<PAGE>   1

Exhibit 10.21
                           OMNIBUS AMENDMENT AGREEMENT
                            NO. 1 TO LEASE AGREEMENTS

                          Dated as of October 25, 2000

          CAPSTONE CAPITAL OF PENNSYLVANIA, INC., a Pennsylvania corporation
("Capstone Pennsylvania"), HR ACQUISITION I CORPORATION, f/k/a Capstone Capital
Corporation, a Maryland corporation ("HRAIC"), CAPSTONE CAPITAL OF VIRGINIA,
INC., an Alabama corporation ("Capstone Virginia" and, together with Capstone
Pennsylvania and HRAIC, the "Lessors"), EXTENDED CARE OPERATORS OF HARRISBURG,
L.L.C., a Delaware limited liability company ("ECO Harrisburg"), EXTENDED CARE
OPERATORS OF RAVENNA, L.L.C., a Delaware limited liability company ("ECO
Ravenna"), ALCO VI, L.L.C., a North Carolina limited liability company ("ALCO
Hampden"), ALCO XI, L.L.C., a North Carolina limited liability company ("ALCO
Danville"), ALCO IX, L.L.C., a North Carolina limited liability company ("ALCO
Harrisonburg"), ALCO X, L.L.C., a North Carolina limited liability company
("ALCO Roanoke"), EXTENDED CARE OPERATORS OF GREENSBORO, L.L.C., a Delaware
limited liability company ("ECO Greensboro" and, together with ECO Harrisburg,
ECO Ravenna, ALCO Hampden, ALCO Danville, ALCO Harrisonburg and ALCO Roanoke,
the "Lessees"), BCC AT GREENSBORO, INC., a Delaware corporation ("First
Assignor"), and BALANCED CARE CORPORATION, a Delaware corporation ("BCC"), agree
as follows:

         1. Preliminary Statements. (a) Capstone Pennsylvania, as lessor, and
ECO Harrisburg, as lessee, entered into that certain Lease Agreement dated as of
March 28, 1997, which was assigned and assumed by Senior Care Operators, L.L.C.,
a Delaware limited liability company ("SCO"), pursuant to an Assignment and
Assumption Agreement dated as of December 30, 1997, which was subsequently
amended and assigned by SCO and assumed by ECO Harrisburg pursuant to an
Assignment, Assumption and Amendment to Lease dated as of February 6, 1998 (as
amended and assigned, the "Harrisburg Lease"), for the lease of an assisted
living facility in Harrisburg, Dauphin County, Pennsylvania (the "Harrisburg
Facility"). (b) HRIAC's predecessor-in-interest, Capstone Capital Corporation,
as lessor, and ECO Ravenna, as lessee, entered into that certain Lease Agreement
dated as of March 28, 1997, which was assigned and assumed by SCO pursuant to an
Assignment and Assumption Agreement dated as of December 30, 1997, which was
subsequently amended and assigned by SCO and assumed by ECO Ravenna pursuant to
an Assignment, Assumption and Amendment to Lease dated as of February 6, 1998,
(as amended and


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assigned, the "Ravenna Lease"), for the lease of an assisted living facility in
Ravenna, Portage County, Ohio (the "Ravenna Facility"). (c) Capstone
Pennsylvania, as lessor, and ALCO Hampden, as lessee, entered into that certain
Lease Agreement dated as of September 30, 1997, as amended and restated by that
certain First Amended and Restated Lease dated as of September 30, 1998 (as
amended and restated, the "Hampden Lease"), for the lease of an assisted living
facility in Hampden Township, Cumberland County, Pennsylvania (the "Hampden
Facility"). (d) Capstone Virginia, as lessor, and ALCO Danville, as lessee,
entered into that certain Lease Agreement dated as of June 15, 1998 (the
"Danville Lease"), for the lease of an assisted living facility in Danville,
Pittsylvania County, Virginia (the "Danville Facility"). (e) Capstone Virginia,
as lessor, and ALCO Harrisonburg, as lessee, entered into that certain Lease
Agreement dated as of June 15, 1998 (the "Harrisonburg Lease"), for the lease of
an assisted living facility in Harrisonburg, Rockingham County, Virginia (the
"Harrisonburg Facility"). (f) Capstone Virginia, as lessor, and ALCO Roanoke, as
lessee, entered into that certain Lease Agreement dated as of June 15, 1998 (the
"Roanoke Lease"), for the lease of an assisted living facility in Roanoke,
Roanoke County, Virginia (the "Roanoke Facility"). (g) HRIAC's
predecessor-in-interest, Capstone Capital Corporation, as lessor, and First
Assignor entered into that certain Lease Agreement dated as of March 28, 1997,
which was assigned and assumed by SCO pursuant to an Assignment and Assumption
Agreement dated December 30, 1997, which was subsequently amended and assigned
by SCO and assumed by ECO Greensboro pursuant to an Assignment, Assumption and
Amendment of Lease Agreement dated February 6, 1998 (as amended and assigned,
the "Greensboro Lease" and, together with the Harrisburg Lease, the Ravenna
Lease, the Hampden Lease, the Danville Lease, the Harrisonburg Lease and the
Roanoke Lease, the "Leases"), for the lease of an assisted living facility
located in the Guilford County, Greensboro, North Carolina (the "Greensboro
Facility" and, together with the Harrisburg Facility, the Ravenna Facility, the
Hampden Facility, the Danville Facility, the Harrisonburg Facility and the
Roanoke Facility, the "Facilities"). Lessors and Lessees have agreed to
recalculate the Minimum Rent due under the Leases after the reallocation of the
budgeted amounts for development and construction of each of the Facilities
pursuant to that certain Omnibus Amendment Agreement No. 1 to Development
Agreements executed as of even date herewith among Lessors, as owners, and BCC
Development and Management Co., a Delaware corporation, as


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developer, and to make further amendments to the Leases in the manner set forth
in this Omnibus Amendment Agreement No. 1 to Lease Agreements (this
"Amendment"), effective as of the date hereof, unless otherwise indicated. BCC
has entered into various agreements with respect to the Facilities, including
guaranties, shortfall funding agreements, working capital assurance agreements
and options to purchase the equity interests of the Lessees and joins in the
execution of this Amendment to acknowledge its consent to the transactions
contemplated hereby.

         2. Definitions. As used herein, the term "Leases" means the Leases as
hereby amended and modified. Unless the context otherwise requires, all
capitalized terms used herein without definition shall have the definitions
provided therefor in the referenced Lease.

         3. Amendment to the Harrisburg Lease. The Harrisburg Lease is amended,
effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was
         January 1, 1998.

                  (b) The parties agree that the amount of the "Approved Budget
         Costs" is equal to $3,834,706.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $383,470.56, and the monthly
         installments for the first year of the Initial Term shall be payable in
         advance in monthly installments on the first day of each calendar month
         beginning with the Commencement Date. The parties also confirm that the
         current monthly installment of the Minimum Rent is $33,605.77.

                  (d) Sections 2.1(c) and 2.1(d) are deleted.

                  (e) The following Sections 2.7, 2.8 and 2.9 are added after
         Section 2.6.

                  2.7 Capital Replacement Reserve.

                  (a) As used herein, the following terms shall have the
         meanings indicated:


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                           "Capital Replacement Project" means repairs or
                  replacements to the Leased Improvements, the costs of which,
                  according to generally accepted accounting principles, must be
                  depreciated over periods of three years or more.

                           "Capital Replacement Reserve" means the reserve
                  established by Lessor and funded by Lessee pursuant to the
                  terms of Section 2.7(b).

                           "Disbursement" means a disbursement of the proceeds
                  of the Capital Replacement Reserve to or for the benefit of
                  Lessee in connection with a Capital Replacement.

                           "Disbursement Request" means a detailed written
                  request for a Disbursement prepared by Lessee in accordance
                  with the Disbursement Schedule.

                           "Disbursement Schedule" means the guidelines for
                  making Disbursements to Lessee from the Capital Replacement
                  Reserve as set forth in Schedule 1 attached hereto.

                           "Project Budget" means a line item budget for a
                  Capital Replacement Project, in form and substance reasonably
                  satisfactory to Lessor, setting forth in such detail as Lessor
                  may require the nature and amount of all the Project Costs.

                           "Project Costs" means the total costs of the
                  development and construction of a Capital Replacement Project.
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                           "Project Plans" means the detailed plans and
                  specifications for a Capital Replacement Project.

                  (b) Beginning on the first (1st) anniversary of the
         Commencement Date, Lessee shall make an annual Facility upgrade
         expenditure in an amount equal to $200 per bed for capital
         improvements, such amount to be increased $50 per bed on each
         Adjustment Date. If requested by Lessor, Lessee shall promptly provide
         evidence of such capital expenditures. In the event Lessee fails to
         make the required capital expenditure in any Lease Year, Lessee shall
         deposit the same with Lessor as the "Capital Replacement Reserve." The
         funds in the Capital Replacement Reserve shall be made available to
         Lessee from time to time for Capital Replacement Projects as approved
         by Lessor pursuant to the terms of the Disbursement Schedule and
         Section 9.3. Lessee shall make detailed requests for such funds in
         writing to Lessor in the same form as a Request pursuant Section 9.3
         hereof. Within 30 days of such Request, Lessor shall reasonably approve
         the amount of requested funds and make mutually agreeable arrangements
         for the disbursement of the funds, or provide Lessee with written
         notice in reasonable detail specifying Lessor's objections to such
         Request.

                  (c) Lessee may from time to time request that Lessor release
         some or all of the funds held by Lessor in the Capital Replacement
         Reserve for a Capital Replacement Project, which Capital Replacement
         Project shall be subject to Lessor's prior consent to be given or
         withheld in its reasonable discretion. In the event that a request for
         a Capital

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         Replacement Project is approved by Lessor, Lessee shall submit the
         Project Plans, together with the Project Budget, in form and substance
         reasonably satisfactory to Lessor, setting forth in such detail as
         Lessor may reasonably require regarding the nature and amount of the
         Project Costs anticipated in connection with the Capital Replacement
         Project, including payment of Lessor's construction inspector for no
         more than one inspection per month during the period of construction.
         Upon approval of each of the Capital Replacement Project, the Project
         Plans and the Project Budget by Lessor, Lessee shall cause construction
         of the Capital Replacement Project to be promptly commenced and
         diligently and continuously prosecuted to completion, subject in each
         case to the following requirements: (i) the Capital Replacement Project
         shall be constructed in substantial conformity with the Project Plans
         and in compliance in all material respects with all applicable Legal
         Requirements, and in a good and workmanlike manner with new materials
         of good quality; and (ii) the Capital Replacement Project shall be
         constructed entirely on the Land and shall not encroach upon or
         overhang any lot line, boundary, set-back, easement, right-of-way or
         other land. If at any time Lessor notifies Lessee that construction of
         the Capital Replacement Project does not conform to the requirements of
         this Section 2.7(c) or the guidelines for any such nonconformity is
         otherwise discovered by Lessee, Lessee shall immediately cause such
         nonconforming construction to be stopped and all necessary corrective
         work to be commenced and diligently and continuously prosecuted to
         completion. Each Disbursement Request for a Disbursement, together with
         the payment of any funds required to be paid by Lessee in connection
         with such Capital Replacement


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         Project, shall be made in accordance with the Disbursement Schedule.

                  2.8 Lease Deposit. On or before the date of this Amendment,
         Lessee must deposit and maintain with Lessor a lease deposit (together
         with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
         equal to approximately three (3) months' Minimum Rent, rounded upward
         to the nearest $1,000. Lessor reserves the right to require additional
         deposits if the Minimum Rent increases during the Term. Lessor, from
         time to time, without prejudice to any other remedy, may apply funds
         from the Lease Deposit to make good any arrearage of Rent or to satisfy
         any other covenant or obligation of Lessee under the Lease, including
         the payment of taxes and insurance, regardless of whether an Event of
         Default shall have occurred and be continuing. In the event that Lessor
         shall apply all or any part of the Lease Deposit pursuant to the
         provisions of this Section, Lessee, within ten days after written
         demand by Lessor to Lessee, shall replenish the Lease Deposit to its
         required amount as calculated above, including any accrued interest or
         late fees as of the date of such disbursement. No such application
         shall be deemed to have been made by operation of law or otherwise
         until actually made by the Lessor as herein provided, nor shall any
         application be deemed to affect any right or remedy of the Lessor
         hereunder, under any statute or rule of law, or in equity.

                  2.9 Provisions Governing the Reserves.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Lease Deposit Rate" means a per annum rate
                           of interest equal to the average rate, for the
                           previous twelve-month period,

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                           offered by Bank of America in Nashville, Tennessee,
                           for certificates of deposits with maturities of
                           90 days.

                                    "Reserves" means, collectively, the Capital
                           Replacement Reserve and the Lease Deposit.

                           (b) The Reserves (A) shall be held by Lessor, but not
                  in escrow, (B) except for the Lease Deposit, shall not earn or
                  accrue any interest, and (C) shall not be considered an
                  advance payment of the Rent or a limit on the measure of
                  Lessor's damages in case of an Event of Default hereunder by
                  Lessee. Lessee hereby grants to Lessor an assignment of, a
                  security interest in and a right of setoff against each of the
                  Reserves to fund any shortfall in the payment or performance
                  by Lessee in the Rent, and Lessee shall not permit any other
                  voluntary or involuntary mortgage, security deed, deed of
                  trust, deed to secure debt, lien, pledge, assignment, security
                  interest, title retention agreement, financing lease, levy,
                  execution, seizure, judgment, attachment, garnishment, charge,
                  lien or other encumbrance of any kind to exist upon any of the
                  Reserves. The parties agree that Lessor shall keep track of
                  the Reserves on Lessor's accounting records and Lessor shall
                  not be required to segregate the Reserves or deposit the same
                  in an account (interest bearing or otherwise) with a bank or
                  other third party. Lessor shall accrue interest on the Lease
                  Deposit on its accounting records at the Lease Deposit Rate,
                  commencing on the date the Lease Deposit was funded and
                  continuing until such funds are either applied or disbursed by
                  Lessor pursuant to the terms of this Lease or returned to
                  Lessee. Lessor shall calculate the accrual of such interest in
                  arrears on
<PAGE>   9

                  an annual basis as of each Adjustment Date and shall prorate
                  such interest for any partial years.

                           (c) So long as no Event of Default shall have
                  occurred and be continuing, all funds remaining in the Lease
                  Deposit at the end of the Term shall be paid to Lessee upon
                  satisfaction of all of Lessee's obligations hereunder,
                  including the payment of all Rent and the surrender of the
                  Leased Property in accordance with the provisions hereof. In
                  the event that Lessee exercises any right to purchase the
                  Leased Property, any unused portion of the Capital Replacement
                  Reserve shall be delivered to Lessee when the title to the
                  Leased Property is transferred; otherwise, any unused portion
                  of the Capital Replacement Reserve shall be retained by Lessor
                  at the end of the Term.

                  (f) Section 2.5 is amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on December
         31, 1999.

                  (g) The parties acknowledge that, simultaneously with the
         execution of this Amendment, Lessor has disbursed the sum of $94,000
         out of the Approved Budget Costs to fund the Lease Deposit on behalf of
         Lessee.

                  (h) Section 35.9 of the Lease is deleted.

         4. Amendment to the Ravenna Lease. The Ravenna Lease is amended,
effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was
         February 1, 1998.

                  (b) The parties agree that the amount of the "Approved Budget
         Costs" is equal to $3,709,656.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $370,965.60, and the monthly
         installments for the first year of the Initial Term shall be payable in

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         monthly installments on the first day of each calendar month beginning
         with the Commencement Date. The parties also confirm that the current
         monthly installment of the Minimum Rent is $32,478.04.

                  (d) Sections 2.1(c) and 2.1(d) are deleted.

                  (e) The following Section 2.7 is added after Section 2.6.

                  2.7 Capital Replacement Reserve.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Capital Replacement Project" means repairs
                           or replacements to the Leased Improvements, the costs
                           of which, according to generally accepted accounting
                           principles, must be depreciated over periods of three
                           years or more.

                                    "Capital Replacement Reserve" means the
                           reserve established by Lessor and funded by Lessee
                           pursuant to the terms of Section 2.7(b).

                                    "Disbursement" means a disbursement of the
                           proceeds of the Capital Replacement Reserve to or for
                           the benefit of Lessee in connection with a Capital
                           Replacement.

                                    "Disbursement Request" means a detailed
                           written request for a Disbursement prepared by Lessee
                           in accordance with the Disbursement Schedule.

                                    "Disbursement Schedule" means the guidelines
                           for making Disbursements to Lessee from the

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                           Capital Replacement Reserve as set forth in Schedule
                           1 attached hereto.

                                    "Project Budget" means a line item budget
                           for a Capital Replacement Project, in form and
                           substance reasonably satisfactory to Lessor, setting
                           forth in such detail as Lessor may require the nature
                           and amount of all the Project Costs.

                                    "Project Costs" means the total costs of the
                           development and construction of a Capital Replacement
                           Project.

                                    "Project Plans" means the detailed plans and
                           specifications for a Capital Replacement Project.

                           (b) Beginning on the first (1st) anniversary of the
                  Commencement Date, Lessee shall make an annual Facility
                  upgrade expenditure in an amount equal to $200 per bed for
                  capital improvements, such amount to be increased $50 per bed
                  on each Adjustment Date. If requested by Lessor, Lessee shall
                  promptly provide evidence of such capital expenditures. In the
                  event Lessee fails to make the required capital expenditure in
                  any Lease Year, Lessee shall deposit the same with Lessor as
                  the "Capital Replacement Reserve." The funds in the Capital
                  Replacement Reserve shall be made available to Lessee from
                  time to time for Capital Replacement Projects as approved by
                  Lessor pursuant to the terms of the Disbursement Schedule and
                  Section 9.3. Lessee shall make detailed requests for such
                  funds in writing to Lessor in the same form as a Request
                  pursuant Section 9.3 hereof. Within 30 days of such Request,
                  Lessor shall reasonably approve the amount of requested funds
                  and

<PAGE>   12
                  make mutually agreeable arrangements for the disbursement of
                  the funds, or provide Lessee with written notice in reasonable
                  detail specifying Lessor's objections to such Request.

                           (c) Lessee may from time to time request that Lessor
                  release some or all of the funds held by Lessor in the Capital
                  Replacement Reserve for a Capital Replacement Project, which
                  Capital Replacement Project shall be subject to Lessor's prior
                  consent to be given or withheld in its reasonable discretion.
                  In the event that a request for a Capital Replacement Project
                  is approved by Lessor, Lessee shall submit the Project Plans,
                  together with the Project Budget, in form and substance
                  reasonably satisfactory to Lessor, setting forth in such
                  detail as Lessor may reasonably require regarding the nature
                  and amount of the Project Costs anticipated in connection with
                  the Capital Replacement Project, including payment of Lessor's
                  construction inspector for no more than one inspection per
                  month during the period of construction. Upon approval of each
                  of the Capital Replacement Project, the Project Plans and the
                  Project Budget by Lessor, Lessee shall cause construction of
                  the Capital Replacement Project to be promptly commenced and
                  diligently and continuously prosecuted to completion, subject
                  in each case to the following requirements: (i) the Capital
                  Replacement Project shall be constructed in substantial
                  conformity with the Project Plans and in compliance in all
                  material respects with all applicable Legal Requirements, and
                  in a good and workmanlike manner with new materials of good
                  quality; and (ii) the Capital Replacement Project shall be
                  constructed entirely on the Land and shall not encroach upon
                  or overhang any lot line, boundary, set-back, easement,
                  right-of-way or other

<PAGE>   13
                  land. If at any time Lessor notifies Lessee that construction
                  of the Capital Replacement Project does not conform to the
                  requirements of this Section 2.7(c) or the guidelines for any
                  such nonconformity is otherwise discovered by Lessee, Lessee
                  shall immediately cause such nonconforming construction to be
                  stopped and all necessary corrective work to be commenced and
                  diligently and continuously prosecuted to completion. Each
                  Disbursement Request for a Disbursement, together with the
                  payment of any funds required to be paid by Lessee in
                  connection with such Capital Replacement Project, shall be
                  made in accordance with the Disbursement Schedule.

                  2.8 Lease Deposit. On or before the date of this Amendment,
         Lessee must deposit and maintain with Lessor a lease deposit (together
         with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
         equal to approximately three (3) months' Minimum Rent, rounded upward
         to the nearest $1,000. Lessor reserves the right to require additional
         deposits if the Minimum Rent increases during the Term. Lessor, from
         time to time, without prejudice to any other remedy, may apply funds
         from the Lease Deposit to make good any arrearage of Rent or to satisfy
         any other covenant or obligation of Lessee under the Lease, including
         the payment of taxes and insurance, regardless of whether an Event of
         Default shall have occurred and be continuing. In the event that Lessor
         shall apply all or any part of the Lease Deposit pursuant to the
         provisions of this Section, Lessee, within ten days after written
         demand by Lessor to Lessee, shall replenish the Lease Deposit to its
         required amount as calculated above, including any accrued interest or
         late fees as of the date of such disbursement. No such application
         shall be deemed to have been made by operation of law

<PAGE>   14
         or otherwise until actually made by the Lessor as herein provided, nor
         shall any application be deemed to affect any right or remedy of the
         Lessor hereunder, under any statute or rule of law, or in equity.

                  2.9 Provisions Governing the Reserves.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Lease Deposit Rate" means a per annum rate
                           of interest equal to the average rate, for the
                           previous twelve-month period, offered by Bank of
                           America in Nashville, Tennessee, for certificates of
                           deposits with maturities of 90 days.

                                    "Reserves" means, collectively, the Capital
                           Replacement Reserve and the Lease Deposit.

                           (b) The Reserves (A) shall be held by Lessor, but not
                  in escrow, (B) except for the Lease Deposit, shall not earn or
                  accrue any interest, and (C) shall not be considered an
                  advance payment of the Rent or a limit on the measure of
                  Lessor's damages in case of an Event of Default hereunder by
                  Lessee. Lessee hereby grants to Lessor an assignment of, a
                  security interest in and a right of setoff against each of the
                  Reserves to fund any shortfall in the payment or performance
                  by Lessee in the Rent, and Lessee shall not permit any other
                  voluntary or involuntary mortgage, security deed, deed of
                  trust, deed to secure debt, lien, pledge, assignment, security
                  interest, title retention agreement, financing lease, levy,
                  execution, seizure, judgment, attachment, garnishment, charge,
                  lien or other encumbrance of any kind to exist upon any of

<PAGE>   15
                  the Reserves. The parties agree that Lessor shall keep track
                  of the Reserves on Lessor's accounting records and Lessor
                  shall not be required to segregate the Reserves or deposit the
                  same in an account (interest bearing or otherwise) with a bank
                  or other third party. Lessor shall accrue interest on the
                  Lease Deposit on its accounting records at the Lease Deposit
                  Rate, commencing on the date the Lease Deposit was funded and
                  continuing until such funds are either applied or disbursed by
                  Lessor pursuant to the terms of this Lease or returned to
                  Lessee. Lessor shall calculate the accrual of such interest in
                  arrears on an annual basis as of each Adjustment Date and
                  shall prorate such interest for any partial years.

                           (c) So long as no Event of Default shall have
                  occurred and be continuing, all funds remaining in the Lease
                  Deposit at the end of the Term shall be paid to Lessee upon
                  satisfaction of all of Lessee's obligations hereunder,
                  including the payment of all Rent and the surrender of the
                  Leased Property in accordance with the provisions hereof. In
                  the event that Lessee exercises any right to purchase the
                  Leased Property, any unused portion of the Capital Replacement
                  Reserve shall be delivered to Lessee when the title to the
                  Leased Property is transferred; otherwise, any unused portion
                  of the Capital Replacement Reserve shall be retained by Lessor
                  at the end of the Term.

                  (f) Section 2.5 is amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on March
         31, 2000.

                  (g) The parties acknowledge that, simultaneously with the
         execution of this Amendment, Lessor has disbursed the sum of $88,000
         out of the Approved Budget Costs to fund the Lease Deposit on behalf of
         Lessee.
<PAGE>   16
                  (h) Section 35.9 of the Lease is deleted.

         5. Amendment to the Hampden Lease. The Hampden Lease is amended,
effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was January
         20, 1999.

                  (b) The parties confirm that the amount of the "Project
         Amount" is equal to $7,416,000.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $591,591.37, and the monthly
         installments for the first year of the Initial Term shall be payable in
         advance in monthly installments on the first day of each calendar month
         beginning with the first full month following the Commencement Date
         (with the Minimum Rent to be prorated for the month during which the
         Commencement Date occurred). The parties also confirm that the current
         monthly installment of the Minimum Rent is $57,555.95.

                  (d)      Section 2.1(c) is deleted.

                  (e) The following Sections 2.7, 2.8 and 2.9 are added after
         Section 2.6.

                  2.7 Capital Replacement Reserve.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Capital Replacement Project" means repairs
                           or replacements to the Leased Improvements, the costs
                           of which, according to generally accepted accounting
                           principles, must be depreciated over periods of three
                           years or more.

                                    "Capital Replacement Reserve" means the
                           reserve established by Lessor and funded by Lessee
                           pursuant to the terms of Section 2.7(b).
<PAGE>   17
                                    "Disbursement" means a disbursement of the
                           proceeds of the Capital Replacement Reserve to or for
                           the benefit of Lessee in connection with a Capital
                           Replacement.

                                    "Disbursement Request" means a detailed
                           written request for a Disbursement prepared by Lessee
                           in accordance with the Disbursement Schedule.

                                    "Disbursement Schedule" means the guidelines
                           for making Disbursements to Lessee from the Capital
                           Replacement Reserve as set forth in Schedule 1
                           attached hereto.

                                    "Project Budget" means a line item budget
                           for a Capital Replacement Project, in form and
                           substance reasonably satisfactory to Lessor, setting
                           forth in such detail as Lessor may require the nature
                           and amount of all the Project Costs.

                                    "Project Costs" means the total costs of the
                           development and construction of a Capital Replacement
                           Project.

                                    "Project Plans" means the detailed plans and
                           specifications for a Capital Replacement Project.

                           (b) Beginning on the first (1st) anniversary of the
                  Commencement Date, Lessee shall make an annual Facility
                  upgrade expenditure in an amount equal to $200 per bed for
                  capital improvements, such amount to

<PAGE>   18
                  be increased $50 per bed on each Adjustment Date. If requested
                  by Lessor, Lessee shall promptly provide evidence of such
                  capital expenditures. In the event Lessee fails to make the
                  required capital expenditure in any Lease Year, Lessee shall
                  deposit the same with Lessor as the "Capital Replacement
                  Reserve." The funds in the Capital Replacement Reserve shall
                  be made available to Lessee from time to time for Capital
                  Replacement Projects as approved by Lessor pursuant to the
                  terms of the Disbursement Schedule and Section 9.3. Lessee
                  shall make detailed requests for such funds in writing to
                  Lessor in the same form as a Request pursuant Section 9.3
                  hereof. Within 30 days of such Request, Lessor shall
                  reasonably approve the amount of requested funds and make
                  mutually agreeable arrangements for the disbursement of the
                  funds, or provide Lessee with written notice in reasonable
                  detail specifying Lessor's objections to such Request.

                           (c) Lessee may from time to time request that Lessor
                  release some or all of the funds held by Lessor in the Capital
                  Replacement Reserve for a Capital Replacement Project, which
                  Capital Replacement Project shall be subject to Lessor's prior
                  consent to be given or withheld in its reasonable discretion.
                  In the event that a request for a Capital Replacement Project
                  is approved by Lessor, Lessee shall submit the Project Plans,
                  together with the Project Budget, in form and substance
                  reasonably satisfactory to Lessor, setting forth in such
                  detail as Lessor may reasonably require regarding the nature
                  and amount of the Project Costs anticipated in connection with
                  the Capital Replacement Project, including payment of Lessor's
                  construction inspector for no more than one inspection per
                  month during the period of construction. Upon approval of

<PAGE>   19
                  each of the Capital Replacement Project, the Project Plans and
                  the Project Budget by Lessor, Lessee shall cause construction
                  of the Capital Replacement Project to be promptly commenced
                  and diligently and continuously prosecuted to completion,
                  subject in each case to the following requirements: (i) the
                  Capital Replacement Project shall be constructed in
                  substantial conformity with the Project Plans and in
                  compliance in all material respects with all applicable Legal
                  Requirements, and in a good and workmanlike manner with new
                  materials of good quality; and (ii) the Capital Replacement
                  Project shall be constructed entirely on the Land and shall
                  not encroach upon or overhang any lot line, boundary,
                  set-back, easement, right-of-way or other land. If at any time
                  Lessor notifies Lessee that construction of the Capital
                  Replacement Project does not conform to the requirements of
                  this Section 2.7(c) or the guidelines for any such
                  nonconformity is otherwise discovered by Lessee, Lessee shall
                  immediately cause such nonconforming construction to be
                  stopped and all necessary corrective work to be commenced and
                  diligently and continuously prosecuted to completion. Each
                  Disbursement Request for a Disbursement, together with the
                  payment of any funds required to be paid by Lessee in
                  connection with such Capital Replacement Project, shall be
                  made in accordance with the Disbursement Schedule.

                  2.8 Lease Deposit. On or before the date of this Amendment,
         Lessee must deposit and maintain with Lessor a lease deposit (together
         with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
         equal to approximately three (3) months' Minimum Rent, rounded upward
         to the nearest $1,000. Lessor reserves the right to require additional
         deposits if the Minimum Rent increases during the Term. Lessor, from

<PAGE>   20
         time to time, without prejudice to any other remedy, may apply funds
         from the Lease Deposit to make good any arrearage of Rent or to satisfy
         any other covenant or obligation of Lessee under the Lease, including
         the payment of taxes and insurance, regardless of whether an Event of
         Default shall have occurred and be continuing. In the event that Lessor
         shall apply all or any part of the Lease Deposit pursuant to the
         provisions of this Section, Lessee, within ten days after written
         demand by Lessor to Lessee, shall replenish the Lease Deposit to its
         required amount as calculated above, including any accrued interest or
         late fees as of the date of such disbursement. No such application
         shall be deemed to have been made by operation of law or otherwise
         until actually made by the Lessor as herein provided, nor shall any
         application be deemed to affect any right or remedy of the Lessor
         hereunder, under any statute or rule of law, or in equity.

                  2.9 Provisions Governing the Reserves.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Lease Deposit Rate" means a per annum rate
                           of interest equal to the average rate, for the
                           previous twelve-month period, offered by Bank of
                           America in Nashville, Tennessee, for certificates of
                           deposits with maturities of 90 days.

                                    "Reserves" means, collectively, the Capital
                           Replacement Reserve and the Lease Deposit.

                           (b) The Reserves (A) shall be held by Lessor, but not
                  in escrow, (B) except for

<PAGE>   21
                  the Lease Deposit, shall not earn or accrue any interest, and
                  (C) shall not be considered an advance payment of the Rent or
                  a limit on the measure of Lessor's damages in case of an Event
                  of Default hereunder by Lessee. Lessee hereby grants to Lessor
                  an assignment of, a security interest in and a right of setoff
                  against each of the Reserves to fund any shortfall in the
                  payment or performance by Lessee in the Rent, and Lessee shall
                  not permit any other voluntary or involuntary mortgage,
                  security deed, deed of trust, deed to secure debt, lien,
                  pledge, assignment, security interest, title retention
                  agreement, financing lease, levy, execution, seizure,
                  judgment, attachment, garnishment, charge, lien or other
                  encumbrance of any kind to exist upon any of the Reserves. The
                  parties agree that Lessor shall keep track of the Reserves on
                  Lessor's accounting records and Lessor shall not be required
                  to segregate the Reserves or deposit the same in an account
                  (interest bearing or otherwise) with a bank or other third
                  party. Lessor shall accrue interest on the Lease Deposit on
                  its accounting records at the Lease Deposit Rate, commencing
                  on the date the Lease Deposit was funded and continuing until
                  such funds are either applied or disbursed by Lessor pursuant
                  to the terms of this Lease or returned to Lessee. Lessor shall
                  calculate the accrual of such interest in arrears on an annual
                  basis as of each Adjustment Date and shall prorate such
                  interest for any partial years.

                           (c) So long as no Event of Default shall have
                  occurred and be continuing, all funds remaining in the Lease
                  Deposit at the end of the Term shall be paid to Lessee upon
                  satisfaction of all of Lessee's obligations hereunder,
                  including the payment of all Rent and the surrender of the
                  Leased Property in accordance with the provisions hereof. In

<PAGE>   22
                  the event that Lessee exercises any right to purchase the
                  Leased Property, any unused portion of the Capital Replacement
                  Reserve shall be delivered to Lessee when the title to the
                  Leased Property is transferred; otherwise, any unused portion
                  of the Capital Replacement Reserve shall be retained by Lessor
                  at the end of the Term.

                  (f) Section 2.5 is amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on
         September 30, 2000.

                  (g) The parties acknowledge that on May 15, 2000, Lessee
         deposited with Lessor the sum of $173,000 to fund the Lease Deposit.

                  (h) Section 35.9 of the Lease is deleted.

         6. Amendment to the Danville Lease. The Danville Lease is amended,
effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was July 1,
         1998.

                  (b) The parties agree that the amount of the "Project Amount"
         is equal to $4,690,815.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $505,153.87, and the monthly
         installments for the first year of the Initial Term shall be payable in
         advance in monthly installments, on the first day of each calendar
         month beginning with the Commencement Date. The parties also confirm
         that the current monthly installment of the Minimum Rent is $44,399.66.

                  (d) Simultaneously herewith, the parties are executing a
         Settlement Statement which sets forth amounts owed to either Lessor or
         Lessee which amount reflects the difference between the Minimum Rent
         and the amount of Minimum Rent actually paid by Lessee.

                  (d) Section 2.1(c) is deleted.

<PAGE>   23
                  (e) The following Section 2.7 is added after Section 2.6.

                       2.7 Capital Replacement Reserve.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Capital Replacement Project" means repairs
                           or replacements to the Leased Improvements, the costs
                           of which, according to generally accepted accounting
                           principles, must be depreciated over periods of three
                           years or more.

                                    "Capital Replacement Reserve" means the
                           reserve established by Lessor and funded by Lessee
                           pursuant to the terms of Section 2.7(b).

                                    "Disbursement" means a disbursement of the
                           proceeds of the Capital Replacement Reserve to or for
                           the benefit of Lessee in connection with a Capital
                           Replacement.

                                    "Disbursement Request" means a detailed
                           written request for a Disbursement prepared by Lessee
                           in accordance with the Disbursement Schedule.

                                    "Disbursement Schedule" means the guidelines
                           for making Disbursements to Lessee from the Capital
                           Replacement Reserve as set forth in Schedule 1
                           attached hereto.

                                    "Project Budget" means a line item budget
                           for a Capital Replacement Project, in form and

<PAGE>   24

                           substance reasonably satisfactory to Lessor, setting
                           forth in such detail as Lessor may require the nature
                           and amount of all the Project Costs.

                                    "Project Costs" means the total costs of the
                           development and construction of a Capital Replacement
                           Project.

                                    "Project Plans" means the detailed plans and
                           specifications for a Capital Replacement Project.

                           (b) Beginning on the first (1st) anniversary of the
                  Commencement Date, Lessee shall make an annual Facility
                  upgrade expenditure in an amount equal to $200 per bed for
                  capital improvements, such amount to be increased $50 per bed
                  on each Adjustment Date. If requested by Lessor, Lessee shall
                  promptly provide evidence of such capital expenditures. In the
                  event Lessee fails to make the required capital expenditure in
                  any Lease Year, Lessee shall deposit the same with Lessor as
                  the "Capital Replacement Reserve." The funds in the Capital
                  Replacement Reserve shall be made available to Lessee from
                  time to time for Capital Replacement Projects as approved by
                  Lessor pursuant to the terms of the Disbursement Schedule and
                  Section 9.3. Lessee shall make detailed requests for such
                  funds in writing to Lessor in the same form as a Request
                  pursuant Section 9.3 hereof. Within 30 days of such Request,
                  Lessor shall reasonably approve the amount of requested funds
                  and make mutually agreeable arrangements for the disbursement
                  of the funds, or provide Lessee with written notice in
                  reasonable detail specifying Lessor's objections to such
                  Request.
<PAGE>   25
                           (c) Lessee may from time to time request that Lessor
                  release some or all of the funds held by Lessor in the Capital
                  Replacement Reserve for a Capital Replacement Project, which
                  Capital Replacement Project shall be subject to Lessor's prior
                  consent to be given or withheld in its reasonable discretion.
                  In the event that a request for a Capital Replacement Project
                  is approved by Lessor, Lessee shall submit the Project Plans,
                  together with the Project Budget, in form and substance
                  reasonably satisfactory to Lessor, setting forth in such
                  detail as Lessor may reasonably require regarding the nature
                  and amount of the Project Costs anticipated in connection with
                  the Capital Replacement Project, including payment of Lessor's
                  construction inspector for no more than one inspection per
                  month during the period of construction. Upon approval of each
                  of the Capital Replacement Project, the Project Plans and the
                  Project Budget by Lessor, Lessee shall cause construction of
                  the Capital Replacement Project to be promptly commenced and
                  diligently and continuously prosecuted to completion, subject
                  in each case to the following requirements: (i) the Capital
                  Replacement Project shall be constructed in substantial
                  conformity with the Project Plans and in compliance in all
                  material respects with all applicable Legal Requirements, and
                  in a good and workmanlike manner with new materials of good
                  quality; and (ii) the Capital Replacement Project shall be
                  constructed entirely on the Land and shall not encroach upon
                  or overhang any lot line, boundary, set-back, easement,
                  right-of-way or other land. If at any time Lessor notifies
                  Lessee that construction of the Capital Replacement Project
                  does not conform to the requirements of this Section 2.7(c) or
                  the guidelines for any such nonconformity is otherwise
                  discovered by Lessee, Lessee shall

<PAGE>   26

                  immediately cause such nonconforming construction to be
                  stopped and all necessary corrective work to be commenced and
                  diligently and continuously prosecuted to completion. Each
                  Disbursement Request for a Disbursement, together with the
                  payment of any funds required to be paid by Lessee in
                  connection with such Capital Replacement Project, shall be
                  made in accordance with the Disbursement Schedule.

                           (d) The Capital Replacement Reserve (A) shall be held
                  by Lessor, but not in escrow, (B) shall not earn or accrue any
                  interest, and (C) shall not be considered an advance payment
                  of the Rent or a limit on the measure of Lessor's damages in
                  case of an Event of Default hereunder by Lessee. Lessee hereby
                  grants to Lessor an assignment of, a security interest in and
                  a right of setoff against the Capital Replacement Reserve to
                  fund any shortfall in the payment or performance by Lessee in
                  the Rent, and Lessee shall not permit any other voluntary or
                  involuntary mortgage, security deed, deed of trust, deed to
                  secure debt, lien, pledge, assignment, security interest,
                  title retention agreement, financing lease, levy, execution,
                  seizure, judgment, attachment, garnishment, charge, lien or
                  other encumbrance of any kind to exist upon the Capital
                  Replacement Reserve. The parties agree that Lessor shall keep
                  track of the Capital Replacement Reserve on Lessor's
                  accounting records and Lessor shall not be required to
                  segregate the Capital Replacement Reserve or deposit the same
                  in an account (interest bearing or otherwise) with a bank or
                  other third party. In the event that Lessee exercises any
                  right to purchase the Leased Property, any unused portion of
                  the Capital

<PAGE>   27
                  Replacement Reserve shall be delivered to Lessee when the
                  title to the Leased Property is transferred; otherwise, any
                  unused portion of the Capital Replacement Reserve shall be
                  retained by Lessor at the end of the Term.

                  (f) Section 2.5 is hereby amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on June 30,
         2000.

                  (h) Section 35.9 of the Lease is deleted.

         7. Amendment to the Harrisonburg Lease. The Harrisonburg Lease is
amended, effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was July 1,
         1998.

                  (b) The parties agree that the amount of the "Project Amount"
         is equal to $4,348,242.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $468,262.18, and the monthly
         installments for the first year of the Initial Term shall be payable in
         advance in monthly installments, on the first day of each calendar
         month beginning with the Commencement Date. The parties also confirm
         that the current monthly installment of the Minimum Rent is $41,157.12.

                  (d) Section 2.1(c) is deleted.

                  (e) The following Section 2.7 is added after Section 2.6.

                  2.7 Capital Replacement Reserve.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Capital Replacement Project" means repairs
                           or replacements to the Leased Improvements, the costs
                           of which, according to generally accepted accounting
                           principles, must be depreciated over periods of three
                           years or more.
<PAGE>   28

                                    "Capital Replacement Reserve" means the
                           reserve established by Lessor and funded by Lessee
                           pursuant to the terms of Section 2.7(b).

                                    "Disbursement" means a disbursement of the
                           proceeds of the Capital Replacement Reserve to or for
                           the benefit of Lessee in connection with a Capital
                           Replacement.

                                    "Disbursement Request" means a detailed
                           written request for a Disbursement prepared by Lessee
                           in accordance with the Disbursement Schedule.

                                    "Disbursement Schedule" means the guidelines
                           for making Disbursements to Lessee from the Capital
                           Replacement Reserve as set forth in Schedule 1
                           attached hereto.

                                    "Project Budget" means a line item budget
                           for a Capital Replacement Project, in form and
                           substance reasonably satisfactory to Lessor, setting
                           forth in such detail as Lessor may require the nature
                           and amount of all the Project Costs.

                                    "Project Costs" means the total costs of the
                           development and construction of a Capital Replacement
                           Project.

                                    "Project Plans" means the detailed plans and
                           specifications for a Capital Replacement Project.
<PAGE>   29

                           (b) Beginning on the first (1st) anniversary of the
                  Commencement Date, Lessee shall make an annual Facility
                  upgrade expenditure in an amount equal to $200 per bed for
                  capital improvements, such amount to be increased $50 per bed
                  on each Adjustment Date. If requested by Lessor, Lessee shall
                  promptly provide evidence of such capital expenditures. In the
                  event Lessee fails to make the required capital expenditure in
                  any Lease Year, Lessee shall deposit the same with Lessor as
                  the "Capital Replacement Reserve." The funds in the Capital
                  Replacement Reserve shall be made available to Lessee from
                  time to time for Capital Replacement Projects as approved by
                  Lessor pursuant to the terms of the Disbursement Schedule and
                  Section 9.3. Lessee shall make detailed requests for such
                  funds in writing to Lessor in the same form as a Request
                  pursuant Section 9.3 hereof. Within 30 days of such Request,
                  Lessor shall reasonably approve the amount of requested funds
                  and make mutually agreeable arrangements for the disbursement
                  of the funds, or provide Lessee with written notice in
                  reasonable detail specifying Lessor's objections to such
                  Request.

                           (c) Lessee may from time to time request that Lessor
                  release some or all of the funds held by Lessor in the Capital
                  Replacement Reserve for a Capital Replacement Project, which
                  Capital Replacement Project shall be subject to Lessor's prior
                  consent to be given or withheld in its reasonable discretion.
                  In the event that a request for a Capital Replacement Project
                  is approved by Lessor, Lessee shall submit the Project Plans,
                  together with the Project Budget, in form and substance
                  reasonably satisfactory to Lessor, setting forth in such
                  detail as Lessor may reasonably require regarding the nature
                  and amount of the Project Costs

<PAGE>   30
                  anticipated in connection with the Capital Replacement
                  Project, including payment of Lessor's construction inspector
                  for no more than one inspection per month during the period of
                  construction. Upon approval of each of the Capital Replacement
                  Project, the Project Plans and the Project Budget by Lessor,
                  Lessee shall cause construction of the Capital Replacement
                  Project to be promptly commenced and diligently and
                  continuously prosecuted to completion, subject in each case to
                  the following requirements: (i) the Capital Replacement
                  Project shall be constructed in substantial conformity with
                  the Project Plans and in compliance in all material respects
                  with all applicable Legal Requirements, and in a good and
                  workmanlike manner with new materials of good quality; and
                  (ii) the Capital Replacement Project shall be constructed
                  entirely on the Land and shall not encroach upon or overhang
                  any lot line, boundary, set-back, easement, right-of-way or
                  other land. If at any time Lessor notifies Lessee that
                  construction of the Capital Replacement Project does not
                  conform to the requirements of this Section 2.7(c) or the
                  guidelines for any such nonconformity is otherwise discovered
                  by Lessee, Lessee shall immediately cause such nonconforming
                  construction to be stopped and all necessary corrective work
                  to be commenced and diligently and continuously prosecuted to
                  completion. Each Disbursement Request for a Disbursement,
                  together with the payment of any funds required to be paid by
                  Lessee in connection with such Capital Replacement Project,
                  shall be made in accordance with the Disbursement Schedule.

                           (d) The Capital Replacement Reserve (A) shall be held
                  by Lessor, but not in escrow, (B) shall not earn or accrue any
                  interest, and (C) shall not be considered an advance payment
                  of the Rent or a limit on
<PAGE>   31
                  the measure of Lessor's damages in case of an Event of Default
                  hereunder by Lessee. Lessee hereby grants to Lessor an
                  assignment of, a security interest in and a right of setoff
                  against the Capital Replacement Reserve to fund any shortfall
                  in the payment or performance by Lessee in the Rent, and
                  Lessee shall not permit any other voluntary or involuntary
                  mortgage, security deed, deed of trust, deed to secure debt,
                  lien, pledge, assignment, security interest, title retention
                  agreement, financing lease, levy, execution, seizure,
                  judgment, attachment, garnishment, charge, lien or other
                  encumbrance of any kind to exist upon the Capital Replacement
                  Reserve. The parties agree that Lessor shall keep track of the
                  Capital Replacement Reserve on Lessor's accounting records and
                  Lessor shall not be required to segregate the Capital
                  Replacement Reserve or deposit the same in an account
                  (interest bearing or otherwise) with a bank or other third
                  party. In the event that Lessee exercises any right to
                  purchase the Leased Property, any unused portion of the
                  Capital Replacement Reserve shall be delivered to Lessee when
                  the title to the Leased Property is transferred; otherwise,
                  any unused portion of the Capital Replacement Reserve shall be
                  retained by Lessor at the end of the Term.

                  (f) Section 2.5 is hereby amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on March
         31, 2000.

                   (h) Section 35.9 of the Lease is deleted.

         8. Amendment to the Roanoke Lease. The Roanoke Lease is amended,
effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was
         July 1, 1998.

<PAGE>   32
                  (b) The parties agree that the amount of the "Project Amount"
         is equal to $4,719,736.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $508,268.37, and the monthly
         installments for the first year of the Initial Term shall be payable in
         advance in monthly installments, on the first day of each calendar
         month beginning with the Commencement Date. The parties also confirm
         that the current monthly installment of the Minimum Rent is $44,498.90.

                  (d) Section 2.1(c) is deleted.

                  (e) The following Section 2.7 is added after Section 2.6.

                  2.7 Capital Replacement Reserve.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Capital Replacement Project" means repairs
                           or replacements to the Leased Improvements, the costs
                           of which, according to generally accepted accounting
                           principles, must be depreciated over periods of three
                           years or more.

                                    "Capital Replacement Reserve" means the
                           reserve established by Lessor and funded by Lessee
                           pursuant to the terms of Section 2.7(b).

                                    "Disbursement" means a disbursement of the
                           proceeds of the Capital Replacement Reserve to or for
                           the benefit of Lessee in connection with a Capital
                           Replacement.

                                    "Disbursement Request" means a detailed
                           written request for a
<PAGE>   33

                           Disbursement prepared by Lessee in accordance with
                           the Disbursement Schedule.

                                    "Disbursement Schedule" means the guidelines
                           for making Disbursements to Lessee from the Capital
                           Replacement Reserve as set forth in Schedule 1
                           attached hereto.

                                    "Project Budget" means a line item budget
                           for a Capital Replacement Project, in form and
                           substance reasonably satisfactory to Lessor, setting
                           forth in such detail as Lessor may require the nature
                           and amount of all the Project Costs.

                                    "Project Costs" means the total costs of the
                           development and construction of a Capital Replacement
                           Project.

                                    "Project Plans" means the detailed plans and
                           specifications for a Capital Replacement Project.

                           (b) Beginning on the first (1st) anniversary of the
                  Commencement Date, Lessee shall make an annual Facility
                  upgrade expenditure in an amount equal to $200 per bed for
                  capital improvements, such amount to be increased $50 per bed
                  on each Adjustment Date. If requested by Lessor, Lessee shall
                  promptly provide evidence of such capital expenditures. In the
                  event Lessee fails to make the required capital expenditure in
                  any Lease Year, Lessee shall deposit the same with Lessor as
                  the "Capital Replacement Reserve." The funds in the Capital
                  Replacement Reserve shall be made available to Lessee from
                  time to time for Capital Replacement Projects as approved by
                  Lessor

<PAGE>   34

                  pursuant to the terms of the Disbursement Schedule and Section
                  9.3. Lessee shall make detailed requests for such funds in
                  writing to Lessor in the same form as a Request pursuant
                  Section 9.3 hereof. Within 30 days of such Request, Lessor
                  shall reasonably approve the amount of requested funds and
                  make mutually agreeable arrangements for the disbursement of
                  the funds, or provide Lessee with written notice in reasonable
                  detail specifying Lessor's objections to such Request.

                           (c) Lessee may from time to time request that Lessor
                  release some or all of the funds held by Lessor in the Capital
                  Replacement Reserve for a Capital Replacement Project, which
                  Capital Replacement Project shall be subject to Lessor's prior
                  consent to be given or withheld in its reasonable discretion.
                  In the event that a request for a Capital Replacement Project
                  is approved by Lessor, Lessee shall submit the Project Plans,
                  together with the Project Budget, in form and substance
                  reasonably satisfactory to Lessor, setting forth in such
                  detail as Lessor may reasonably require regarding the nature
                  and amount of the Project Costs anticipated in connection with
                  the Capital Replacement Project, including payment of Lessor's
                  construction inspector for no more than one inspection per
                  month during the period of construction. Upon approval of each
                  of the Capital Replacement Project, the Project Plans and the
                  Project Budget by Lessor, Lessee shall cause construction of
                  the Capital Replacement Project to be promptly commenced and
                  diligently and continuously prosecuted to completion, subject
                  in each case to the following requirements: (i) the Capital
                  Replacement Project shall be constructed in substantial
                  conformity with the Project Plans and in compliance in all
                  material respects with all

<PAGE>   35
                  applicable Legal Requirements, and in a good and workmanlike
                  manner with new materials of good quality; and (ii) the
                  Capital Replacement Project shall be constructed entirely on
                  the Land and shall not encroach upon or overhang any lot line,
                  boundary, set-back, easement, right-of-way or other land. If
                  at any time Lessor notifies Lessee that construction of the
                  Capital Replacement Project does not conform to the
                  requirements of this Section 2.7(c) or the guidelines for any
                  such nonconformity is otherwise discovered by Lessee, Lessee
                  shall immediately cause such nonconforming construction to be
                  stopped and all necessary corrective work to be commenced and
                  diligently and continuously prosecuted to completion. Each
                  Disbursement Request for a Disbursement, together with the
                  payment of any funds required to be paid by Lessee in
                  connection with such Capital Replacement Project, shall be
                  made in accordance with the Disbursement Schedule.

                           (d) The Capital Replacement Reserve (A) shall be held
                  by Lessor, but not in escrow, (B) shall not earn or accrue any
                  interest, and (C) shall not be considered an advance payment
                  of the Rent or a limit on the measure of Lessor's damages in
                  case of an Event of Default hereunder by Lessee. Lessee hereby
                  grants to Lessor an assignment of, a security interest in and
                  a right of setoff against the Capital Replacement Reserve to
                  fund any shortfall in the payment or performance by Lessee in
                  the Rent, and Lessee shall not permit any other voluntary or
                  involuntary mortgage, security deed, deed of trust, deed to
                  secure debt, lien, pledge, assignment, security interest,
                  title retention agreement, financing lease, levy, execution,
                  seizure, judgment, attachment, garnishment, charge, lien or
                  other encumbrance of any kind to exist upon the Capital
                  Replacement Reserve. The parties

<PAGE>   36

                  agree that Lessor shall keep track of the Capital Replacement
                  Reserve on Lessor's accounting records and Lessor shall not be
                  required to segregate the Capital Replacement Reserve or
                  deposit the same in an account (interest bearing or otherwise)
                  with a bank or other third party. In the event that Lessee
                  exercises any right to purchase the Leased Property, any
                  unused portion of the Capital Replacement Reserve shall be
                  delivered to Lessee when the title to the Leased Property is
                  transferred; otherwise, any unused portion of the Capital
                  Replacement Reserve shall be retained by Lessor at the end of
                  the Term.

                  (f) Section 2.5 is hereby amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on March
         31, 2000.

                  (h) Section 35.9 of the Lease is deleted.

         9. Amendment to the Greensboro Lease. The Greensboro Lease is amended,
effective as of the date hereof, as follows:

                  (a) The parties confirm that the Commencement Date was
         October 1, 1998.

                  (b) The parties agree that the amount of the "Approved Budget
         Costs" is $4,172,763.

                  (c) The parties confirm that the Minimum Rent for the first
         year of the Initial Term shall be $412,276.30, and the monthly
         installments for the first year of the Initial Term shall be payable in
         advance in monthly installments on the first day of each calendar month
         beginning with the Commencement Date. The parties also confirm that the
         current monthly installment of the Minimum Rent is $35,875.14.

                  (d) Sections 2.1(c) and 2.1(d) are deleted.

                  (e) The following Sections 2.7, 2.8 and 2.9 are added after
         Section 2.6.

<PAGE>   37

                  2.7 Capital Replacement Reserve.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:

                                    "Capital Replacement Project" means repairs
                           or replacements to the Leased Improvements, the costs
                           of which, according to generally accepted accounting
                           principles, must be depreciated over periods of three
                           years or more.

                                    "Capital Replacement Reserve" means the
                           reserve established by Lessor and funded by Lessee
                           pursuant to the terms of Section 2.7(b).

                                    "Disbursement" means a disbursement of the
                           proceeds of the Capital Replacement Reserve to or for
                           the benefit of Lessee in connection with a Capital
                           Replacement.

                                    "Disbursement Request" means a detailed
                           written request for a Disbursement prepared by Lessee
                           in accordance with the Disbursement Schedule.

                                    "Disbursement Schedule" means the guidelines
                           for making Disbursements to Lessee from the Capital
                           Replacement Reserve as set forth in Schedule 1
                           attached hereto.

                                    "Project Budget" means a line item budget
                           for a Capital Replacement Project, in form and
                           substance reasonably satisfactory to Lessor, setting
                           forth in such detail as Lessor may require the

<PAGE>   38

                           nature and amount of all the Project Costs.

                                    "Project Costs" means the total costs of the
                           development and construction of a Capital Replacement
                           Project.

                                    "Project Plans" means the detailed plans and
                           specifications for a Capital Replacement Project.

                           (b) Beginning on the first (1st) anniversary of the
                  Commencement Date, Lessee shall make an annual Facility
                  upgrade expenditure in an amount equal to $200 per bed for
                  capital improvements, such amount to be increased $50 per bed
                  on each Adjustment Date. If requested by Lessor, Lessee shall
                  promptly provide evidence of such capital expenditures. In the
                  event Lessee fails to make the required capital expenditure in
                  any Lease Year, Lessee shall deposit the same with Lessor as
                  the "Capital Replacement Reserve." The funds in the Capital
                  Replacement Reserve shall be made available to Lessee from
                  time to time for Capital Replacement Projects as approved by
                  Lessor pursuant to the terms of the Disbursement Schedule and
                  Section 9.3. Lessee shall make detailed requests for such
                  funds in writing to Lessor in the same form as a Request
                  pursuant Section 9.3 hereof. Within 30 days of such Request,
                  Lessor shall reasonably approve the amount of requested funds
                  and make mutually agreeable arrangements for the disbursement
                  of the funds, or provide Lessee with written notice in
                  reasonable detail specifying Lessor's objections to such
                  Request.

                           (c) Lessee may from time to time request that Lessor
                  release some or all of the funds held by Lessor in the Capital
                  Replacement Reserve for a Capital

<PAGE>   39
                  Replacement Project, which Capital Replacement Project shall
                  be subject to Lessor's prior consent to be given or withheld
                  in its reasonable discretion. In the event that a request for
                  a Capital Replacement Project is approved by Lessor, Lessee
                  shall submit the Project Plans, together with the Project
                  Budget, in form and substance reasonably satisfactory to
                  Lessor, setting forth in such detail as Lessor may reasonably
                  require regarding the nature and amount of the Project Costs
                  anticipated in connection with the Capital Replacement
                  Project, including payment of Lessor's construction inspector
                  for no more than one inspection per month during the period of
                  construction. Upon approval of each of the Capital Replacement
                  Project, the Project Plans and the Project Budget by Lessor,
                  Lessee shall cause construction of the Capital Replacement
                  Project to be promptly commenced and diligently and
                  continuously prosecuted to completion, subject in each case to
                  the following requirements: (i) the Capital Replacement
                  Project shall be constructed in substantial conformity with
                  the Project Plans and in compliance in all material respects
                  with all applicable Legal Requirements, and in a good and
                  workmanlike manner with new materials of good quality; and
                  (ii) the Capital Replacement Project shall be constructed
                  entirely on the Land and shall not encroach upon or overhang
                  any lot line, boundary, set-back, easement, right-of-way or
                  other land. If at any time Lessor notifies Lessee that
                  construction of the Capital Replacement Project does not
                  conform to the requirements of this Section 2.7(c) or the
                  guidelines for any such nonconformity is otherwise discovered
                  by Lessee, Lessee shall immediately cause such nonconforming
                  construction to be stopped and all necessary corrective work
                  to be commenced and diligently and continuously prosecuted to

<PAGE>   40
                  completion. Each Disbursement Request for a Disbursement,
                  together with the payment of any funds required to be paid by
                  Lessee in connection with such Capital Replacement Project,
                  shall be made in accordance with the Disbursement Schedule.

                  2.8 Lease Deposit. On or before the date of this Amendment,
         Lessee must deposit and maintain with Lessor a lease deposit (together
         with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
         equal to approximately three (3) months' Minimum Rent, rounded upward
         to the nearest $1,000. Lessor reserves the right to require additional
         deposits if the Minimum Rent increases during the Term. Lessor, from
         time to time, without prejudice to any other remedy, may apply funds
         from the Lease Deposit to make good any arrearage of Rent or to satisfy
         any other covenant or obligation of Lessee under the Lease, including
         the payment of taxes and insurance, regardless of whether an Event of
         Default shall have occurred and be continuing. In the event that Lessor
         shall apply all or any part of the Lease Deposit pursuant to the
         provisions of this Section, Lessee, within ten days after written
         demand by Lessor to Lessee, shall replenish the Lease Deposit to its
         required amount as calculated above, including any accrued interest or
         late fees as of the date of such disbursement. No such application
         shall be deemed to have been made by operation of law or otherwise
         until actually made by the Lessor as herein provided, nor shall any
         application be deemed to affect any right or remedy of the Lessor
         hereunder, under any statute or rule of law, or in equity.

                  2.9 Provisions Governing the Reserves.

                           (a) As used herein, the following terms shall have
                  the meanings indicated:
<PAGE>   41
                                    "Lease Deposit Rate" means a per annum rate
                           of interest equal to the average rate, for the
                           previous twelve-month period, offered by Bank of
                           America in Nashville, Tennessee, for certificates of
                           deposits with maturities of 90 days.

                                    "Reserves" means, collectively, the Capital
                           Replacement Reserve and the Lease Deposit.

                           (b) The Reserves (A) shall be held by Lessor, but not
                  in escrow, (B) except for the Lease Deposit, shall not earn or
                  accrue any interest, and (C) shall not be considered an
                  advance payment of the Rent or a limit on the measure of
                  Lessor's damages in case of an Event of Default hereunder by
                  Lessee. Lessee hereby grants to Lessor an assignment of, a
                  security interest in and a right of setoff against each of the
                  Reserves to fund any shortfall in the payment or performance
                  by Lessee in the Rent, and Lessee shall not permit any other
                  voluntary or involuntary mortgage, security deed, deed of
                  trust, deed to secure debt, lien, pledge, assignment, security
                  interest, title retention agreement, financing lease, levy,
                  execution, seizure, judgment, attachment, garnishment, charge,
                  lien or other encumbrance of any kind to exist upon any of the
                  Reserves. The parties agree that Lessor shall keep track of
                  the Reserves on Lessor's accounting records and Lessor shall
                  not be required to segregate the Reserves or deposit the same
                  in an account (interest bearing or otherwise) with a bank or
                  other third party. Lessor shall accrue interest on the Lease
                  Deposit on its accounting records at the Lease Deposit Rate,
                  commencing on the date the Lease Deposit was

<PAGE>   42
                  funded and continuing until such funds are either applied or
                  disbursed by Lessor pursuant to the terms of this Lease or
                  returned to Lessee. Lessor shall calculate the accrual of such
                  interest in arrears on an annual basis as of each Adjustment
                  Date and shall prorate such interest for any partial years.

                           (c) So long as no Event of Default shall have
                  occurred and be continuing, all funds remaining in the Lease
                  Deposit at the end of the Term shall be paid to Lessee upon
                  satisfaction of all of Lessee's obligations hereunder,
                  including the payment of all Rent and the surrender of the
                  Leased Property in accordance with the provisions hereof. In
                  the event that Lessee exercises any right to purchase the
                  Leased Property, any unused portion of the Capital Replacement
                  Reserve shall be delivered to Lessee when the title to the
                  Leased Property is transferred; otherwise, any unused portion
                  of the Capital Replacement Reserve shall be retained by Lessor
                  at the end of the Term.

                  (f) Section 2.5 is amended to provide that the Rent and
         Adjusted Rent Coverage Ratios will be calculated commencing on March
         31, 2000.

                  (g) The parties acknowledge that on August 17, 1998, Lessee
         deposited with Lessor the sum of $89,000 to fund the Lease Deposit.

                  (h) Section 35.9 of the Lease is deleted.

         10. Modification to Addresses for Notices. The address for notices to
Lessors set forth in the Leases is modified as follows:
<PAGE>   43

                  c/o HEALTHCARE REALTY TRUST INCORPORATED
                  3310 West End Avenue
                  Suite 700
                  Nashville, Tennessee 37203
                  Attention: J.D. Carter Steele,
                  Vice President
                  Telephone: (615) 269-8175
                  Telecopier: (615) 269-8260

                  With a copy to:

                  Mr. Thomas A. Ansley
                  Sirote & Permutt
                  2311 Highland Avenue South
                  Birmingham, Alabama 35205
                  Telephone:  (205) 930-5300
                  Telecopier:  (205) 930-5301

         11. Settlement of Overpayment/Past Due Minimum Rent. The Lessors and
Lessees hereby acknowledge that (i) some of Lessees have made payments in excess
of the amount of the Minimum Rent that was due under the applicable Lease, and
(ii) some of Lessees have made payments in amounts less than the amount of
Minimum Rent due under the applicable Lease. Simultaneously herewith, the
parties are executing a Settlement Statement which reflects the difference for
each Lease between the Minimum Rent and other charges due to the Lessors and the
construction draws and other amounts due to Lessees, in all cases through
October 31, 2000. The parties recognize that the net amount due from any Lessee
to the applicable Lessor is due to be paid promptly in immediately available
funds and that the net amount due from any Lessor to the applicable Lessee is to
be credited against the monthly payment of the Minimum Rent due by such Lessee
for the month of November, 2000, and the months following, if applicable. The
parties also acknowledge that the combined total due to Lessees exceeds the
combined total due to the Lessors (such excess amount, the "Combined Credit").
Notwithstanding the terms of the Leases, Lessees request that the Lessors apply
the Combined Credit, as reflected in the Settlement Statement, to the
installments of Minimum Rent due under the Leases on November 1, 2000, and
Lessees shall pay to Lessors the balance of any installment of the Minimum Rent
under the Leases that remains owing after such application of the Combined
Credit. Lessees shall make or accept such payments among themselves as is
necessary or appropriate to reflect the

<PAGE>   44

use of the Combined Credit for the benefit of all of Lessees in the manner and
to the extent set forth in the Settlement Statement.

         12. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be an original and taken together shall
constitute one and the same document. Signature and acknowledgment pages, if
any, may be detached from the counterparts and attached to a single copy of this
document to physically form one document. The failure of any party hereto to
execute this Amendment or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.

         13. Waiver. Developer hereby (i) acknowledges that there is no default
on the part of Lessors under the Leases, (ii) acknowledges that there are no
offsets or defenses to payment or performance of the obligations of the
Developer under the Leases, and (iii) waives any defense, claim or counterclaim
of the Developer regarding the obligations of the Lessors under the Leases.

         14. Entire Agreement. This Amendment sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter.

         15. Force and Effect of Amendment. Except as specifically amended,
modified or supplemented as set forth in this Amendment, the Leases remain in
full force and effect.

                    - SIGNATURES ARE ON THE FOLLOWING PAGES -


<PAGE>   45

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


                                       "Capstone Pennsylvania:"

                                       CAPSTONE CAPITAL OF
                                       PENNSYLVANIA, INC.


                                       By/s/J.D. Carter Steele
                                            J.D. Carter Steele
                                            Vice President


                                       "HRAIC:"

                                       HR ACQUISITION I CORPORATION


                                       By/s/J.D. Carter Steele
                                            J.D. Carter Steele
                                            Vice President


                                       "Capstone Virginia:"

                                       CAPSTONE CAPITAL OF VIRGINIA, INC.


                                       By/s/J.D. Carter Steele
                                            J.D. Carter Steele
                                            Vice President
<PAGE>   46


                                       "ECO Harrisburg:"

                                       EXTENDED CARE OPERATORS OF
                                       HARRISBURG, L.L.C.


                                       By:/s/Robin L. Barber

                                       Name:Robin L. Barber

                                       Title:Vice President and Secretary


                                       "ECO Ravenna:"

                                       EXTENDED CARE OPERATORS OF
                                       RAVENNA, L.L.C.

                                       By: EXTENDED CARE OPERATORS, L.L.C.,
                                           Manager

                                       By: RETIREMENT OPERATORS FUNDING, L.L.C.,
                                           Manager

                                       By: RETIREMENT OPERATORS MANAGEMENT,
                                           INC., Manager



                                       By:/s/ F. David Carr

                                       Name:  F. David Carr

                                       Title:    President
<PAGE>   47

                                       "ALCO Hampden:"

                                        ALCO VI, L.L.C.



                                       By:/s/Charles E. Trefzger, Jr

                                       Name: Charles E. Trefzger, Jr

                                       Title:Manager


                                       "ALCO Danville:"

                                       ALCO IX, L.L.C.



                                       By:/s/Charles E. Trefzger, Jr

                                       Name: Charles E. Trefzger, Jr

                                       Title:Manager


                                       "ALCO Harrisonburg:"

                                       ALCO XI, L.L.C.



                                       By:/s/Charles E. Trefzger, Jr

                                       Name: Charles E. Trefzger, Jr
                                       Title:Manager


<PAGE>   48



                                       "ALCO Roanoke:"

                                       ALCO X, L.L.C.


                                       By:/s/Charles E. Trefzger, Jr

                                       Name: Charles E. Trefzger, Jr
                                       Title:Manager


                                       "ECO Greensboro:"

                                       EXTENDED CARE OPERATORS
                                       OF GREENSBORO, LLC

                                       By: EXTENDED CARE OPERATORS, L.L.C.,
                                           Manager

                                       By: RETIREMENT OPERATORS FUNDING, L.L.C.,
                                           Manager

                                       By: RETIREMENT OPERATORS MANAGEMENT,
                                           INC., Manager



                                       By:/s/F. David Carr

                                       Name:    F. David Carr

                                       Title:   President

<PAGE>   49

                              CONSENT TO AMENDMENT

         The undersigned First Assignor and BCC join in the execution of this
Amendment for the purpose of consenting to the foregoing terms of this
Amendment.


                                       "First Assignor:"

                                       BCC AT GREENSBORO, INC.


                                       By:/s/Robin L. Barber

                                       Name:Robin L. Barber

                                       Title:Vice President and Secretary


                                       "BCC:"

                                       BALANCED CARE CORPORATION



                                       By:/s/Robin L. Barber

                                       Name:Robin L. Barber

                                       Title:Senior Vice President,
                                             Legal Counsel & Assistant Secretary