LOAN AGREEMENT


         THIS LOAN AGREEMENT, dated as of April ___, 1998 (this "Agreement"), is
entered  into by and between  BROOKDALE  LIVING  COMMUNITIES,  INC.,  a Delaware
corporation  (the  "Borrower"),  and LaSALLE  NATIONAL BANK, a national  banking
association  (the "Bank").  In  consideration  of the covenants,  agreements and
provisions  set forth  herein,  and other good and valuable  consideration,  the
receipt and  sufficiency  of which is hereby  acknowledged,  the parties  hereto
agree as follows:

ARTICLE I.  DEFINITIONS; RULES OF CONSTRUCTION.

         1.01  Definitions.  The  following  words and phrases,  as used herein,
shall have the following respective meanings:

         "Accounts"  shall mean any and all accounts,  contract  rights,  notes,
drafts, chattel paper, instruments, documents and general intangibles consisting
of rights to payment (all as defined in the UCC).

         "Affiliate" shall mean any Person which,  directly or indirectly,  owns
or controls,  on an aggregate  basis,  including  all  beneficial  ownership and
ownership  or control  as a trustee,  guardian  or other  fiduciary,  any of the
outstanding  Stock having ordinary voting power to elect a majority of the board
of directors  (irrespective of whether, at the time, Stock of any other class or
classes of such  corporation  have or might have  voting  power by reason of the
happening of any contingency) of the Borrower,  or which controls, is controlled
by or is under  common  control  with the  Borrower or any  stockholders  of the
Borrower.  For purposes  hereof,  "control"  means the  possession,  directly or
indirectly,  of the power to direct or cause the  direction  of  management  and
policies,  whether  through the ownership of voting  securities,  by contract or
otherwise.

          "Authorized  Borrower  Representative"  shall  mean  Mark J.  Schulte,
Darryl W.  Copeland,  Jr.,  Craig G.  Walczyk,  or such other  person or persons
approved by  resolution  of the Board of Directors of the Borrower  from time to
time, a certified copy of which resolution shall be delivered to the Bank.

         "Bank"  shall  mean   LaSalle   National   Bank,  a  national   banking
association,  with its principal  place of business at 135 South LaSalle Street,
Chicago, Illinois 60603.

         "Borrower"  shall mean Brookdale Living  Communities,  Inc., a Delaware
corporation  having its  principal  place of business  at 77 West Wacker  Drive,
Suite 4800, Chicago, Illinois 60601.

         "Business  Day" shall mean any  calendar  day,  other than a  Saturday,
Sunday or other day in which the Bank's  downtown  Chicago,  Illinois  office is
authorized to close for domestic business.

         "Closing" shall have the meaning specified in Section 3.01.


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         "Debt"  shall mean,  with respect to the subject  Person,  all items of
indebtedness,  obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or indirect, or joint or several, including:

         (A)      all Obligations of such Person;

         (B) all indebtedness in effect guaranteed,  directly or indirectly,  in
any manner,  or endorsed by such Person (other than for collection or deposit in
the ordinary course of business) or discounted by such Person with recourse;

         (C) all indebtedness in effect  guaranteed by such Person,  directly or
indirectly  through  agreements,  contingent or otherwise:  (1) to purchase such
indebtedness,  or (2) to purchase, sell or lease (as lessee or lessor) property,
products,  materials or supplies or to purchase or sell services,  primarily for
the purpose of enabling  the debtor to make payment of such  indebtedness  or to
assure the owner of the indebtedness  against loss, or (3) to supply funds to or
in any other manner invest in any Person;

         (D)  all  indebtedness  secured  (or  for  which  the  holder  of  such
indebtedness  has a  right,  contingent  or  otherwise,  to be  secured)  by any
mortgage,  trust deed, deed of trust,  pledge,  lien, security interest or other
charge or  encumbrance  upon property  owned or acquired by such Person  subject
thereto, whether or not the liabilities secured thereby have been assumed; and

         (E) all indebtedness  incurred by such Person as the lessee of goods or
services under leases that, in accordance  with GAAP, are or should be reflected
on the lessee's balance sheet as a capital lease.

         "Documents"  shall  mean  this  Agreement,   the  Note  and  any  other
documents, instruments or certificates to be executed and delivered hereunder or
in connection herewith by or on behalf of the Borrower or any of its Affiliates.

         "EBITDAR"  shall mean for any period  the  consolidated  net income (or
loss) of the Borrower and its  Subsidiaries for the fiscal quarter ending on the
last day of such period,  plus (to the extent  included in determining  such net
income (or loss)) the sum of the following:  (i) consolidated  interest expense,
plus (ii)  consolidated  income tax expense,  plus (iii)  extraordinary  losses,
minus   (iv)   extraordinary   gains,   plus  (v)   consolidated   depreciation,
amortization,  and  similar  non-cash  charges,  plus (vi)  consolidated  rental
expenses for Real Property, all determined in accordance with GAAP.


          "Equipment" shall mean all equipment, machinery, fixtures and supplies
and any and all


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parts,  accessories,   attachments,   fittings,  special  tools,  additions  and
accessories thereto and any renewals, substitutions or replacements thereof.

         "Employee  Benefit  Plan" shall mean any employee  benefit plan (within
the meaning of Section  3(3) of ERISA) and any other  profit  sharing,  deferred
compensation,  bonus, stock option, stock ownership, stock purchase, employment,
consulting, incentive, vacation, sick leave, salary continuation,  service ward,
severance pay, insurance,  or other retirement,  welfare or fringe benefit plan,
agreement or practice,  that is (or within the last five years was) established,
maintained or  contributed  to by the Borrower or by any ERISA  Affiliate of the
Borrower.   For  purposes  of  this  definition,   an  ERISA  Affiliate  is  any
corporation,  trade  or  business  that is  considered  a  single  employer,  or
otherwise aggregated,  with the Borrower under Section 414(b), (c), (m), (n), or
(o) of the Code or Section 4001(b)(1) of ERISA.

         "Environmental  Laws"  shall  mean any  federal,  state  or local  law,
statute,  ordinance,  order,  decree,  rule or regulation  relating to releases,
discharges,  emissions or disposals to air, water,  land or groundwater,  to the
withdrawal  or  use  of  groundwater,  to  the  use,  handling  or  disposal  of
polychlorinated  biphenyls,  asbestos or urea  formaldehyde,  to the  treatment,
storage,  disposal or management of Hazardous Substances,  to exposure to toxic,
hazardous or other  controlled,  prohibited or regulated  substances  and to the
transportation,  storage,  disposal,  management  or release of gaseous or other
liquid   substances,   including  the  Comprehensive   Environmental   Response,
Compensation  and Liability Act of 1980, as amended by the Superfund  Amendments
and   Reauthorization  Act  of  1986,  42  USC  '9601  et  seq.,  the  Resource,
Conservation  and Recovery Act of 1976, as amended by the Hazardous  Solid Waste
Amendments of 1984, 42 USC '6901 et seq., the Toxic  Substances  Control Act, 15
USC '2601 et seq., the  Occupational  Safety and Health Act of 1970, 29 USC '651
et seq.,  the Clean Air Act of 1966, as amended,  42 USC '7401 et seq.,  and the
Federal Water Pollution  Control Act, as amended by the Clean Water Act of 1977,
33 USC '1251 et seq., the Illinois Environmental Protection Act, as amended (415
ILCS 5/1 et seq.) and all rules,  regulations and guidance documents promulgated
pursuant thereto or published thereunder.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended,  together with any successor  statutes of similar  import,  together
with all regulations thereunder, in each case as amended from time to time.

         "Event of Default" shall have the meaning specified in Section 7.01.

         "Financial  Statements"  shall  mean  any of the  audited  consolidated
financial  statements of the Borrower for its most  recently  ended fiscal year,
the unaudited  consolidated  financial  statements  for the most recently  ended
quarter of the Borrower that have been filed with a Governmental Authority,  the
internally prepared monthly cash flow statements of the Borrower,  and any other
information and data concerning the financial affairs of the Borrower (including
without limitation


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pro forma financial statements),  copies of which have previously been furnished
to the Bank.

          "GAAP"   shall   mean   generally   accepted   accounting   principles
consistently applied.

         "General  Intangibles"  shall mean all general  intangibles,  including
choses in action, designs, patents, trademarks, service marks, trade names, good
will,  applications  for  registration,   registrations,  licenses,  franchises,
customer  lists,  [rights to  indemnification  and other  rights under the Stock
Purchase  Agreement,] and all other  intangible  property of every nature (other
than Accounts).

         "Governmental  Authority" shall mean the United States of America,  any
state,  territory or district  thereof,  and any other political  subdivision or
body politic  created  pursuant to any  applicable  Law, and any court,  agency,
department,   commission,  board,  bureau  or  instrumentality  of  any  of  the
foregoing.

         "Hazardous Substances" shall mean (i) any hazardous or toxic substance,
chemical or waste, or any pollutant or contaminant defined as such in any now or
hereafter  existing   Environmental  Law,  (ii)  asbestos,   (iii)  radon,  (iv)
petroleum,   its   derivative   by-products   and   other   hydrocarbons,    (v)
polychlorinated  biphenyls,  (vi) explosives,  (vii)  radioactive  materials and
(viii) any additional  substances or materials  which at any time are classified
or considered to be hazardous or toxic under any Environmental Laws.

         "Inventory"  shall mean all  inventory,  goods,  merchandise  and other
personal  property held for sale or lease, or furnished or to be furnished under
any contract of service,  or held as raw materials,  work in process or material
used or consumed,  or to be used or consumed, in business (all as defined in the
UCC).

         "Laws" shall mean any federal, state or local law, statute,  ordinance,
order, decree, rule or regulation.


         "Loan" shall mean the unsecured  loan in the principal  amount of up to
Fifteen Million Dollars ($15,000,000.00) contemplated by this Agreement.

         "Loan Advance" shall have the meaning specified in Section 2.01(a).

         "Loan Commitment" shall have the meaning specified in Section 2.01(a).

         "Maturity Date" means April ___, 1998.

         "NASDAQ"  shall mean the National  Association  of  Securities  Dealers
Automated Quotations system.



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         "Note" shall mean the Note in form attached hereto as Exhibit A.

         "Obligations" shall mean all of Borrower's liabilities, obligations and
indebtedness  to the Bank of any and every kind and nature,  including the Loan,
Borrower's  liabilities  obligations,  representations,  warranties or covenants
with or to the  Bank  under  this  Agreement,  and  Borrower's  liabilities  and
obligations  to the Bank  under any other  agreement,  document  or  instrument,
(including any guaranty of another Person's  Obligations),  whether  heretofore,
now or hereafter  owing,  arising,  due or payable by or from such Person to the
Bank, howsoever  evidenced,  created,  incurred,  acquired or owing, and whether
joint, several, primary, secondary, direct, contingent, fixed or otherwise.

         "Ordinary  Course of  Business"  shall mean,  with respect to Borrower,
such debt, financing or other obligations incurred by the Borrower in the normal
operation  and course of its  business,  specifically  excluding,  however,  any
indebtedness, liabilities, guarantees or obligations incurred in connection with
the  acquisition  or development  of real estate,  or which is prohibited  under
other provisions of this Agreement.

         "Person"   shall  mean  any   individual,   corporation,   partnership,
association,   limited  liability   company,   limited  liability   partnership,
joint-stock company, trust,  unincorporated  association,  joint venture, court,
Governmental Authority, or any other similar entity.

         "Prime  Rate" shall mean the rate of  interest  referred to by the Bank
from time to time as its prime rate, as fixed by the  management of the Bank for
the  guidance  of its  loan  officers,  whether  or not such  rate is  otherwise
published, with each change in such prime rate to take effect on the same day as
the  determination  of each change by the Bank. Such rate is not necessarily the
most favorable rate offered by the Bank to its borrowers.

         "Real Property" shall mean any improved or unimproved real property now
or hereafter owned or leased by Borrower.

         "Reportable  Event"  shall mean any of the events  described in Section
4043 of ERISA,  other than any such  event for which the thirty  (30) day notice
requirement has been waived.

         "Stock" shall mean all shares,  options,  interests,  participations or
other equivalents, howsoever designated, of or in a corporation,  partnership or
similar entity,  whether voting or nonvoting,  including common stock, warrants,
preferred  stock,   convertible   debentures,   partnership  interests  and  all
agreements, instruments and documents convertible, in whole or in part, into any
one or more of the foregoing.

         "Subsidiary"  shall mean, with respect to any Person,  any corporation,
partnership  or  similar  entity  of which  fifty  percent  (50%) or more of the
outstanding Stock having ordinary voting power


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is at the time, directly or indirectly,  owned by such Person and/or one or more
of such Person's  Subsidiaries  (irrespective of whether,  at the time, Stock of
any other class or classes of such entity  shall have or might have voting power
by reason of the happening of any contingency).

         "Supplemental   Documentation"   means  all  agreements,   instruments,
documents,  financing  statements,  warehouse  receipts,  schedules  of accounts
assigned,  certificates of title and other written matter necessary or requested
by the Bank to create,  evidence,  enforce,  or to consummate  the  transactions
contemplated in or by this Agreement and the other Documents.

         "UCC" shall mean the Uniform Commercial Code as in effect in Illinois.


         1.02 Rules of  Construction.  Whenever it is provided in this Agreement
that a party "may"  perform an act or do anything,  it shall be  construed  that
such  party  "may,  but shall not be  obligated  to," so  perform  or so do. The
following  words and phrases  shall be construed  as follows:  (i) "at any time"
shall be  construed  as "at any time or from time to time;"  (ii) "any" shall be
construed as "any and all;" (iii) "include" and  "including"  shall be construed
as  "including  but not limited  to;" and (iv) "will" and "shall"  shall each be
construed as mandatory.  Except as otherwise  specifically indicated herein, all
references to Article,  Section and Sub-Section  numbers and letters shall refer
to Articles,  Sections and  Sub-Sections  of this  Agreement;  all references to
Exhibits and  Schedules  shall refer to the Exhibits and  Schedules  attached to
this Agreement. The words "hereby", "hereof", "hereto", "herein" and "hereunder"
and any similar  terms shall refer to this  Agreement  as a whole and not to any
particular  Article,  Section or Sub-Section.  The word  "hereafter"  shall mean
after the date this  Agreement is executed and delivered by the parties  hereto,
and the word  "heretofore"  shall mean before such date. Words of the masculine,
feminine or neuter gender shall mean and include the correlative  words of other
genders,  and words  importing  the  singular  number shall mean and include the
plural  number  and vice  versa.  The  Article  headings  are  inserted  in this
Agreement  for  convenience  only and are not  intended  to,  and  shall  not be
construed to limit,  enlarge or affect the scope or intent of this  Agreement or
the meaning of any provision hereof. Any accounting terms used in this Agreement
which are not specifically defined shall have the meaning customarily given them
in accordance with GAAP; provided,  however,  that, in the event that changes in
generally  accepted  accounting  principles  shall be mandated by the  Financial
Accounting  Standards  Board,  or any  similar  accounting  body  of  comparable
standing,   or  shall  be  recommended  by  the  Borrower's   certified   public
accountants,  to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof,  such changes shall be followed in
defining such accounting terms only from and after such date as the Borrower and
the Bank shall have  amended this  Agreement to the extent  necessary to reflect
any such changes in the financial  covenants  and other terms and  conditions of
this  Agreement.  All other terms  contained in this Agreement  shall,  when the
context so  indicates,  have the meanings  provided for by the UCC to the extent
the same are used or defined therein.



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ARTICLE II.  THE LOAN.

         2.01     Loan Terms.

   
         (A) Subject to the terms and  conditions  of this  Agreement,  the Bank
will make an unsecured  loan facility (the "Loan  Commitment")  available to the
Borrower,  pursuant  to which  the Bank  shall  from  time to time  make  credit
advances  (each, a "Loan  Advance") to the Borrower.  The Borrower may repay and
reborrow under the Loan  Commitment  subject to the terms and conditions of this
Agreement.  The  aggregate  amount of Loan Advances  outstanding  under the Loan
Commitment  shall  at no  time  exceed  the  sum  of  $15,000,000.00.  The  Loan
Commitment  shall  terminate on the Maturity  Date at which time no further Loan
Advances  shall be made by the  Bank.  Requests  for Loan  Advances  under  this
Agreement may be made by the Borrower at any time, and from time to time,  prior
to the Maturity Date.
    

         (B) The proceeds of each Loan Advance  shall be disbursed by deposit to
the  Borrower's  operating  account  pursuant  to  instructions  provided by the
Borrower,  unless  other  arrangements  are agreed upon between the Bank and the
Borrower.  The Loan shall be used by the Borrower solely for working capital and
real estate  acquisition  purposes on an interim  basis  pending the  Borrower's
procurement of permanent financing.

         (C) Commencing on the first day of the first month  following the first
disbursement  of any portion of the Loan Commitment and on the first day of each
consecutive month thereafter until the Maturity Date, the Borrower shall pay all
interest  that  has  accrued  on  the  outstanding  balance  of  the  Loan.  All
outstanding Loan Advances  together with any accrued but unpaid interest thereon
and any other costs or amounts owed to the Bank hereunder  shall be due and paid
in full on the Maturity  Date.  If any payment falls due on a day which is not a
Business Day, payment shall be made on the next Business Day, and interest shall
accrue until such later date.

         (D) The Loan shall be evidenced by the Note.

         2.02 Interest  Rate;  Calculation.  Except as provided in Section 2.03,
Loan Advances  under the Loan  Commitment  shall bear interest at the Prime Rate
plus one-half of one percent (0.50%) per annum.  Interest shall be calculated on
the basis of a 360-day year,  counting the actual  number of days  elapsed,  and
shall be paid monthly in arrears.

         2.03 Default Rate.  Any  Obligation  of the Borrower  which is not paid
when due,  whether at stated  maturity,  by  acceleration  or otherwise,  shall,
without  notice,  bear  interest  payable on demand at the interest rate then in
effect with respect  thereto plus three  percent  (3%).  In addition,  after the
occurrence  of any other  Event of Default and  delivery to the  Borrower of the
Bank's notice to charge post-default  interest,  all Obligations of the Borrower
hereunder shall bear interest at the


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rate provided for in the immediately preceding sentence.

         2.04  Excessive  Rate.  If, at any time,  the  interest  rate and other
charges  imposed  hereunder  shall  be  deemed  by  any  competent  Governmental
Authority  to exceed the maximum rate of interest  permitted  by any  applicable
Laws, for such time as the interest and such charges would be deemed  excessive,
its  application  shall be  suspended  and there  shall be charged  instead  the
maximum rate of interest and charges permissible under such Laws.

         2.05 Prepayment. The Borrower may prepay the outstanding amounts of the
Loan from time to time in whole or in part on any Business  Day without  penalty
or premium.

         2.06 Application of Payments. All payments,  which are not prepayments,
received  from the Borrower for payment on the Loan shall be applied by the Bank
first to unpaid  interest due and payable on the Loan,  and second the reduction
of the principal outstanding on the Loan.

         2.07  No  Setoff.  All  payments  received  or due  from  the  Borrower
hereunder  shall be paid directly to the Bank without setoff or  counterclaim in
immediately  available funds. The Bank shall send the Borrower statements of all
amounts  due  hereunder,  which  statements  shall  be  considered  correct  and
conclusively binding on the Borrower absent manifest error.

         2.08 Bank  Fees.  At the  Closing,  the  Borrower  shall pay the Bank a
non-refundable closing fee of $75,000.00, which fee was fully earned at the time
the Borrower  accepted  the Bank's  commitment  letter  dated April 3, 1998.  In
addition to the  $75,000.00  closing fee, the Borrower shall pay to the Bank, on
the first day of each month,  a fee in the amount of  one-quarter of one percent
(0.25%)  multiplied  by the  unused  portion of the Loan  Commitment  during the
immediately preceding month.


ARTICLE III.  CONDITIONS PRECEDENT

         The obligation of the Bank to make the Loan is subject to the following
conditions precedent:

         3.01 Conditions  Precedent to Initial Loan Advance.  The Borrower shall
have  delivered  or caused to be delivered to the Bank on the date of, but prior
to,  the  disbursement  of any Loan  Advance  pursuant  to the  Loan  Commitment
(hereinafter called the "Closing"), the following:

         (A)      the Note, duly executed by the Borrower;

         (B) a  certificate  of the  secretary or an assistant  secretary of the
Borrower,  dated the date of the Closing,  as to incumbency,  and resolutions of
the  Board  of  Directors  of  Borrower  (or an  authorized  committee  thereof)
approving the transaction contemplated hereby;
         (C) a certificate, dated as of the most recent date practicable, of the
Secretary of State of


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          Delaware  and the  Secretary  of  State  of  Illinois  as to the  good
standing of the Borrower;

         (D) a Solvency and Business  Purpose  Affidavit,  in form and substance
satisfactory to the Bank, duly executed by the Borrower;

         (E) an  opinion  of  counsel  to the  Borrower  in form  and  substance
satisfactory to the Bank;

         (F) the Borrower shall have paid the  $75,000.00  closing fee set forth
above and agrees to reimburse the Bank for all other out-of-pocket  expenses and
fees incurred by the Bank, including reasonable legal fees of Bank counsel; and

         (G) such other  documents,  certificates  or  evidence  as the Bank may
reasonably request to consummate the transactions contemplated hereby.

         3.02 Condition  Precedent to Subsequent  Loan Advances.  At the time of
the Closing,  at the time of each subsequent  request for and disbursement under
the Loan  Commitment  and on the last day of each fiscal quarter of the Borrower
after the date hereof, each of the following statements shall be true:

         (A) The  representations and warranties set forth in this Agreement are
true and correct in all  material  respects  unless  otherwise  disclosed to and
approved by the Bank in writing,  in its sole  discretion,  since the prior Loan
Advance.

         (B) No Event of Default shall have occurred and be  continuing,  and no
event shall have occurred and be continuing  that,  with the giving of notice or
passage of time or both, would be an Event of Default.

         (C) No material  adverse  change shall have  occurred in the  financial
condition of the Borrower since the date of this Agreement.


ARTICLE IV.  REPRESENTATIONS AND WARRANTIES

         To induce the Bank to consummate the transactions  contemplated hereby,
the Borrower represents and warrants to the Bank as follows:

         4.01 The Borrower is a corporation duly organized, validly existing and
in good standing  under the laws of the State of Delaware,  has the lawful power
and  authority  to own  its  properties  and to  carry  on its  business  as now
conducted,  and possesses all material permits necessary to operate the business
it  conducts.  Borrower  is duly  qualified  to  conduct  business  as a foreign
corporation  and is in good  standing in the State of Illinois and in each other
jurisdiction  in  which  such  qualification  is  required  for the  conduct  of
Borrower's business. Each Subsidiary of Borrower is qualified to


                                      - 9 -



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conduct  business  and is in good  standing in each  jurisdiction  in which such
qualification is required for the conduct of such Subsidiary's business.

         4.02  The  Borrower  is  empowered  to  perform  all  acts  and  things
undertaken  and done  pursuant to this  Agreement and has taken all corporate or
other action  necessary to authorize the execution,  delivery and performance of
the Documents.  The officers of Borrower  executing the Documents have been duly
elected or appointed and have been fully authorized to execute such Documents at
the time  executed.  The  Documents,  when executed and  delivered,  will be the
legal, valid and binding obligations of the Borrower,  enforceable against it in
accordance with their respective terms.

         4.03 The Financial Statements furnished by or on behalf of the Borrower
to the Bank are complete and accurate, fairly present the financial condition of
the  Borrower  and its  Subsidiaries  at the  respective  dates  thereof and the
results of operations for the respective  periods covered thereby,  and (subject
to normal year-end  adjustments  with respect to interim  Financial  Statements)
were prepared in accordance  with GAAP.  The Borrower does not have any material
liabilities or obligations  (contingent or otherwise),  liability for taxes,  or
unusual forward or long-term  commitments,  except as disclosed in the Financial
Statements.

         4.04 Since the date of  Borrower's  most  recent  Financial  Statements
furnished  to the  Bank,  there  has  been no  material  change  in the  assets,
liabilities   or  condition,   financial  or  otherwise,   of  Borrower  or  its
Subsidiaries,  other than changes  arising from  transactions  in the Borrower's
Ordinary  Course  of  Business,  and none of such  changes  has been  materially
adverse.

         4.05 Other than as set forth in the Financial Statements,  there are no
actions,  suits or proceedings  pending, or, to the best of the knowledge of the
Borrower,   threatened   against  or  affecting  the  Borrower  or  any  of  its
Subsidiaries at law or in equity or before or by any  Governmental  Authority or
any  foreign  equivalent  thereof,  which is  reasonably  likely  to result in a
material  judgment or  liability,  or which are, in the  aggregate,  material in
light of the  financial  condition  and  assets  of the  Borrower  or any of its
Subsidiaries,  as  determined by the Bank in its sole  discretion.  There are no
actions,  suits,  investigations or proceedings  pending,  or to the best of the
knowledge  of  the  Borrower,  threatened  against  the  Borrower  or any of its
Subsidiaries or its properties  regarding  Environmental  Laws, the manufacture,
storage or treatment of Hazardous Substances or products liability.

         4.06  The  Borrower  is not in  violation  of,  and the  execution  and
delivery of the Documents and the performance by the Borrower of its obligations
under  the  Documents,  do not and  will not  result  in the  Borrower  being in
violation of or in conflict  with,  or  constitute  a default  under any of, the
Borrower's  Articles of Incorporations or By-Laws,  any term or provision of any
note, mortgage,  indenture,  contract,  agreement,  instrument,  judgment or Law
applicable to the Borrower,  and the execution and delivery of the Documents and
the  performance by Borrower of its  obligations  under the Documents do not and
will not result in the creation or imposition of any mortgage, lien, charge


                                     - 10 -



<PAGE>



or encumbrance of any nature whatsoever (other than those in favor of Bank) upon
any of the assets of the  Borrower  or any of its  Subsidiaries  pursuant to any
such term or provision.  Neither the Borrower nor any of its  Subsidiaries is in
default,  after the expiration of any applicable  grace or cure periods,  in any
respect in the performance or fulfillment of any of its  obligations,  covenants
or conditions contained in any agreement or instrument to which it is a party or
by which any of its properties  may be bound,  and the Borrower does not know of
any dispute regarding any such agreement or instrument.

         4.07 Neither the Borrower nor any of its Subsidiaries  have outstanding
any Debt or other  obligation for borrowed money,  or for the deferred  purchase
price of property or services nor are the Borrower or any  Subsidiary  obligated
as guarantor, co-signer or otherwise on any Debt or other obligation of any kind
of any other Person,  except and to the extent shown on the Financial Statements
or trade debt incurred in the Borrower's Ordinary Course of Business.  No Person
is in default under any of said obligations.

         4.08 All tax returns and reports of the Borrower  and its  Subsidiaries
required  by law to be filed have been duly filed,  and all taxes,  assessments,
fees and other governmental  charges (other than those presently payable without
penalty or interest)  upon each or upon any of its  properties or assets,  which
are due and payable,  have been paid. The charges,  accruals and reserves on the
books of the Borrower and its  Subsidiaries  in respect of taxes are  considered
adequate by the Borrower,  and the Borrower does not know of any assessment of a
material nature against it or any of its Subsidiaries.

         4.09 Except to the extent that failure to comply  would not  materially
or practically interfere with the conduct of the business of the Borrower or its
Subsidiaries, or affect in any way the Borrower's obligations (or Bank's rights)
under the Documents,  the Borrower and its  Subsidiaries  have complied with all
applicable laws with respect to: (i) any  restrictions,  specifications or other
requirements  pertaining  to  products  that the  Borrower  or its  Subsidiaries
manufacture  and/or  sell  or  the  services  they  perform,  including  without
limitation all Environmental  Laws, (ii) the conduct of their business and (iii)
the use, maintenance, and operation of the real and personal properties owned or
leased by them in the conduct of their business.

         4.10 No  authorization,  consent,  license or approval of, or filing or
registration with, or notification to, any Governmental Authority is required in
connection  with the execution,  delivery or performance of the Documents by the
Borrower.

         4.11     With respect to each Employee Benefit Plan:

         (A) each  Employee  Benefit  Plan that is  intended  to  qualify  under
Section  401(a) of the Code and the  assets of which are  exempt  from  taxation
under  Section  501 of the Code  ("Qualified  Plan") has  received  a  favorable
determination letter as to such qualification and there has been no


                                     - 11 -



<PAGE>



development  or  circumstance  since  the date of such  letter  that  creates  a
material risk of the loss of such plan's qualified  status,  except with respect
to Borrower's  401k plan, in which case a favorable  determination  letter as to
such  qualification  has been  applied for and Borrower has no reason to believe
such favorable determination letter will not be issued;

         (B) each Qualified Plan that is subject to the requirements of Title IV
of ERISA has met the minimum funding standards of Section 412 of the Code and is
not  subject to any event or  condition  (including  a  reportable  event  under
Section 4043 of ERISA) that would be grounds for the termination of such plan by
the Pension Benefit Guaranty Corporation or would otherwise subject the Borrower
to any  liability  with respect to such plan  (including  liability  for Pension
Benefit Guaranty Corporation premiums for periods prior to the Closing);

         (C) no Employee Benefit Plan has engaged in a transaction prohibited by
or under Section 406 of ERISA, or which would subject the Borrower or any of its
Subsidiaries  to any tax on  prohibited  transactions  under Section 4975 of the
Code;

         (D) each  Employee  Benefit Plan is in full  compliance in all material
respects (as determined by the Bank in its sole  discretion)  with the reporting
and disclosure requirements of ERISA and all other applicable laws;

         (E) no Qualified  Plan is a  multi-employer  plan within the meaning of
Section 3(37) of ERISA; and

         (F) there are no obligations for future post-retirement health, medical
or death  benefits  under any Employee  Benefit  Plan except for death  benefits
under a Qualified Plan.

         4.12 The Borrower is solvent,  no transaction  under or contemplated by
this  Agreement  renders or will render the  Borrower  insolvent,  the  Borrower
retains sufficient capital for the business and transactions in which it engages
or intends to engage, no obligation incurred hereby is beyond the ability of the
Borrower to pay as such obligation  matures,  the Borrower is not  contemplating
either  the  filing  of a  petition  under any state or  federal  bankruptcy  or
insolvency  laws  or the  liquidating  of all or a major  portion  of any of its
property,  and Borrower has no knowledge of any person  contemplating the filing
of any such petition against it.

         4.13 There exists no actual or threatened termination,  cancellation or
limitation  of,  or  any  modification  or  change  in,  the  proposed  business
relationship of Borrower or any of its  Subsidiaries  with any customer or group
of customers  whose  purchases  individually or in the aggregate are material to
the current business of Borrower or any of its Subsidiaries,  or in the proposed
business  relationship of Borrower or any of its Subsidiaries  with any material
supplier,  and  Borrower  reasonably  anticipates  that all such  customers  and
suppliers  will  continue  a  business   relationship   with  Borrower  and  its
Subsidiaries,  as the case may be, on a basis no less  favorable to the Borrower
than that heretofore conducted;  and there exists no other condition or state of
facts or circumstances


                                     - 12 -



<PAGE>



which would materially adversely affect the current operation of the business of
Borrower  after  the  consummation  of the  transactions  contemplated  by  this
Agreement on a basis no less favorable to the Borrower than that in which it has
heretofore been conducted by Borrower.
         4.14 No strike,  work stoppage or other labor  dispute  relating to the
Borrower or any of its  Subsidiaries is pending or, to the best knowledge of the
Borrower  or any of its  Subsidiaries,  is  threatened  and no  application  for
certification  of a  collective  bargaining  agent is  pending  or,  to the best
knowledge of the Borrower,  is  threatened.  There are no unfair labor  practice
charges or grievances or similar  matters  pending or in process or, to the best
knowledge  of the  Borrower,  threatened  by or on behalf of any employee of the
Borrower  or  any  of its  Subsidiaries,  nor  any  complaints  received  by the
Borrower,  or any of its Subsidiaries or, to the best knowledge of the Borrower,
threatened or on file, with any federal,  state or local  governmental  agencies
alleging  employment  discrimination  or other  violations of laws pertaining to
such  employees  which  could have a material  adverse  effect on the  condition
(financial or otherwise), properties, assets, operations, results of operations,
business or rights of the Company or any of its Subsidiaries.

         4.15 The  Borrower's  execution  and delivery of this  Agreement or any
other Document does not directly or indirectly  violate or result in a violation
of Section 7 of the  Securities  and  Exchange Act of 1934,  as amended,  or any
regulations issued pursuant thereto, including, without limitation,  regulations
G, U, T and X of the Board of  Governors  of the  Federal  Reserve  System,  and
neither the Borrower nor any of its Subsidiaries owns any "margin stock," within
the meaning of said  regulations,  or is engaged in the  business  of  extending
credit to others for such purpose,  and no part of the proceeds of any borrowing
hereunder  will be used to  purchase  or carry any  "margin  stock" or to extend
credit to others for the purpose of purchasing or carrying any "margin stock."

         4.16 No representation or warranty by the Borrower  contained herein or
in any  certificate or other document  furnished by or on behalf of the Borrower
or its Subsidiaries in connection with the transactions  hereunder  contains any
untrue statement of material fact or omits to state a material fact necessary to
make such  representation or warranty not misleading in any material respect, as
determined  by the Bank in its sole  discretion,  in light of the  circumstances
under which it was made.

         4.17 The Borrower has not  encumbered,  pledged,  mortgaged,  granted a
security  interest  in,  assigned,  sold,  leased  or  otherwise  disposed  of a
transfer, in whole or in part, any Real Estate, Accounts, Inventory,  Equipment,
General  Intangibles  or other assets or  properties  now or hereafter  owned or
leased by Borrower or in which  Borrower  has an  interest;  provided,  however,
Borrower may pledge Borrower's partnership,  membership or ownership interest in
a Subsidiary of Borrower in connection  with Debt incurred by such  Subsidiaries
to the extent not prohibited by other provisions of this Agreement.


         4.18  All of the  representations  and  warranties  set  forth  in this
Article IV shall survive and continue to be true, complete and correct until all
Obligations  of the Borrower  hereunder  are paid and satisfied in full and this
Agreement shall have been terminated.


                                     - 13 -



<PAGE>




ARTICLE V.   NEGATIVE COVENANTS
         The Borrower covenants that until all Obligations of Borrower hereunder
are paid and  satisfied  in full,  and the Bank's  obligation  to make  advances
hereunder has terminated, the Borrower will not, directly or indirectly, without
the prior consent in writing of the Bank:

         5.01 dispose by sale,  assignment,  lease,  sale leaseback or otherwise
any material portion,  as determined by the Bank in its sole discretion,  of its
properties  or assets (other than obsolete or worn out property or equipment not
used or useful in its  business),  whether now owned or  hereafter  acquired and
including,  without limitation,  any notes,  accounts  receivable,  equipment or
machinery;

         5.02 transfer,  directly or  indirectly,  any of its assets or pay out,
directly or  indirectly,  money or property or provide  services or do any other
act,  or fail to do any act,  which  would  have the  effect of  materially  and
adversely affecting its ability to perform its obligations hereunder;

         5.03 own, hold,  purchase from or acquire stock,  bonds,  debentures or
other  securities of, or make any capital  contribution to any new Subsidiary or
dissolve or liquidate any existing Subsidiary;  provided,  however, Borrower may
create and contribute  capital to new Subsidiaries  upon the conditions that (i)
Borrower  owns 100% of all of the Stock of each such  Subsidiary,  and (ii) such
subsidiary is formed for the sole purpose of acquiring  real estate to be owned,
operated  or  developed  by such  Subsidiary  and does  not  violate  any  other
provision of this Agreement;

         5.04 make any material change in its ownership or financial  structure,
make any material  change in its  management  (except on 15 days prior notice to
the Bank),  change its name (except on 15 days prior notice to the Bank),  enter
into any merger,  consolidation,  dissolution,  liquidation,  reorganization  or
recapitalization,  or  reclassification  of its stock  except for stock  options
granted to  employees  of Borrower  pursuant to  employment  incentive  plans as
previously  disclosed  to the Bank and  issuing  stock  pursuant  to such  stock
options;

         5.05  engage  in  business   activities  or  operations   substantially
different  from and  unrelated  to its business  activities  on the date of this
Agreement;

          5.06 directly or indirectly apply any part of the proceeds of the Loan
for any purpose other than as set forth herein;

         5.07 directly or indirectly  apply any part of the proceeds of the Loan
to the  purchasing  or  carrying  of any  "margin  stock"  within the meaning of
Regulation  U of the Board of Governors of the Federal  Reserve  System,  or any
regulations, interpretations or rulings thereunder;

         5.08 create,  incur,  remain obligated on or assume any Debt other than
(i) the Loan, (ii) Debt disclosed in Financial  Statements  provided to the Bank
on or before the date hereof,  (iii) debt  incurred in the  Borrower's  Ordinary
Course of Business, provided such Debt is not borrowed from


                                     - 14 -



<PAGE>



or owed to a bank,  financial,  lending or similar  institution and which is not
prohibited by the other  provisions of this  Agreement,  (iv) the guarantees and
indemnities of Debt incurred by Subsidiaries of Borrower that is in existence as
of the date of this  Agreement  in  connection  with the (A)  Health  Retirement
Property  Trust  leases  referred  to on  Exhibit B hereto,  and (B)  Borrower's
guarantee  of the  financing  currently  in  place  from  Nomura  Asset  Capital
Corporation to certain Subsidiaries of Borrower in connection with the projects,
also  referred to on Exhibit B hereto,  (v) up to  $50,000,000.00  of additional
guarantees  and  indemnities  of  Debt  incurred  by  Subsidiaries  of  Borrower
subsequent  to the  date  of this  Agreement  in  connection  with  real  estate
acquisitions   and   developments  by  such   Subsidiaries  of  Borrower,   (vi)
environmental  indemnities to lenders in connection with real estate acquisition
loans made to  Subsidiaries  of Borrower,  upon the condition  that Borrower has
procured  from  a  qualified  environmental  professional  a  Phase  I  and,  if
necessary,  a Phase  II  environmental  audit  of each  property  for  which  an
environmental indemnity is delivered,  which concludes that there is no presence
or likely presence of Hazardous Substances and that there has been no release or
substantial threat of a release of Hazardous  Substances in connection with such
property,  and (vii) loan guaranties to lenders in connection  with  nonrecourse
loans  made  to   Subsidiaries  of  Borrower  in  connection  with  real  estate
acquisitions  by  Subsidiaries  of  Borrower,   upon  the  condition  that  such
guaranties are limited to the customary  "carve-outs"  to nonrecourse  financing
due to  fraud,  misrepresentation  and  similar  conduct  of  Borrower  or  such
Subsidiary;

         5.09 encumber,  pledge, mortgage, grant a security interest in, assign,
sell, lease or otherwise  disposes of a transfer,  in whole or in part, any Real
Estate, Accounts,  Inventory,  Equipment, General Intangibles or other assets or
properties now or hereafter owned or leased by Borrower or in which Borrower has
an interest;  provided, however, Borrower may pledge, on a non-recourse basis to
Borrower,  Borrower's  partnership,   membership  or  ownership  interest  in  a
Subsidiary of Borrower in connection with Debt incurred by such  Subsidiaries to
the extent not prohibited by other provisions of this Agreement.

         5.10 enter into, or be a party to, any transaction  with any Affiliate,
except in the ordinary course of and pursuant to the reasonable  requirements of
its business  and upon fair and  reasonable  terms which are fully  disclosed in
writing  to the Bank and are no less  favorable  to such  Person  than  would be
obtained  in a  comparable  arm's  length  transaction  with  a  person  not  an
Affiliate;

         5.11     change its fiscal year; or

         5.12  furnish  the Bank any  certificate  or other  document  that will
contain  any  untrue  statement  of  material  fact or that will omit to state a
material fact  necessary to make it not misleading in any material  respect,  as
determined  by the Bank in its sole  discretion,  in light of the  circumstances
under which it was furnished.


ARTICLE VI.   AFFIRMATIVE COVENANTS


                                     - 15 -



<PAGE>



         The Borrower  covenants that until all  Obligations of the Borrower are
paid and satisfied in full, and the Bank's obligation to make advances hereunder
has terminated, the Borrower will:

          6.01 furnish and deliver to the Bank:

          (A)  as soon as  practicable,  and in any event  within 120 days after
               the end of each fiscal year: (i) a statement of cash flows of the
               Borrower for such year, (ii) an income  statement of the Borrower
               for such year,  (iii) a balance  sheet of the  Borrower as of the
               end  of  such  year;  all in  reasonable  detail,  including  all
               footnotes,  and audited by certified public accountants  selected
               by  the  Borrower  and  reasonably  acceptable  to the  Bank  and
               certified by such accountants to have been prepared in accordance
               with  GAAP,  except  for any  inconsistencies  explained  in such
               certificate, and (iv) a copy of all Form 10-K reports required to
               be filed with any Governmental Authority;

          (B)  as soon as practicable, and in any event within 45 days after the
               end  of  each  quarter   commencing   with  the  quarter   ending
               immediately subsequent to the first Loan Advance, (i) a statement
               of cash flows of the Borrower for such quarter and the portion of
               the  fiscal  year then  ended,  (ii) an income  statement  of the
               Borrower for such quarter and the portion of the fiscal year then
               ended,  (iii) a balance  sheet of the  Borrower  as of the end of
               such  quarter;  all in  reasonable  detail  and  certified  by an
               Authorized  Borrower  Representative  as complete and accurate in
               all material respects,  fairly presenting the financial condition
               of the Borrower and prepared in accordance  with GAAP, and (iv) a
               copy of all Form  10-Q  reports  required  to be  filed  with any
               Governmental Authority, and

          (C)  within 45 days after the end of each month  commencing  as of the
               date of this Agreement, a report of all cash flows and operations
               of the Borrower as is typically  prepared by the Borrower for the
               preceding month and year to date; and

          (D)  concurrent with year end and quarterly fiscal statements required
               to  be  delivered  hereunder,  a  certificate  of  an  Authorized
               Borrower Representative (a) calculating Borrower's compliance (or
               lack  thereof)  with the  financial  covenants  in  Section  6.13
               hereof,  in reasonable  detail,  and (b) stating that no Event of
               Default has occurred and is  continuing or if an Event of Default
               has occurred and is continuing  setting  forth a  description  of
               such event and the steps being taken to remedy such event;

          (E)  with reasonable  promptness,  such other  information  materially
               concerning  the business,  properties,  conditions or operations,
               financial or  otherwise,  of the  Borrower,  or compliance by the
               Borrower with any of the covenants in the Documents,  as the Bank
               may from time to time reasonably request;

         6.02     furnish and deliver to Bank:


                                     - 16 -



<PAGE>



          (A)  immediately after the occurrence thereof,  notice of any Event of
               Default or of any fact,  condition  or event that with the giving
               of notice or  passage of time or both,  could  become an Event of
               Default,  or of the failure by the Borrower to observe any of its
               respective undertakings hereunder;

          (B)  immediately after the occurrence  thereof,  notice of any default
               under  any  Debt,  or  under  any  indenture,  mortgage  or other
               agreement relating thereto for which the Borrower is liable;

          (C)  immediately after knowledge thereof,  notice of any litigation or
               proceeding  in  which  the  Borrower  is a  party  if an  adverse
               decision  therein  would  require  the  Borrower to pay more than
               $1,000,000 or deliver  assets the value of which exceeds such sum
               (whether  or  not  the  claim  is  considered  to be  covered  by
               insurance);

          (D)  immediately  after  receipt  of  notice  thereof,  notice  of the
               institution  of  any  other  suit  or  proceeding  involving  the
               Borrower that would  reasonably  likely  materially and adversely
               affect the  Borrower's  business,  properties  or  conditions  or
               operations,  financial or otherwise, as determined by the Bank in
               its sole discretion;

          (E)  immediately  after the  occurrence  thereof,  notice of any other
               matter which has resulted in, or would  reasonably  likely result
               in, a materially adverse change in the business,  properties,  or
               the  conditions or  operations,  financial or  otherwise,  of the
               Borrower, as determined by the Bank in its sole discretion; and

          (F)  immediately upon their becoming available, Borrower shall deliver
               or cause to be delivered to the Bank a copy of (i) all regular or
               special  reports  or  effective  registration   statements  which
               Borrower, or any Subsidiary of Borrower, shall file with the U.S.
               Securities and Exchange  Commission (or any successor thereto) or
               any  securities  exchange,  (ii) all reports,  proxy  statements,
               financial   statements  and  other  information   distributed  by
               Borrower,   or  any  Subsidiary  of  Borrower,   to  all  of  its
               stockholders,  bondholders or the financial community in general,
               and (iii) any  written  reports  submitted  to  Borrower,  or any
               Subsidiary of Borrower, by independent  accountants in connection
               with any  annual,  interim  or  special  audit  of the  financial
               statements of Borrower, or any Subsidiary of Borrower;

         6.03 promptly pay and  discharge  when due all taxes,  assessments  and
other  governmental  charges  imposed  upon it, or upon its  income,  profits or
property, and all claims for labor, material or supplies which, if unpaid, might
by law become a lien or charge upon its  property;  provided,  however,  that it
shall  not be  required  to pay any  tax,  assessment,  charge  or  claim  if so
permitted  by law, so long as the  validity  thereof  shall be contested in good
faith by appropriate  proceedings and adequate  reserves  therefor in accordance
with GAAP shall be maintained on its books;



                                     - 17 -



<PAGE>



         6.04  maintain  its  inventory,   equipment,   real  estate  and  other
properties in good condition and repair (normal wear and tear excepted), pay and
discharge or cause to be paid and  discharged  when due, the costs of repairs to
or  maintenance  of the same, and pay or cause to be paid all rental or mortgage
payments due on the same except if it is in good faith contesting by appropriate
proceedings  such  amounts due and is  maintaining  adequate  reserves  for such
liability in accordance with GAAP;

         6.05 maintain and comply with leases  covering real  property,  if any,
used by it in accordance with the respective  terms thereof so as to prevent any
default  thereunder  which may  result in the  exercise  or  enforcement  of any
landlord's or other lien against it or its property;  provided, however, that it
may  contest  any  matters in  connection  with such leases in good faith and by
appropriate  proceedings  if it makes such  payments as are  required by law and
maintains  adequate  reserves on its books in accordance with GAAP in connection
therewith;

         6.06 maintain its corporate existence, maintain all rights, privileges,
franchises, permits and approvals necessary or desirable for the continuation of
its business,  and comply with the  requirements  of all material  agreements to
which it is a party or by which any of its assets is bound,  and all  applicable
Laws,  including  Environmental Laws, and orders of any Governmental  Authority,
noncompliance  with  which  would  materially  adversely  affect  its  business,
properties,   condition,  financial  or  otherwise,  or  ability  to  repay  its
Obligations;

         6.07 keep adequate  records and books of the accounts and operations of
Borrower,  in which  complete  entries will be made in accordance  with its past
practices and  consistent  with sound business  practice,  reflecting all of its
financial transactions,  and collect its accounts only in the Ordinary Course of
Business;

         6.08  permit any of the Bank's  representatives  to examine and inspect
all properties and  operations of Borrower,  and all books of account,  records,
reports  and other  papers and to make  copies and  extracts  therefrom,  and to
discuss the  Borrower's  affairs,  finances and  accounts  with its officers and
employees or its  independent  public  accountants  (and by this  provision  the
Borrower  authorizes said accountants to discuss the finances and affairs of the
Borrower),  all at such  reasonable  times  and as  often  as may be  reasonably
requested  and upon two (2)  Business  Days  notice by the Bank,  (not to exceed
$3,000.00 provided no Event of Default has occurred);

         6.09 at its  sole  cost  and  expense,  keep  and  maintain  all of its
property and assets insured for the full insurable value thereof against loss or
damage by fire,  theft,  explosions,  sprinklers and all other hazards and risks
(i) covered by extended coverage and/or (ii) ordinarily insured against by other
owners or users of  properties  in  similar  businesses.  All such  policies  of
insurance  shall  be in  form,  with  insurers  and in  such  amounts  as may be
reasonably satisfactory to the Bank;

         6.10 pay when due all of its Debt except if (with respect to Debt other
than the  Obligations  hereunder) it is in good faith  contesting by appropriate
proceedings such amounts due and has


                                     - 18 -



<PAGE>




maintained adequate reserves for such liability in accordance with GAAP; 


         6.11 at the Bank's request,  execute and/or deliver to the Bank, at any
time or  times  hereafter,  all  Supplemental  Documentation  that  the Bank may
request, in form and substance  acceptable to the Bank, and pay the costs of any
recording or filing of the same;

          6.12 Maintain its principal banking relationship and accounts with the
Bank; and

         6.13 for each  calendar  quarter  ending on the date set  forth  below,
maintain a minimum quarterly EBITDAR as set forth next to such date:

 March 31 - June 30, 1998 -   $4,100,000.00 plus seventy-five percent
                              (75%) of the quarterly EBITDAR of each
                              business acquired by Borrower  after the date
                              hereof and prior to June 30, 1998 (determined
                              as set forth below)

 July 1 - September 30, 1998- $4,630,000.00 plus seventy-five percent (75%) of
                              qthe uarterly EBITDAR of each business acquired by
                              Borrower  after the date hereof and prior to 
                              September 30, 1998 (determined as set forth below)

 October 1 - December 31, 1998-$5,000,000.00 plus seventy-five percent (75%) of 
                               the quarterly EBITDAR of each business acquired 
                               by Borrower  after the date hereof and prior to 
                               December 31, 1998 (determined as set forth below)


The  quarterly  EBITDAR of each  business  acquired by  Borrower  after the date
hereof shall be determined by the Bank in accordance  with GAAP based upon a the
financial   statements   of  the  acquired   company,   together  with  proforma
projections,  which shall be delivered by Borrower to the Bank at least  fifteen
(15) days  prior to the  closing  of such  acquisition.  Each  determination  of
EBITDAR by the Bank  shall be  controlling  absent  proof of  manifest  error in
calculation.

ARTICLE VII.   EVENTS OF DEFAULT

         7.01  The  occurrence  of any of the  following  events  or acts  shall
constitute an Event of Default ("Event of Default"):

          (A)  The Borrower defaults in the payment of any of its Obligations or
               any part  thereof  when the same shall  become  due and  payable,
               either by their terms or as otherwise herein provided.


                                     - 19 -



<PAGE>




          (B)  Any Financial  Statement,  representation or warranty made by the
               Borrower  herein or delivered by the Borrower  pursuant hereto or
               otherwise made in writing by the Borrower in connection with this
               Agreement proves to have been false in any material respect as of
               the date on which it was made or  deemed  made,  or the  Borrower
               defaults in the  performance of any of the covenants,  conditions
               or agreements contained in this Agreement.

          (C)  The Borrower  fails to pay any Debt when due, or suffers to exist
               any other event of default  giving rise to any  obligation  under
               any  agreement  binding the Borrower and such failure or event of
               default continues beyond any applicable grace period,  the effect
               of which is to cause the Debt or such  obligation  to become  due
               prior to its stated maturity or prior to its regularly  scheduled
               dates of payment.

          (D)  The Borrower or any of its  Subsidiaries  files a petition  under
               any section or chapter of the United  States  Bankruptcy  Code or
               any similar  federal or state law or regulation,  the Borrower or
               any of its Subsidiaries admits its inability to pay debts as they
               mature,  the  Borrower  or  any  of  its  Subsidiaries  makes  an
               assignment for the benefit of one or more of its  creditors,  the
               Borrower or any of its Subsidiaries  makes an application for the
               appointment  of a receiver,  trustee or custodian  for any of its
               properties or assets,  or the Borrower or any of its Subsidiaries
               files any case or proceeding for its reorganization,  dissolution
               or liquidation or for relief from creditors; provided that any of
               the  foregoing  with respect to a Subsidiary  will  constitute an
               Event of Default only if it materially and adversely  affects the
               ability of Borrower to perform its Obligations hereunder.

          (E)  The Borrower or any of its  Subsidiaries is enjoined,  restrained
               or in any way prevented by court order from conducting all or any
               material  part of its  business  affairs,  a  petition  under any
               section or chapter of the United  States  Bankruptcy  Code or any
               similar  federal or state law or  regulation is filed against the
               Borrower or any of its  Subsidiaries,  any case or  proceeding is
               filed  against the  Borrower or any of its  Subsidiaries  for its
               reorganization,   dissolution  or  liquidation  or  for  creditor
               relief,  or an  application  is made by any Person other than the
               Borrower  or any of its  Subsidiaries  for the  appointment  of a
               receiver,  trustee,  or custodian  for any of its  properties  or
               assets, and such injunction,  restraint,  petition or application
               is not  dismissed  or stayed  within  thirty  (30) days after the
               entry or filing thereof;  provided that any of the foregoing with
               respect to a Subsidiary  will constitute an Event of Default only
               if it materially and adversely affects the ability of Borrower to
               perform its Obligations hereunder.

          (F)  The  Borrower or any of its  Subsidiaries  conceals or removes or
               permits to be concealed or removed any part of its property  with
               intent to hinder, delay or defraud


                                     - 20 -



<PAGE>



               its  creditors  or any of them,  or makes or suffers to be made a
               transfer of any of its property that may be fraudulent  under any
               federal or state  bankruptcy,  fraudulent  conveyance  or similar
               law.

          (G)  The  Borrower  or  any  of its  Subsidiaries  permits  any of its
               properties or assets to be attached,  seized, subjected to a writ
               or  distress  warrant,  or levied  upon,  or to come  within  the
               possession  of any receiver,  trustee,  custodian or assignee for
               the benefit of creditors; provided that any of the foregoing with
               respect to a Subsidiary  will constitute an Event of Default only
               if it materially and adversely affects the ability of Borrower to
               perform its Obligations hereunder.

          (H)  The Borrower or any of its Subsidiaries  suffers a final judgment
               for payment of money in excess of  $1,000,000  which shall not be
               stayed on appeal and does not  discharge the same within a period
               of thirty  (30) days;  provided  that any of the  foregoing  with
               respect to a Subsidiary  will constitute an Event of Default only
               if it materially and adversely affects the ability of Borrower to
               perform its Obligations  hereunder,  as determined by the Bank in
               its sole discretion.

          (I)  A judgment  creditor of the  Borrower or any of its  Subsidiaries
               obtains  possession  of any of its  properties  or assets with an
               aggregate  value in excess of $1,000,000 by any means,  including
               without  limitation,  levy,  distraint,  replevin  or  self-help;
               provided that any of the  foregoing  with respect to a Subsidiary
               will  constitute  an Event of Default only if it  materially  and
               adversely   affects  the  ability  of  Borrower  to  perform  its
               Obligations  hereunder,  as  determined  by the  Bank in its sole
               discretion.

          (J)  Any  authorization,   consent,  approval,   license,   exemption,
               registration,  qualification,  designation,  declaration,  report
               filing or other action or undertaking now or hereafter made by or
               with any  Governmental  Authority in connection with the business
               or  operations  of Borrower or any of its  Subsidiaries,  or with
               this  Agreement  or any  other  Document  or any such  action  or
               undertaking  now or hereafter  necessary to make its business and
               operations or this Agreement or any other Document legal,  valid,
               enforceable  and  admissible in evidence is not obtained or shall
               have  ceased to be in full  force and  effect or shall  have been
               revoked,  modified  or  amended  or shall  have  been  held to be
               illegal or invalid and, as a result  thereof,  the ability of the
               Borrower to perform its  Obligations  hereunder is materially and
               adversely  affected,  as  determined  by the  Bank  in  its  sole
               discretion.

          (K)  Any permit  material to the  business,  operations  or  financial
               condition  of the  Borrower or any of its  Subsidiaries  shall be
               terminated,  suspended or revoked and, as a result  thereof,  the
               ability of the Borrower to perform its  Obligations  hereunder is
               materially and adversely  affected,  as determined by the Bank in
               its sole discretion.



                                     - 21 -



<PAGE>



          (L)  There shall occur any  uninsured  damage to, or loss,  theft,  or
               destruction  of, any of the  properties or assets of the Borrower
               in excess of $1,000,000.

          (M)  A notice of lien or  assessment is filed or recorded with respect
               to  all  or  any of  the  Borrower's  or  any  Subsidiary  of the
               Borrower's assets by the United States, or any department, agency
               or instrumentality thereof, or by any state, county, municipal or
               other governmental  agency, or if any taxes or debts owing at any
               times hereafter to any one of these becomes a lien or encumbrance
               upon any such Person's assets and the same is not released within
               thirty  (30) days  after the same  becomes a lien or  encumbrance
               and,  as a result,  the  ability of the  Borrower  to perform its
               obligations  hereunder is or could be  materially  and  adversely
               affected,  as  determined  by the  Bank in its  sole  discretion;
               provided  that such  Person  shall  have the right to  contest by
               appropriate proceedings any such lien, levy or assessment if such
               Person provides the Bank with a bond or indemnity satisfactory to
               the Bank assuring the payment of such lien, levy or assessment.

          (N)  Any of the  following  events if such event could have a material
               adverse  effect on the Borrower as  reasonably  determined by the
               Bank:  (i)  the  existence  of  a  Reportable   Event,  (ii)  the
               withdrawal  of the  Borrower or any of its  Subsidiaries,  or any
               ERISA Affiliate from an Employee  Benefit Plan during a plan year
               in which it was a  "substantial  employer"  as defined in Section
               4001(a)(2)  of ERISA,  (iii) the  occurrence  of an obligation to
               provide  affected  parties  with a  written  notice  of intent to
               terminate  an  Employee  Benefit  Plan in a distress  termination
               under  Section  4041 of ERISA,  (iv) the  institution  by PBGC of
               proceedings to terminate any Employee Benefit Plan, (v) any event
               or condition  which would require the appointment of a trustee to
               administer an Employee  Benefit Plan,  (vi) the withdrawal of the
               Borrower or any of its Subsidiaries,  or any ERISA Affiliate from
               a  Multi-employer  Plan, and (vii) any event that would give rise
               to a Lien under Section 302(f) of ERISA.

          (O)  At any time that any portion of the Loan remains outstanding, the
               closing price of the Borrower's  publicly  traded shares of stock
               as quoted on the NASDAQ is less than  $14.00 per share  (adjusted
               for any share splits after the date of this Agreement).

          (P)  The  occurrence  of a default or an Event of Default under any of
               the other  Documents  which is not cured within the time, if any,
               specified therefor in such other Document.

         7.02 Upon the  occurrence  of any Event of Default,  and at any and all
times while any Event of Default  shall be  continuing,  the Bank shall have all
rights and  remedies  provided by this  Agreement  or any other  Document and by
applicable law and,  without  limiting the generality of the foregoing,  may, at
its option,  declare the Loan  Commitment  to be  terminated  by giving  written
notice  thereof to the  Borrower,  and the Note,  upon such  declaration,  shall
thereupon be and become  forthwith,  due and payable,  without any  presentment,
demand, protest or other notice of any kind,


                                     - 22 -



<PAGE>



all of which are hereby  expressly  waived.  The Bank  should  further  have the
right, without notice to the Borrower, to set off against and to appropriate and
apply to such due and payable  amounts  any debt owing to, and any other  funds,
accounts, deposits or amounts held in any manner for the account of the Borrower
by Lender.


ARTICLE VIII.  MISCELLANEOUS

         8.01 No  failure  or delay on the  part of the Bank in  exercising  any
right, power or remedy hereunder or under any other Documents shall operate as a
waiver  thereof,  nor shall any single or partial  exercise  of any such  right,
power or remedy preclude any other or further  exercise  thereof or the exercise
of any other right,  power or remedy hereunder or under any other Document.  The
remedies  herein  provided and under any other  Document are  cumulative and not
exclusive of any remedies provided by law.

         8.02 This  Agreement  and the other  Documents  constitute  the  entire
agreement  between the parties  with  respect to the subject  matter  hereof and
thereof and there are no promises  expressed or implied unless  contained herein
and therein. No amendment, modification,  termination or waiver of any provision
of the Documents nor consent to any departure by the Borrower therefrom shall in
any event be  effective  unless the same  shall be in writing  and signed by the
Bank,  and then such waiver or consent shall be effective  only for the specific
purpose  for which  given.  No notice to or demand on the  Borrower  in any case
shall  entitle the Borrower to any other or further  notice or demand in similar
or other circumstances.

         8.03 The  Borrower  will pay any  documentary,  stamp or similar  taxes
payable in respect of the Documents. The Borrower will, on demand, reimburse the
Bank for all  expenses,  including  the  reasonable  fees and  expenses of legal
counsel (including, without limitation, legal assistants) for the Bank, incurred
by the Bank in connection  with any amendment or  modification of the Documents,
the  administration  of the Loan and the  enforcement  of the  Documents and the
collection or attempted collection of the Obligations.

         8.04 (A) For the  purposes of any action or  proceeding  involving  the
Documents or any other agreement or document  referred to therein,  the Borrower
hereby  expressly  submits to the  jurisdiction  of all federal and state courts
located in the State of Illinois and consents that any order, process, notice of
motion or other  application  to or by any of said courts or a judge thereof may
be served within or without such court's  jurisdiction  by registered mail or by
personal service,  provided a reasonable time for appearance is allowed.  To the
extent permitted by applicable law, the Borrower hereby  irrevocably  waives any
objection  that it may now or hereafter have to the laying of venue of any suit,
action or proceeding  arising out of or relating to this  Agreement or any other
Document brought in any federal or state court sitting in Cook County,  State of
Illinois, and, to the extent permitted by law, hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.


                                                     - 23 -



<PAGE>



         (B) THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
(TO THE EXTENT  PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS  AGREEMENT,  THE NOTE, ANY
OTHER OF THE  DOCUMENTS AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A
JUDGE SITTING WITHOUT A JURY.

         8.05 Any notices or consents  required or permitted  by this  Agreement
shall be in writing and shall be delivered in person or sent by certified  mail,
postage prepaid, return receipt requested, or delivered by, facsimile,  telegram
or telex, or delivered by a nationally  recognized  overnight  express  delivery
service,  addressed as follows, unless such address is changed by written notice
hereunder:

       If to the Borrower:                Brookdale Living Communities, Inc.
                                          77 West Wacker Drive, Suite 4800
                                          Chicago, Illinois 60601
                                          Attn:    Darryl W. Copeland, Jr.
                                                   Executive Vice President
                                          FAX:     (312) 977-3699

       with a copy to:                    Brookdale Living Communities, Inc.
                                          c/o The Prime Group, Inc.
                                          77 West Wacker Drive, Suite 3900
                                          Chicago, Illinois 60601
                                          Attn:    Robert J. Rudnik
                                                   General Counsel
                                          FAX:     (312) 917-1684

       If to the Bank:                    LaSalle National Bank
                                          135 South LaSalle Street
                                          Chicago, Illinois 60603
                                          Attn:    Ann B. O'Shaughnessy
                                                   Assistant Vice President

Any such notice or  communication  shall be deemed to have been given  either at
the time of personal delivery,  or in the case of overnight express delivery, as
of the date delivery was first attempted, or in the case of facsimile,  telegram
or telex,  upon receipt or in the case of certified  mail, two (2) Business Days
after delivery to the United States Postal Service.

         8.06 This Agreement may be executed in any number of  counterparts  and
by the different parties hereto in separate counterparts,  each of which when so
executed and delivered  shall be deemed to be an original and all of which taken
together shall constitute but one and the same


                                     - 24 -



<PAGE>



instrument.

         8.07 This  Agreement  shall  become  effective  when it shall have been
executed and  delivered by the Borrower and the Bank,  and  thereafter  shall be
binding  upon and inure to the  benefit of the  Borrower  and the Bank and their
respective  successors and assigns,  except that the Borrower shall not have the
right to assign its rights  hereunder or any interest  herein  without the prior
written consent of the Bank.

         8.08  This  Agreement  has  been,  and any  other  Documents  will  be,
delivered  and accepted in and shall be deemed to be,  contracts  made under and
governed by the laws of the State of  Illinois,  and for all  purposes  shall be
construed in accordance with the laws of said State.

         8.09  Any   provision  of  this   Agreement   which  is  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining  provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction;  wherever possible,  each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law.

         8.10 All covenants, agreements,  representations and warranties made by
the Borrower herein and any and all  certificates  and instruments  delivered by
the Borrower in connection herewith shall,  notwithstanding any investigation by
the Bank,  be deemed  material  and relied on by the Bank and shall  survive the
execution and delivery to the Bank of this Agreement, the Note and any extension
or renewal thereof.

         8.11 From time to time,  the Borrower  will execute and deliver to Bank
such additional  documents and will provide such  additional  information as the
Bank may  reasonably  require  to carry out the terms of this  Agreement  and be
informed of the Borrower's status and affairs.

         8.12  All  Exhibits   attached  to  this  Agreement   shall  be  deemed
incorporated herein by this reference.

         8.13  Whenever  under  the  terms  of  this  Agreement,  the  time  for
performance  of a covenant or  condition  falls upon a day other than a Business
Day,  such time for  performance  shall be  extended to the next  Business  Day.
Unless  otherwise  stated,  all references  herein to "days" shall mean calendar
days.

         8.14 The Borrower  hereby consents to the Bank's  participation,  sale,
assignment or transfer,  at any time or times hereafter of this Agreement or the
Documents, or any portion hereof or thereof,  without affecting the liability of
the Borrower hereunder;  provided,  however,  the Bank shall at all times act as
sole agent on behalf of itself and any participant that acquires any interest in
this  Agreement  or the  Documents  and shall at all times  service  the Loan on
behalf of itself and any participant.


                                     - 25 -


                                                       

<PAGE>



         IN WITNESS WHEREOF,  the parties have hereunto caused this Agreement to
be executed by their respective  officers  thereunto duly authorized,  as of the
date first above written.

                                            BORROWER:

                                            BROOKDALE LIVING COMMUNITIES, INC.


                                            By:
                                            Print Name:
                                            Title:

ATTEST:

By:
Print Name:
Title:


                                            BANK:

                                            LaSALLE NATIONAL BANK


                                            By:
                                            Print Name:
                                            Title:


                                     - 26 -


                                                  

<PAGE>



                                    EXHIBIT A

                                      Note



                                  See attached.



                                     - 27 -


                                 

                                     <PAGE>


                                    EXHIBIT B



Health Retirement Property Trust Leases






 Current Projects Financed By Nomura Asset Capital Corporation

         Austin, Texas

         Southfield, Michigan

         Raleigh, North Carolina

         Glen Ellyn, Illinois

         New York, New York (Battery Park City)






















                                                     - 28 -


                                                      

<PAGE>