent and other charges have been paid;
(iii) that neither Tenant nor Landlord is in default nor is there any fact or
condition which, with notice or lapse of time, or both, would constitute a
default, if that be the case, or specifying any existing default; (iv) that
Tenant has accepted and occupies the Leased Property; (v) that Tenant has no
defenses, set-offs, deductions, credits, or counterclaims against Landlord, if
that be the case, or specifying such that exist; and (vi) such other information
as may reasonably be requested by Landlord or any mortgagee or purchaser. Any
purchaser or mortgagee may rely on this estoppel certificate. If Tenant fails to
deliver the estoppel certificates to Landlord within twenty (20) days after the
request of the Landlord, then Tenant shall be deemed to have certified that (a)
the Lease is in full force and effect and has not been modified, or that the
Lease has been modified as set forth in the certificate delivered to Tenant; (b)
Tenant has not prepaid any Rent or other charges except for the current month;
(c) Tenant has accepted and occupies the Leased Property; (d) neither Tenant nor
Landlord is in default nor is there any fact or condition which, with notice or
lapse of time, or both, would constitute a default; and (e) Tenant has no
defenses, set-offs, deductions, credits, or counterclaims against Landlord.
Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-fact to
execute, acknowledge, and deliver on Tenant's behalf any estoppel certificate
which Tenant does not object to within twenty (20) days after Landlord sends the
certificate to Tenant. This power of attorney is coupled with an interest and is
irrevocable.
<PAGE>   35
                          ARTICLE XVIII: MISCELLANEOUS

18.01 Notices. Landlord and Tenant hereby agree that all notices, demands,
requests, and consents (hereinafter "notices") required to be given pursuant to
the terms of this Lease shall be in writing, shall be addressed to the addresses
set forth in the introductory paragraph of this Lease, and shall be served by
(i) personal delivery; (ii) certified mail, return receipt requested, postage
prepaid; or (iii) nationally recognized overnight courier. All notices shall be
deemed to be given upon the earlier of actual receipt or three (3) days after
mailing, or one (1) business day after deposit with the overnight courier. Any
notices meeting the requirements of this Section shall be effective, regardless
of whether or not actually received. Landlord or Tenant may change its notice
address at any time by giving the other party notice of such change. Landlord
also agrees to send a copy of any notices given by Landlord to Signature Health
Care Corporation, 2105 Clubhouse Drive, Greeley, Colorado 80634.

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

18.03 Entire Agreement. This Lease and the Agreement contain the entire
agreement between Landlord and Tenant with respect to the subject matter hereof.
No representations, warranties, and agreements have been made by Landlord except
as set forth in this Lease.

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

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

18.06 Governing Law. This Lease shall be construed under the laws of the state
where the Leased Property is located.

18.07 Memorandum of Lease. Tenant shall not record this Lease. Tenant may,
however, record a memorandum of lease approved by Landlord.
<PAGE>   36
18.08 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.

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

18.10 Authority. If Tenant is a corporation or partnership, the persons
executing this Lease on behalf of Tenant warrant that (i) Tenant has the power
and authority to enter into this Lease; (ii) Tenant is qualified to do business
in the state in which the Leased Property is located; and (iii) they are
authorized to execute this Lease on behalf of Tenant. Tenant shall, at the
request of Landlord, provide evidence satisfactory to Landlord confirming these
representations.

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

18.12 Modification. This Lease may only be modified by a writing signed by both
Landlord and Tenant.

18.13 Lender's Modification. Tenant acknowledges that Landlord may mortgage the
Leased Property or use the Leased Property as collateral for a collateralized
mortgage obligations or REMICS. If any mortgage lender of Landlord requires any
modification of this Lease, Tenant agrees to execute such modification, so long
as such modification (i) does not increase the Rent, the option price, the
amount of the Security Deposit, or Tenant's share of any cost in addition to
Rent; (ii) does not materially interfere with Tenant's use or occupancy of the
Leased Property; and (iii) does not materially adversely affect Tenant's rights
or liabilities hereunder.

18.14 No Merger. The surrender of this Lease by Tenant or the cancellation of
this Lease by agreement of Tenant and Landlord or the termination of this Lease
on account of Tenant's default will not work a merger, and will, at Landlord' s
option, terminate, any subleases or operate as an assignment to Landlord of any
subleases.
<PAGE>   37
Landlord's option under this paragraph will be exercised by notice to Tenant and
all known subtenants of the Leased Property.

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

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

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

18.18 Permitted Contests. Tenant, on its own or on Landlord's behalf (or in
Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any legal
requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that (i) in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; (ii) neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; (iii) in the case
Of a legal requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; (iv) in the event that any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand Dollars ($50,000.00), Tenant
shall deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses (i), (ii) and (iii), to the extent applicable; (v)
in the case of a legal requirement and/or an Imposition, lien, encumbrance or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and to prevent any sale or
forfeiture
<PAGE>   38
of the affected Leased Property or the Rent by reason of such nonpayment or
noncompliance; provided, however, the provisions of this Section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; (vi) in the case of an insurance requirement, the
coverage required by Article IV shall be maintained; and (vii) if such contest
be finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable legal
requirement or insurance requirement. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant hereby
agrees to indemnify and save Landlord harmless from and against any liability,
cost or expense of any kind that may be imposed upon Landlord in connection with
any such contest and any loss resulting therefrom.

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

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

18.21 Relationship of Landlord and Tenant. The relationship of Landlord and
Tenant is the relationship of lessor and lessee. Landlord and Tenant are not
partners, joint venturers, or associates.

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

18.23 Landlord's Status as a REIT. Tenant acknowledges that Landlord has now and
may hereafter elect to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code. Tenant shall not do anything which would adversely
affect Landlord's status as a REIT. Tenant hereby agrees to modifications of
this Lease which do not materially, adversely affect the Tenant's rights and
liabilities if such modifications are required to retain Landlord's status as a
REIT.
<PAGE>   39
18.24 Exhibits. The following exhibits are attached hereto and incorporated
herein:

         Exhibit  A:  Legal Description
         Exhibit  B:  Permitted Exceptions
         Exhibit  C:  Personal Property
         Exhibit  D:  Base Rent Schedule
         Exhibit  E:  Option Exercise Price
         Exhibit  F:  Environmental Compliance
                      Provision for Leases

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


                                          HEALTH CARE REIT, INC.


                                          By: ________________________________
                                               Title: ________________________

                                          THE ARBORS HEALTH CARE CENTER, INC.

                                          By: ________________________________
                                               Title: ________________________